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One of the primary reasons for long timelines, high costs, and high failure rates in drug discovery is that predicting properties of molecules in advance of chemical synthesis is extremely complex and not amenable to traditional approaches.
−Removed: Over the past 30 years and with the concerted efforts of hundreds of our scientists and software engineers, we have developed a physics-based computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.
+Added: Over the past several decades and with the concerted efforts of hundreds of our scientists and software engineers, we have developed a physics-based computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.
This key capability enables drug discovery teams to design and selectively synthesize molecules with more optimal properties, reducing the average time and costs required to identify a development candidate and increasing the probability that a drug discovery program will enter clinical development.
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We had 190, 153, and 131 such customers, which represented 80%, 79%, and 78% of our total ACV, for the years ended December 31, 2021, 2020, and 2019, respectively.
−Removed: In addition, our customer retention rate for our customers with an ACV over $100,000 for the year ended December 31, 2020 was 99% and was 96% or higher for each of the previous seven fiscal years.
+Added: In addition, our customer retention rate for our customers with an ACV over $100,000 for the year ended December 31, 2021 was 98% and was 96% or higher for each of the previous eight fiscal years.
We believe the growth in the number of our customers demonstrates that companies are increasingly recognizing the power and efficiency of our platform while the retention in this group is indicative of the continued value of our platform.
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Our drug discovery group is comprised of a multidisciplinary team of over 100 experts in protein science, biochemistry, biophysics, medicinal and computational chemistry, and discovery scientists with expertise in preclinical and early clinical development.
−Removed: During the year ended December 31, 2020, we collaborated on more than 25 drug discovery programs with more than ten different biopharmaceutical companies, including a number of companies we co-founded.
+Added: During the year ended December 31, 2021, we collaborated on more than 20 drug discovery programs with more than ten different biopharmaceutical companies.
These collaborations generate drug discovery revenue, including upfront payments, research funding payments, and discovery and development milestones, and have the potential to produce additional milestone payments, option fees, and future royalties.
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Since then, we have expanded into other therapeutic areas, including in the areas of immunology and neurology.
−Removed: We continue to advance multiple internal programs towards investigational new drug, or IND, -enabling studies, and we expect to submit up to three IND applications in 2022, with our first submission expected in the first half of 2022, subject to favorable data from IND-enabling studies.
−Removed: While our revenue-generating collaborations are an important component of our business, our strategy is to pursue an increasing number of wholly-owned programs
−Removed: and strategically evaluate on a program-by-program basis entering into clinical development ourselves , entering into collaborations, or out-licensing programs to maximize commercial opportunities.
+Added: We continue to advance multiple internal programs through investigational new drug, or IND, -enabling studies.
+Added: We expect to submit an IND application to the U.S.
+Added: Food and Drug Administration, or FDA, for our MALT1 program in the first half of 2022, and subject to receiving regulatory clearance, we expect to initiate a Phase 1 clinical trial of our MALT1 inhibitor in patients with relapsed and resistant lymphoma in the second half of 2022.
+Added: We also plan to submit IND applications to the FDA for our CDC7 program in early 2023 and our WEE1 program in 2023, subject to
+Added: favorable data from IND-enabling studies.
+Added: In addition, we plan to initiate a Phase 1 clinical trial of our CDC7 inhibitor in 2023, subject to receipt of regulatory clearance.
+Added: While our revenue-generating collaborations are an important component of our business, our strategy is to pursue an increasing number of wholly-owned programs and strategically evaluate on a program-by-program basis entering into clinical development ourselves , entering into collaborations, or out-licensing programs to maximize commercial opportunities.
As part of this strategy, in November 2020, we entered into an exclusive, worldwide collaboration and license agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas.
−Removed: The collaboration includes HIF-2 alpha and SOS1/KRAS, which are two of our internal pipeline programs.
+Added: The initial collaboration targets included HIF-2 alpha and SOS1/KRAS, which were two of our internal pipeline programs.
+Added: In November 2021, we and BMS mutually agreed to replace the HIF-2 alpha target with another precision oncology target.
+Added: Following the replacement election, all rights to the HIF-2 alpha target program reverted to us.
Under the terms of the agreement, we received a $55.0 million upfront payment from BMS, and we are eligible to receive up to $2.7 billion in total milestones from BMS across all potential targets, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions.
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Our physics-based approach and differentiated software solutions enable the discovery of novel molecules for drug development and materials applications more rapidly, at lower cost, and with, we believe, a higher likelihood of success compared to traditional methods.
−Removed: We license our software to biopharmaceutical and industrial companies, government laboratories, and academic institutions globally.
−Removed: We are also using our software and internal capabilities across a diverse portfolio of drug discovery programs .
Advancing the science that underlies our computational platform:
We have emerged as the leader in the field of physics-based computational drug discovery, and we believe our computational platform is far ahead of that of our nearest competitors.
−Removed: As of December 31, 2020, we had approximately 450 employees, roughly half of whom have Ph.D.
We intend to maintain our industry-leading position by introducing new capabilities and refining our software to further strengthen our technology and advance the science underlying our platform.
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Life science software business:
−Removed: In 2020, all of the top 20 pharmaceutical companies, measured by 2019 revenue, licensed our solutions, accounting for $31.9 million, or 34%, of our software revenue in 2020, and these companies have been our customers for an average of over 15 years.
−Removed: However, we estimate that many of our largest customers are currently purchasing only enough software to optimally enable one or two drug discovery projects, which typically represents a small fraction of their drug discovery projects.
+Added: In 2021, all of the top 20 pharmaceutical companies, measured by 2020 revenue, licensed our solutions, accounting for $42.0 million, or 37%, of our software revenue in 2021.
+Added: However, we estimate that many of our largest customers are currently purchasing only enough software to optimally enable only a small portion of their drug discovery projects, which typically represents a small fraction of their drug discovery projects.
Our ability to expand within our customer base is demonstrated by the increasing number of our customers with an ACV of over $100,000.
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Accelerating growth of our drug discovery business:
−Removed: We also apply our computational platform across a diversified portfolio of more than 25 drug discovery programs through collaborations with companies we have co-founded, with biopharmaceutical companies, and through our own efforts on internal programs.
+Added: We also apply our computational platform across a diversified portfolio of drug discovery programs through collaborations with biopharmaceutical companies, and through our own efforts on internal programs.
Our collaborations generate revenues through upfront payments, research funding, preclinical and clinical milestones as well as the potential for option fees, commercial milestones, and future royalties.
−Removed: We also benefit from equity positions in our co-founded companies.
−Removed: Our drug discovery group comprises over 80 scientists, including biologists, medicinal chemists, biochemists, crystallographers, drug metabolism and pharmacokinetics scientists, and pharmacologists.
+Added: We also benefit from equity positions in certain of our collaborators
We are actively working with our collaborators to discover novel therapies.
We also intend to add new collaborations that offer scientific synergies and favorable economic terms.
−Removed: We plan to progress our existing internal programs and continue to add new programs that leverage our computational platform.
−Removed: As we progress these programs, we will strategically evaluate on a program-by-program basis entering into clinical development ourselves , entering into collaborations, or out-licensing programs to maximize commercial opportunities.
−Removed: As part of this strategy, in November 2020, we entered into an exclusive, worldwide collaboration and license agreement with BMS pursuant to which we and BMS agreed to collaborate in the discovery, research and pre clinical development of small molecule compounds for biological targets in the oncology, neurology, and immunology therapeutic areas.
+Added: We plan to progress our existing internal programs , including our MALT1, CDC7 and WEE1 inhibitor programs , and continue to add new programs that leverage our computational platform.
+Added: As we progress these programs, we will strategically evaluate on a program-by-program basis entering into preclinical and clinical development ourselves , entering into collaborations, or out-licensing programs to maximize commercial opportunities.
Leveraging the synergies between our businesses:
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Successfully reaching an IND application filing requires on average five to six years, and the average success rates suggest two out of three projects will fail.
−Removed: Accounting for such failures, the average cost to complete a successful IND filing is $35 million.
+Added: Accounting for such failures, the industry average cost to complete a successful IND filing is $35 million.
A typical drug discovery project only has the budget and time to synthesize and assay fewer than 10,000 molecules, because the cost and timelines associated with interrogating a greater number of molecules is impractical.
−Removed: This small sampling of molecules represents a minuscule fraction of the total number of molecules that could potentially be synthesized.
+Added: This small sampling of molecules
+Added: represents a minuscule fraction of the total number of molecules that could potentially be synthesized.
Exploring such a limited number of molecules reduces the likelihood of identifying molecules with the desired property profile, which we believe leads to development candidates with higher failure rates.
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However, despite all of these challenges, physics-based methods have a significant advantage over machine learning in that they do not require a training set and can, in principle, compute properties for any molecule .
−Removed: Over the past 30 years and with the concerted effort of hundreds of our scientists and software engineers, we have developed a computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.
+Added: Over the past several decades and with the concerted effort of hundreds of our scientists and software engineers, we have developed a computational platform that is capable of predicting critical properties of molecules with a high degree of accuracy.
We have built our platform on a foundation of rigorous, physics-based methods, combined with the rapid data processing and scaling advantages of machine learning, that together provide a significant advantage over traditional methods.
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Our platform is able to evaluate molecules in hours rather than the weeks that it typically takes to synthesize and assay molecules in the laboratory.
−Removed: Our platform can explicitly evaluate tens of billions of molecules per week, whereas traditionally operated discovery projects only synthesize approximately one thousand molecules per year, thereby increasing the probability that we find a novel molecule with the desired property profile.
+Added: Our platform can explicitly evaluate billions of molecules per day, whereas traditionally operated discovery projects only synthesize approximately one thousand molecules per year, thereby increasing the probability that we find a novel molecule with the desired property profile.
In a peer-reviewed study, our platform was tested against traditional methods for selecting tight-binding molecules and resulted in an eight-fold increase in the number of molecules with the desired affinity.
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Large-Scale Molecule Evaluation :
−Removed: the ability to scale our calculations of key drug properties to ultra-large idea sets of over a billion molecules to enable more rapid and successful identification of high-quality drug candidate molecules via integration of next-generation machine-learning methods with our physics-based techniques, as well as large-scale utilization of internal and cloud computing resources;
+Added: the ability to scale our calculations of key drug properties to ultra-large idea sets of billions of molecules to enable more rapid and successful identification of high-quality drug candidate molecules;
Integrated Data Management and Visualization :
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Recognition of our scientific advances has come through customer adoption, and in citations of publications in peer reviewed journals.
−Removed: For example, the initial paper describing our ligand-protein docking program, Glide, published in 2004 is currently the most cited paper in the history of the Journal of Medicinal Chemistry , a premier journal in its field.
−Removed: Glide continues to be broadly used as a hit-finding technology throughout the biopharmaceutical industry by our customers.
+Added: For example, the initial paper describing our ligand-protein docking program, Glide, published in 2004 is one of the most cited papers in the history of the Journal of Medicinal Chemistry , a premier journal in its field.
+Added: Glide continues to be broadly used as a
+Added: hit-finding technology throughout the biopharmaceutical industry by our customers.
We have made many similar scientific advances in fields including druggability assessment, affinity calculation, protein structure refinement, and molecule ideation and design.
These advances were achieved by our team of hundreds of Ph.D.-level scientists and software engineers with extensive input from our Scientific Advisory Board, or SAB, which includes thought leaders in computational chemistry, physics-based simulations, statistical mechanics, and machine learning .
−Removed: Also, critically important to the advances we have made are the performance gains offered by using graphical processing unit, or GPU, computing and the cloud.
−Removed: Our platform is capable of running on all major cloud providers and taking advantage of their combined compute power.
−Removed: Combining the dramatic effects of GPU and cloud computing with our integrated physics-based and machine learning technologies enables shortening timelines, decreasing costs, and increasing the probability of success of drug discovery efforts.
Our computational platform is also applicable to new problems of interest and new fields of study.
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Software Business
−Removed: We are transforming drug discovery and materials design by driving widespread adoption of our computational platform by biopharmaceutical and industrial companies, academic institutions, and government laboratories globally.
We are the leading provider of computational software solutions for drug discovery to the biopharmaceutical industry.
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The widespread adoption of our software is supported by an approximately 150-person global team of sales, technical, and scientific personnel.
−Removed: Our direct sales operations span across the United States, Europe, Japan and India, and we have sales distributors in other important markets, including China and South Korea.
+Added: Our direct sales operations span across the United States, Europe, Japan, India, and South Korea, and we have sales distributors in other important markets, including China.
We have a diverse and large existing customer base, ranging from startup biotechnology companies to the largest global pharmaceutical companies as well as an increasing number of materials science customers.
−Removed: Our ten largest software customers represented approximately 29% of our software revenue in 2020, and no single software customer represented more than 5% of our software revenue.
+Added: Our ten largest software customers represented approximately 33% of our software revenue in 2021, including one customer that makes up 14% of total revenue.
We continue to expand our customer base as we promote the education and recognition of the potential of our computational platform across industries.
−Removed: As of December 31, 2020, we had 1,463 active customers, which we define as the number of customers who had an ACV of at least $1,000 in a given fiscal year, and the figure below shows the growth in the number of our active customers since 2013 .
+Added: As of December 31, 2021, we had 1,647 active customers, which we define as the number of customers who had an ACV of at least $1,000 in a given fiscal year.
We believe there is a significant opportunity to expand the adoption of our platform within our growing customer base.
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In addition, we had 15, 16, and 10 customers for the years ended December 31, 2021, 2020, and 2019, respectively, with an ACV of over $1.0 million.
+Added: For the year ended December 31, 2021, our top 10 customers, measured by ACV, accounted for $34.1 million of our total ACV compared to $28.5 million for the year ended December 31, 2020.
We believe biopharmaceutical companies are increasingly recognizing and applying the power and efficiency of our platform.
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Furthermore, our ability to expand our customer relationships over time is exemplified by our ability to retain our customers with an ACV over $100,000.
−Removed: For the year ended December 31, 2020, our year-over-year customer retention rate for our customers with an ACV over $100,000 was 99% and was 96% or higher for each of the previous seven fiscal years.
+Added: For the year ended December 31, 2021 , our year-over-year customer retention rate for our customers with an ACV over $100,000 was 98 % and was 96% or higher for each of the previous eight fiscal years .
We believe the continued expansion of our customer base coupled with our ability to expand our customers’ use of our software will continue to drive revenue growth.
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Often these molecules have much higher binding affinity and have a better property profile than typical hit molecules.
−Removed: FEP+ has also recently been extended to support the calculation of absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context.
+Added: FEP+ can also be used to calculate absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context.
Glide is our virtual screening program that is used to screen libraries of molecules to find hit molecules likely to bind a particular protein target in a specific conformation.
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AutoQSAR/DeepChem uses modern machine-learning methods trained to earlier known hit molecules to find novel hits when screening libraries of molecules.
−Removed: Induced fit docking , or IFD , can computationally predict the binding mode of molecules to a binding site of a protein, including predicting how the conformation of the protein binding site may reorganize upon binding the molecule.
+Added: Induced Fit Docking can computationally predict the binding mode of molecules to a binding site of a protein, including predicting how the conformation of the protein binding site may reorganize upon binding the molecule.
Hit to Lead and Lead Optimization:
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Maestro is our user-friendly modeling environment, which allows expert modelers to utilize our advanced modeling solutions.
+Added: Furthermore, in January 2022, we acquired XTAL BioStructures, Inc., a company that provides structural biology services, including biophysical methods, protein production and purification, and X-ray crystallography, which we believe will expand our offerings to include an advanced and differentiated service that provides customers access to protein structures that have been computationally validated and are ready for structure-based virtual screening and lead optimization.
Our Software Solutions for Materials Science
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The software solutions for our materials science customers leverage much of the same technology as our software for biopharmaceutical companies.
−Removed: similar to traditional drug discovery efforts, traditional approaches to discovering new molecules in these fields also suffer from long timelines, and it can take as long as 10 to 20 years to bring new materials to the market.
+Added: In addition, similar to traditional drug discovery efforts, traditional approaches to discovering new molecules in these fields also suffer from long timelines, and it can take as long as 10 to 20 years to bring new materials to the market.
We are focused on leveraging our technology to transform the way new materials are discovered, and we believe that materials science industries are only beginning to recognize the potential of computational methods.
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The figures below show the number of collaborative programs we have worked on in each given year, as well as the amount of drug discovery revenue we have generated for the periods presented.
−Removed: While our revenue-generating collaborations are an important component of our business, our strategy is to pursue an increasing number of internal programs and strategically evaluate on a program-by-program basis entering into clinical development ourselves, entering into collaboration, or out-licensing programs to maximize commercial opportunities.
+Added: While our revenue-generating collaborations are an important component of our business, our strategy is also to pursue an increasing number of internal programs and strategically evaluate on a program-by-program basis entering into preclinical and clinical development ourselves, entering into collaboration, or out-licensing programs to maximize commercial opportunities.
As part of this strategy, in November 2020, we entered into an exclusive, worldwide collaboration and license agreement with BMS pursuant to which we and BMS agreed to collaborate in the discovery, research and clinical development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas.
+Added: Furthermore, in August 2021, we entered into a global discovery, development and commercialization collaboration with Zai Lab Limited focused on a novel program in oncology targeting DNA damage response.
These programs are not included in the number of collaborative programs described below.
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Furthermore, collaborative programs which we did not actively work on in a given year, but for which we are still eligible to receive potential milestone payments and royalties, are not included in the number of collaborative programs below.
−Removed: For the year ended December 31, 2020, we had nine such programs compared to two and one for the years ended December 31, 2019 and 2018, respectively.
−Removed: The number of these programs has increased as a result of a higher proportion of our collaborative programs advancing beyond the discovery phase, which is typically the stage where we are actively involved in the discovery of development candidates together with our collaborators.
+Added: For the year ended December 31, 2021, we had seven such programs compared to nine and two for the years ended December 31, 2020, and 2019, respectively.
Our drug discovery revenue consists of revenue generated from collaborations through the combination of upfront payments, research funding payments, discovery and development milestones, and other fees, as well as any revenue generated from our pipeline of internal drug discovery programs, including revenue generated from our collaboration with BMS.
As part of the BMS collaboration in November 2020, we received an upfront payment of $55.0 million.
−Removed: Approximately $1.0 million of the upfront payment was included in our drug discovery revenue for the year ended December 31, 2020, with the remainder recorded as deferred revenue as of December 31, 2020.
−Removed: Our Drug Discovery Expertise
−Removed: Our drug discovery group is comprised of a team of over 80 experts in protein science, biochemistry, biophysics, medicinal and computational chemistry, and discovery scientists with expertise in preclinical and early clinical development.
−Removed: Many of our scientists have decades of biopharmaceutical industry experience across multiple disciplines and areas of expertise and deploy our computational platform across an array of disease targets and indications.
−Removed: Our differentiated, physics-based platform empowers our integrated team of experts to design better molecules, in shorter time frames, and at a lower cost than traditional drug design.
+Added: Approximately $13.7 million and $1.0 million of the upfront payment were included in our drug discovery revenue for the years ended December 31, 2021 and 2020, with the remainder recorded as deferred revenue as of December 31, 2021.
Our Drug Discovery Collaborations
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Access to massive compute power :
−Removed: Ability to run our computational software on one of the largest GPU clusters dedicated to drug design in the industry, thereby avoiding the time and cost needed to build this infrastructure on their own.
+Added: Ability to run our computational software at scale, thereby avoiding the time and cost needed to build such computational infrastructure on their own.
Early access to cutting-edge functionality :
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We have entered into a number of collaborations with biopharmaceutical companies under which our collaborators are pursuing research in a number of therapeutics areas, including without limitation, various programs in oncology, antifungal diseases, fibrosis, inflammatory bowel disease, metabolic disease, autoimmune disease, immune-oncology, cardiopulmonary disease and tuberculosis.
−Removed: Our current collaborators include Ajax Therapeutics, Inc., Bright Angel Therapeutics Inc., Faxian Therapeutics, LLC, or Faxian, Morphic Holding, Inc., Nimbus Therapeutics, LLC, Ono Pharmaceuticals Co., LTD., Sanofi S.A., ShouTi Inc., Sun Pharma Advanced Research Company Ltd., TB Alliance and Takeda Pharmaceuticals Company Limited, or Takeda.
+Added: Our current collaborators include Ajax Therapeutics, Inc., Bright Angel Therapeutics Inc., Morphic Holding, Inc., or Morphic, Nimbus Therapeutics, LLC, Sanofi S.A., ShouTi Inc., TB Alliance and Takeda Pharmaceuticals Company Limited, or Takeda.
With the exception of Takeda, where we retain all intellectual property rights until Takeda exercises its option to acquire a program, all of the programs being pursued under these collaborations are fully owned and controlled by each respective collaborator.
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Ravenna Pharmaceuticals, Inc.
−Removed: Relay Therapeutics, Inc.
−Removed: Based on the number of shares of common stock outstanding as of February 24, 2021, as reported on Morphic’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021.
−Removed: On a fully diluted unit basis.
−Removed: Based on the number of shares of common stock outstanding as of November 10, 2020, as reported on Relay’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, as filed with the SEC on November 12, 2020.
−Removed: In January 2021, we disposed of our equity stake in Relay Therapeutics, Inc.
−Removed: for aggregate consideration of $15.7 million.
+Added: Based on the number of shares of common stock outstanding as of November 1, 2021, as reported on Morphic’s Quarterly Report on Form 10-Q for the period ended September 30, 2021, as filed with the SEC on November 4, 2021.
+Added: On a fully diluted basis
Financial Rights.
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Under certain of our collaboration agreements, we are also eligible to receive a percentage of our collaborators’ sublicense revenue.
−Removed: Most of our collaborative programs are currently still in the discovery stages.
+Added: Many of our collaborative programs are currently still in the discovery stages.
Generally, the size of the payments we are eligible to receive from a collaborative program increases as the program advances.
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However, because these collaborations are not under our control, we cannot predict whether or when we might achieve any event-based increases in research funding payments, milestone payments, royalty or other payments under these collaborations or estimate the full amount of such payments, and we may never receive any such payments.
−Removed: For a further discussion of the risks we face
−Removed: with respect to receipt of any of these payments, please refer to “Risk Factors—Risks Related to Drug Discovery—We may never realize a return on our investment of resources and cash in our drug discovery collaborations”.
+Added: For a further discussion of the risks we face with respect to receipt of any of these payments, please refer to “Risk Factors—Risks Related to Drug Discovery—We may never realize a return on our investment of resources and cash in our drug discovery collaborations”.
How We Work with Our Collaborators.
Generally, our existing collaboration agreements provide that we agree to design drugs for a particular target or targets using our computational platform and knowhow exclusively for the collaborator.
−Removed: The collaborator retains the intellectual property related to any molecules developed under the collaboration.
+Added: With the exception of Takeda, where we retain all intellectual property rights until Takeda exercises its option to acquire a program, the collaborator retains the intellectual property related to any molecules developed under the collaboration.
Generally, our collaborators are not contractually required to provide us with, nor do we expect generally to receive, access to nonpublic information regarding key developments related to the advancement of these collaboration programs, such as clinical trial results, including safety and efficacy data, regulatory communications, or commercialization plans and strategies.
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Since then, we have expanded into other therapeutic areas, including in the areas of immunology and neurology.
−Removed: We continue to advance multiple internal programs towards investigational new drug, or IND, -enabling studies, and we expect to submit up to three IND applications in 2022, with our first submission expected in the first half of 2022, subject to favorable data from IND-enabling studies.
−Removed: Our strategy is to pursue an increasing number of wholly-owned programs and strategically evaluate on a program-by-program basis entering into clinical development ourselves, entering into collaborations, or out-licensing programs to maximize commercial opportunities.
+Added: We continue to advance multiple internal programs through investigational new drug, or IND, -enabling studies.
+Added: We expect to submit an IND application to the FDA for our MALT1 program in the first half of 2022, and subject to receiving regulatory clearance, we expect to initiate a Phase 1 clinical trial of our MALT1 inhibitor in patients with relapsed and resistant lymphoma in the second half of 2022.
+Added: We also plan to submit IND applications to the FDA for our CDC7 program in early 2023 and our WEE1 program in 2023, subject to favorable data from IND-enabling studies.
+Added: In addition, we plan to initiate a Phase 1 clinical trial of our CDC7 inhibitor in 2023, subject to receipt of regulatory clearance.
+Added: Our strategy is to pursue an increasing number of wholly-owned programs and strategically evaluate on a program-by-program basis entering into preclinical and clinical development ourselves, entering into collaborations, or out-licensing programs to maximize commercial opportunities.
As part of this strategy, in November 2020, we entered into an exclusive, worldwide collaboration and license agreement with BMS pursuant to which we and BMS agreed to collaborate in the discovery, research and development of small molecule compounds for biological targets in the oncology, neurology and immunology therapeutic areas.
−Removed: The collaboration includes HIF-2 alpha and SOS1/KRAS, which are two of our internal pipeline programs.
+Added: The initial collaboration targets included HIF-2 alpha and SOS1/KRAS, which were two of our internal pipeline programs.
+Added: In November 2021, the Company and BMS mutually agreed to replace the HIF-2 alpha target with another precision oncology target.
+Added: Following the replacement election, all rights to the HIF-2 alpha target program reverted to us.
Under the terms of the agreement, we received a $55.0 million upfront payment from BMS, and we are eligible to receive up to $2.7 billion in total milestones from BMS across all potential targets, as well as a tiered percentage royalty on net sales of each product commercialized by BMS ranging from mid-single digits to low-double digits, subject to certain specified reductions.
See “—Collaboration Agreement with Bristol-Myers Squibb Company” for additional information relating to this agreement.
+Added: Furthermore, in August 2021, we entered into a global discovery, development and commercialization collaboration with Zai Lab Limited focused on a novel program in oncology targeting DNA damage response.
+Added: Under the terms of the agreement, we are entitled to receive an upfront payment, and if we elect to co-fund clinical development of a product candidate under the collaboration, we will be entitled to receive 50% of any profits from the commercialization of an approved therapeutic in the United States.
+Added: We are also eligible to receive up to approximately $338 million in preclinical, clinical, regulatory and sales-based milestone payments from Zai Lab Limited for any product candidate developed under the collaboration, and we are entitled to receive tiered royalties on net sales outside the United States.
The following is a summary of our drug discovery programs:
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We continue to evaluate a number of additional targets using this analysis methodology.
+Added: MALT1 Inhibitor Program
+Added: We are developing novel MALT1 inhibitors for the treatment of patients with non-Hodgkin’s lymphoma and chronic lymphocytic leukemia who are resistant to or have relapsed on Bruton’s tyrosine kinase, or BTK, inhibitors, a currently-approved therapy for lymphoma patients.
+Added: Constant activation of nuclear factor-kappa B, or NF-κB, a key signaling molecule in B cells, is a hallmark of several subtypes of lymphoma.
+Added: MALT1 is a key mediator of the NF-κB signaling pathway, the main driver of a subset of B-cell lymphomas and functions by forming a complex with CARMA1 (Caspase recruitment domain-containing protein 11 also known as CARD-containing MAGUK protein 1) and BCL10 (B-cell lymphoma/leukemia 10) to mediate antigen receptor-induced lymphocyte activation.
+Added: MALT1 is considered a potential therapeutic target for several subtypes of non-Hodgkin’s lymphomas.
+Added: Activated B-cell, or ABC, a subtype of diffuse large B-cell lymphoma, or ABC-DLBCL, is the most common type of aggressive non-Hodgkin’s B-cell lymphoma.
+Added: ABC-DLBCL is associated with a number of mutations that trigger a constitutively active NF-κB signaling pathway, which often is mediated by increased MALT1 protease activity.
+Added: Among these mutations is a gain of function mutation or amplification of MALT1, which has also been identified in ABC-DLBCL patients.
+Added: Our program utilizes our physics-based software platform to enable the identification and advancement of multiple novel series from hit finding to lead optimization.
+Added: Combining multi-parameter optimization, FEP+, and machine learning, we were able to prioritize tight-binding compounds with drug-like properties, and identify multiple novel and distinct chemical series which showed strong anti-tumor activity, ultimately enabling development candidate selections in our MALT1 inhibitor program in under two years.
+Added: As shown in the figures below, in preclinical studies, one of our MALT1 inhibitors, Compound 1, showed anti-tumor activity in a MALT1 enzymatic assay and strong anti-proliferative effect in cell viability in a BTK inhibitor resistant OCI-LY3 B-cell non-Hodgkin’s lymphoma cell line, when compared to ibrutinib, a covalent BTK inhibitor.
+Added: As shown in the figures below, in preclinical studies, Compound 1 also demonstrated strong anti-tumor activities as a single agent in BTK inhibitor resistant OCI-LY3 cells and in BTK sensitive OCI-LY10 B-cell non-Hodgkin’s lymphoma in vivo cell-line derived xenograft (CDX) models.
+Added: TPGS = D-alpha-tocopheryl polyethylene glycol succinate, a solvent used in co-administration for drug dosing in animals;
+Added: TID = three times a day dosing;
+Added: SDD = spray dried dispersion
+Added: In addition, Compound 1 demonstrated strong anti-tumor activities in combination with ibrutinib in the BTK inhibitor sensitive in viv o models, such as the ABC-DLBCL patient-derived xenograft (PDX) model LY2298 and the OCI-LY10 CDX model.
+Added: Beyond ABC-DLBCL disease models, Compound 1 also demonstrated single agent anti-tumor activity in an in vivo mantle cell lymphoma REC-1 CDX model.
+Added: Compound 1 also showed strong combination effects with venetoclax (an inhibitor of the anti-apoptotic protein B-cell lymphoma 2 (BCL2)) on inhibition of cancer cell viability in the OCI-LY10 CDX model.
+Added: QD = once per day dosing;
+Added: BID = twice a day dosing
+Added: These data suggest that targeting MALT1 may expand therapeutic options for patients with selected B-cell lymphomas, such as ABC-DLBCL, with the possibility of expanding into other B-cell lymphomas such as mantle cell lymphoma.
+Added: Furthermore, these small molecule MALT1 inhibitors demonstrated potential in combination with BTK inhibitors to overcome drug-induced resistance to BTK inhibitors in patients with relapsed/refractory B-cell lymphomas.
+Added: Taken together, we believe the data present an opportunity to move a potential best-in-class MALT1 inhibitor into clinical trials, subject to the submission of our IND application and clearance from the FDA, and strongly underscore the therapeutic potential of our MALT1 inhibitors.
+Added: We expect to submit an IND application to the FDA for our MALT1 program in the first half of 2022, and subject to receiving regulatory clearance, we expect to initiate a Phase 1 clinical trial of our MALT1 inhibitor in patients with relapsed and resistant lymphoma in the second half of 2022.
CDC7 Kinase Inhibitor Program
We are developing tight-binding, selective, novel small molecule inhibitors of CDC7 for the treatment of advanced solid and liquid tumors.
−Removed: CDC7 is a serine/threonine protein kinase that has been shown to be a required step in DNA replication initiation.
+Added: CDC7 is a serine/threonine protein kinase that has been shown to play important roles in DNA replication initiation and in response to replication stress and DNA damage.
CDC7 levels are high in certain tumors, and are thought to be linked to these cancer cells’ proliferative capacity and ability to bypass normal DNA damage responses.
−Removed: CDC7 phosphorylates and activates the enzymes responsible for DNA replication initiation.
−Removed: Disruption of CDC7 activity in cancer cells leads to delayed DNA replication, cell cycle abnormalities, and cell death.
+Added: CDC7 phosphorylates and activates the enzymes responsible for DNA replication initiation and proteins involved in replication stress response.
+Added: Disruption of CDC7 activity in cancer cells leads to delayed DNA replication, increased replication stress, cell cycle abnormalities, and cell death.
The antiproliferative potential of CDC7 inhibition was validated by a third party in Phase 1 clinical trials of a CDC7 inhibitor in which responses were observed in patients, including those with bladder and pancreatic cancer.
Prior to this positive result, existing CDC7 inhibitors were not sufficiently tight-binding, lacked selectivity, and demonstrated poor pharmacokinetic properties.
−Removed: In order to maximize the number of cancer cells in cell cycle arrest, very tight-binding inhibitors are required to achieve durable clinical impact as monotherapy or in the context of clinical combinations.
−Removed: Using our computational platform, we have identified multiple tight-binding, selective, and novel CDC7 inhibitor series and are preparing for preclinical development activities.
−Removed: As shown in the figure below, our early molecules demonstrated inhibition of a downstream biomarker of CDC7, intratumoral phosphorylated MCM2, or pMCM2, that was used as an endpoint in recent third- party clinical trials of a CDC7 inhibitor.
−Removed: Furthermore, one series of our molecules displayed high levels of brain penetration in preclinical assays, which may provide an opportunity for the treatment of brain metastases in solid tumor patients.
−Removed: Combination of our early molecules and the Wee1 inhibitor AZD1775 (adavosertib), which is undergoing clinical trial testing in cancer patients, showed additive anti-proliferative effect in Colo205 cells, or human colon adenocarcinoma cells.
−Removed: Combination of another of our molecules and olaparib, an FDA-approved PARP inhibitor marketed as LYNPARZA by AstraZeneca, also showed additive anti-proliferative effects in H460 cells, or human non-small-cell lung cancer cells.
−Removed: Additive effects were also shown in combination with ceralasertib, an ataxia telangiectasia and Rad3-related, or ATR, inhibitor in Colo205 cells.
+Added: In order to maximize the anti-cancer activities of CDC7 inhibitors, very tight-binding inhibitors are required to achieve durable clinical impact as monotherapy or in the context of clinical combinations.
+Added: Using our computational platform, we have identified multiple tight-binding, selective, and novel CDC7 inhibitor series.
+Added: As shown in the figures below, our advanced preclinical molecules, compound 1 (Cpd-1) and compound 2 (Cpd-2), demonstrated inhibition of recombinant human CDC7 in a biochemical kinase assay and inhibition of the phosphorylation of the serine in position 53, or S53, of the protein MCM2, or pMCM2, a downstream substrate of CDC7, in a Colo205 colorectal cancer cell line.
+Added: Dose-dependent inhibition of CDC7 by Compound-1 (Cpd-1)
+Added: or Cpd-2 in a biochemical kinase (ADP-Glo) assay
+Added: Inhibition of phosphorylation of MCM2 (CDC7 substrate) at S53 by CDC7
+Added: inhibitors in Colo205 cells measured by MSD (Meso Scale Discovery) assay
+Added: Furthermore, Cpd-1 showed tumor growth inhibition resulting in tumor regression in the Colo205 colorectal cancer CDX model at doses that did not result in significant body weight loss.
+Added: Cpd-1 also showed a dose-dependent increase in plasma drug concentration and a dose-dependent decrease in intratumoral pMCM2 in the Colo205 CDX model.
+Added: In mouse models of acute myeloid leukemia, Cpd-1 also showed strong anti-tumor activity at doses that did not result in significant body weight loss.
+Added: As also shown in the figures below, a combination of our advanced preclinical molecule, compound 4 (Cpd-4), with venetoclax (an inhibitor of the anti-apoptotic protein B-cell lymphoma 2 (BCL2)), olaparib (an FDA-approved PARP inhibitor marketed as LYNPARZA by AstraZeneca), ceralasertib (an ataxia telangiectasia and RAD-3relate, or ATR, inhibitor), or adavosertib (a WEE1 inhibitor) showed synergistic effect on inhibition of cancer cell viability in the indicated cancer cell lines, which are the acute myeloid leukemia cell line, or MV-4-11, the lung cancer cell line, or H460, and the Colo205 colorectal cancer cell line.
+Added: All competitor data is internally generated by contract research organizations, using commercially available tools or synthesized by third-party research chemists using publicly available structure information.
WEE1 Kinase Inhibitor Program
WEE1 is a gatekeeper checkpoint kinase that prevents cellular progression through the cell cycle allowing time for DNA repair before cell division takes place.
−Removed: We are therefore developing tight-binding, selective Wee1 inhibitors with optimized physicochemical properties that we believe will be well suited for combinations with other DNA damage response therapies such as PARP and ATR inhibitors for the treatment of ovarian, pancreatic, breast, and lung cancers.
−Removed: Wee1 acts as a negative regulator of entry into mitosis at the G2/M transition by protecting the nucleus from CDC2, an important activator that triggers cell division.
−Removed: Wee1 is one of the two mechanisms known by which the G2 checkpoint is initiated in response to DNA damage.
−Removed: Blockade at the G2 checkpoint is especially important, as some tumors rely on DNA repair at the G2 checkpoint.
−Removed: Thus, inhibition of Wee1 can trigger massive DNA breakage and apoptosis in tumor cells.
−Removed: A Wee1 inhibitor currently being investigated in Phase 2 clinical trials by a third party has shown clinically meaningful tumor regression with partial responses and stable disease in ovarian cancer and small cell lung carcinoma, and is being studied in combinations with chemotherapy, PARP inhibitors, and immunotherapy.
−Removed: A prior third party Wee1 inhibitor that has advanced to clinical trials may have off-target effects resulting from inhibition of polo-like kinase 1, or PLK1, and inactivation of a liver enzyme, CYP3A4, which is responsible for elimination of drug and drug metabolites from the body, making dosing and combinations more challenging.
+Added: Inhibition of WEE1 allows for accumulation of DNA damage, triggering DNA breakage and
+Added: apoptosis in tumor cells.
+Added: We are therefore developing tight-binding, selective W EE 1 inhibitors with optimized physicochemical properties that we believe will be well suited for combinations with DNA damage response inhibitors such as PARP and ATR inhibitors and other targeted therapies for the treatment of ovarian, colorectal, breast, and other solid tumors.
+Added: A WEE1 inhibitor currently being investigated in Phase 2 clinical trials by a third party has shown clinically meaningful tumor regression with partial responses and stable disease in ovarian and uterine cancer, and is being studied in combinations with chemotherapy, PARP inhibitors, and immunotherapy.
+Added: A prior third party WEE1 inhibitor that has advanced to clinical trials may have off-target effects resulting from inhibition of other kinases, and inactivation of a liver enzyme, CYP3A4, which is responsible for elimination of drug and drug metabolites from the body, making dosing and combinations more challenging.
We believe our computational platform can be used to identify tight-binding molecules with optimized drug-like properties that exhibit neither of these liabilities.
−Removed: We have identified Wee1 inhibitor lead molecules that are tight-binding and 100-fold more selective for Wee1 versus PLK1, and have exhibited a favorable property profile, including no observable inactivation of CYP3A4.
+Added: As shown in the figure below, we have identified WEE1 inhibitor lead molecules that are tight-binding and highly selective, and have exhibited a favorable drug-like property profile, including no observable inactivation of CYP3A4.
+Added: We have benchmarked our compounds against AZD-1775, a WEE1 inhibitor being advanced by AstraZeneca, and Zn-C3, a WEE1 inhibitor being advanced by Zentalis Pharmaceuticals, and our lead molecules have shown comparable binding affinity against WEE1, as measured by Kd, a measure of binding affinity.
+Added: Our compounds have also shown comparable effects on the viability of the A427 non-small cell lung cancer cell line and the OVCAR3 high grade serous ovarian cancer cell line.
+Added: The selectivity of our WEE1 inhibitors was evaluated by profiling one of our lead compounds at 1 uM across a panel of over 450 kinases.
+Added: Our WEE1 inhibitor showed high selectivity for WEE1 in this assay panel, binding significantly, with a greater than 90% inhibition relative to control, to only eight other kinases.
+Added: Furthermore, time-dependent inhibition, or TDI, of the enzyme CYP3A4 often results in clinically significant drug-drug interactions, or DDI.
+Added: In vitro, our compound showed no measurable TDI of CYP3A4, which we believe might lead to a lower potential liability for DDI if our WEE1 inhibitors were used in combination with other agents.
We are pursuing in vitro and in vivo WEE1 and PARP inhibitor combination studies and studies in patient-derived tumor mouse models and other combinations, which we believe may have implications for future clinical combination trials.
−Removed: MALT1 Inhibitor Program
−Removed: We are developing novel MALT1 inhibitors for the treatment of patients with non-Hodgkin’s lymphoma and chronic lymphocytic leukemia who are resistant to or have relapsed on Bruton’s tyrosine kinase, or BTK, inhibitors, a currently-approved therapy for lymphoma patients.
−Removed: Constant activation of nuclear factor-kappa B, or NF-kB, a key signaling molecule in B cells, is a hallmark of several subtypes of lymphoma.
−Removed: MALT1 is a protein that is downstream of BTK in the NF-kB signaling pathway and when rearranged, drives lymphoma cell growth.
−Removed: The anti-proliferative effect of covalent BTK inhibitors, such as ibrutinib and acalabrutinib, provides clinical and commercial proof-of-concept that inhibiting NF-kB signaling can be effective for the treatment of B-cell malignancies with elevated B-cell receptors signaling, including chronic lymphocytic leukemia, Waldenström’s macroglobulinemia, mantle cell lymphoma and marginal zone lymphoma.
−Removed: However, a common active site mutation in patients following long-term BTK inhibitor treatment prevents covalent binding of ibrutinib and acalabrutinib to BTK leading to loss of efficacy.
−Removed: Activated B-cell, or ABC, a subtype of diffuse large B-cell lymphoma, or ABC DLBCL, is the most common type of aggressive non-Hodgkin B-cell lymphoma.
−Removed: ABC DLBCL is associated with a number of mutations that trigger a constitutively active NF-kB signaling pathway, which often is mediated by increased MALT1 protease activity.
−Removed: Among these mutations is a gain of function mutation or amplification of MALT1, which has also been identified in ABC DLBCL patients.
−Removed: We have used our computational platform to rapidly identify novel, tight-binding MALT1 small-molecule allosteric inhibitors with drug-like properties.
−Removed: Furthermore, we have been able to demonstrate that our MALT1 inhibitors show additive effects when combined with BTK inhibitors in ABC DLBCL lymphoma cell lines.
−Removed: In OCI-LY3 cells, which are resistant to BTK inhibitors, our current MALT1 inhibitors showed dose responsive anti-proliferative effects compared to ibrutinib, strongly suggesting the potential of our inhibitors to benefit patients with acquired resistance due to long term BTK inhibitor treatment.
−Removed: Our MALT1 inhibitors demonstrated in vivo target engagement with decreased tumor B-cell lymphoma 10 (BCL 10) cleavage in a mouse model bearing OCI-LY10 cell derived tumors after oral daily dosing.
−Removed: Further, additive anti-proliferative effects were observed when combining our inhibitors with ibrutinib and acalabrutinib in preclinical studies of OCI-LY10 cells, which are responsive to BTK inhibitors.
−Removed: Additional combination studies were conducted with a next generation BTK inhibitor, ARQ-531, a third-party investigational reversible non-covalent inhibitor of BTK that inhibits wild type and ibrutinib-resistant BTK-C481S mutants.
−Removed: Our MALT1 inhibitors showed additive effects when combined with ARQ-531 in preclinical studies.
−Removed: This supports the potential for our MALT1 inhibitors to be combined with BTK inhibitors to treat patients with B-cell malignancies who no longer respond to existing BTK inhibitors.
−Removed: HIF-2 alpha Inhibitor Program
−Removed: In collaboration with BMS, we are developing a HIF-2 alpha inhibitor for the treatment of renal cell carcinoma as monotherapy or in combination with immunotherapy agents, PD-1 or PDL-1 antibodies, and potentially other indications, such as pulmonary hypertension.
−Removed: HIF-2 alpha, also known as EPAS1, is one of several master regulators of intratumoral hypoxia and control hypoxia-mediated pathological processes in tumors, including angiogenesis, pH homeostasis, cell migration/invasion, stem cell pluripotency, immune evasion, and therapy resistance.
−Removed: In third-party studies, clinical proof of concept was recently demonstrated for the role of HIF-2 alpha inhibition in patients with clear cell renal cell carcinoma, or CCRCC, caused by a germline mutation in the Von Hippel-Lindau tumor suppressor gene.
−Removed: Pursuant to our collaboration and license agreement with BMS, once we have discovered or identified a HIF-2 alpha inhibitor that meets specified, mutually-agreed criteria (or upon BMS’s selection), BMS will be solely responsible for the further preclinical and clinical development, manufacturing and commercialization of such candidate at its own expense.
−Removed: See “—Collaboration Agreement with Bristol-Myers Squibb Company” for additional information relating to this agreement.
+Added: All competitor data is internally generated by contract research organizations, using commercially available tools or synthesized by third-party research chemists using publicly available structure information.
SOS1/KRAS Inhibitor Program
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SOS1, or Son of sevenless-1, is involved in the activation and regulation of KRAS.
−Removed: Oncogenic mutant KRAS stimulates the growth of some of the most intractable tumors, such as lung, pancreatic, and colon cancer.
+Added: Oncogenic mutant KRAS
+Added: stimulates the growth of some of the most intractable tumors, such as lung, pancreatic, and colon cancer.
Strategies to disrupt the persistently active Ras pathway have focused on targeting Cys12 of the oncogenic mutant KRAS G12C with covalent inhibitors.
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See “—Collaboration Agreement with Bristol-Myers Squibb Company” for additional information relating to this agreement.
−Removed: Future Programs
+Added: Other and Future Programs
We have identified a large number of protein targets that we believe are amenable to our computational platform, which creates a large and growing inventory of targets that we can potentially advance into discovery programs.
−Removed: Our drug discovery group also intends to pursue targets with strong biological validation and therapeutic potential that currently lack protein structures of sufficient
−Removed: quality to permit the use of our computational platform for drug discovery.
+Added: Our drug discovery group also intends to pursue targets with strong biological validation and therapeutic potential that currently lack protein structures of sufficient quality to permit the use of our computational platform for drug discovery.
We are actively pursuing strategic alliances with collaborators that have the ability to generate high-quality protein structures for these targets, which will enable us to initiate discovery efforts.
For example, as part of these efforts, in 2020 we entered into strategic partnerships with Viva Biotech to access new x-ray crystal structures as well as with Thermo Fisher Scientific to obtain structures of protein complexes leveraging cryo-EM technology.
+Added: Furthermore, in January 2022, we acquired XTAL BioStructures, Inc., a company that provides structural biology services, including biophysical methods, protein production and purification, and X-ray crystallography, which we believe will augment our ability to produce high quality target structures for our drug discovery programs.
Our initial programs are focused on discovering and developing inhibitors for targets in DNA damage response pathways and genetically defined cancers.
3 unchanged sentences
We believe that deploying our platform at scale with access to genomic profiling data for patients puts us in a strong position to predict the impact of active-site resistance mutations with clinically relevant accuracy to optimize the design of molecules that are robust against common resistant mutations.
−Removed: Since we have launched our initial programs which are focused on oncology, we have expanded into other therapeutic areas, including in the areas of immunology and neurology.
+Added: In addition to our programs highlighted above, we are also progressing a number of undisclosed programs in the areas of oncology, immunology, and neurology.
+Added: We are pursuing certain of these programs on our own and certain of these programs are being advanced in collaboration with BMS pursuant to our collaboration agreement described above, as well as under a separate collaboration agreement with BMS that we entered into in August 2021 to discover, develop and commercialize bifunctional protein degraders.
+Added: All of these programs are currently in the discovery stage, and we have not yet identified a development candidate for any of these programs.
Technical Details of Our Key Technologies
Calculation of key drug properties using physics-based methods
−Removed: Over the past 30 years and with the concerted effort of hundreds of our scientists and software engineers, we have developed a physics-based computational platform that is capable of predicting the binding affinity of a drug molecule with a high degree of accuracy.
+Added: Over the past several decades and with the concerted effort of hundreds of our scientists and software engineers, we have developed a physics-based computational platform that is capable of predicting the binding affinity of a drug molecule with a high degree of accuracy.
The binding affinity of a drug molecule to a target protein is the key driving force of its in vivo efficacy.
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These contributions include the deformation and/or rigidification of the small molecule into the bound conformation ( Δ G(1) in the figure below) and the rigidification of the protein in the bound conformation ( Δ G(2)), the removal of waters surrounding the molecule ( Δ G(3)) and the removal of waters within the protein binding site ( Δ G(4)), and finally the interactions achieved between the molecule and protein when binding to form the protein-molecule complex ( Δ G(5)).
−Removed: We have developed a solution to consistently assess all of these contributions to binding with a high degree of accuracy, building on a method called “free energy perturbation.” Free energy perturbation perturbs, or transforms, an initial molecule into
−Removed: another molecule of interest and evaluates how that transformation changes binding affinity to a particular protein target.
+Added: We have developed a solution to consistently assess all of these contributions to binding with a high degree of accuracy, building on a method called “free energy perturbation.” Free energy perturbation perturbs, or transforms, an initial molecule into another molecule of interest and evaluates how that transformation changes binding affinity to a particular protein target.
Our solution for conducting these calculations is called FEP+.
2 unchanged sentences
an automated workflow allowing for force field coverage to be extended on the fly utilizing our accurate quantum mechanics software;
−Removed: computationally efficient molecular dynamics engine that runs on GPUs;
+Added: computationally efficient molecular dynamics engine that runs on graphic processing units;
efficient, enhanced sampling methods that allow the calculation to be converged with reduced simulation times;
2 unchanged sentences
All of these constituent technologies are necessary to achieve the accuracy, scalability and applicability of our free energy perturbation implementation.
−Removed: In a recent peer-reviewed study including approximately 3,000 molecules across approximately 90 distinct projects, FEP+ exhibited an error profile that indicates its affinity predictions approach the accuracy of running a laboratory experiment.
+Added: In a notable peer-reviewed study including approximately 3,000 molecules across approximately 90 distinct projects, FEP+ exhibited an error profile that indicates its affinity predictions approach the accuracy of running a laboratory experiment.
FEP+ is also able to perform these computations more rapidly than experimental assays.
−Removed: Computational assessment of a molecule utilizing FEP+ requires approximately 24 hours of computation on a GPU or only a few hours on a computer that contains eight GPUs.
+Added: Computational assessment of a molecule utilizing FEP+ requires approximately only a few hours.
In comparison, it often takes weeks to synthesize a drug-like molecule and assay its binding affinity for the target of interest in a laboratory.
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We have developed methods to enumerate extremely large libraries of molecules with our PathFinder software solution, thereby allowing our software customers, our drug discovery collaborators, and our internal drug discovery team to explore a much larger portion of chemical space than is possible through manual design.
−Removed: The chemical enumeration technology we have developed incorporates over a hundred known chemical reactions that can, in a fully automated fashion, computationally explore billions of alterations of a molecule of interest.
+Added: The chemical enumeration technology we have developed incorporates the most commonly used chemical reactions and can, in a fully automated fashion, computationally explore billions of alterations of a molecule of interest.
Scaling accurate physics-based calculations to extremely large libraries of molecules
Although FEP+ calculations have been shown to be accurate, it is not possible to apply these calculations to billions of molecules given the current availability of computing resources.
−Removed: To address this problem, we developed an approach that leverages the accuracy of FEP+, but allows for exploration of billions of molecules in a reasonable amount of time by leveraging machine learning.
+Added: To address this problem, we developed an approach that leverages the accuracy of FEP+, but allows for exploration of billions of molecules rapidly by leveraging machine learning.
We have succeeded in integrating our physics-based molecule scoring with highly computationally efficient modern machine-learning methods.
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In addition, by integrating FEP+ with our machine learning implementation, which we refer to as AutoQSAR/DeepChem, we developed a solution that we refer to as Active Learning FEP+.
−Removed: Active Learning FEP+ combines the accuracy of free energy calculations with the speed of machine learning calculations and can be used to explore up to billions of molecules within a few days.
+Added: Active Learning FEP+ combines the accuracy of free energy calculations with the speed of machine learning calculations and can be used to explore up to billions of molecules within a day.
By further combining this functionality with our ability to enumerate large sets of molecules provided by PathFinder and our ability to build and manage complex workflows utilizing cloud resources, we are able to deploy these capabilities at scale to advance projects.
2 unchanged sentences
That machine learning model is then used to filter the large library of molecules down to a number that is small enough to be able to prioritize with FEP+.
−Removed: The result is that it takes only a few days to prioritize one billion molecules rather than one million days.
+Added: The result is that we can prioritize one billion molecules in as little as a day, rather than one million days.
Rapid identification of novel active hit molecules suitable to initiate hit-to-lead and lead optimization efforts
9 unchanged sentences
From this training process, AutoQSAR/DeepChem learns to identify substructures in the molecules that may lead to activity.
−Removed: Then when applied to large libraries of molecules, these methods can identify molecules with measurable activity against the target protein.
−Removed: These methods are highly efficient and can be used to screen one billion molecules in less than one day on a few hundred CPUs.
−Removed: However, one significant limitation is that machine learning methods cannot extrapolate
−Removed: into chemical space that differs from the training set and therefore, this method tends to identify molecules similar to already known molecules.
+Added: Then when applied to large libraries of molecules, these methods can identify molecules with
+Added: measurable activity against the target protein.
+Added: These methods are highly efficient and can be used to screen billion s of molecules in less than one day.
+Added: However, one significant limitation is that machine learning methods cannot extrapolate into chemical space that differs from the training set and therefore, this method tends to identify molecules similar to already known molecules.
Shape is used to identify molecules with a similar shape to known active molecules.
4 unchanged sentences
Glide and WScore evaluate molecules based on the number and kind of contacts made between the molecule and protein.
−Removed: These methods are much more computationally expensive than AutoQSAR/DeepChem or Shape, often requiring seconds to minutes of CPU computing time per molecule.
+Added: These methods are much more computationally expensive than AutoQSAR/DeepChem or Shape.
However, they can be more readily applied to targets for which there is little or no earlier reported active molecules.
1 unchanged sentence
When used in this context, FEP+ can be used to completely replace the core moiety of an earlier known molecule to yield a novel molecule with similar binding potency.
−Removed: This approach is much more computationally intensive than previous methods, often ~24 GPU hours per molecule, but is also much more accurate.
+Added: This approach is much more computationally intensive than previous methods, but is also much more accurate.
Utilizing this approach on multiple programs, we have been able to identify novel nanomolar or picomolar inhibitors in the first few months of project chemistry that have property profiles typical of molecules only observed in the later hit-to-lead phases of drug discovery.
−Removed: Our FEP+ solution has also recently been extended to support the calculation of absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context.
+Added: Our FEP+ solution also supports the calculation of absolute binding affinities, which enables the software to evaluate and triage diverse molecules sharing no common peripheral features in a hit discovery context.
Computational analysis of the energetic properties of water molecules occupying molecule binding sites in proteins
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This makes interpretation of binding affinity data more intuitive and provides insights to possible design routes to improve potency and selectivity.
+Added: Software Business
The overall market for molecular discovery and design software is global, rapidly evolving, competitive, and subject to changing technology and shifting customer focus.
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Our ability to remain competitive will largely depend on our ability to continue to improve our computational platform and demonstrate success in our drug discovery efforts.
−Removed: Our software solutions face competition from commercial competitors in the business of selling simulation and modeling software to biopharmaceutical companies.
−Removed: These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA, Chemical Computing Group (US) Inc., Cresset Biomolecular Discovery Limited, OpenEye Scientific Software, Inc., Optibrium Limited, and Simulations Plus, Inc.
−Removed: We also have competitors in materials science, such as BIOVIA and Materials Design, Inc., and in
−Removed: enterprise software for the life sciences, such as BIOVIA, Certara USA, Inc., and Dotmatics, Inc.
+Added: Our software solutions face competition from commercial competitors in the business of selling or providing simulation and modeling software to biopharmaceutical companies.
+Added: These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA, Chemical Computing Group (US) Inc., Cresset Biomolecular Discovery Limited, OpenEye Scientific Software, Inc., Optibrium Limited, Cyrus Biotechnology, Inc., Molsoft LLC , Insilico Medicine , Inc.
+Added: , Iktos, XtalPi Inc., and Simulations Plus, Inc.
+Added: We also have competitors in materials science, such as BIOVIA and Materials Design, Inc., and in enterprise software for the life sciences, such as BIOVIA, Certara USA, Inc., ChemAxon, PerkinElmer, Inc., and Dotmatics, Inc.
In some cases, these competitors are well-established providers of these solutions and have long-standing relationships with many of our current and potential customers, including large biopharmaceutical companies.
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We also face competition from solutions that biopharmaceutical companies develop internally, smaller companies that offer products and services directed at more specific markets than we target, enabling these competitors to focus a greater proportion of their efforts and resources on these markets, as well as a large number of companies that have been founded with the goal of applying machine learning technologies to drug discovery.
−Removed: The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition, and strong emphasis on proprietary products.
+Added: Drug Discovery Business
+Added: The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition, and strong emphasis on proprietary and novel products and product candidates.
While we believe that our computational platform, technology, knowledge, experience, and scientific resources provide us with competitive advantages, our drug discovery business faces potential competition from many sources, including major pharmaceutical, specialty biopharmaceutical companies, technology companies, academic institutions and government agencies, and public and private research institutions.
Any product candidates that we or one of our collaborators successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
+Added: The key competitive factors affecting the success of the product candidates we develop, if approved, are likely to be their efficacy, safety, convenience and price, the level of generic competition and the availability of coverage and adequate reimbursement from third-party payors.
+Added: If any of our product candidates are approved and successfully commercialized, it is likely that we will face increased competition as a result of other companies pursuing development of products to address similar diseases.
+Added: In particular, there is intense competition in the fields of oncology we are pursuing.
+Added: We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, emerging and start-up companies, universities and other research institutions.
+Added: We also compete with these organizations to recruit management, scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business plan.
+Added: We will also face competition in establishing clinical trial sites, enrolling subjects for clinical trials and in identifying new product candidates.
+Added: Large pharmaceutical and biotechnology companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing biotechnology products.
+Added: These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions.
+Added: Established pharmaceutical and biotechnology companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete.
+Added: 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 our products.
+Added: Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies, as well as in acquiring technologies complementary to, or necessary for, our programs.
+Added: As a result of all of these factors, our competitors may succeed in obtaining approval from the FDA or other comparable foreign regulatory authorities or in discovering, developing and commercializing products in our field before we do.
Collaboration Agreement with Bristol-Myers Squibb Company
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Under the agreement, during a limited research term, we will be responsible, at our own cost and expense, for the discovery of small molecule compounds (other than protein-degrader compounds) directed to five specified biological targets pursuant to a mutually agreed research plan for each such target.
−Removed: The initial specified targets include HIF-2 alpha and SOS1/KRAS, which are two of our early-stage programs.
+Added: The initial collaboration targets included HIF-2 alpha and SOS1/KRAS, which were two of our early-stage programs.
+Added: In November 2021, we and BMS mutually agreed to replace the HIF-2 alpha target with another precision oncology target.
+Added: Following the replacement election, all rights to the HIF-2 alpha target program reverted to us.
Once we have discovered or identified a compound for a target that meets specified, mutually-agreed criteria or upon BMS selection of a compound as a development candidate, BMS will be solely responsible for the further preclinical and clinical development, manufacturing and commercialization of such candidate at its own cost and expense.
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The agreement excludes any activities relating to protein-degrader compounds.
−Removed: However, under the terms of the agreement, for a limited period of time after the execution of the agreement, we and BMS agreed to negotiate a separate definitive agreement pursuant to which we will agree to license to BMS the right to conduct research, development and commercialization activities with respect to degrader compounds for th e targets under the agreement.
+Added: However, under the terms of the agreement, for a limited period of time after the execution of the agreement, we and BMS agreed to negotiate a separate definitive agreement pursuant to which we will agree to license to BMS the right to conduct research, development and commercialization activities with respect to degrader compounds for the targets under the agreement.
+Added: In August 2021, we and BMS entered into a definitive agreement to discover, develop and commercialize bifunctional protein degraders consistent with the terms and conditions described in the initial collaboration agreement.
On a target-by-target basis, during the term of the agreement for a given target, we are prohibited from clinically developing or commercializing, ourselves or with a third party, any nucleic acid, antibody, biologic, compound, small molecule or other molecule, or any product that contains the foregoing, that specifically modulates as its primary mechanism of action such target, or is designed to specifically modulate such target.
16 unchanged sentences
In the event that one or more Licensed Products are sold together with other products for a single aggregate license fee, we have agreed to pay to Columbia University the applicable royalty on the gross revenues attributable to each Licensed Product based on the relative list prices of each product covered by such license fee.
−Removed: For a description of the royalties payable by us to Columbia University in connection with our services agreements, see “License Agreements with Columbia University—Services Royalty Amendment” below.
+Added: For a description of the royalties payable by us to Columbia University in connection with our services agreements, see “—Services Royalty Amendment” below.
PS-GVB License Agreement
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The technology licensed under the 1994 Columbia Agreement is incorporated into our Jaguar quantum mechanical program, which we market and distribute as part of our physics-based computational platform.
−Removed: The 1994 Columbia Agreement grants us a worldwide, exclusive, license to the software code developed by Columbia University and incorporated into the electronic structure software program PS-GVB v1.0, or the PS-GVB Code, and all improvement to the PS-GVB v1.0 software program and PS-GVB Code developed by Columbia University, or the PS-GVB Improvements, including all PS-GVB Code and PS-GVB Improvements that are incorporated into any new products, new releases, and new versions related to the software, or the New PS-GVB Module Code, in each case, to reproduce, use, execute, copy, operate, sublicense, and distribute in connection
−Removed: with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
+Added: The 1994 Columbia Agreement grants us a worldwide, exclusive, license to the software code developed by Columbia University and incorporated into the electronic structure software program PS-GVB v1.0, or the PS-GVB Code, and all improvement to the PS-GVB v1.0 software program and PS-GVB Code developed by Columbia University, or the PS-GVB Improvements, including all PS-GVB Code and PS-GVB Improvements that are incorporated into any new products, new releases, and new versions related to the software, or the New PS-GVB Module Code, in each case, to reproduce, use, execute, copy, operate, sublicense, and distribute in connection with the marketing and sale of our products and services, to develop improvements thereto, and to conduct research and backup disaster recovery.
We may only sublicense the PS-GVB Code, the PS-GVB Improvements, and the New PS-GVB Module Code, or the Licensed PS-GVB Software, to the extent they are incorporated into a product that is sold directly by us or that is distributed on our behalf.
2 unchanged sentences
The 1994 Columbia Agreement and the licenses granted thereunder may be terminated by us or Columbia University only upon the other party’s material breach of the agreement and such party’s failure to cure such breach.
−Removed: Upon termination, any third party that has licensed the Licensed PS-GVB Software from us will retain the right to use such software, and we will have the perpetual right to continue to provide support to any such third parties in connection with their use of such software.
+Added: Upon termination, any third party that
+Added: has licensed the Licensed PS-GVB Software from us will retain the right to use such software, and we will have the perpetual right to continue to provide support to any such third parties in connection with their use of such software.
Fast Multipole RESPA License Agreement
39 unchanged sentences
and (c) any products that incorporate or include the Water Site Software, or that is covered by the Water Site Patents, or the Water Site Products, in each case, to reproduce, modify, distribute, and perform and display in connection with the development, marketing, and sale of our products and services, to conduct research using the Water Site Software, and to conduct backup disaster recovery.
−Removed: Our Water Site Products include
−Removed: our WaterMap Core program, which we market and distribute as part of our physics-based computational platform.
+Added: Our Water Site Products include our WaterMap Core program, which we market and distribute as part of our physics-based computational platform.
We are restricted from distributing the Water Site Software source code without the prior written consent of Columbia University.
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The royalties under the 2008 Columbia Agreement are paid on a product-by-product basis and vary based on whether or not the gross revenues are generated in countries of manufacture or sale in which the Water Site Product is covered by a Water Site Patent.
−Removed: In the event that there are multiple royalties payable on a single product, we are required to (i) pay the higher of the two royalties, if there are no more than two royalties payable on the particular Water Site Product or (ii) negotiate in good faith with Columbia University on a single royalty, if there are more than two royalties payable on the particular Water Site Product.
+Added: In the event that there are multiple royalties payable on a single product, we are required to (i) pay the higher of the two royalties, if there are no more than two royalties payable on the particular Water Site Product or
+Added: (ii) negotiate in good faith with Columbia University on a single royalty, if there are more than two royalties payable on the particular Water Site Product.
In the event that we take action against Columbia University with respect to the validity or enforceability of any Water Site Patents, excluding any defensive actions or claims, the royalties paid under the 2008 Columbia Agreement will increase by a specified amount.
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It is important to our future commercial success to obtain and maintain patent and other proprietary protection for commercially important technology, inventions, and know-how related to our business;
−Removed: defend and enforce our intellectual property rights, in
−Removed: particular our patent, trademark, and copyright rights;
+Added: defend and enforce our intellectual property rights, in particular our patent, trademark, and copyright rights;
preserve the confidentiality of our trade secrets;
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As a result, we cannot guarantee that any products we develop will be protected or remain protectable by enforceable patents.
−Removed: Moreover, any patents that we hold or may hold may be challenged, circumvented or invalidated by third parties.
+Added: Moreover, any patents that we
+Added: hold or may hold may be challenged, circumvented or invalidated by third parties.
See “Risk Factors—Risks Related to Our Intellectual Property” for a more comprehensive description of risks related to our intellectual property.
3 unchanged sentences
cases, five pending U.S.
−Removed: non-provisional patent applications, ten issued or allowed non-U.S.
−Removed: cases, including six granted European patents which have been validated among multiple individual European Patent Convention nations and four non-European patents, and nine pending foreign patent applications relating to our computational platform.
+Added: non-provisional patent applications, 11 issued or allowed non-U.S.
+Added: cases, including six granted European patents which have been validated among multiple individual European Patent Convention nations and five non-European patents, and nine pending foreign patent applications relating to our computational platform.
While we believe that the specific and generic claims contained in our wholly-owned and licensed pending U.S.
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Any patents that are issued or that may issue from these families are expected to expire between 2026 and 2038, absent any adjustments or extensions.
−Removed: As of February 3, 2021, there were no published patent families related to our internal drug discovery business, and although several of our drug discovery collaborators have filed patent applications related to our collaborations that include employees of ours as inventors, including over 100 compound patents and patent applications since 2010, we do not own any intellectual property rights related to these inventions.
−Removed: As of February 3, 2021, 13 pending wholly-owned provisional applications, two pending international patent applications, and two pending non-U.S.
−Removed: patent applications have been filed.
+Added: As of February 4, 2022, there were two published patent families related to our internal drug discovery business, and several of our drug discovery collaborators have filed patent applications related to our collaborations that include employees of ours as inventors, including over 100 compound patents and patent applications since 2010.
+Added: We do not own any intellectual property rights related to these inventions.
+Added: As of February 4, 2022, there are six pending wholly-owned provisional applications, six pending international patent applications, and two pending non-U.S.
+Added: patent applications related to our internal drug discovery business.
Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the U.S.
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These agreements may not provide meaningful protection.
−Removed: These agreements may also be breached, and we may not have an adequate remedy for any such
+Added: These agreements may also be breached, and we may not have an adequate remedy for any such breach.
In addition, our trade secrets and/or confidential know-how may become known or be independently developed by a third party, or misused by any collaborator to whom we disclose such information.
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We commercialize our software solutions in various jurisdictions around the world through our software sales organization.
−Removed: We have sales operations in the United States, Europe, Japan, and India, and we also have established distribution channels in other important markets, including China and South Korea.
+Added: We have sales operations in the United States, Europe, Japan, India, and South Korea and we also have established distribution channels in other important markets, including China.
These efforts are led by our approximately 150 person global team of sales, technical, and scientific personnel.
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We do not own or operate manufacturing facilities for the production of any product candidates, nor do we have plans to develop our own manufacturing operations.
−Removed: We expect to rely on third-party contract manufacturers for all of our required raw materials, drug substance, and finished drug product for the preclinical and clinical development of any development candidates we develop ourselves.
+Added: We rely and expect to continue to rely on third-party contract manufacturers for all of our required raw materials, drug substance, and finished drug product for the preclinical and clinical development of any development candidates we develop ourselves.
Government Regulation and Product Approvals
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In the United States, drug products are approved and regulated under the Federal Food, Drug and Cosmetic Act, or FDCA, and applicable implementing regulations and guidance.
−Removed: The failure of an applicant to comply with the applicable regulatory requirements at any time during the product development process, including non-clinical testing, clinical testing, the approval process or post-approval process, may result in delays to the conduct of a study, regulatory review and approval, and/or administrative or judicial sanctions.
−Removed: An applicant seeking approval to market and distribute a new drug in the United States generally must satisfactorily complete each of the following steps before the product candidate will be approved by the FDA:
+Added: A company, institution, or organization which takes responsibility for the initiation and management of a clinical development program for such products, and for their regulatory approval, is typically referred to as a sponsor.
+Added: The failure of a sponsor to comply with the applicable regulatory requirements at any time during the product development process, including non-clinical testing, clinical testing, the approval process or post-approval process, may result in delays to the conduct of a study, regulatory review and approval, and/or administrative or judicial sanctions.
+Added: A sponsor seeking approval to market and distribute a new drug in the United States generally must satisfactorily complete each of the following steps before the product candidate will be approved by the FDA:
preclinical testing including laboratory tests, animal studies, and formulation studies, which must be performed in accordance with the FDA’s good laboratory practice, or GLP, regulations and standards;
−Removed: submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;
+Added: design of a clinical protocol and submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;
approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;
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Preclinical Studies
−Removed: Before an applicant begins testing a product candidate with potential therapeutic value in humans, the product candidate enters the preclinical testing stage, including in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use.
+Added: Before a sponsor begins testing a product candidate with potential therapeutic value in humans, the product candidate enters the preclinical testing stage, including in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use.
Preclinical tests include laboratory evaluations of product chemistry, formulation, and stability, as well as other studies to evaluate, among other things, the toxicity of the product candidate.
−Removed: The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations and standards.
+Added: The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations and standards and the United States Department of Agriculture’s Animal Welfare Act, if applicable.
The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND.
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Such authorization must be secured prior to interstate shipment and administration of any product candidate that is not the subject of an approved NDA.
−Removed: In support of a request for an IND, applicants must submit a protocol for each clinical trial, and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
+Added: In support of a request for an IND, sponsors must submit a protocol for each clinical trial, and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin.
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Other reasons for suspension or termination may be made by us based on evolving business objectives and/or the competitive environment.
−Removed: Information about clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on its ClinicalTrials.gov website.
+Added: Expanded Access
+Added: Expanded access, sometimes called “compassionate use,” is the use of investigational new products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options.
+Added: The rules and regulations related to expanded access are intended to improve access to investigational products for patients who may benefit from investigational therapies.
+Added: FDA regulations allow access to investigational products under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for:
+Added: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings);
+Added: intermediate-size patient populations;
+Added: and larger populations for use of the investigational product under a treatment protocol or Treatment IND Application.
+Added: When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply:
+Added: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition;
+Added: the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated;
+Added: and the expanded use of the investigational product for the requested treatment will not interfere with the initiation, conduct or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.
+Added: There is no obligation for a sponsor to make its investigational products available for expanded access;
+Added: however, as required by amendments to the FDCA included in the 21st Century Cures Act passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests with respect to product candidates in development to treat serious diseases or conditions, it must make that policy publicly available.
+Added: Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 trial for a covered investigational product;
+Added: or 15 days after the investigational product receives designation from the FDA as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.
Human Clinical Trials in Support of an NDA
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Such Phase 3 studies are referred to as “pivotal.”
+Added: A clinical trial may combine the elements of more than one phase and the FDA often requires more than one Phase 3 trial to support marketing approval of a product candidate.
+Added: A company’s designation of a clinical trial as being of a particular phase is not necessarily indicative that the study will be sufficient to satisfy the FDA requirements of that phase because this determination cannot be made until the protocol and data have been submitted to and reviewed by the FDA.
+Added: Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need.
In some cases, the FDA may approve an NDA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval.
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The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
+Added: In August 2018, the FDA released a draft guidance entitled “Expansion Cohorts:
+Added: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how sponsors can utilize an adaptive trial design in the early stages of oncology product development (i.e., the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial.
+Added: Information to support the design of individual expansion cohorts are included in IND applications and assessed by FDA.
+Added: Expansion cohort trials can potentially bring efficiency to product development and reduce developmental costs and time.
+Added: Sponsors of clinical trials are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the U.S.
+Added: National Institutes of Health.
+Added: In particular, information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial.
+Added: The failure to submit clinical trial information to clinicaltrials.gov, as required, is a prohibited act under the FDCA with violations subject to potential civil monetary penalties of up to $10,000 for each day the violation continues.
Concurrent with clinical trials, companies often complete additional animal studies.
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Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
−Removed: Review and Approval of an NDA
+Added: Pediatric Studies
+Added: Under the Pediatric Research Equity Act, or PREA, applications and certain types of supplements to applications must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.
+Added: The sponsor must submit an initial Pediatric Study Plan within 60 days of an end-of-phase 2 meeting or as may be agreed between the sponsor and the FDA.
+Added: Those plans must contain an outline of the proposed pediatric study or studies the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.
+Added: The FDA may, on its own initiative or at the request of the sponsor, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.
+Added: A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin.
+Added: The law now requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation.
+Added: Expedited Review Programs
+Added: The FDA is authorized to expedite the review of applications in several ways.
+Added: None of these expedited programs changes the standards for approval but they may help expedite the development or approval process of product candidates.
+Added: Fast Track designation.
+Added: The sponsor of a product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND.
+Added: Candidate products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition.
+Added: In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track application before the application is complete, a process known as rolling review.
+Added: Breakthrough therapy designation.
+Added: To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies.
+Added: The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives intensive guidance on an efficient development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review and rolling review.
+Added: Priority review.
+Added: A product candidate is eligible for priority review if it treats a serious condition and, if approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention compared to marketed products.
+Added: FDA aims to complete its review of priority review applications within six months as opposed to 10 months for standard review.
+Added: Accelerated approval.
+Added: Drug products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval.
+Added: Accelerated approval means that a product candidate may be approved on the basis of adequate and well controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments.
+Added: As a condition of approval, the FDA may require that a sponsor of a drug product candidate receiving accelerated approval perform adequate and well controlled post-marketing clinical trials.
+Added: In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials.
+Added: Regenerative advanced therapy.
+Added: With passage of the 21st Century Cures Act, or the Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies.
+Added: A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for such disease or condition.
+Added: The benefits of a regenerative advanced therapy designation include early interactions with the FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.
+Added: Filing and Review of an NDA
In order to obtain approval to market a drug product in the United States, a NDA must be submitted to the FDA that provides sufficient data establishing the safety and efficacy of the proposed drug product for its intended indication.
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To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the drug product to the satisfaction of the FDA.
−Removed: The NDA is a vehicle through which applicants formally propose that the FDA approve a new product for marketing and sale in the United States for one or more indications.
+Added: The NDA is a vehicle through which sponsors formally propose that the FDA approve a new product for marketing and sale in the United States for one or more indications.
Every new drug product candidate must be the subject of an approved NDA before it may be commercialized in the United States.
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Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation, an exception from the program fee when the program does not engage in manufacturing the drug during a particular fiscal year and a waiver for certain small businesses.
−Removed: The FDA conducts a preliminary review of the application, generally within 60 calendar days of its receipt, and strives to inform the sponsor within 74 days whether the application is sufficiently complete to permit substantive review.
−Removed: The FDA may request additional information rather than accept the application for filing.
−Removed: In this event, the application must be resubmitted with the additional information.
+Added: The FDA conducts a preliminary review of the application within 60 calendar days of its receipt, and must inform the sponsor within that period of time whether the application is sufficiently complete to permit substantive review.
+Added: In the event that FDA determines that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor.
+Added: The FDA may request additional information rather than accept the application for filing and, the application may be resubmitted with the additional information.
The resubmitted application is also subject to review before the FDA accepts it for filing.
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For applications seeking approval of products that are not NMEs, the ten-month and six-month review periods run from the date that the FDA receives the application.
−Removed: The review process and the Prescription Drug User Fee Act, or PDUFA, goal date may be extended by
−Removed: the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
−Removed: Before approving an application, the FDA typically will inspect the facility or facilities where the product is being or will be manufactured.
+Added: The review process and the Prescription Drug User Fee Act, or PDUFA, goal date may be extended by the FDA for three additional months to consider new information or clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.
+Added: In connection with its review of an application, the FDA typically will inspect the facility or facilities where the product is being or will be manufactured.
These pre-approval inspections may cover all facilities associated with an NDA submission, including component manufacturing, finished product manufacturing, and control testing laboratories.
The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.
−Removed: Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
−Removed: In addition, as a condition of approval, the FDA may require an applicant to develop a REMS.
+Added: Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the data in the application.
+Added: In addition, as a condition of approval, the FDA may require a sponsor to develop a REMS.
A REMS uses risk-minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks.
To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, the seriousness of the disease, the expected benefit of the product, the expected duration of treatment, the seriousness of known or potential adverse events, and whether the product is a new molecular entity.
−Removed: The FDA may refer an application for a novel product to an advisory committee or explain why such referral was not made.
−Removed: Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that review, evaluate and provide a recommendation as to whether the application should be approved and under what conditions.
+Added: The FDA may also refer an application for a novel product to an advisory committee or explain why such referral was not made.
+Added: Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that review,
+Added: evaluate and provide a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but the FDA considers such recommendations carefully when making decisions.
The FDA’s Decision on an NDA
−Removed: On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter.
−Removed: An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.
−Removed: A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.
−Removed: If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter.
−Removed: The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.
−Removed: Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
+Added: The FDA reviews an application to determine, among other things, whether the product is safe and whether it is effective for its intended use(s), with the latter determination being made on the basis of substantial evidence.
+Added: The FDA has interpreted this evidentiary standard to require at least two adequate and well-controlled clinical investigations to establish effectiveness of a new product.
+Added: Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional information may satisfy this standard.
+Added: Ultimately, the FDA will determine whether the expected benefits of the drug product outweigh its potential risks to patients, and the agency will issue either a complete response letter, or CRL, or an approval letter.
+Added: A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form.
+Added: A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.
+Added: The CRL may require additional clinical or other data, additional pivotal Phase 3 clinical trials and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing.
+Added: If a CRL is issued, the sponsor will have one year to respond to the deficiencies identified by the FDA, at which time the FDA can deem the application withdrawn or, in its discretion, grant the sponsor an additional six-month extension to respond.
If the FDA approves a new product, it may limit the approved indications for use of the product, require that contraindications, warnings, or precautions be included in the product labeling, or require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval.
6 unchanged sentences
After approval, many types of changes to the approved product, such as adding new indications, changing manufacturing processes, and adding labeling claims, are subject to further testing requirements and FDA review and approval.
+Added: Post-Approval Requirements
+Added: Following approval of a new prescription product, the manufacturer, the approved product and the product’s manufacturing locations are subject to pervasive and continuing regulation by the FDA, governing, among other things, monitoring and record-keeping activities, reporting of adverse experiences with the product and product problems to the FDA, product sampling and distribution, manufacturing and promotion and advertising.
+Added: Although physicians may prescribe legally available products for unapproved uses or patient populations (i.e., “off-label uses”), manufacturers may not market or promote such uses.
+Added: 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.
+Added: In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a drug product.
+Added: If a company is found to have promoted off-label uses, it may become subject to administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities.
+Added: This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes products, as well as adverse public relations and reputational harm.
+Added: The federal government has levied large civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
Patent Term Restoration and Extension
A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch- Waxman Act, which permits a patent restoration of up to five years for patent term lost during the FDA regulatory review.
−Removed: The restoration period granted on a patent covering a product is typically one-half the time between the effective date of a clinical investigation involving human beings is begun and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date.
−Removed: Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date.
+Added: The restoration period granted on a patent covering a product is typically one-half the time between the effective date of the IND and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date.
+Added: Patent term restoration cannot
+Added: be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date.
Only one patent applicable to an approved product is eligible for the extension, and only those claims covering the approved product, a method for using it, or a method for manufacturing it, may be extended.
2 unchanged sentences
The United States Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with the FDA.
−Removed: Health Care Law and Regulation
−Removed: Our collaborators who use our platform and we, if we develop a product, may be subject to broadly applicable healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our software and any products for which we obtain marketing approval.
−Removed: Restrictions under applicable federal and state health care laws and regulations, include the following:
−Removed: the federal health care Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and Medicaid and similar state anti-kickback laws.
−Removed: 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;
−Removed: the federal civil and criminal false claims laws, including the civil False Claims Act (which can be enforced through civil whistleblower actions), and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious, or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease, or conceal an obligation to pay money to the federal government.
−Removed: In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
−Removed: the federal and state laws and regulations that protect the privacy and security of health-related or other personal identifiable information that we may generate or receive, and that require disclosure of breaches in which such information is compromised by being lost or obtained or accessible by unauthorized persons, including, among others, laws and regulations implemented through informed consents for clinical research studies and the privacy and security standards imposed under the Health Insurance Portability and Accountability Act, or HIPAA, for certain individually identifiable health information of patients and health plan beneficiaries;
−Removed: the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services;
−Removed: the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services within the United States Department of Health and Human Services, information related to certain payments and other transfers of value made by that entity to physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.
−Removed: Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided, as well as ownership and investment interest held, during the previous year to certain other healthcare professionals, including physician assistances and nurse practitioners;
−Removed: analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to health care items or services that are reimbursed by non-government third-party payors, including private insurers.
−Removed: Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to payments and other transfers of value to physicians and other health care providers or marketing expenditures.
−Removed: Additionally, some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction.
−Removed: Violations of applicable healthcare laws and regulations may result in significant civil, criminal and administrative penalties, damages, disgorgement, fines, imprisonment, and possible exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and integrity oversight and reporting obligations.
−Removed: In addition to the health care laws set forth above, we may also be subject to additional federal laws, such as the U.S.
−Removed: Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, companies and their intermediaries from making, or offering or promising to make, improper payments to non-U.S.
−Removed: officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment.
−Removed: Privacy and the General Data Protection Regulation
−Removed: The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the General Data Protection Regulation, or GDPR, which became effective on May 25, 2018.
−Removed: The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.
−Removed: The GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater.
−Removed: The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
−Removed: Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance.
−Removed: Although there are legal mechanisms to allow for the transfer of personal data from the United Kingdom, European Economic Area, or EEA, and Switzerland to the United States, uncertainty about compliance with such data protection laws remains and such mechanisms may not be available or applicable with respect to the personal data processing activities necessary to research, develop and market our products and services.
−Removed: For example, legal challenges in Europe to the mechanisms allowing companies to transfer personal data from the EEA to the United States could result in further limitations on the ability to transfer personal data across borders, particularly if governments are unable or unwilling to reach new or maintain existing agreements that support cross-border data transfers, such as the EU-U.S.
−Removed: and Swiss-U.S.
−Removed: Privacy Shield Frameworks.
−Removed: Specifically, on July 16, 2020, the Court of Justice of the European Union invalidated Decision 2016/1250 on the adequacy of the protection provided by the EU-U.S.
−Removed: Privacy Shield Framework.
−Removed: To the extent that we were to rely on the EU-U.S.
−Removed: Privacy Shield Framework, we will not be able to do so in the future, which could increase our costs and limit our ability to process personal data from the European Union.
−Removed: The same decision also cast doubt on the ability to use one of the primary alternatives to the Privacy Shield, namely, the European Commission’s Standard Contractual Clauses, to lawfully transfer personal data from Europe to the United States and most other countries.
−Removed: At present, there are few if any viable alternatives to the Privacy Shield and the Standard Contractual Clauses.
−Removed: Similar privacy and data security requirements are either in place or underway in the United States.
+Added: Healthcare Compliance
+Added: In the United States, biopharmaceutical manufacturers and their products are subject to extensive regulation at the federal and state level, such as laws intended to prevent fraud and abuse in the healthcare industry.
+Added: Healthcare providers and third-party payors play a primary role in the recommendation and prescription of pharmaceutical products that are granted marketing approval.
+Added: Arrangements with providers, consultants, third-party payors, and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to healthcare providers and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements.
+Added: Restrictions under applicable federal and state healthcare laws and regulations, including certain laws and regulations applicable only if we have marketed products, include the following:
+Added: federal false claims, false statements and civil monetary penalties laws prohibiting, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment of government funds or knowingly making, or causing to be made, a false statement to get a false claim paid;
+Added: federal healthcare program anti-kickback law, which prohibits, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
+Added: the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
+Added: federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs;
+Added: federal Open Payments (or federal “sunshine” law), which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with certain healthcare providers to the Center for Medicare & Medicaid Services, or CMS, within the U.S.
+Added: Department of Health and Human Services for re-disclosure to the public, as well as ownership and investment interests held by certain healthcare providers and their immediate family members;
+Added: federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;
+Added: analogous state laws and regulations, including:
+Added: state anti-kickback and false claims laws;
+Added: state laws requiring pharmaceutical companies to comply with specific compliance standards, restrict financial interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments to health care providers or marketing expenditures;
+Added: and state laws governing privacy, security and breaches of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;
+Added: laws and regulations prohibiting bribery and corruption such as the FCPA, which, among other things, prohibits U.S.
+Added: companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations or foreign government-owned or affiliated entities, candidates for foreign public office, and foreign political parties or officials thereof.
+Added: Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, exclusion from participation in federal and state health care programs, such as Medicare and Medicaid.
+Added: Ensuring compliance is time consuming and costly.
+Added: Similar healthcare laws and regulations exist in the EU and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of personal information.]
+Added: Privacy Requirements
+Added: Privacy and data security requirements are either in place or underway in the United States.
There are a broad variety of data protection laws that may be applicable to our activities, and a range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns based on general consumer protection laws.
11 unchanged sentences
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals.
−Removed: Nonetheless, product candidates may not be considered
−Removed: medically necessary or cost effective.
+Added: Nonetheless, product candidates may not be considered medically necessary or cost effective.
A decision by a third-party payer not to cover a product could reduce market acceptance once the product is approved and have a material adverse effect on sales, results of operations and financial condition.
12 unchanged sentences
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety, and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales, and distribution of products.
−Removed: Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable non-U.S.
+Added: Whether or not it obtains FDA approval for a product, a
+Added: sponsor will need to obtain the necessary approvals by the comparable non-U.S.
regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions.
6 unchanged sentences
Clinical Trial Approval
−Removed: The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP and the related national implementing provisions of the individual member states of the European Union, or EU Member States, govern the system for the approval of clinical trials in the European Union.
−Removed: Under this system, an applicant must obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is to be conducted.
−Removed: Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorable opinion.
−Removed: The clinical trial application must be accompanied by, among other documents, an investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the implementing national provisions of the individual EU Member States and further detailed in applicable guidance documents.
−Removed: In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014, was adopted.
−Removed: The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European Union.
−Removed: The main characteristics of the regulation include:
−Removed: a streamlined application procedure via a single entry point, the “EU Portal and Database”;
−Removed: a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors;
−Removed: and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts.
−Removed: Part I is assessed by the appointed reporting Member State, whose assessment report is submitted for review by the sponsor and all other competent authorities of all EU Member States in which an application for authorization of a clinical trial has been submitted (Concerned Member States).
−Removed: Part II is assessed separately by each Concerned Member State.
−Removed: Strict deadlines have been established for the assessment of clinical trial applications.
−Removed: The role of the
−Removed: relevant ethics committees in the assessment procedure will continue to be governed by the national law of the Concerned Member State.
−Removed: However, overall related timelines will be defined by the Clinical Trials Regulation.
−Removed: The Clinical Trials Regulation will be directly applicable in all the EU Member States, repealing the current Clinical Trials Directive 2001/20/EC and replacing any national legislation that was put in place to implement the Clinical Trials Directive.
−Removed: Conduct of all clinical trials performed in the European Union will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable.
−Removed: The extent to which on-going clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial.
−Removed: If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial.
−Removed: In January 2020, the website of the European Commission reported that the implementation of the Clinical Trials Regulation was dependent on the development of a fully functional clinical trials portal and database, which would be confirmed by an independent audit which was conducted in December 2020, and that the new legislation would come into effect six months after the European Commission publishes a notice of this confirmation.
−Removed: The Clinical Trials Regulation becomes applicable six months after the European Commission publishes notice of this confirmation and has published an expected system “go live” in December 2021.
−Removed: When the Clinical Trials Regulation becomes applicable, the existing Clinical Trials Directive and national legislation put in place to implement the Directive will be repealed.
−Removed: Following implementation of the Clinical Trials Regulation, a transitional period will be in effect for one year where new clinical trial applications can be submitted either under the existing Clinical Trials Directive or under the new Clinical Trials Regulation.
+Added: On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the European Union and replaced the prior Clinical Trials Directive 2001/20/EC.
+Added: The new regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials in the European Union.
+Added: Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one Member State of the European Union, or EU Member State, will only be required to submit a single application for approval.
+Added: The submission will be made through the Clinical Trials Information System, a new clinical trials portal overseen by the EMA and available to clinical trial sponsors, competent authorities of the EU Member States and the public.
+Added: The new regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted.
+Added: If the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial.
+Added: Furthermore, the sponsor may only start a clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion.
+Added: Parties conducting certain clinical trials must, as in the United States, post clinical trial information in the EU at the EudraCT website:
+Added: https://eudract.ema.europa.eu.
PRIME Designation in the European Union
6 unchanged sentences
Marketing Authorization
−Removed: To obtain a marketing authorization for a product under European Union regulatory systems, an applicant must submit an MAA either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure).
−Removed: A marketing authorization may be granted only to an applicant established in the European Union.
−Removed: Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, applicants have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver, or (3) a deferral for one or more of the measures included in the PIP.
+Added: To obtain a marketing authorization for a product under European Union regulatory systems, a sponsor must submit an MAA either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the EU Member States (decentralized procedure, national procedure or mutual recognition procedure).
+Added: A marketing authorization may be granted only to a sponsor established in the European Union.
+Added: Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, sponsors have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver, or (3) a deferral for one or more of the measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid across the European Economic Area (i.e.
the European Union as well as Iceland, Liechtenstein and Norway).
−Removed: Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy medicinal products, and products with a new active substance indicated for the treatment of certain diseases.
+Added: Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy medicinal products, and products
+Added: with a new active substance indicated for the treatment of certain diseases.
For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.
−Removed: The centralized procedure may at the request of the applicant also be used in certain other cases.
+Added: The centralized procedure may at the request of the sponsor also be used in certain other cases.
Under the centralized procedure, the CHMP is responsible for conducting the initial assessment of a product and for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization.
−Removed: Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response
−Removed: to questions of the CHMP.
+Added: Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the sponsor in response to questions of the CHMP.
Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation.
8 unchanged sentences
The European Commission may grant a so-called “marketing authorization under exceptional circumstances”.
−Removed: Such authorization is intended for products for which the applicant can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use, because the indications for which the product in question is intended are encountered so rarely that the applicant cannot reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge, comprehensive information cannot be provided, or it would be contrary to generally accepted principles of medical ethics to collect such information.
+Added: Such authorization is intended for products for which the sponsor can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use, because the indications for which the product in question is intended are encountered so rarely that the sponsor cannot reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge, comprehensive information cannot be provided, or it would be contrary to generally accepted principles of medical ethics to collect such information.
Consequently, marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the following:
−Removed: the applicant must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile;
+Added: the sponsor must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile;
the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person;
5 unchanged sentences
The European Commission may also grant a so-called “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization.
−Removed: Such conditional marketing authorizations may be granted for product candidates (including medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet medical need, and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required.
+Added: Such conditional marketing authorizations may be granted for product candidates (including medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely that the sponsor will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet medical need, and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required.
A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data.
3 unchanged sentences
While the products we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain EU Member States may prohibit or restrict us from commercializing our products, even if they have been granted a European Union marketing authorization.
−Removed: Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be
+Added: Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed.
This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure.
9 unchanged sentences
Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in accordance the centralized authorization procedure.
−Removed: Data exclusivity prevents applicants for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years.
+Added: Data exclusivity prevents sponsors for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years.
During an additional two-year period of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the European Union market until the expiration of the market exclusivity.
9 unchanged sentences
Brexit and the Regulatory Framework in the United Kingdom
−Removed: On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit.
−Removed: Following protracted negotiations, the United Kingdom withdrew from the European Union on January 31, 2020.
−Removed: On December 24, 2020, the United Kingdom and the European Union entered into a Trade and Cooperation Agreement, which sets out certain procedures for approval and recognition of medical products in each jurisdiction.
−Removed: Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom , as the United Kingdom legislation now has the potential to diverge from European Union legislation.
−Removed: It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the United Kingdom in the long-term.
−Removed: The Medicines and Healthcare Products Regulatory Agency has recently published detailed guidance for industry and organizations to follow from January 1, 2021 now the transition period is over, which will be updated as the United Kingdom’s regulatory position on medicinal products evolves over time.
+Added: The United Kingdom’s withdrawal from the European Union took place on January 31, 2020.
+Added: The European Union and the United Kingdom reached an agreement on their new partnership in the Trade and Cooperation Agreement, or the Agreement, which was applied provisionally beginning on January 1, 2021 and which entered into force on May 1, 2021.
+Added: The Agreement focuses primarily on free trade by ensuring no tariffs or quotas on trade in goods, including healthcare products such as medicinal products.
+Added: Thereafter, the E uropean Union and the U nited Kingdom will form two separate markets governed by two distinct regulatory and legal regimes.
+Added: As such, the Agreement seeks to minimize barriers to trade in goods while accepting that border checks will become inevitable as a consequence that the U nited Kingdom is no longer part of the single market.
+Added: As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or the MHRA, became responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law whereas Northern Ireland continues to be subject to EU rules under the Northern Ireland Protocol.
+Added: The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended), or the HMR, as the basis for regulating medicines.
+Added: The HMR has incorporated into the domestic law the body of EU law instruments governing medicinal products that pre-existed prior to the U nited Kingdom’s withdrawal from the E uropean Union .
Furthermore, while the Data Protection Act of 2018 in the United Kingdom that “implements” and complements the European Union’s GDPR is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR.
2 unchanged sentences
After such period, the United Kingdom will be a “third country” under the GDPR unless the European Commission adopts an adequacy decision in respect of transfers of personal data to the United Kingdom.
−Removed: The United Kingdom has already determined that it considers all of the E uropean Union and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the E uropean and EEA remain unaffected.
+Added: The United Kingdom has already determined that it considers all of the European Union and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the European and EEA remain unaffected.
Pricing Decisions for Approved Products
11 unchanged sentences
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 products, if approved in those countries.
−Removed: As of December 31, 2020, we had 445 full-time employees and 452 total employees, including a total of 231 employees with Ph.D.
−Removed: None of our employees are represented by labor unions or covered by collective bargaining agreements.
−Removed: We consider our relationship with our employees to be good.
+Added: General Data Protection Regulation
+Added: Many countries outside of the United States maintain rigorous laws governing the privacy and security of personal information.
+Added: The collection, use, disclosure, transfer, or other processing of personal data, including personal health data, regarding individuals who are located in the EEA, and the processing of personal data that takes place in the EEA, is subject to the GDPR, which became effective on May 25, 2018.
+Added: The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, and it imposes heightened requirements on companies that process health and other sensitive data, such as requiring in many situations that a company obtain the consent of the individuals to whom the sensitive personal data relate before processing such data.
+Added: Examples of obligations imposed by the GDPR on companies processing personal data that fall within the scope of the GDPR include providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, appointing a data protection officer, providing notification of data breaches and taking certain measures when engaging third-party processors.
+Added: The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater.
+Added: The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
+Added: Compliance with the GDPR is a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance.
+Added: In July 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-U.S.
+Added: Privacy Shield framework, one of the mechanisms used
+Added: to legitimize the transfer of personal data from the EEA to the United States.
+Added: The CJEU decision also drew into question the long-term viability of an alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EEA to the United States.
+Added: Following the withdrawal of the U.K.
+Added: from the EU, the U.K.
+Added: Data Protection Act 2018 applies to the processing of personal data that takes place in the U.K.
+Added: and includes parallel obligations to those set forth by GDPR.
+Added: Human Capital
+Added: As of February 14, 2022, we had 664 full-time employees, including a total of 289 employees with Ph.D.
+Added: Of these full-time employees, 477 of these employees are located in the United States and 187 of these employees are located in our offices outside of the United States.
+Added: Additionally, as of February 14, 2022, 32% of our full-time employees self-identified as female or non-binary, or chose not to disclose their gender and 38% of our executive team self-identified as female, and 37% of our new hires since January 1, 2021 self-identify as female or non-binary, or have chosen not to disclose their gender.
+Added: Our employees are our greatest asset and we strive to create a work environment that is inclusive, challenging and rewarding.
+Added: We are committed to embedding a long-term, formal Environmental, Social and Governance, or ESG, strategy within our business, and we recently created a new leadership role dedicated to Corporate Sustainability and ESG.
+Added: We expect to complete a formal sustainability materiality assessment in the first half of 2022, serving as the foundation of our comprehensive, long-term, Corporate Sustainability strategy.
+Added: Further, our vision for Diversity, Equity and Inclusion, or DEI, is focused on developing a culture of transparency and accountability, active inclusion, and a growth mindset.
+Added: We have focused our recruiting efforts on diversifying our candidate pipeline by participating in conferences and engaging with student networks that promote racial and gender diversity in the science and technology industries.
+Added: Further, we utilize a structured interviewing model when assessing candidates to provide for consistency and equity in the hiring process across candidates and to help reduce unconscious bias.
+Added: Given our DEI aspirations, in 2021 we created our first DEI Council, a cross functional learning and listening body that allows our executive leadership team, employee volunteers, and Employee Resource Group, or ERG, leaders to listen to feedback from all levels of the company.
+Added: ERG membership directly engages one third of our employees, however, these forums provide an environment for community support, professional development, and educational opportunities for our entire employee population.
+Added: Through our ERG leadership program, ERG leaders are paired with an executive sponsor to guide them throughout their tenure, they have the opportunity to hone skills such as negotiation, influence, and public speaking.
+Added: Our commitment to offering employee programs also extends to our investments in learning and development, or L&D, and in 2022, we launched a global L&D initiative with the Neuroleadership Institute designed to build active listening and bias mitigation skills.
+Added: We consider the intellectual capital of our employees to be an essential driver of our business and key to our future prospects.
+Added: Though the biotechnology industry is historically competitive for talent, we have maintained high employee retention rates.
+Added: For the year ended December 31, 2021, our employee retention rate was 96.5%.
+Added: Given our financial resources, our industry-leading position in the field of physics-based computational drug discovery and materials science research and our developing internal drug discovery programs, we believe that we will continue to be able to fill positions and grow our headcount in support of our software, drug discovery and materials science businesses.
+Added: We are committed to providing our employees with compensation that meets the expectations of the market and industry norms.
+Added: We monitor our compensation programs closely using comprehensive industry surveys and data to guide us, and we provide what we consider to be a competitive mix of incentives, including competitive salaries and bonuses, a 401(k) retirement plan with an employer matching contribution, health and welfare benefits and participation in our equity programs.
+Added: We routinely review our compensation practices and analyze the equity of our compensation decisions for all employees.
+Added: None of our employees is subject to a collective bargaining agreement or represented by a trade or labor union.
+Added: We consider our relations with our employees to be good.
+Added: We believe our company culture is one that aims to support each individual fully, not just their contribution as an employee.
+Added: The COVID-19 pandemic has resulted in the creation of a more fluid and flexible work environment to allow individuals to meet their needs and those of their family members while contributing to our success.
+Added: In the current virtual world, we have moved from regular onsite wellness activities to those that can be enjoyed virtually, including meditation, yoga and other fitness classes, as well as art classes for employees and their families.
+Added: Our company culture also encourages engagement, both among our employees and within the communities we live and work.
+Added: In the advancement of these efforts, internally, we have established a new mentorship program, updated our management training programs to include mental health and wellness trainings, and refreshed our annual review process to encourage more real-time feedback between employees and managers to set and achieve personal performance goals.
+Added: In engaging with our external community, we host a student internship program, including in partnership with a non-profit educational group that supports underserved local high school students who have demonstrated the knowledge, character, and skills to achieve their aspirations.
+Added: In addition, our ERGs sponsor a summer camp for a local non-profit organization dedicated to providing underserved students with hands-on science and
+Added: engineering educational and mentorship experiences.
+Added: To further our community engagement efforts, each of our U.S.-based employees is provided with a paid full day each year to volunteer in their local community.
+Added: The health and safety of our onsite employees has been an even greater focus for us since the onset of the COVID-19 pandemic.
+Added: In early March 2020, we issued a global work from home policy to ensure the health of our employees and local communities while continuing to advance our business objectives.
+Added: Beginning in June 2020, we began limited re-openings of certain of our offices in the United States and abroad.
+Added: Our office re-openings are being conducted on a limited basis and are voluntary for all of our employees.
+Added: We believe we are well-equipped to work remotely, engage with our customers and continue to advance our business
Our Corporate Information
−Removed: Our principal executive offices are located at 120 West 45th Street, 17th Floor, New York, New York 10036, and our telephone number is (212) 295-5800.
+Added: Our principal executive offices are located at 1540 Broadway, 24th Floor, New York, New York 10036, and our telephone number is (212) 295-5800.
Our website address is http://www.schrodinger.com.
8 unchanged sentences
The information contained on, or that can be access through, our website is not a part of or incorporated by reference in this Annual Report.
−Removed: Risk Factors.
−Removed: You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report and our other public filings with the SEC.
−Removed: The risks described below are not the only risks facing our company.
−Removed: The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, operating results, and financial condition to suffer materially.
−Removed: Risks Related to Our Financial Position and Need for Additional Capital
−Removed: We have a history of significant operating losses, and we expect to incur losses over the next several years.
−Removed: We have a history of significant operating losses.
−Removed: Our net loss was $26.6 million, $25.7 million, and 28.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
−Removed: As of December 31, 2020, we had an accumulated deficit of $129.6 million.
−Removed: We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest in our internal drug discovery programs, sales and marketing infrastructure, and our computational platform.
−Removed: We are still in the early stages of development of our own drug discovery program, and we have not yet identified our first clinical candidate.
−Removed: We have no drug products licensed for commercial sale and have not generated any revenue from our own drug product sales to date.
−Removed: We expect to continue to incur significant expenses and operating losses over the next several years.
−Removed: Our operating expenses and net income or loss may fluctuate significantly from quarter to quarter and year to year.
−Removed: We anticipate that our expenses will increase substantially as we:
−Removed: continue to invest in and develop our computational platform and software solutions;
−Removed: continue our research and development efforts for our internal drug discovery programs;
−Removed: conduct preclinical studies and clinical trials for any of our future product candidates;
−Removed: maintain, expand, enforce, defend, and protect our intellectual property;
−Removed: hire additional software engineers, programmers, sales and marketing, and other personnel to support our software business;
−Removed: hire additional clinical, quality control, and other scientific personnel;
−Removed: add operational, financial, and management information systems and personnel to support our operations as a public company.
−Removed: If we are unable to increase sales of our software, or if we and our current and future collaborators are unable to successfully develop and commercialize drug products, our revenues may be insufficient for us to achieve or maintain profitability.
−Removed: To achieve and maintain profitability, we must succeed in significantly increasing our software sales, or we and our current or future collaborators must succeed in developing, and eventually commercializing, a drug product or drug products that generate significant revenue.
−Removed: We currently generate revenues primarily from the sales of our software solutions and expect to continue to derive most of our revenue from sales of our software until such time as our or our collaborators’ drug development and commercialization efforts are successful, if ever.
−Removed: As such, increasing sales of our software to existing customers and successfully marketing our software to new customers are critical to our success.
−Removed: Demand for our software solutions may be affected by a number of factors, including continued market acceptance by the biopharmaceutical industry, market adoption of our software solutions beyond the biopharmaceutical industry including for material science applications, the ability of our platform to identify more promising molecules and accelerate and lower the costs of discovery as compared to traditional methods, timing of development and release of new offerings by our competitors, technological change, and the rate of growth in our target markets.
−Removed: If we are unable to continue to meet the demands of our customers, our business operations, financial results, and growth prospects will be adversely affected.
−Removed: Achieving success in drug development will require us or our current or future collaborators to be effective in a range of challenging activities, including completing preclinical testing and clinical trials of product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing, and selling any products for which we or they may obtain regulatory approval.
−Removed: We and most of our current drug discovery collaborators are only in the preliminary stages of most of these activities.
−Removed: We and they may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve and to maintain profitability, or even if our collaborators do, we may not receive option fees, milestone payments, or royalties from them that are significant enough for us to achieve and to maintain profitability.
−Removed: Because of the intense competition in the market for our software solutions and the numerous risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict when, or if, we will be able to sustain profitability.
−Removed: Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
−Removed: 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, increase sales of our software, develop a pipeline of product candidates, enter into collaborations, or even continue our operations.
−Removed: A decline in the value of our company could also cause our stockholders to lose all or part of their investment.
−Removed: In addition, although we have experienced revenue growth in recent periods, we may not be able to sustain revenue growth consistent with our recent history or at all.
−Removed: Our total revenues increased by 26% from $85.5 million in the fiscal year ended December 31, 2019 to $108.1 million in the fiscal year ended December 31, 2020.
−Removed: You should not consider our revenue growth in recent periods as indicative of our future performance.
−Removed: As we grow our business, our revenue growth rates may slow in future periods.
−Removed: Our quarterly and annual results may fluctuate significantly, which could adversely impact the value of our common stock.
−Removed: Our results of operations, including our revenues, gross margin, profitability, and cash flows, have historically varied from period to period, and we expect that they will continue to do so.
−Removed: As a result, period-to-period comparisons of our operating results may not be meaningful, and our quarterly and annual results should not be relied upon as an indication of future performance.
−Removed: Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside of our control.
−Removed: Factors that may cause fluctuations in our quarterly and annual financial results include, without limitation, those listed elsewhere in this “Risk Factors” section and those listed below:
−Removed: customer renewal rates and the timing and terms of customer renewals, including the seasonality of customer renewals of our on-premise software arrangements, for which revenue historically has been recognized at a single point in time in the first and fourth quarter of each fiscal year;
−Removed: our ability to attract new customers for our software;
−Removed: the addition or loss of large customers, including through acquisitions or consolidations of such customers;
−Removed: the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure;
−Removed: network outages or security breaches;
−Removed: general economic, industry, and market conditions, including within the life sciences industry;
−Removed: our ability to collect receivables from our customers;
−Removed: the amount of software purchased by our customers, including the mix of on-premise and hosted software sold during a period;
−Removed: variations in the timing of the sales of our software, which may be difficult to predict;
−Removed: changes in the pricing of our solutions and in our pricing policies or those of our competitors;
−Removed: the timing and success of the introduction of new software solutions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic collaborators;
−Removed: changes in the fair value of or receipt of distributions or proceeds on account of the equity interests we hold in our drug discovery collaborators, such as Morphic;
−Removed: the success of our drug discovery collaborators in developing and commercializing drug products for which we are entitled to receive milestone payments or royalties and the timing of receipt of such payments, if any, such as under our collaboration agreement with Bristol-Myers Squibb Company, or BMS;
−Removed: the timing of expenses related to our drug discovery programs, the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies .
−Removed: In addition, because we recognize revenues from our hosted software solutions ratably over the life of the contract, a significant upturn or downturn in sales of our hosted software solutions may not be reflected immediately in our operating results.
−Removed: As a result of these factors, we believe that period-to-period comparisons of our operating results are not a good indication of our future performance and that our interim financial results are not necessarily indicative of results for a full year or for any subsequent interim period.
−Removed: We may require additional capital to fund our operations.
−Removed: If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
−Removed: We expect to devote substantial financial resources to our ongoing and planned activities, including the development of drug discovery programs and continued investment in our computational platform.
−Removed: We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our internal drug discovery programs, initiate preclinical and investigational new drug, or IND, enabling studies and invest in the further development of our platform.
−Removed: In addition, if we determine to advance any of our drug discovery programs into clinical development and seek regulatory approval on our own, we expect to incur significant additional expenses.
−Removed: Furthermore, we incur additional costs associated with operating as a public company.
−Removed: Our current drug discovery collaborators, from whom we are entitled to receive milestone payments upon achievement of various development, regulatory, and commercial milestones as well as royalties on commercial sales, if any, under the collaboration agreements that we have entered into with them, face numerous risks in the development of drugs, including the conduct of preclinical and clinical testing, obtaining regulatory approval, and achieving product sales.
−Removed: In addition, the amounts we are entitled to receive upon the achievement of such milestones tend to be smaller for near-term development milestones and increase if and as a collaborative product candidate advances through regulatory development to commercialization and will vary depending on the level of commercial success achieved, if any.
−Removed: We do not anticipate receiving significant milestone payments from many of our drug discovery collaborators for several years, if at all, and our drug discovery collaborators may never achieve milestones that result in significant cash payments to us.
−Removed: Accordingly, we may need to obtain substantial additional capital to fund our continuing operations.
−Removed: As of December 31, 2020, we had cash, cash equivalents, restricted cash, and marketable securities of $643.2 million.
−Removed: We believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations and capital expenditure requirements for at least the next 12 months.
−Removed: However, we have based this estimate on assumptions that may prove to be wrong, and our operating plans may change as a result of many factors currently unknown to us.
−Removed: As a result, we could deplete our capital resources sooner than we currently expect.
−Removed: Our future capital requirements will depend on many factors, including:
−Removed: the growth of our software revenue;
−Removed: the timing and extent of spending to support research and development efforts;
−Removed: the continued expansion of software sales and marketing activities;
−Removed: the timing and receipt of payments from our collaborations as well as spending to support, advance, and broaden our internal drug discovery programs;
−Removed: the timing and receipt of any distributions or proceeds we may receive from our equity stakes in our co-founded companies and other drug discovery collaborators and partners.
−Removed: In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all.
−Removed: 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.
−Removed: If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations and invest in our computational platform, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
−Removed: Raising additional capital may cause dilution to our stockholders, restrict our operations, or require us to relinquish rights to our technologies or drug programs.
−Removed: To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights as common stockholders.
−Removed: 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, selling or licensing our assets, making product acquisitions, making capital expenditures, or declaring dividends.
−Removed: 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 product candidates or grant licenses on terms that may not be favorable to us or agree to exploit a drug development target exclusively for one of our collaborators when we may prefer to pursue the drug development target for ourselves.
−Removed: If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.
−Removed: The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S.
−Removed: GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
−Removed: We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” of this Annual Report.
−Removed: The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
−Removed: Significant assumptions and estimates used in preparing our consolidated financial statements include the estimated variable consideration included in the transaction price in our contracts with customers, stock-based compensation, and valuation of our equity investments in early-stage biotechnology companies.
−Removed: Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
−Removed: Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us.
−Removed: As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements.
−Removed: Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position, and profit.
−Removed: Risks Related to Our Software
−Removed: If our existing customers do not renew their licenses, do not buy additional solutions from us, or renew at lower prices, our business and operating results will suffer.
−Removed: We expect to continue to derive a significant portion of our software revenues from renewal of existing license agreements.
−Removed: As a result, maintaining the renewal rate of our existing customers and selling additional software solutions to them is critical to our future operating results.
−Removed: Factors that may affect the renewal rate for our customers and our ability to sell additional solutions to them include:
−Removed: the price, performance, and functionality of our software solutions;
−Removed: the availability, price, performance, and functionality of competing software solutions;
−Removed: the effectiveness of our professional services;
−Removed: our ability to develop complementary software solutions, applications, and services;
−Removed: the success of competitive products or technologies;
−Removed: the stability, performance, and security of our technological infrastructure;
−Removed: the business environment of our customers.
−Removed: We deliver our software through either (i) a product license that permits our customers to install the software solution directly on their own in-house hardware and use it for a specified term, or (ii) a subscription that allows our customers to access the cloud-based software solution on their own hardware without taking control of the licenses.
−Removed: Our customers have no obligation to renew their product licenses or subscriptions for our software solutions after the license term expires, which is typically after one year, and many of our contracts may be terminated or reduced in scope either immediately or upon notice.
−Removed: In addition, our customers may negotiate terms less advantageous to us upon renewal, which may reduce our revenues from these customers.
−Removed: Factors that are not within our control may contribute to a reduction in our software revenues.
−Removed: For instance, our customers may reduce the number of their employees who are engaged in research and who would have use of our software, which would result in a corresponding reduction in the number of user licenses needed for some of our solutions and thus a lower aggregate renewal fee.
−Removed: The loss, reduction in scope, or delay of a large contract, or the loss or delay of multiple contracts, could materially adversely affect our business.
−Removed: Our future operating results also depend, in part, on our ability to sell new software solutions and licenses to our existing customers.
−Removed: For example, the willingness of existing customers to license our software will depend on our ability to scale and adapt our existing software solutions to meet the performance and other requirements of our customers, which we may not do successfully.
−Removed: If our customers fail to renew their agreements, renew their agreements upon less favorable terms or at lower fee levels, or fail to purchase new software solutions and licenses from us, our revenues may decline and our future revenues may be constrained.
−Removed: Our software sales cycle can vary and be long and unpredictable.
−Removed: The timing of sales of our software solutions is difficult to forecast because of the length and unpredictability of our sales cycle.
−Removed: We sell our solutions primarily to biopharmaceutical companies, and our sales cycles can be as long as nine to twelve months or longer.
−Removed: Further, the length of time that potential customers devote to their testing and evaluation, contract negotiation, and budgeting processes varies significantly, depending on the size of the organization and the nature of their needs.
−Removed: In addition, we might devote substantial time and effort to a particular unsuccessful sales effort, and as a result, we could lose other sales opportunities or incur expenses that are not offset by an increase in revenue, which could harm our business.
−Removed: A significant portion of our revenues are generated by sales to life sciences industry customers, and factors that adversely affect this industry could also adversely affect our software sales.
−Removed: A significant portion of our current software sales are to customers in the life sciences industry, in particular the biopharmaceutical industry.
−Removed: Demand for our software solutions could be affected by factors that adversely affect the life sciences industry.
−Removed: The life sciences industry is highly regulated and competitive and has experienced periods of considerable consolidation.
−Removed: Consolidation among our customers could cause us to lose customers, decrease the available market for our solutions, and adversely affect our business.
−Removed: In addition, changes in regulations that make investment in the life sciences industry less attractive or drug development more expensive could adversely impact the demand for our software solutions.
−Removed: For these reasons and others, selling software to life sciences companies can be competitive, expensive, and time consuming, often requiring significant upfront time and expense without any assurance that we will successfully complete a software sale.
−Removed: Accordingly, our operating results and our ability to efficiently provide our solutions to life sciences companies and to grow or maintain our customer base could be adversely affected as a result of factors that affect the life sciences industry generally.
−Removed: We also intend to continue leveraging our solutions for broad application to industrial challenges in molecule design, including in the fields of aerospace, energy, semiconductors, and electronic displays.
−Removed: However, we believe the materials science industry is in the very early stages of recognizing the potential of computational methods for molecular discovery, and there can be no assurance that the industry will adopt computational methods such as our platform.
−Removed: Any factor adversely affecting our ability to market our software solutions to customers outside of the life sciences industry, including in these new fields, could increase our dependence on the life sciences industry and adversely affect the growth rate of our revenues, operating results, and business.
−Removed: The markets in which we participate are competitive, and if we do not compete effectively, our business and operating results could be adversely affected.
−Removed: The overall market for molecular discovery and design software is global, rapidly evolving, competitive, and subject to changing technology and shifting customer focus.
−Removed: Our software solutions face competition from commercial competitors in the business of selling simulation and modeling software to biopharmaceutical companies.
−Removed: These competitors include BIOVIA, a brand of Dassault Systèmes SE, or BIOVIA;
−Removed: Chemical Computing Group (US) Inc.;
−Removed: Cresset Biomolecular Discovery Limited;
−Removed: OpenEye Scientific Software, Inc.;
−Removed: Optibrium Limited;
−Removed: and Simulations Plus, Inc.
−Removed: We also have competitors in materials science, such as BIOVIA and Materials Design, Inc., and in enterprise software for the life sciences, such as BIOVIA;
−Removed: Certara USA, Inc.;
−Removed: and Dotmatics, Inc.
−Removed: In some cases, these competitors are well-established providers of these solutions and have long-standing relationships with many of our current and potential customers, including large biopharmaceutical companies.
−Removed: In addition, there are academic consortia that develop physics-based simulation programs for life sciences and materials applications.
−Removed: In life sciences, the most prominent academic simulation packages include AMBER, CHARMm, GROMACS, GROMOS, OpenMM, and OpenFF.
−Removed: These packages are primarily maintained and developed by graduate students and post-doctoral researchers, often without the intent for commercialization.
−Removed: We also face competition from solutions that biopharmaceutical companies develop internally and from smaller companies that offer products and services directed at more specific markets than we target, enabling these smaller competitors to focus a greater proportion of their efforts and resources on these markets, as well as a large number of companies that have been founded with the goal of applying machine learning technologies to drug discovery.
−Removed: Many of our competitors are able to devote greater resources to the development, promotion, and sale of their software solutions and services.
−Removed: It is possible that our new focus on internal drug discovery will result in loss of management focus and resources relating to our software business, thereby resulting in decreasing revenues from our software business.
−Removed: Furthermore, third parties with greater available resources and the ability to initiate or withstand substantial price competition could acquire our current or potential competitors.
−Removed: Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources.
−Removed: If our competitors’ products, services, or technologies become more accepted than our solutions, if our competitors are successful in bringing their products or services to market earlier than ours, if our competitors are able to respond more quickly and effectively to new or changing opportunities, technologies, or customer requirements, or if their products or services are more technologically capable than ours, then our software revenues could be adversely affected.
−Removed: We may be required to decrease our prices or modify our pricing practices in order to attract new customers or retain existing customers due to increased competition.
−Removed: Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.
−Removed: We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform.
−Removed: Such investments may affect our operating results, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.
−Removed: We have invested and expect to continue to invest in research and development efforts that further enhance our computational platform, often in response to our customers’ requirements.
−Removed: These investments may involve significant time, risks, and uncertainties, including the risk that the expenses associated with these investments may affect our margins and operating results and that such investments may not generate sufficient revenues to offset liabilities assumed and expenses associated with these new investments.
−Removed: The software industry changes rapidly as a result of technological and product developments, which may render our solutions less desirable.
−Removed: We believe that we must continue to invest a significant amount of time and resources in our platform and software solutions to maintain and improve our competitive position.
−Removed: If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, or if a slowdown in general computing power impacts the rate at which we expect our physics-based simulations to increase in power and domain applicability, our revenue and operating results may be adversely affected.
−Removed: If we are unable to collect receivables from our customers, our operating results may be adversely affected.
−Removed: While the majority of our current customers are well-established, large companies and universities, we also provide software solutions to smaller companies.
−Removed: Our financial success depends upon the creditworthiness and ultimate collection of amounts due from our customers, including our smaller customers with fewer financial resources.
−Removed: If we are not able to collect amounts due from our customers, we may be required to write-off significant accounts receivable and recognize bad debt expenses, which could materially and adversely affect our operating results.
−Removed: Defects or disruptions in our solutions could result in diminishing demand for our solutions, a reduction in our revenues, and subject us to substantial liability.
−Removed: Our software business and the level of customer acceptance of our software depend upon the continuous, effective, and reliable operation of our software and related tools and functions.
−Removed: Our software solutions are inherently complex and may contain defects or errors.
−Removed: Errors may result from our own technology or from the interface of our software solutions with legacy systems and data, which we did not develop.
−Removed: The risk of errors is particularly significant when a new software solution is first introduced or when new versions or enhancements of existing software solutions are released.
−Removed: We have from time to time found defects in our software, and new errors in our existing software may be detected in the future.
−Removed: Any errors, defects, disruptions, or other performance problems with our software could hurt our reputation and may damage our customers’ businesses.
−Removed: If that occurs, our customers may delay or withhold payment to us, cancel their agreements with us, elect not to renew, make service credit claims, warranty claims, or other claims against us, and we could lose future sales.
−Removed: The occurrence of any of these events could result in diminishing demand for our software, a reduction of our revenues, an increase in collection cycles for accounts receivable, require us to increase our warranty provisions, or incur the expense of litigation or substantial liability.
−Removed: We rely upon third-party providers of cloud-based infrastructure to host our software solutions.
−Removed: Any disruption in the operations of these third-party providers, limitations on capacity, or interference with our use could adversely affect our business, financial condition, and results of operations.
−Removed: We outsource substantially all of the infrastructure relating to our hosted software solutions to third-party hosting services.
−Removed: Customers of our hosted software solutions need to be able to access our computational platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime.
−Removed: Our hosted software solutions depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features, and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers.
−Removed: Any limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could adversely affect our business, financial condition, and results of operations.
−Removed: In addition, any incident affecting our third-party hosting services’ infrastructure that may be caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss, telecommunications failures, terrorist or other attacks, and other similar events beyond our control could negatively affect our cloud-based solutions.
−Removed: A prolonged service disruption affecting our cloud-based solutions for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose
−Removed: customers, or otherwise harm our business.
−Removed: We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.
−Removed: In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity, or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our hosted software solutions for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition, and results of operations.
−Removed: If our security measures are breached or unauthorized access to customer data is otherwise obtained, our solutions may be perceived as not being secure, customers may reduce the use of or stop using our solutions, and we may incur significant liabilities.
−Removed: Our solutions involve the collection, analysis, and storage of our customers’ proprietary information and sensitive proprietary data related to the discovery efforts of our customers.
−Removed: As a result, unauthorized access or security breaches, as a result of third-party action, employee error, malfeasance, or otherwise could result in the loss of information, litigation, indemnity obligations, damage to our reputation, and other liability.
−Removed: Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
−Removed: In addition, if our employees fail to adhere to practices we have established to maintain a firewall between our internal drug discovery team and our teams that work with software customers, or if the technical solutions we have adopted to maintain the firewall malfunction, our customers and collaborators may lose confidence in our ability to maintain the confidentiality of their intellectual property, we may have trouble attracting new customers and collaborators, we may be subject to breach of contract claims by our customers and collaborators, and we may suffer reputational and other harm as a result.
−Removed: Any or all of these issues could adversely affect our ability to attract new customers, cause existing customers to elect to not renew their licenses, result in reputational damage or subject us to third-party lawsuits or other action or liability, which could adversely affect our operating results.
−Removed: Our insurance may not be adequate to cover losses associated with such events, and in any case, such insurance may not cover all of the types of costs, expenses, and losses we could incur to respond to and remediate a security breach.
−Removed: Any failure to offer high-quality technical support services could adversely affect our relationships with our customers and our operating results.
−Removed: Our customers depend on our support organization to resolve technical issues relating to our solutions, as our software requires expert usage to fully exploit its capabilities.
−Removed: Certain of our customers also rely on us to troubleshoot problems with the performance of the software, introduce new features requested for specific customer projects, inform them about the best way to set up and analyze various types of simulations and illustrate our techniques for drug discovery using examples from publicly available data sets.
−Removed: We may be unable to respond quickly enough to accommodate short-term increases in customer demand for these support services.
−Removed: Increased customer demand for our services, without corresponding revenues, could increase costs and adversely affect our operating results.
−Removed: In addition, our sales process is highly dependent on the reputation of our solutions and business and on positive recommendations from our existing customers.
−Removed: Any failure to offer high-quality technical support, or a market perception that we do not offer high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers and our business and operating results.
−Removed: Our solutions 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 or our ability to sell our software solutions, subject us to litigation, or create potential liability.
−Removed: Our solutions include software licensed by third parties under any one or more open source licenses, including the GNU General Public License, the GNU Lesser General Public License, the Affero General Public License, the BSD License, the MIT License, the Apache License, and others, and we expect to continue to incorporate open source software in our solutions in the future.
−Removed: Moreover, we cannot ensure that we have effectively monitored our use of open source software or that we are in compliance with the terms of the applicable open source licenses or our current policies and procedures.
−Removed: There have been claims against companies that use open source software in their products and services asserting that the use of such open source software infringes the claimants’ intellectual property rights.
−Removed: As a result, we and our customers could be subject to suits by third parties claiming that what we believe to be licensed open source software infringes such third parties’ intellectual property rights, and we may be required to indemnify our customers against such claims.
−Removed: Additionally, if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we or our customers could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contain the open source software and required to comply with onerous conditions or restrictions on these solutions,
−Removed: which could disrupt the distribution and sale of these solutions.
−Removed: Litigation could be costly for us to defend, have a negative effect on our business, financial condition, and results of operations, or require us to devote additional research and development resources to change our solutions.
−Removed: Use of open source software may entail greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code, including with respect to security vulnerabilities.
−Removed: 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.
−Removed: The terms of various open source licenses have not been interpreted by courts in the relevant jurisdictions, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions.
−Removed: 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.
−Removed: 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 solutions, or otherwise be limited in the licensing of our solutions, each of which could reduce or eliminate the value of our solutions.
−Removed: Disclosing our proprietary source code could allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales.
−Removed: Any of these events could create liability for us and damage our reputation, which could have a material adverse effect on our revenue, business, results of operations, and financial condition and the market price of our shares.
−Removed: Risks Related to Drug Discovery
−Removed: We may never realize return on our investment of resources and cash in our drug discovery collaborations.
−Removed: We use our computational platform to provide drug discovery services to collaborators who are engaged in drug discovery and development.
−Removed: These collaborators include start-up companies we co-found, pre-commercial biotechnology companies, and large-scale pharmaceutical companies.
−Removed: When we engage in drug discovery with these collaborators, we typically provide access to our platform and platform experts who assist the drug discovery collaborator in identifying molecules that have activity against one or more specified protein targets.
−Removed: We historically have not received significant initial cash consideration for these services, except for the upfront payment of $55.0 million we received from BMS upon entry into our collaboration agreement with BMS.
−Removed: However, we have received equity consideration in certain of our collaborators and/or the right to receive option fees, cash milestone payments upon the achievement of specified development, regulatory, and commercial sales milestones for the drug discovery targets, and potential royalties.
−Removed: From time to time, we have also made additional equity investments in our drug discovery collaborators.
−Removed: We may never realize return on our investment of resources and cash in our drug discovery collaborations.
−Removed: Clinical drug development involves a lengthy and expensive process, with an uncertain outcome.
−Removed: Our drug discovery collaborators may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates.
−Removed: In addition, our ability to realize return from our drug discovery collaborations is subject to the following risks:
−Removed: drug discovery collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as expected;
−Removed: drug discovery collaborators may not pursue development or commercialization of any product candidates for which we are entitled to option fees, milestone payments, or royalties or may elect not to continue or renew development or commercialization programs based on results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
−Removed: drug discovery collaborators may delay clinical trials for which we are entitled to milestone payments;
−Removed: we may not have access to, or may be restricted from disclosing, certain information regarding our collaborators’ product candidates being developed or commercialized and, consequently, may have limited ability to inform our stockholders about the status of, and likelihood of achieving, milestone payments or royalties under such collaborations;
−Removed: drug discovery collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with any product candidates and products for which we are entitled to milestone payments or royalties if the collaborator believes that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive;
−Removed: product candidates discovered in drug discovery collaborations with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause our collaborators to cease to devote resources to the commercialization of any such product candidates;
−Removed: existing drug discovery collaborators and potential future drug discovery collaborators may begin to perceive us to be a competitor more generally, particularly as we advance our internal drug discovery programs, and therefore may be unwilling to continue existing collaborations with us or to enter into new collaborations with us;
−Removed: a drug discovery collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a product candidate or product, which may impact our ability to receive milestone payments;
−Removed: disagreements with drug discovery collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of product candidates for which we are eligible to receive milestone payments, or might result in litigation or arbitration;
−Removed: drug discovery collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary information or expose us and them to potential litigation;
−Removed: drug discovery collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability;
−Removed: drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the COVID-19 pandemic;
−Removed: drug discovery collaborations may be terminated prior to our receipt of any significant value from the collaboration.
−Removed: Our drug discovery collaborations may not lead to development or commercialization of product candidates that results in our receipt of option fees, milestone payments, or royalties in a timely manner, or at all.
−Removed: If any drug discovery collaborations that we enter into do not result in the successful development and commercialization of drug products that result in option fees, milestone payments, or royalties to us, we may not receive return on the resources we have invested in the drug discovery collaboration.
−Removed: Moreover, even if a drug discovery collaboration initially leads to the achievement of milestones that result in payments to us, it may not continue to do so.
−Removed: We also rely on collaborators for the development and potential commercialization of product candidates we discover internally when we believe it will help maximize the commercial value of the product candidate.
−Removed: For example, under our collaboration agreement with BMS, after mutual agreement on the targets(s) of interest, our drug discovery group will be responsible for the discovery of development candidates.
−Removed: Once a development candidate meeting specified criteria for a target has been identified, BMS will be solely responsible for the development, manufacturing and commercialization of such development candidate.
−Removed: Even if we successfully identify one or more development candidates for BMS to develop and commercialize under our collaboration agreement, BMS may not achieve the research, development, regulatory and sales milestones for those development candidates that result in additional payments to us.
−Removed: We may never realize a return on our equity investments in our drug discovery collaborators.
−Removed: We may never realize a return on our equity investments in our drug discovery collaborators.
−Removed: None of the drug discovery collaborators in which we hold equity generate revenue from commercial sales of drug products.
−Removed: They are therefore dependent on the availability of capital on favorable terms to continue their operations.
−Removed: In addition, if the drug discovery collaborators in which we hold equity raise additional capital, our ownership interest in and degree of control over these drug discovery collaborators will be diluted, unless we have sufficient resources and choose to invest in them further or successfully negotiate contractual anti-dilution protections for our equity investment.
−Removed: The financial success of our equity investment in any collaborator will likely be dependent on a liquidity event, such as a public offering, acquisition, or other favorable market event reflecting appreciation in the value of the equity we hold.
−Removed: The capital markets for public offerings and acquisitions are dynamic, and the likelihood of liquidity events for the companies in which we hold equity interests could significantly worsen.
−Removed: Further, valuations of privately held companies are inherently complex due to the lack of readily available market data.
−Removed: If we determine that any of our investments in such companies have experienced a decline in value, we may be required to record an impairment, which could negatively impact our financial results.
−Removed: The fair value of our equity interests in public companies, such as Morphic, may fluctuate significantly in future periods since we determine the fair value
−Removed: of such equity interests based on the market value of such companies’ common stock as of a given reporting date.
−Removed: All of the equity we hold in our drug discovery collaborators is subject to a risk of partial or total loss of our investment.
−Removed: Our drug discovery collaborators have significant discretion in determining when to make announcements, if any, about the status of our collaborations, including about clinical developments and timelines for advancing collaborative programs, and the price of our common stock may decline as a result of announcements of unexpected results or developments.
−Removed: Our drug discovery collaborators have significant discretion in determining when to make announcements about the status of our collaborations, including about preclinical and clinical developments and timelines for advancing the collaborative programs.
−Removed: While as a general matter we intend to periodically report on the status of our collaborations, our drug discovery collaborators, and in particular, our privately-held collaborators, may wish to report such information more or less frequently than we intend to or may not wish to report such information at all.
−Removed: The price of our common stock may decline as a result of the public announcement of unexpected results or developments in our collaborations, or as a result of our collaborators withholding such information.
−Removed: Although we believe that our computational platform has the potential to identify more promising molecules than traditional methods and to accelerate drug discovery, our focus on using our platform technology to discover and design molecules with therapeutic potential may not result in the discovery and development of commercially viable products for us or our collaborators.
−Removed: Our scientific approach focuses on using our platform technology to conduct “computational assays” that leverage our deep understanding of physics-based modeling and theoretical chemistry to design molecules and predict their key properties without conducting time-consuming and expensive physical experiments.
−Removed: Our computational platform underpins our software solutions, our drug discovery collaborations and our own internal drug discovery programs.
−Removed: While the results of certain of our drug discovery collaborators suggest that our platform is capable of accelerating drug discovery and identifying high quality product candidates, these results do not assure future success for our drug discovery collaborators or for us with our internal drug discovery programs.
−Removed: Even if we or our drug discovery collaborators are able to develop product candidates that demonstrate potential in preclinical studies, we or they may not succeed in demonstrating safety and efficacy of product candidates in human clinical trials.
−Removed: For example, in collaboration with us, Nimbus Therapeutics, LLC, or Nimbus, was able to identify a unique series of acetyl-CoA carboxylase, or ACC, allosteric protein-protein interaction inhibitors with favorable pharmaceutical properties that inhibit the activity of the ACC enzyme.
−Removed: Nimbus achieved proof of concept in a Phase 1b clinical trial of its ACC inhibitor, firsocostat, and later sold the program to Gilead Sciences, Inc., or Gilead Sciences, in a transaction valued at approximately $1.2 billion, comprised of an upfront payment and earn outs.
−Removed: Of this amount, $601.3 million has been paid to Nimbus to date, and we received a total of $46.0 million in cash distributions in 2016 and 2017.
−Removed: In December 2019, Gilead Sciences announced topline results from its Phase 2 clinical trial which included firsocostat, both as a monotherapy and in combination with other investigational therapies for advanced fibrosis due to nonalcoholic steatohepatitis, in which the primary endpoint was not met.
−Removed: Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates.
−Removed: We may not be successful in our efforts to identify or discover product candidates and may fail to capitalize on programs, collaborations, or product candidates that may present a greater commercial opportunity or for which there is a greater likelihood of success.
−Removed: Research programs to identify new product candidates require substantial technical, financial, and human resources.
−Removed: As an organization, we have not yet developed any product candidates, and we may fail to identify potential product candidates for clinical development.
−Removed: Similarly, a key element of our business plan is to expand the use of our computational platform through an increase in software sales and drug discovery collaborations.
−Removed: A failure to demonstrate the utility of our platform by successfully using it ourselves to discover internal product candidates could harm our business prospects.
−Removed: Because we have limited resources, we focus our research programs on protein targets where we believe our computational assays are a good substitute for experimental assays, where we believe it is theoretically possible to discover a molecule with properties that are required for the molecule to become a drug and where we believe there is a meaningful commercial opportunity, among other factors.
−Removed: The focus of our initial internal drug discovery programs was in the area of oncology, and we have only recently begun expanding into other therapeutic areas, including neurology and immunology.
−Removed: We may forego or delay pursuit of opportunities with certain programs, collaborations, or product candidates or for indications that later prove to have greater commercial potential.
−Removed: However, the development of any product candidate we pursue may ultimately prove to be unsuccessful or less successful than another potential product candidate that we might have chosen to pursue on a more aggressive basis with our capital resources.
−Removed: do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, partnership, licensing, or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
−Removed: Alternatively, we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration.
−Removed: We rely on contract research organizations to synthesize any molecules with therapeutic potential that we discover.
−Removed: If such organizations do not meet our supply requirements, development of any product candidate we may develop may be delayed.
−Removed: We expect to rely on third parties to synthesize any molecules with therapeutic potential that we discover.
−Removed: Reliance on third parties may expose us to different risks than if we were to synthesize molecules ourselves.
−Removed: If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or synthesize molecules in accordance with regulatory requirements, if there are disagreements between us and such parties or if such parties are unable to expand capacities, we may not be able to fulfill, or may be delayed in producing sufficient product candidates to meet, our supply requirements.
−Removed: These facilities may also be affected by natural disasters, such as floods or fire, or geopolitical developments or public health pandemics, such as COVID-19, or such facilities could face production issues, such as contamination or regulatory concerns following a regulatory inspection of such facility.
−Removed: In such instances, we may need to locate an appropriate replacement third-party facility and establish a contractual relationship, which may not be readily available or on acceptable terms, which would cause additional delay and increased expense, and may have a material adverse effect on our business.
−Removed: We or any third party may also encounter shortages in the raw materials or active pharmaceutical ingredient, or API, necessary to synthesize any molecule we may discover in the quantities needed for preclinical studies or clinical trials, as a result of capacity constraints or delays or disruptions in the market for the raw materials or API.
−Removed: Even if raw materials or API are available, we may be unable to obtain sufficient quantities at an acceptable cost or quality.
−Removed: The failure by us or the third parties to obtain the raw materials or API necessary to synthesize sufficient quantities of any molecule we may discover could delay, prevent, or impair our development efforts and may have a material adverse effect on our business.
−Removed: If we are not able to establish or maintain collaborations to develop and commercialize any of the product candidates we discover internally, we may have to alter our development and commercialization plans for those product candidates and our business could be adversely affected.
−Removed: We have not yet identified any product candidates or advanced any of our drug discovery programs past the discovery stage and into preclinical studies or human clinical trials.
−Removed: We expect to rely on future collaborators for the development and potential commercialization of product candidates we discover internally when we believe it will help maximize the commercial value of the product candidate.
−Removed: We face significant competition in seeking appropriate collaborators for these activities, and a number of more established companies may also be pursuing such collaborations.
−Removed: These established companies may have a competitive advantage over us due to their size, financial resources, and greater clinical development and commercialization expertise.
−Removed: Whether we reach a definitive agreement for such collaborations will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors.
−Removed: Those factors may include the design or results of preclinical studies and clinical trials, the likelihood of approval by the U.S.
−Removed: Food and Drug Administration, or FDA, or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.
−Removed: The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.
−Removed: Collaborations are complex and time-consuming to negotiate and document.
−Removed: In addition, there have been a significant number of recent business combinations among large biopharmaceutical companies that have resulted in a reduced number of potential future collaborators.
−Removed: If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, or increase our expenditures and undertake development or commercialization activities at our own expense.
−Removed: If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.
−Removed: If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop any product candidates or bring them to market.
−Removed: As a company, we do not have any experience in clinical development and have not advanced any product candidates into clinical development.
−Removed: We only began conducting our own internal drug discovery efforts in mid-2018.
−Removed: As a company, we do not have any experience in clinical development and have not advanced any product candidates into clinical development.
−Removed: Our lack of experience in conducting clinical development activities may adversely impact the likelihood that we will be successful in advancing our programs.
−Removed: Further, any predictions you make about the future success or viability of our internal drug discovery programs may not be as accurate as they could be if we had a history of conducting clinical trials and developing our own product candidates.
−Removed: In addition, as our internal drug discovery business grows, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors.
−Removed: Our internal drug discovery business may need to transition to a business capable of supporting clinical development activities.
−Removed: We may not be successful in such a transition.
−Removed: If we and any current or future collaborators are unable to successfully complete clinical development, obtain regulatory approval for, or commercialize any product candidates, or experience delays in doing so, our business may be materially harmed.
−Removed: The success of our and any current or future collaborators’ development and commercialization programs will depend on several factors, including the following:
−Removed: successful completion of necessary preclinical studies to enable the initiation of clinical trials;
−Removed: successful enrollment of patients in, and the completion of, the clinical trials;
−Removed: acceptance by the FDA or other regulatory agencies of regulatory filings for any product candidates we and our current or future collaborators may develop;
−Removed: expanding and maintaining a workforce of experienced scientists and others to continue to develop any product candidates;
−Removed: obtaining and maintaining intellectual property protection and regulatory exclusivity for any product candidates we and our current or future collaborators may develop;
−Removed: making arrangements with third-party manufacturers for, or establishing, clinical and commercial manufacturing capabilities;
−Removed: establishing sales, marketing, and distribution capabilities for drug products and successfully launching commercial sales, if and when approved;
−Removed: acceptance of any product candidates we and our current or future collaborators may develop, if and when approved, by patients, the medical community, and third-party payors;
−Removed: effectively competing with other therapies;
−Removed: obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors;
−Removed: patients’ willingness to pay out-of-pocket in the absence of coverage and/or adequate reimbursement from third-party payors;
−Removed: ongoing or future restrictions resulting from the COVID-19 pandemic and its collateral consequences may result in internal and external operational delays and limitations;
−Removed: maintaining a continued acceptable safety profile following receipt of any regulatory approvals.
−Removed: Many of these factors are beyond our control, including clinical outcomes, the regulatory review process, potential threats to our intellectual property rights, and the manufacturing, marketing, and sales efforts of any current or future collaborator.
−Removed: Clinical drug development involves a lengthy and expensive process, with an uncertain outcome.
−Removed: If we or our current or future collaborators are unable to develop, receive marketing approval for, and successfully commercialize any product candidates, or if we or they experience delays as a result of any of these factors or otherwise, we may need to spend significant additional time and resources, which would adversely affect our business, prospects, financial condition, and results of operations.
−Removed: Risks Related to Our Operations
−Removed: Doing business internationally creates operational and financial risks for our business.
−Removed: For the fiscal year ended December 31, 2020, sales to customers outside of the United States accounted for approximately 44% of our total revenues.
−Removed: Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States.
−Removed: We have limited operating experience in some international markets, and we cannot assure you that our expansion efforts into other international markets will be successful.
−Removed: Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other markets.
−Removed: Our international expansion efforts may not be successful in creating further demand for our solutions outside of the United States or in effectively selling our solutions in the international markets we enter.
−Removed: In addition, we face risks in doing business internationally that could adversely affect our business, including:
−Removed: the need to localize and adapt our solutions for specific countries, including translation into foreign languages;
−Removed: data privacy laws which require that customer data be stored and processed in a designated territory or handled in a manner that differs significantly from how we typically handle customer data;
−Removed: difficulties in staffing and managing foreign operations, including employee laws and regulations;
−Removed: different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and collections issues;
−Removed: new and different sources of competition;
−Removed: weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;
−Removed: laws and business practices favoring local competitors;
−Removed: compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, reimbursement and pricing, privacy and data protection, and anti-bribery laws and regulations;
−Removed: increased financial accounting and reporting burdens and complexities;
−Removed: restrictions on the transfer of funds;
−Removed: changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes, and other trade barriers;
−Removed: changes in social, political, and economic conditions or in laws, regulations, and policies governing foreign trade, manufacturing, development, and investment both domestically as well as in the other countries and jurisdictions;
−Removed: adverse tax consequences, including the potential for required withholding taxes;
−Removed: global health pandemics, such as COVID-19;
−Removed: unstable regional and economic political conditions.
−Removed: Our international agreements may provide for payment denominated in local currencies and our local operating costs are denominated in local currencies.
−Removed: Therefore, fluctuations in the value of the U.S.
−Removed: dollar and foreign currencies may impact our operating results when translated into U.S.
−Removed: We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations.
−Removed: Additionally, we could face heightened risks as a result of the recent withdrawal of the United Kingdom from the European Union on January 31, 2020, commonly referred to as Brexit.
−Removed: On December 24, 2020, the United Kingdom and the European Union entered into a Trade and Cooperation Agreement, which sets out certain procedures for approval and recognition of medical products in each jurisdiction.
−Removed: Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.
−Removed: A widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business and make it more difficult to meet our obligations to our customers, and could result in reduced demand from our customers as well as delays in our drug discovery and development programs.
−Removed: Our business and operations could be adversely affected by health epidemics, including the recent COVID-19 pandemic, impacting the markets and industries in which we and our customers and collaborators operate.
−Removed: In December 2019, a disease referred to as COVID-19 was reported and has spread to many countries worldwide, including the United States.
−Removed: The ongoing global COVID-19 pandemic may adversely impact many aspects of our business.
−Removed: The COVID-19 pandemic has been declared a national emergency.
−Removed: In response to the COVID-19 pandemic, state, local, federal, and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders, and similar government orders and restrictions in order to control the spread of the disease.
−Removed: Such orders or restrictions, or the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions, and cancellation or postponement of events, among other effects that could negatively impact productivity and disrupt our operations and those of our customers and collaborators.
−Removed: In early March 2020, we implemented a work-from-home policy for all of our employees.
−Removed: Beginning in June 2020, we began limited re-openings of certain of our offices in the United States and abroad.
−Removed: Our re-openings have begun on a limited basis and are voluntary for all of our employees.
−Removed: We intend to continue to phase-in the re-opening of our offices as our management and federal, state, or local authorities advise, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we determine are in our best interests.
−Removed: While most of our operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed, many employees may have additional personal needs to attend to (such as looking after children as a result of school closures or family who become sick), and employees may become sick themselves and be unable to work.
−Removed: Decreased effectiveness of our team could adversely affect our results due to our inability to meet in person with potential or current customers and collaborators, or other decreases in productivity that could seriously harm our business.
−Removed: The full extent of the future impact will depend on many factors outside of our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy.
−Removed: For instance, if certain of our customers experience downturns or uncertainty in their own business operations and revenue because of the economic effects resulting from the spread of COVID-19, they may decrease their spending, which may result in decreased software revenue.
−Removed: Furthermore, as a result of the restrictions related to COVID-19, our sales force has limited in-person interactions, and their ability to attend events that promote and expand knowledge of our company and platform, including industry conferences and events has been hampered.
−Removed: In addition, as a result of the COVID-19 pandemic, we may experience delays in the progress of certain of our drug discovery and development programs, particularly those that are in clinical studies or preparing to enter clinical studies.
−Removed: Delays in any such programs could result in delays achieving milestones and related revenue.
−Removed: The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation closely.
−Removed: The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.
−Removed: We do not yet know the full extent of potential delays or impacts on our business, operations, or the global economy as a whole.
−Removed: While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.
−Removed: If we fail to manage our technical operations infrastructure, our existing customers, and our internal drug discovery team, may experience service outages, and our new customers may experience delays in the deployment of our solutions.
−Removed: We have experienced significant growth in the number of users and data that our operations infrastructure supports.
−Removed: We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and to support our internal drug discovery programs.
−Removed: We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments.
−Removed: In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our solutions.
−Removed: However, the provision of new hosting infrastructure requires adequate lead-time.
−Removed: We have experienced, and may in the future experience, website disruptions, outages, and other performance problems.
−Removed: These types of problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in usage, and denial of service issues.
−Removed: In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.
−Removed: If we do not accurately predict our infrastructure requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities, and customer losses.
−Removed: If our operations infrastructure fails to keep pace with increased sales and usage, customers and our internal drug discovery team may experience delays in the deployment
−Removed: of our solutions as we seek to obtain additional capacity, which could adversely affect our reputation and adversely affect our revenues.
−Removed: Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition.
−Removed: Changes in tax law may adversely affect our business or financial condition.
−Removed: On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the 2017 Tax Act, which significantly revised the Internal Revenue Code of 1986, as amended, or the Code.
−Removed: The 2017 Tax Act, among other things, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted earnings (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years ending after December 31, 2017 to 80% of current year taxable income and elimination of net operating loss carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the imposition of a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, the elimination of U.S.
−Removed: tax on foreign earnings (subject to certain important exceptions), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.
−Removed: As part of Congress’s response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020, and COVID relief provisions were included in the Consolidated Appropriations Act, 2021, or CAA, which was enacted on December 27, 2020.
−Removed: All contain numerous tax provisions.
−Removed: In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of net operating losses, which was enacted as part of the 2017 Tax Act.
−Removed: It also provides that net operating losses arising in any taxable year beginning after December 31, 2017, and before January 1, 2021 are generally eligible to be carried back up to five years.
−Removed: The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30 to 50% of adjusted taxable income.
−Removed: Regulatory guidance under the 2017 Tax Act, the FFCR Act, the CARES Act, and the CAA is and continues to be forthcoming, and such guidance could ultimately increase or lessen the impact of these laws on our business and financial condition.
−Removed: It is also possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company.
−Removed: In addition, it is uncertain if and to what extent various states will conform to the 2017 Tax Act, the FFCR Act, the CARES Act, and the CAA.
−Removed: Our ability to use our NOLs and research and development tax credit carryforwards to offset future taxable income may be subject to certain limitations.
−Removed: As of December 31, 2020, we had federal net operating losses of approximately $206.3 million and state NOLs of approximately $126.7 million, which, if not utilized, generally begin to expire in 2022.
−Removed: As of December 31, 2020, we also had federal research and development tax credit carryforwards of approximately $9.4 million and state research and development tax credit carryforwards of approximately $0.5 million, which, if not utilized, generally begin to expire in 2021.
−Removed: These NOLs and research and development tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.
−Removed: In addition, under Section 382 of the Code, and corresponding provisions of state law, a corporation that undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three year period, is subject to limitations on its ability to utilize its pre-change NOLs and research and development tax credit carryforwards to offset future taxable income.
−Removed: We have performed an analysis through December 31, 2019 and determined that such an ownership change has not occurred.
−Removed: However, we may experience such ownership changes in the future as a result of offerings of our common stock or changes in our stock ownership (which may be outside our control).
−Removed: As a result, if, and to the extent that, we earn net taxable income, our ability to use our pre-change NOLs and research and development tax credit carryforwards to offset such taxable income may be subject to limitations.
−Removed: There is also a risk that due to regulatory changes, such as suspension of the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities.
−Removed: As described above in “Changes in tax laws or in their implementation or interpretation could adversely affect our business and financial condition,” the 2017 Tax Act as amended by the CARES Act, includes changes to U.S.
−Removed: federal tax rates and rules governing NOL carryforwards that may significantly impact our ability to utilize NOLs to offset taxable income in the future.
−Removed: In addition, state NOLs generated in one state cannot be used to offset income generated in another state.
−Removed: For these reasons, we may be unable to use a material portion of our NOLs and other tax attributes.
−Removed: Our international operations subject us to potentially adverse tax consequences.
−Removed: We report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions.
−Removed: These jurisdictions include Germany, Japan, and India.
−Removed: The international nature and organization of our business activities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions.
−Removed: The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
−Removed: If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
−Removed: Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added, or similar taxes, and we could be subject to tax liabilities with respect to past or future sales, which could adversely affect our results of operations.
−Removed: We do not collect sales and use, value added, and similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable or that we are not required to collect such taxes with respect to the jurisdiction.
−Removed: Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction.
−Removed: Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties, and interest, and we may be required to collect such taxes in the future.
−Removed: Such tax assessments, penalties, and interest or future requirements may adversely affect our results of operations.
−Removed: Unanticipated changes in our effective tax rate could harm our future results.
−Removed: We are subject to income taxes in the United States and various foreign jurisdictions, and our domestic and international tax liabilities are subject to the allocation of expenses in differing jurisdictions.
−Removed: Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.
−Removed: Our effective tax rate could be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses as a result of acquisitions, the valuation of deferred tax assets and liabilities, and changes in federal, state, or international tax laws and accounting principles.
−Removed: Increases in our effective tax rate would reduce our profitability or in some cases increase our losses.
−Removed: In addition, we may be subject to income tax audits by many tax jurisdictions throughout the world.
−Removed: Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.
−Removed: We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.
−Removed: We may in the future seek to acquire or invest in businesses, solutions, or technologies that we believe could complement or expand our solutions, enhance our technical capabilities, or otherwise offer growth opportunities.
−Removed: The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
−Removed: In addition, we have limited experience in acquiring other businesses.
−Removed: If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations, and technologies successfully, effectively manage the combined business following the acquisition or preserve the operational synergies between our business units that we believe currently exist.
−Removed: We cannot assure you that following any acquisition we would achieve the expected synergies to justify the transaction, due to a number of factors, including:
−Removed: inability to integrate or benefit from acquired technologies or services in a profitable manner;
−Removed: unanticipated costs or liabilities associated with the acquisition;
−Removed: incurrence of acquisition-related costs;
−Removed: difficulty integrating the accounting systems, operations, and personnel of the acquired business;
−Removed: difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
−Removed: difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenues, licensing, support, or professional services model of the acquired company;
−Removed: diversion of management’s attention from other business concerns;
−Removed: adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;
−Removed: the potential loss of key employees;
−Removed: use of resources that are needed in other parts of our business;
−Removed: use of substantial portions of our available cash to consummate the acquisition.
−Removed: In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually.
−Removed: In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
−Removed: Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results.
−Removed: In addition, if an acquired business fails to meet our expectations, our operating results, business, and financial position may suffer.
−Removed: Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event at our primary facilities.
−Removed: Our operations are primarily conducted at our facilities in New York, New York and Portland, Oregon and our internal hosting facility located in Clifton, New Jersey.
−Removed: The occurrence of natural disasters or other catastrophic events could disrupt our operations.
−Removed: Any natural disaster or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations.
−Removed: Risks Related to Our Intellectual Property
−Removed: If we fail to comply with our obligations under our existing license agreements with Columbia University, under any of our other intellectual property licenses, or under any future intellectual property licenses, or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.
−Removed: We are party to a number of license agreements pursuant to which we have been granted exclusive and non-exclusive worldwide licenses to certain patents, software code, and software programs to, among other things, reproduce, use, execute, copy, operate, sublicense, and distribute the licensed technology in connection with the marketing and sale of our software solutions and to develop improvements thereto.
−Removed: In particular, the technology that we license from Columbia University pursuant to our license agreements with them are used in and incorporated into a number of our software solutions which we market and license to our customers.
−Removed: For further information regarding our license agreements with Columbia University, see “Business—License Agreements with Columbia University”.
−Removed: Our license agreements with Columbia University and other licensors impose, and we expect that future licenses will impose, specified royalty and other obligations on us.
−Removed: In spite of our best efforts, our current or any future licensors might conclude that we have materially breached our license agreements with them and might therefore terminate the license agreements, thereby delaying our ability to market and sell our existing software solutions and develop and commercialize new software solutions that utilize technology covered by these license agreements.
−Removed: If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors could market, products and technologies similar to ours.
−Removed: This could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
−Removed: Disputes may arise regarding intellectual property subject to a licensing agreement, including:
−Removed: the scope of rights granted under the license agreement and other interpretation related issues;
−Removed: the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
−Removed: the sublicensing of patent and other rights under any collaborative development relationships;
−Removed: the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our current or future licensors and us and our collaborators;
−Removed: the priority of invention of patented technology.
−Removed: In addition, license agreements are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.
−Removed: The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement.
−Removed: For example, our counterparties have in the past and may in the future dispute the amounts owed to them pursuant to payment obligations.
−Removed: If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may experience delays in the development and commercialization of new software solutions and in our ability to market and sell existing software solutions, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: Our obligations under our existing or future drug discovery collaboration agreements may limit our intellectual property rights that are important to our business.
−Removed: Further, if we fail to comply with our obligations under our existing or future collaboration agreements, or otherwise experience disruptions to our business relationships with our prior, current, or future collaborators, we could lose intellectual property rights that are important to our business.
−Removed: We are party to collaboration agreements with biopharmaceutical companies, pursuant to which we provide drug discovery services but have no ownership rights, or only co-ownership rights, to certain intellectual property generated through the collaborations.
−Removed: We are also party to a collaboration agreement with BMS for the development and potential commercialization of product candidates we discover internally, which also provides for co-ownership rights to certain intellectual property generated through the collaboration in certain scenarios.
−Removed: We may enter into additional collaboration agreements in the future, pursuant to which we may have no ownership rights, or only co-ownership rights, to certain intellectual property generated through the future collaborations.
−Removed: If we are unable to obtain ownership or license of such intellectual property generated through our prior, current, or future collaborations and overlapping with, or related to, our own proprietary technology or product candidates, then our business, financial condition, results of operations, and prospects could be materially harmed.
−Removed: Our existing collaboration agreements contain certain exclusivity obligations that require us to design compounds exclusively for our collaborators with respect to certain specific targets over a specified time period.
−Removed: Our future collaboration agreements may grant similar exclusivity rights to future collaborators with respect to target(s) that are the subject of such collaborations.
−Removed: Existing or future collaboration agreements may also impose diligence obligations on us.
−Removed: For example, existing or future collaboration agreements may impose restrictions on us from pursuing the drug development targets for ourselves or for our other current or future collaborators, thereby removing our ability to develop and commercialize, or to jointly develop and commercialize with other current or future collaborators, product candidates, and technology related to the drug development targets.
−Removed: Under our collaboration with BMS, for example, we are prohibited from developing and commercializing product candidates anywhere in the world that are directed at the targets specified under the agreement, until the earlier of such target ceasing to be included under the agreement or the expiration of the last to expire royalty term for the program related to the target.
−Removed: In spite of our best efforts, our prior, current, or future collaborators might conclude that we have materially breached our collaboration agreements.
−Removed: If these collaboration agreements are terminated, or if the underlying intellectual property, to the extent we have ownership or license of, fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technology identical to ours.
−Removed: This could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
−Removed: Disputes may arise regarding intellectual property subject to a collaboration agreement, including:
−Removed: the scope of ownership or license granted under the collaboration agreement and other interpretation related issues;
−Removed: the extent to which our technology and product candidates infringe on intellectual property that generated through the collaboration to of which we do not have ownership or license under the collaboration agreement;
−Removed: the assignment or sublicense of intellectual property rights and other rights under the collaboration agreement;
−Removed: our diligence obligations under the collaboration agreement and what activities satisfy those diligence obligations;
−Removed: the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by us and our current or future collaborators.
−Removed: In addition, collaboration agreements are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.
−Removed: The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property, or increase what we believe to be our obligations under the relevant agreements, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: Moreover, if disputes over intellectual property that we have owned, co-owned, or in-licensed under the collaboration agreements prevent or impair our ability to maintain our current collaboration arrangements on commercially acceptable terms, we may be unable
−Removed: to successfully develop and commercialize the affected technology or product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: If we are unable to obtain, maintain, enforce, and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.
−Removed: Our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely and jointly with others or may license from others, particularly patents, in the United States and other countries with respect to any proprietary technology and product candidates we develop.
−Removed: We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our technology and any product candidates we may develop that are important to our business and by in-licensing intellectual property related to our technology and product candidates.
−Removed: If we are unable to obtain or maintain patent protection with respect to any proprietary technology or product candidate, our business, financial condition, results of operations, and prospects could be materially harmed.
−Removed: The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, defend, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner.
−Removed: It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
−Removed: Moreover, in some circumstances, we may not have the right to control the preparation, filing, and prosecution of patent applications, or to maintain, enforce, and defend the patents, covering technology that we co-own with third parties or license from third parties.
−Removed: Therefore, these co-owned and in-licensed patents and applications may not be prepared, filed, prosecuted, maintained, defended, and enforced in a manner consistent with the best interests of our business.
−Removed: The patent position of software and biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation.
−Removed: In addition, the scope of patent protection outside of the United States is uncertain and laws of non-U.S.
−Removed: countries may not protect our rights to the same extent as the laws of the United States or vice versa.
−Removed: With respect to both owned and in-licensed patent rights, we cannot predict whether the patent applications we and our licensor are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors.
−Removed: Further, we may not be aware of all third-party intellectual property rights or prior art potentially relating to our computational platform, technology, and any product candidates we may develop.
−Removed: 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 of the priority application, or in some cases not published at all.
−Removed: Therefore, neither we nor our collaborators, or our licensor can know with certainty whether either we, our collaborators, or our licensor were the first to make the inventions claimed in the patents and patent applications we own or in-license now or in the future, or that either we, our collaborators, or our licensor were the first to file for patent protection of such inventions.
−Removed: As a result, the issuance, scope, validity, enforceability, and commercial value of our owned, co-owned, and in-licensed patent rights are highly uncertain.
−Removed: Moreover, our owned, co-owned, and in-licensed pending and future patent applications may not result in patents being issued that protect our technology and product candidates, in whole or in part, or that effectively prevent others from commercializing competitive technologies and products.
−Removed: Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our owned, co-owned, or in-licensed current or future patents and our ability to obtain, protect, maintain, defend, and enforce our patent rights, narrow the scope of our patent protection and, more generally, could affect the value of, or narrow the scope of, our patent rights.
−Removed: For example, recent Supreme Court decisions have served to curtail the scope of subject matter eligible for patent protection in the United States, and many software patents have since been invalidated on the basis that they are directed to abstract ideas.
−Removed: In order to pursue protection based on our provisional patent applications, we will need to file Patent Cooperation Treaty applications, non-U.S.
−Removed: applications, and/or U.S.
−Removed: non-provisional patent applications prior to applicable deadlines.
−Removed: Even then, as highlighted above, patents may never issue from our patent applications, or the scope of any patent may not be sufficient to provide a competitive advantage.
−Removed: Moreover, we, our collaborators, or our licensor may be subject to a third-party preissuance submission of prior art to the U.S.
−Removed: Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, revocation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others.
−Removed: An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights or allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us.
−Removed: If the breadth or strength of protection provided by our owned, co-owned, or in-licensed current or future patents and patent applications is threatened,
−Removed: regardless of the outcome, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future technology or product candidates.
−Removed: Additionally, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.
−Removed: Even if our owned, co-owned, and in-licensed current and future patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us, or otherwise provide us with any competitive advantage.
−Removed: The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our owned and in-licensed patents may be challenged in the courts or patent offices in the United States and abroad.
−Removed: Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and product candidates.
−Removed: Such proceedings also may result in substantial cost and require significant time from our management and employees, even if the eventual outcome is favorable to us.
−Removed: In particular, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.
−Removed: Furthermore, our competitors may be able to circumvent our owned, co-owned, or in-licensed current or future patents by developing similar or alternative technologies or products in a non-infringing manner.
−Removed: As a result, our owned, co-owned, and in-licensed current or future patent portfolio may not provide us with sufficient rights to exclude others from commercializing technology and products similar or identical to any of our technology and product candidates.
−Removed: Changes to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
−Removed: Changes in either the patent laws or interpretation of patent laws in the United States, including patent reform legislation such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, could increase the uncertainties and costs surrounding the prosecution of our owned and in-licensed patent applications and the maintenance, enforcement or defense of our owned and in-licensed issued patents.
−Removed: The Leahy-Smith Act includes a number of significant changes to United States patent law.
−Removed: These changes include provisions that affect the way patent applications are prosecuted, redefine prior art, provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and enable third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent at USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings.
−Removed: Assuming that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent.
−Removed: After March 2013, under the Leahy-Smith Act, the United States transitioned to a first-to-file system in which, assuming that the other statutory 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.
−Removed: As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
−Removed: In addition, the patent positions of companies in the development and commercialization of software, biologics and pharmaceuticals are particularly uncertain.
−Removed: Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.
−Removed: This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained.
−Removed: Depending on future actions by the U.S.
−Removed: Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future.
−Removed: A number of recent cases decided by the U.S.
−Removed: Supreme Court have involved questions of when claims reciting abstract ideas, laws of nature, natural phenomena and/or natural products are eligible for a patent, regardless of whether the claimed subject matter is otherwise novel and inventive.
−Removed: These cases include Association for Molecular Pathology v.
−Removed: Myriad Genetics, Inc., 569 U.S.
−Removed: 12-398 (2013) or Myriad;
−Removed: CLS Bank International, 573 U.S.
−Removed: 13-298 (2014);
−Removed: and Mayo Collaborative Services v.
−Removed: Prometheus Laboratories, Inc., or Prometheus, 566 U.S.
−Removed: 10-1150 (2012).
−Removed: In response to these cases, federal courts have held numerous patents invalid as claiming subject matter ineligible for patent protection.
−Removed: Moreover, the USPTO has issued guidance to the examining corps on how to apply these cases during examination.
−Removed: The full impact of these decisions is not yet known.
−Removed: In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained.
−Removed: Depending on these and other decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change or be interpreted in unpredictable ways that would weaken our ability to obtain new patents or to enforce any patents that may issue to us in the future.
−Removed: In addition, these events may adversely affect our ability to defend any patents that may issue in procedures in the USPTO or in courts.
−Removed: We, our prior, existing, or future collaborators, and our existing or future licensors, may become involved in lawsuits to protect or enforce our patent or other intellectual property rights, which could be expensive, time-consuming and unsuccessful.
−Removed: Competitors and other third parties may infringe, misappropriate, or otherwise violate our, our prior, current and future collaborators’, or our current and future licensors’ issued patents or other intellectual property.
−Removed: As a result, we, our prior, current, or future collaborators, or our current or future licensor may need to file infringement, misappropriation, or other intellectual property related claims, which can be expensive and time-consuming.
−Removed: Any claims we assert against perceived infringers could provoke such parties to assert counterclaims against us alleging that we infringe, misappropriate, or otherwise violate their intellectual property.
−Removed: In addition, in a patent infringement proceeding, such parties could assert that the patents we or our licensors have asserted are invalid or unenforceable.
−Removed: In patent litigation in the United States, defenses alleging invalidity or unenforceability are commonplace.
−Removed: Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement.
−Removed: Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.
−Removed: Third parties may institute such claims before administrative bodies in the United States or abroad, even outside the context of litigation.
−Removed: Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in non-U.S.
−Removed: jurisdictions (e.g., opposition proceedings).
−Removed: The outcome following legal assertions of invalidity and unenforceability is unpredictable.
−Removed: An adverse result in any such proceeding could put one or more of our owned, co-owned, or in-licensed current or future patents at risk of being invalidated or interpreted narrowly and could put any of our owned, co-owned, or in-licensed current or future patent applications at risk of not yielding an issued patent.
−Removed: A court may also refuse to stop the third party from using the technology at issue in a proceeding on the grounds that our owned, co-owned, or in-licensed current or future patents do not cover such technology.
−Removed: Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information or trade secrets could be compromised by disclosure during this type of litigation.
−Removed: Any of the foregoing could allow such third parties to develop and commercialize competing technologies and products in a non-infringing manner and have a material adverse impact on our business, financial condition, results of operations, and prospects.
−Removed: Interference or derivation proceedings provoked by third parties, or brought by us or by our licensor, or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications.
−Removed: An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party.
−Removed: Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology.
−Removed: Our defense of litigation or interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees.
−Removed: In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to conduct clinical trials, continue our research programs, license necessary technology from third parties, or enter into development collaborations that would help us bring any product candidates to market.
−Removed: Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
−Removed: Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell any product candidates we may develop and for our collaborators, customers and partners to use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties.
−Removed: There is considerable patent and other intellectual property litigation in the software, pharmaceutical, and biotechnology industries.
−Removed: We may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our technology and product candidates, including interference proceedings, post grant review, inter partes review, and derivation proceedings before the USPTO and similar proceedings in non-U.S.
−Removed: jurisdictions such as oppositions before the European Patent Office.
−Removed: Numerous U.S.
−Removed: issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates.
−Removed: As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our technologies or product candidates that we may identify may be subject to claims of infringement of the patent rights of third parties.
−Removed: The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend.
−Removed: Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can.
−Removed: The risks of being involved in such litigation and proceedings may increase if and as any product candidates near commercialization and as we gain the greater visibility associated with being a public company.
−Removed: Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of merit.
−Removed: We may not be aware of all such intellectual property rights potentially relating to our technology and product candidates and their uses, or we may incorrectly conclude that third-party intellectual property is invalid or that our activities and product candidates do not infringe such intellectual property.
−Removed: Thus, we do not know with certainty that our technology and product candidates, or our development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third party’s intellectual property.
−Removed: Third parties may assert that we are employing their proprietary technology without authorization.
−Removed: There may be third-party patents or patent applications with claims to materials, formulations or methods, such as methods of manufacture or methods for treatment, related to the discovery, use or manufacture of the product candidates that we may identify or related to our technologies.
−Removed: Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that the product candidates that we may identify may infringe.
−Removed: In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.
−Removed: Moreover, as noted above, there may be existing patents that we are not aware of or that we have incorrectly concluded are invalid or not infringed by our activities.
−Removed: If any third-party patents were held by a court of competent jurisdiction to cover, for example, the manufacturing process of the product candidates that we may identify, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.
−Removed: Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize the product candidates that we may identify.
−Removed: Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
−Removed: In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products, be forced to indemnify our customers or collaborators or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
−Removed: We may choose to take a license or, if we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, we could also be required to obtain a license from such third party to continue developing, manufacturing and marketing our technology and product candidates.
−Removed: However, we may not be able to obtain any required license on commercially reasonable terms or at all.
−Removed: Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us and could require us to make substantial licensing and royalty payments.
−Removed: We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product.
−Removed: A finding of infringement could prevent us from commercializing any product candidates or force us to cease some of our business operations, which could materially harm our business.
−Removed: In addition, we may be forced to redesign any product candidates, seek new regulatory approvals and indemnify third parties pursuant to contractual agreements.
−Removed: Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations and prospects.
−Removed: We may be subject to claims by third parties asserting that our employees, consultants, or contractors have wrongfully used or disclosed confidential information of third parties, or we have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
−Removed: Certain of our employees, consultants, and contractors were previously employed at universities or other software or biopharmaceutical companies, including our competitors or potential competitors.
−Removed: Although we try to ensure that our employees, consultants and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer.
−Removed: Litigation may be necessary to defend against these claims.
−Removed: In addition, while it is our policy to require that our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.
−Removed: Our intellectual property assignment agreements with them may not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
−Removed: Such claims could have a material adverse effect on our business, financial condition, results of operations, and prospects.
−Removed: If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could have a material adverse effect on our competitive business position and prospects.
−Removed: Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products, which license may not be available on commercially reasonable terms, or at all, or such license may be non-exclusive.
−Removed: Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and employees.
−Removed: If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.
−Removed: In addition to seeking patents for any product candidates and technology, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information, to maintain our competitive position.
−Removed: We seek to protect our trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors, collaborators, and other third parties.
−Removed: We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants, but we cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology.
−Removed: Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
−Removed: Detecting the disclosure or misappropriation of a trade secret and enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable.
−Removed: In addition, some courts inside and outside of the United States are less willing or unwilling to protect trade secrets.
−Removed: If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
−Removed: If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position may be materially and adversely harmed.
−Removed: Risks Related to Regulatory and Other Legal Compliance Matters
−Removed: Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition, or results of operations.
−Removed: The regulatory framework for the collection, use, safeguarding, sharing, transfer, and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.
−Removed: Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply.
−Removed: For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data and employee data, is subject to the European Union General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or EEA, in May 2018.
−Removed: The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.
−Removed: The GDPR would increase our obligations with respect to any clinical trials conducted in the EEA by expanding the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators.
−Removed: In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States and, as a result, increases the scrutiny that such rules should apply to transfers of personal data from any clinical trial sites located in the EEA to the United States.
−Removed: The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information and/or impose substantial fines for violations of the GDPR, which can be up to four percent of global revenues or 20 million Euros, whichever is greater, and confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
−Removed: In addition, the GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric, or health data.
−Removed: Given the breadth and depth of changes in data protection obligations, preparing for and complying with the GDPR’s requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors, or consultants that process or transfer personal data collected in the European Union.
−Removed: The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information, could require us to change our business practices and put in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation, and significant fines and penalties against us, and could have a material adverse effect on our business, financial condition, or results of operations.
−Removed: Similar privacy and data security requirements are either in place or underway in the United States.
−Removed: There are a broad variety of data protection laws that may be applicable to our activities, and a range of enforcement agencies at both the state and federal levels that can review companies for privacy and data security concerns.
−Removed: The Federal Trade Commission and state Attorneys General all are aggressive in reviewing privacy and data security protections for consumers.
−Removed: New laws also are being considered at both the state and federal levels.
−Removed: For example, the California Consumer Privacy Act, or CCPA, which went into effect on January 1, 2020, is creating similar risks and obligations as those created by GDPR.
−Removed: Because of this, we may need to engage in additional activities (e.g., data mapping) to identify the personal information we are collecting and the purposes for which such information is collected.
−Removed: In addition, we will need to ensure that our policies recognize the rights granted to consumers (as that phrase is broadly defined in the CCPA and can include business contact information), including granting consumers the right to opt-out of the sale of their personal information.
−Removed: Many other states are considering similar legislation.
−Removed: A broad range of legislative measures also have been introduced at the federal level.
−Removed: Accordingly, failure to comply with current and any future federal and state laws regarding privacy and security of personal information could expose us to fines and penalties.
−Removed: We also face a threat of consumer class actions related to these laws and the overall protection of personal data.
−Removed: Even if we are not determined to have violated these laws, investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.
−Removed: We, and the collaborators who use our computational platform, may be subject to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations.
−Removed: Failure to comply with such laws and regulations, may result in substantial penalties.
−Removed: We, and the collaborators who use our computational platform, may be subject to broadly applicable healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our software solutions and any products for which we obtain marketing approval.
−Removed: Such healthcare laws and regulations include, but are not limited to, the federal health care Anti-Kickback Statute;
−Removed: federal civil and criminal false claims laws, such as the federal False Claims Act;
−Removed: the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA;
−Removed: the Federal Food, Drug, and Cosmetic Act;
−Removed: the federal Physician Payments Sunshine Act;
−Removed: and analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency laws.
−Removed: Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.
−Removed: 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.
−Removed: Violations of applicable healthcare laws and regulations may result in significant civil, criminal, and administrative penalties, damages, disgorgement, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements, and/or oversight if a corporate integrity agreement or similar agreement is executed to resolve allegations of non-compliance with these laws and the curtailment or restructuring of operations.
−Removed: In addition, violations may also result in reputational harm, diminished profits, and future earnings.
−Removed: We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws, and other laws governing our operations.
−Removed: If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, be precluded from developing, manufacturing, and selling certain products outside the United States or be required to develop and implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.
−Removed: Our operations are subject to anti-corruption laws, including the U.K.
−Removed: Bribery Act 2010, or Bribery Act, the U.S.
−Removed: Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future.
−Removed: The Bribery Act, FCPA, and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed, or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage.
−Removed: Compliance with the FCPA, in particular, is expensive and difficult, particularly in countries in which corruption is a recognized problem.
−Removed: In addition, the FCPA presents particular challenges in the biopharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.
−Removed: 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.
−Removed: We may in the future operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act, FCPA, or local anti-corruption laws.
−Removed: In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
−Removed: If we further expand our operations outside of the United States, we will need to dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate.
−Removed: We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements, and currency exchange regulations, collectively referred to as the Trade Control laws.
−Removed: In addition, 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.
−Removed: nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products.
−Removed: 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 products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.
−Removed: There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA, or other legal requirements, including Trade Control laws.
−Removed: If we are not in compliance with the Bribery Act, the FCPA, and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations, and liquidity.
−Removed: Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S.
−Removed: exchanges for violations of the FCPA’s accounting provisions.
−Removed: Any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by the United Kingdom, U.S., or other authorities could also have an adverse impact on our reputation, our business, results of operations, and financial condition.
−Removed: Our employees, independent contractors, consultants, and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading laws, which could cause significant liability for us and harm our reputation.
−Removed: We are exposed to the risk of fraud or other misconduct by our employees, independent contractors, consultants, and vendors.
−Removed: Misconduct by these partners could include intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately, or disclose unauthorized activities to us.
−Removed: Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.
−Removed: This could include violations of HIPAA, other U.S.
−Removed: federal and state law, and requirements of non-U.S.
−Removed: jurisdictions, including the European Union Data Protection Directive.
−Removed: We are also exposed to risks in connection with any insider trading violations by employees or others affiliated with us.
−Removed: 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 be in compliance with such laws, standards, regulations, guidance, or codes of conduct.
−Removed: Furthermore, our employees may, from time to time, bring lawsuits against us for employment issues, including injury, discrimination, wage and hour disputes, sexual harassment, hostile work environment, or other employment issues.
−Removed: If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
−Removed: Our internal information technology systems, or those of our third-party vendors, contractors, or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of our services, compromise sensitive information related to our business, or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.
−Removed: We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business.
−Removed: In the ordinary course of business, we collect, store, and transmit confidential information (including but not limited to intellectual property, proprietary business information, and personal information).
−Removed: It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
−Removed: We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors and other contractors and consultants who have access to our confidential information.
−Removed: Despite the implementation of security measures, given the size and complexity of our internal information technology systems and those of our third-party vendors and other contractors and consultants, and the increasing amounts of confidential information that they maintain, our information technology systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware,
−Removed: ransomware, denial-of-service attacks, 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 or lead to data leakage.
−Removed: The risk of a security breach or disruption, particularly through cyber-attacks 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.
−Removed: We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats.
−Removed: For example, third parties have in the past and may in the future illegally pirate our software and make that software publicly available on peer-to-peer file sharing networks or otherwise.
−Removed: 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.
−Removed: To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or those of our third-party vendors and other contractors and consultants, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage and the further development and commercialization of our software could be delayed.
−Removed: The costs related to significant security breaches or disruptions could be material and exceed the limits of the cybersecurity insurance we maintain against such risks.
−Removed: If the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, 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.
−Removed: While we have not experienced any such system failure, accident, or security breach to date, and believe that our data protection efforts and our investment in information technology reduce the likelihood of such incidents in the future, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems, or those of our third-party vendors and other contractors and consultants, or other cyber incidents that could have a material adverse effect upon our reputation, business, operations, or financial condition.
−Removed: For example, if such an event were to occur and cause interruptions in our operations, or those of our third-party vendors and other contractors and consultants, it could result in a material disruption of our programs and the development of our services and technologies could be delayed.
−Removed: Furthermore, significant disruptions of our internal 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, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.
−Removed: For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our customers or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.
−Removed: Further, sophisticated cyber attackers (including foreign adversaries engaged in industrial espionage) are skilled at adapting to existing security technology and developing new methods of gaining access to organizations’ sensitive business data, which could result in the loss of sensitive information, including trade secrets.
−Removed: Additionally, actual, potential, or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants.
−Removed: Risks Related to Employee Matters and Managing Growth
−Removed: Our future success depends on our ability to retain key executives and to attract, retain, and motivate qualified personnel.
−Removed: We are highly dependent on the research and development, clinical, financial, operational, scientific, software engineering, and other business expertise of our executive officers, as well as the other principal members of our management, scientific, clinical, and software engineering teams.
−Removed: Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time.
−Removed: We do not maintain “key person” insurance for any of our executives or other employees.
−Removed: The loss of the services of our executive officers or other key employees could impede the achievement of our development and sales goals in our software business and the achievement of our research, development, and commercialization objectives in our drug discovery business.
−Removed: In either case, the loss of the services of our executive officers or other key employees could seriously harm our ability to successfully implement our business strategy.
−Removed: Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize products in the life sciences industry.
−Removed: Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal, and sales and marketing personnel, as well as software engineers and computational chemists, will also be critical to our success.
−Removed: In the technology industry, there is substantial and continuous competition for engineers with high levels of expertise in designing, developing, and managing software and related services, as well as competition for sales executives, data scientists, and operations personnel.
−Removed: Competition to hire these individuals is intense, and we may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous biopharmaceutical and technology companies for similar personnel.
−Removed: We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
−Removed: In addition, we rely on consultants and advisors to assist us in formulating our research and development and commercialization strategy and advancing our computational platform.
−Removed: Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
−Removed: If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited and our business would be adversely affected.
−Removed: We are pursuing multiple business strategies and expect to expand our development and regulatory capabilities, and as a result, we may encounter difficulties in managing our multiple business units and our growth, which could disrupt our operations.
−Removed: Currently, we are pursuing multiple business strategies simultaneously, including activities in research and development, software sales, and collaborative and internal drug discovery.
−Removed: We believe pursuing these multiple business strategies offers financial and operational synergies, but these diversified operations place increased demands on our limited resources.
−Removed: Furthermore, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, clinical and regulatory affairs.
−Removed: To manage our multiple business units and anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel.
−Removed: Due to our limited financial resources and our management team’s limited attention and limited experience in managing a company with such anticipated growth, we may not be able to effectively manage our multiple business units and the expansion of our operations or recruit and train additional qualified personnel.
−Removed: The expansion of our operations may lead to significant costs and may divert our management and business development resources.
−Removed: In addition, in order to meet our obligations as a public company and to support our anticipated long-term growth, we will need to increase our general and administrative capabilities.
−Removed: Our management, personnel, and systems may not be adequate to support this future growth.
−Removed: Any inability to manage our multiple business units and growth could delay the execution of our business plans or disrupt our operations and the synergies we believe currently exist between our business units.
−Removed: In addition, adverse developments in one of these business units may disrupt these synergies.
−Removed: Risks Related to Ownership of Our Common Stock
−Removed: An active trading market for our common stock may not be sustained.
−Removed: Our shares of common stock began trading on the Nasdaq Global Select Market on February 6, 2020.
−Removed: Prior to February 6, 2020, there was no public market for our common stock, and we cannot assure you that an active trading market for our shares will be sustained.
−Removed: As a result, it may be difficult for our stockholders to sell their shares without depressing the market price of our common stock, or at all.
−Removed: Our executive officers, directors, and principal stockholders, if they choose to act together, have the ability to significantly influence all matters submitted to stockholders for approval.
−Removed: As of February 26, 2021, our executive officers and directors and our stockholders who beneficially owned more than 5% of our outstanding common stock, in the aggregate, beneficially owned shares representing approximately 35.5% of our common stock and all of our limited common stock, or, if the holder of our limited common stock exercised its right to convert each share of its limited common stock for one share of our common stock, approximately 43.9% of our common stock.
−Removed: As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs.
−Removed: For example, these persons, if they choose to act together, would significantly influence the election of directors and approval of any merger, consolidation, or sale of all or substantially all of our assets.
−Removed: This concentration of ownership control may:
−Removed: delay, defer, or prevent a change in control;
−Removed: entrench our management and board of directors;
−Removed: delay or prevent a merger, consolidation, takeover, or other business combination involving us that other stockholders may desire.
−Removed: This concentration of ownership may also adversely affect the market price of our common stock.
−Removed: The price of our common stock is volatile and fluctuates substantially, which could result in substantial losses for our stockholders.
−Removed: Our stock price has been, and is likely to continue to be volatile.
−Removed: Since our initial public offering in February 2020 and through February 26, 2021, the intraday price of our common stock has fluctuated from a low of $25.50 to a high of $117.00.
−Removed: As a result of volatility, our stockholders may not be able to sell their common stock at or above the price paid for the shares.
−Removed: The market price for our common stock may be influenced by many factors, including:
−Removed: our investment in, and the success of, our software solutions;
−Removed: the success of our research and development efforts for our internal drug discovery programs;
−Removed: initiation and progress of preclinical studies and clinical trials for any product candidates that we may develop;
−Removed: results of or developments in preclinical studies and clinical trials of any product candidates we may develop or those of our competitors or potential collaborators;
−Removed: the success of our drug discovery collaborators and any milestone or other payments we receive from such collaborators;
−Removed: the success of competitive products or technologies;
−Removed: regulatory or legal developments in the United States and other countries;
−Removed: the recruitment or departure of key personnel;
−Removed: variations in our financial results or the financial results of companies that are perceived to be similar to us;
−Removed: sales of common stock by us, our executive officers, directors or principal stockholders, or others, or the anticipation of such sales;
−Removed: market conditions in the biopharmaceutical sector;
−Removed: general economic, industry, and market conditions;
−Removed: the societal and economic impact of public health epidemics, such as the ongoing COVID-19 pandemic;
−Removed: the other factors described in this “Risk Factors” section.
−Removed: In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company.
−Removed: Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment.
−Removed: We also may decide to settle lawsuits on unfavorable terms.
−Removed: Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, or adverse changes to our offerings or business practices.
−Removed: Such litigation may also cause us to incur other substantial costs to defend such claims and divert management’s attention and resources.
−Removed: Our actual operating results may differ significantly from our guidance.
−Removed: From time to time, we may release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release.
−Removed: This guidance, which would include forward-looking statements, would be based on projections prepared by our management.
−Removed: Neither our registered public accountants nor any other independent expert or outside party would compile or examine the projections.
−Removed: Accordingly, no such person would express any opinion or any other form of assurance with respect to the projections.
−Removed: Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.
−Removed: The principal reason that we would release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors.
−Removed: We do not accept any responsibility for any projections or reports published by any such third parties.
−Removed: Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying any guidance furnished by us will not materialize or will vary significantly from actual results.
−Removed: Accordingly, our guidance would be only an estimate of what management believes is realizable as of the date of release.
−Removed: Actual results may vary from our guidance and the variations may be material.
−Removed: We and our collaborators may not achieve projected discovery and development milestones and other anticipated key events in the time frames that we or they announce, which could have an adverse impact on our business and could cause our stock price to decline.
−Removed: From time to time, we expect that we will make public statements regarding the expected timing of certain milestones and key events, such as the commencement and completion of preclinical and IND-enabling studies in our internal drug discovery programs as well developments and milestones under our collaborations.
−Removed: Morphic has also made public statements regarding its expectations for the development of programs under collaboration with us and they and other collaborators may in the future make additional statements about their goals and expectations for collaborations with us.
−Removed: The actual timing of these events can vary dramatically due to a number of factors such as delays or failures in our or our current and future collaborators’ drug discovery and development programs, including as a result of COVID-19, the amount of time, effort, and resources committed by us and our current and future collaborators, and the numerous uncertainties inherent in the development of drugs.
−Removed: As a result, there can be no assurance that our or our current and future collaborators’ programs will advance or be completed in the time frames we or they announce or expect.
−Removed: If we or any collaborators fail to achieve one or more of these milestones or other key events as planned, our business could be materially adversely affected and the price of our common stock could decline.
−Removed: If securities analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about our business or if they publish negative evaluations of our stock, the price and trading volume of our stock could decline.
−Removed: The market price and trading volume for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business.
−Removed: We do not have control over these analysts.
−Removed: There can be no assurance that existing analysts will continue to cover us or that new analysts will begin to cover us.
−Removed: There is also no assurance that any covering analyst will provide favorable coverage.
−Removed: Although we have obtained analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, the price of our stock could decline.
−Removed: If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.
−Removed: We have broad discretion in the use of our cash, cash equivalents, and marketable securities and may not use them effectively.
−Removed: Our management will have broad discretion in the application of our cash, cash equivalents, and marketable securities and could use such funds in ways that do not improve our results of operations or enhance the value of our common stock or in ways that our stockholders may not agree with.
−Removed: The failure by our management to apply these funds effectively could harm our business, financial condition, results of operations, and prospects and could cause the price of our common stock to decline.
−Removed: Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for our stockholders.
−Removed: We have never declared or paid cash dividends on our common stock.
−Removed: We currently intend to retain all of our future earnings to fund the development and expansion of our business.
−Removed: Any determination to pay dividends in the future will be at the discretion of our board of directors.
−Removed: As a result, capital appreciation of our common stock, if any, will be the sole source of gain for our stockholders for the foreseeable future.
−Removed: Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well.
−Removed: Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock, impair our ability to raise capital through the sale of additional equity securities, and make it more difficult for our stockholders to sell their common stock at a time and price that they deem appropriate.
−Removed: As of February 26, 2021, we had outstanding 60,848,093 shares of common stock and 9,164,193 shares of limited common stock.
−Removed: All of our outstanding shares of common stock, including shares of common stock issuable upon the conversion of shares of our limited common stock, are available for sale in the public market, subject only to the restrictions of Rule 144 under the Securities Act in the case of our affiliates.
−Removed: In addition, certain of our executive officers, directors and affiliated stockholders have entered or may enter into Rule 10b5-1 plans providing for sales of shares of our common stock from time to time.
−Removed: Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the executive officer, director or affiliated stockholder when entering into the plan, without further direction from the executive officer, director or affiliated stockholder.
−Removed: A Rule 10b5-1 plan may be amended or terminated in some circumstances.
−Removed: Our executive officers, directors and affiliated stockholders also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
−Removed: Moreover, certain holders of our common stock and our limited common stock have rights, subject to specified conditions, to include their shares in registration statements that we may file for ourselves or other stockholders and, beginning at any time after we become eligible to file a registration statement on Form S-3, to require us to file Form S-3 registration statements covering their shares.
−Removed: We also have filed a registration statement on Form S-8 to register shares of common stock that we may issue under our equity compensation plans.
−Removed: Shares registered under the registration statement on Form S-8 are available for sale in the public market upon issuance, subject to volume limitations applicable to affiliates, vesting arrangements and exercise of options.
−Removed: We are an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
−Removed: We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
−Removed: We may remain an EGC until December 31, 2025, although if we become a “large accelerated filer” or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year.
−Removed: We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.
−Removed: For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs.
−Removed: These exemptions include:
−Removed: not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
−Removed: not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
−Removed: reduced disclosure obligations regarding executive compensation;
−Removed: exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
−Removed: We are also a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, although we expect to cease to be a smaller reporting company in connection with the filing of our Quarterly Report on Form 10-Q for the first quarter of 2021.
−Removed: Similar to EGCs, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statement in an annual report on Form 10-K, with correspondingly reduced “ Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure .
−Removed: We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
−Removed: If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
−Removed: In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.
−Removed: We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we may adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either irrevocably elect to “opt out” of such extended transition period or no longer qualify as an EGC.
−Removed: We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management has devoted and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices.
−Removed: As a public company, we have incurred and will continue to incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an EGC.
−Removed: The Exchange Act, Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
−Removed: Our management and other personnel devote and will need to continue to devote a substantial amount of time and resources to these compliance initiatives, potentially at the expense of other business concerns, which could harm our business, financial condition, results of operations, and prospects.
−Removed: Moreover, these rules and regulations will increase our legal and financial compliance costs, and will make some activities more time-consuming and costly compared to when we were a private company.
−Removed: We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
−Removed: These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
−Removed: This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
−Removed: As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting.
−Removed: Any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.
−Removed: Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to furnish a report by our management on our internal control over financial reporting on an annual basis.
−Removed: This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
−Removed: However, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an EGC.
−Removed: At such time as we are required to obtain auditor attestation, if we then have an unremediated material weakness, we would receive an adverse opinion regarding our internal control over financial reporting from our independent registered accounting firm.
−Removed: To achieve compliance with Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.
−Removed: In this regard, we will need to continue to dedicate internal resources, including through hiring additional financial and accounting personnel, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.
−Removed: During our evaluation of our internal control, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.
−Removed: We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
−Removed: Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, or results of operations.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of shares of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities.
−Removed: Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
−Removed: Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
−Removed: As a public company, we are subject to certain reporting requirements of the Exchange Act.
−Removed: Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC.
−Removed: We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
−Removed: These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
−Removed: Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
−Removed: Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.
−Removed: Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current directors and members of management.
−Removed: Provisions in our certificate of incorporation and our bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of our company that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.
−Removed: These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.
−Removed: In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
−Removed: Among other things, these provisions:
−Removed: establish a classified board of directors such that only one of three classes of directors is elected each year;
−Removed: allow the authorized number of our directors to be changed only by resolution of our board of directors;
−Removed: limit the manner in which stockholders can remove directors from our board of directors;
−Removed: establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
−Removed: require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
−Removed: limit who may call stockholder meetings to the board of directors or to the secretary at the request of the holders of at least 25% of the outstanding shares of our common stock and limited common stock;
−Removed: authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors.
−Removed: Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
−Removed: Our certificate of incorporation designates the state courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors, officers, and employees.
−Removed: Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for:
−Removed: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to our company or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (4) any action asserting a claim arising pursuant to any provision of our certificate of incorporation or bylaws (in each case, as they may be amended from time to time) or governed by the internal affairs doctrine.
−Removed: These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, the Exchange Act or any other claim for which federal courts have exclusive jurisdiction.
−Removed: This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers, or employees, which may discourage such lawsuits against us and our directors, officers, and employees.
−Removed: Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and operating results.
−Removed: Unresolve d Staff Comments.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.