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Item 1. Business

2023-02-23 compared with 2022-03-15 · 305 added, 339 removed, 608 unchanged (51% of the section changed)

We are an innovative clinical-stage biotechnology company pioneering the development of dual-sided fusion proteins as an entirely new class of biologic medicine.

We have created a novel approach to immune modulation by designing biologics with structural characteristics that are not achievable by existing therapeutic modalities, including monoclonal or bispecific antibodies.

Compounds derived from our proprietary Agonist Redirected Checkpoint, or ARC, platform simultaneously inhibit checkpoint molecules and activate costimulatory molecules within a single therapeutic.

We have created a novel approach to immune modulation by designing biologics with structural characteristics that may not be achievable by existing therapeutic modalities, including monoclonal or bispecific antibodies.

Compounds derived from our proprietary Agonist Redirected Checkpoint, or ARC ® , platform simultaneously inhibit checkpoint molecules and activate costimulatory molecules with a single therapeutic.

Our lead product candidate, SL-172154, is designed to simultaneously inhibit the CD47/SIRPα macrophage checkpoint interaction and activate the CD40 costimulatory receptor to induce an antitumor immune response.

Coupling CD40 activation with CD47 inhibition differentiates SL-172154 from all other clinical-stage CD47/SIRPα inhibitors in development, and in our published preclinical studies, SL-172154 resulted in superior antitumor immunity as compared to certain CD47/SIRPα inhibitors.

We are pursuing a broad clinical development strategy in both hematologic and solid tumors, with multiple ongoing clinical trials.

We are pursuing a broad clinical development strategy in both solid and hematologic tumors, with multiple ongoing clinical trials.

SL-172154 is in an ongoing Phase 1 clinical trial for the treatment of patients with ovarian cancer.

In addition to our clin ical trials in solid tumors, we are also evaluating SL-172154 in an ongoing Phase 1 clinical trial for the treatment of patients with certa in hematologic malignancies, including acute myeloid leukemia, or AML, and higher-risk myelodysplastic syndromes, or HR-MDS.

We believe our clinical development plan will provide both first-in-class and best-in-class development opportunities for SL-172154.

Our second product candidate, SL-279252, is designed to simultaneously inhibit the PD-1/PD-L1 interaction and activate the OX40 costimulatory receptor and is in an ongoing Phase 1 clinical trial in patients with advanced solid tumors.

In November 2021, at the 36 th annual meeting of the Society for Immunotherapy of Cancer, or the SITC Meeting, we announced initial clinical data from our ongoing Phase 1 clinical trials for SL-172154 in ovarian cancer and for SL-279252 in advanced solid tumors and lymphoma.

We believe that these data generated in human cancer patients have demonstrated that the unique protein engineering and physical properties of the ARC platform have led to a differentiated profile in terms of safety and on-target immune activation as compared to monoclonal or bispecific antibodies.

In addition to our clinical-stage ARC product candidates, we possess a deep pipeline of preclinical immuno-oncology candidates.

As an example, SL-9258, an ARC in preclinical development, is designed to inhibit the TIGIT/PVR checkpoint interaction while simultaneously activating HVEM and LTβ costimulatory receptors.

W e are also evaluating SL-172154 in an ongoing Phase 1 clinical trial for the treatment of patients with certa in hematologic malignancies, including acute myeloid leukemia, or AML, and higher-risk myelodysplastic syndromes, or HR-MDS.

We believe our clinical development plan may provide both first-in-class and best-in-class development opportunities for SL-172154.

We believe that data shared to date in human cancer patients have demonstrated that the unique protein engineering and physical properties of the ARC platform have led to a differentiated profile in terms of safety and on-target immune activation, demonstrated by unique pharmacodynamic findings, as compared to monoclonal or bispecific antibodies.

In addition to our clinical-stage ARC product candidate, we possess a deep pipeline of potential product candidates in preclinical development.

As an example, SL-9258, an ARC compound in preclinical development, is designed to inhibit the TIGIT/PVR checkpoint interaction while simultaneously activating HVEM and LTβ costimulatory receptors.

Furthermore, our expertise in dual-sided fusion proteins has led to the development of a second novel platform technology.

We call this our gamma delta T cell engager, or GADLEN ™ , platform.

We plan to nominate a third clinical product candidate from our preclinical pipeline in 2022.

The most advanced compounds from this platform are a CD20-directed GADLEN and a B7-H3-directed GADLEN.

Longer-term, we are pursuing additional disease areas, including autoimmune diseases, where our dual-sided fusion protein platforms may provide advantages over current treatment modalities.

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Coupling the costimulatory effect of CD40 activation with CD47 inhibition differentiates SL-172154 from other CD47/SIRPα inhibitors in clinical development.

In clinical studies, we believe that SL-172154 has further differentiated from other CD47/SIRPα inhibitors both in terms of safety and tolerability, and has demonstrated evidence of potent CD40 activation in human cancer patients.

In clinical studies, we believe that SL-172154 has further differentiated from other CD47/SIRPα inhibitors both in terms of safety and tolerability and has demonstrated pharmacodynamic evidence of potent CD40 activation in human cancer patients.

We are conducting a Phase 1 clinical trial evaluating SL-172154 in patients with platinum-resistant ovarian cancer.

In November 2021, at the SITC Meeting, we a nnounced initial data from 15 patients in the first four dose-escalation cohorts from the monotherapy dose-escalation portion of this trial.

In November 2021, at the 36th annual meeting of the Society for Immunotherapy Cancer, or the SITC Meeting, we a nnounced initial data from 15 patients in the first four dose-escalation cohorts from our Phase 1A monotherapy dose-escalation clinical trial.

These data demonstrated that SL-172154 was well tolerated through 3 mg/kg, with no treatment-related grade 3 or greater adverse events.

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We also observed pharmacodynamic activity, including dose-dependent margination of CD40 expressing leukocytes from the peripheral blood and dose-dependent increases in cytokines, such as IL-12, that are associated with antitumor immunity.

Monotherapy dose escalation is ongoing.

We plan to initiate combination clinical trials in parallel due to the observation of monotherapy immunologic activity across the current dose range.

We plan to initiate a Phase 1B clinical trial evaluating SL-172154 in combination with liposomal doxorubicin in patients with platinum-resistant ovarian

cancer in 2022.

We expect to announce additional data from the ongoing Phase 1A monotherapy dose-escalation trial and initial data from the Phase 1B combination trial in the first half of 2023.

We have conducted a Phase 1 clinical trial in patients with cutaneous squamous cell carcinoma, or CSCC, or head and neck squamous cell carcinoma, or HNSCC, to evaluate the intratumoral administration of SL-172154.

We expect to announce data from this trial in the first half of 2022.

In addition to evaluating SL-172154 in solid tumors, we have expanded our evaluation of SL-172154 to include hematologic malignancies.

We are conducting a Phase 1A/B clinical trial in patients with AML and HR-MDS, wherein patients will be enrolled into either a monotherapy Phase 1A or combination Phase 1B cohort in a staggered parallel design.

In AML, we intend to study SL-172154 in combination with azacitidine and venetoclax.

Subsequently, we completed the Phase 1A monotherapy dose-escalation clinical trial.

We completed enrollment at the anticipated top dose level of 10 mg/kg, which was the maximum administered dose.

A maximum tolerated dose was not reached in this clinical trial.

The data collected through 10 mg/kg demonstrated that the pharmacodynamic activity, including increased serum cytokines and margination of CD40 positive leukocytes, observed at 3 mg/kg was maintained through 10 mg/kg, with no evidence of a “bell shaped” dose response curve.

As a result, we selected the 3 mg/kg dose level to advance into the Phase 1B combination cohorts in platinum-resistant ovarian cancer patients.

We have initiated a Phase 1B clinical trial with two combination cohorts due to the observation of monotherapy immunologic activity across the administered dose range, as described above, and because multiple approved agents in the platinum-resistant ovarian cancer patient population are known to provide the prophagocytic, or “eat me”, signal necessary to drive efficacy in the setting of CD47 inhibition.

We have initiated a combination cohort evaluating SL-172154 in combination with liposomal doxorubicin, and a second combination cohort evaluating SL-172154 in combination with mirvetuximab soravtansine, in patients with platinum-resistant ovarian cancer.

We expect to announce additional data from the Phase 1A monotherapy dose-escalation clinical trial and initial data from the Phase 1B cohort in combination with liposomal doxorubicin midyear 2023.

In addition to evaluating SL-172154 in solid tumors, we have initiated our clinical trial of SL-172154 in certain hematologic malignancies.

We are conducting a Phase 1A/B clinical trial in patients with AML and HR-MDS, wherein patients will be enrolled into either a Phase 1A monotherapy cohort or Phase 1B combination cohort in a staggered parallel design.

In HR-MDS and TP53 mutant AML, we intend to study SL-172154 in combination with azacitidine.

We expect to announce initial data from this Phase 1A/B trial in the first half of 2023.

We also intend to continue to assess other drug combination opportunities for SL-172154 in ovarian cancer and other solid tumors, as well as hematologic malignancies.

Our second product candidate, SL-279252, is designed to simultaneously inhibit the PD-1/PD-L1 interaction and activate the OX40 receptor.

We are evaluating SL-279252 in a Phase 1 clinical trial in patients with advanced solid tumors.

In November 2021, at the SITC Meeting, we announced initial data from 43 patients from the first ten dose levels of this clinical trial.

These data demonstrated initial monotherapy antitumor activity in patients who previously failed checkpoint inhibitors, at doses of 1 mg/kg or greater.

Data through 6 mg/kg demonstrated that SL-279252 was well tolerated, and we observed pharmacodynamic activity, including dose-dependent margination of OX40+ lymphocytes from the peripheral blood.

We are currently dosing at 12 mg/kg and plan to continue dose escalation to 24 mg/kg.

We expect to announce additional data from this clinical trial in the second half of 2022.

In AML, we intend to study SL-172154 in combination with azacitidine and venetoclax.

We expect to announce initial data, as monotherapy and in combination, from the dose-escalation portion of this Phase 1A/B trial in the first half of 2023.

We are leveraging our proprietary ARC and GADLEN platforms to discover and develop dual-sided, bi-functional fusion protein product candidates.

We own, or have exclusively licensed, the intellectual property rights to our product candidates.

The following table highlights our clinical-stage product candidates:

In addition to our clinical-stage ARC product candidates, we possess a deep pipeline of preclinical immuno-oncology candidates.

The following table highlights our clinical-stage product candidate and selected preclinical compounds:

In addition to our clinical-stage ARC product candidate, we possess a deep pipeline of preclinical immuno-oncology compounds.

As an example, SL-9258 is designed to inhibit the interaction between TIGIT and its known ligands, including PVR, PVRL2, PVRL3, and NECTIN-4, while simultaneously activating HVEM and LTβ receptors with two preformed LIGHT trimers.

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Utilizing a proprietary animal model of PD-1 acquired resistance, SL-9258 demonstrated differentiation from antibody-mediated TIGIT blockade in its ability to overcome checkpoint inhibitor acquired resistance.

The following table highlights the preclinical programs from which we may select our next clinical candidates:

In addition to our preclinical ARC compounds, we have a pipeline of preclinical GADLEN compounds.

The two most advanced compounds from our GADLEN platform are a CD20-directed GADLEN and a B7-H3-directed GADLEN.

We have shared in vitro preclinical data demonstrating that the CD20-directed GADLEN stimulated human gamma delta T cells to target and kill human CD20 expressing B cells.

Additionally, we conducted a non-GLP (as defined below) non-human primate study that demonstrated that the CD20-directed GADLEN was both well tolerated and led to B cell depletion in a dose-dependent manner.

The CD20-directed GADLEN may have therapeutic utility in certain autoimmune indications, via depletion of autoantibody producing CD20-positive B-cells.

The B7-H3-directed GADLEN may have therapeutic utility in certain solid tumors.

We plan to provide additional detail and further guidance on our GADLEN platform in 2023.

In February 2023, following completion of our Phase 1 dose-escalation clinical trial of SL-279252 in patients with advanced solid tumors, and evaluation of the relevant data, we discontinued clinical development of SL-279252.

We did not observe an overall response rate necessary to justify continued development in a very difficult PD-1 relapsed/refractory patient population.

Our Platforms

Our ARC Platform

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As shown in Panel C of Figure 2, ARCs are designed to self-assemble into two sets of TNF trimers, which induces trimerization of TNF receptor targets and drives a costimulatory signal.

We believe that the totality of our clinical data generated to date, from multiple ARC-derived product candidates and across multiple indications, provide strong evidence that our ARC compounds can uniquely activate members of the TNF superfamily by addressing certain structural properties of these receptors.

For example, our clinical data demonstrate that high levels of receptor occupancy of CD40 are achievable with an ARC, and that the “bell shaped” dose-response curve observed with antibodies was not seen in humans treated with SL-172154.

Instead, we believe that the pharmacodynamic data indicate that SL-172154 may more effectively activate CD40-dependent pharmacodynamic effects in human cancer patients, in a manner that allows this pathway to be appropriately drugged and may provide benefit in the treatment of cancer patients.

Figure 2—Antibody Therapies Lead to Inefficient TNF Pathway Activation

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We utilize our understanding of disease pathology and immune dysfunction to identify pairings of optimal targets within a single therapeutic.

Our GADLEN Platform

Our expertise in engineering dual-sided, bi-functional fusion proteins has enabled the development of our GADLEN platform, which is designed to leverage gamma delta T cells for the treatment of cancer and autoimmune disorders.

The therapeutic utilization of gamma delta T cells represents an emerging approach for the treatment of cancer.

This approach may be particularly beneficial in targeting tumors that are not addressable by alpha beta T cells.

Additionally, as immunotherapies that stimulate alpha beta T cell-dependent immune response are increasingly utilized across cancer treatment paradigms, we expect the proportion of patients who will become refractory to alpha beta T cell-mediated therapies will also increase over time, creating an opportunity for therapeutics which harness the antitumor activity of gamma delta T cells.

A majority of T cells in the human body bear an alpha beta T cell receptor, which recognizes tumor antigens presented on major histocompatibility complex, or MHC, molecules.

Some cancer cells reduce the expression of MHC molecules or tumor antigens, rendering those cancer cells invisible to most alpha beta T cells.

The predominant gamma delta T cell population in the peripheral blood expresses the V gamma 9 / V delta 2 T cell receptor and is activated by a heterodimer consisting of butyrophilin 2A1 and butyrophilin 3A1.

Thus, therapeutics which are designed to display a heterodimer of butyrophilin 2A1 and 3A1 may provide a means of modulating gamma delta T cells in vivo .

We have leveraged our expertise in engineering dual-sided bi-functional fusion proteins to develop a suite of heterodimerized butyrophilin proteins connected to antigen-targeted single chain antibody fragments.

GADLEN compounds are comprised of two distinct fusion protein chains, and an engineered Fc linker domain that facilitates heterodimerization between the two chains.

As shown in Figure 3 below, the assembled GADLEN compound contains the extracellular domains of heterodimerized butyrophilin proteins on one side and is linked to tumor antigen specific single chain antibody fragments on the opposite side.

The gamma delta T cell receptors recognize and are activated by specific butyrophilin protein heterodimers.

Thus, the GADLEN construct is designed to facilitate targeting of specific gamma delta T cells to tumor cells expressing a defined antigen.

Figure 3—GADLEN Platform Overview

To demonstrate the feasibility of the GADLEN approach, a murine GADLEN construct was developed incorporating a butyrophilin 1, or BTNL1, and butyrophilin 6, or BTNL 6, heterodimer and an scFv domain targeting the CD19 antigen.

In both mice and humans, gamma delta T cells represent approximately 2% to 5% of the total T cell population, as shown in Figure 4 below, in a murine model.

We treated mice on Days 0, 3, and 6 with the murine GADLEN, mBTNL1/6-Fc-CD19scFv.

We observed dose-dependent expansion of the endogenous gamma delta T cell compartment to approximately 12% of all T cells 24 hours after the second treatment.

Concurrent with expansion, mBTNL1/6-Fc-CD19scFv also caused activation of murine gamma delta T cells, as demonstrated by upregulation of the CD69 activation marker, shown in Figure 4 below.

Murine B cells express CD19, and therefore were a potential target of gamma delta T cells following treatment with mBTNL1/6-Fc-CD19scFv.

Accordingly, we observed depletion of the endogenous B cell compartment concurrent with gamma delta T cell expansion and activation following treatment with mBTNL1/6-Fc-CD19scFv, as shown in Figure 4 below.

Importantly, when mice with established CD19 positive tumors were treated with mBTNL1/6-Fc-CD19scFv, dose-dependent reduction in tumor growth and rejection was observed.

Figure 4—Dose Dependent Gamma T Cell Expansion, Activation, and Killing Activity Following Administration of the GADLEN Compound mBTNL1/6-Fc-CD19scFv

As a result of these data, we have developed multiple human GADLEN compounds.

A human GADLEN compound comprising a heterodimer of BTN2A1 and BTN3A1, adjoined via an engineered Fc linker to a CD20 antigen specific scFv domain, was shown in our preclinical model systems to stimulate human gamma delta T cells to target and kill human CD20-expressing B cells in a dose-dependent manner.

We believe that gamma delta T cell engagers may also have a broader therapeutic window than CD3-directed T cell engagers, both because gamma delta T cells represent a smaller proportion of the overall T cell pool in humans, and because gamma delta T cells do not recognize traditional MHC/antigen complexes.

To explore this hypothesis, we evaluated the CD20-targeted GADLEN in a non-GLP, dose-range finding and safety study in non-human primates.

These data demonstrated that the CD20-targeted GADLEN was well tolerated through at least 25 mg/kg in non-human primates, with no evidence of cytokine release syndrome, and led to rapid and dose-dependent depletion of CD20-expressing B cells within a few hours in non-human primates.

We believe these studies indicate that GADLEN compounds may enable therapeutic modulation of gamma delta T cells in vivo , and that GADLEN compounds may be designed to activate tissue-restricted populations of endogenous gamma delta T cells to target specific tumor antigens in both solid and liquid tumors, and with potential therapeutic utility in autoimmune disorders.

We plan to provide additional detail and further guidance in 2023.

Our goal is to become the world leader in the discovery, development, and commercialization of dual-sided, bi-functional fusion proteins for the treatment of cancer and autoimmune diseases.

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Key elements of our strategy include:

• Rapidly advancing our clinical-stage ARC product candidates, SL-172154 and SL-279252, through clinical development and marketing approval

• Rapidly advancing our clinical-stage ARC product candidate, SL-172154, through clinical development and marketing approval

• Leveraging our ARC and GADLEN platforms to rapidly advance additional product candidates into clinical development

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• Deepening our intellectual property portfolio to continue to protect our platform technologies and product candidates

Our ARC Product Candidates

Our ARC Product Candidate

A Dual CD47/SIRPα Blocking and CD40-Activating ARC Compound

Clinical Data to Date

In November 2021, at the SITC Meeting, we presented data from the dose-escalation portion of our ongoing Phase 1A trial of SL-172154 as monotherapy in heavily pretreated platinum-resistant ovarian cancer patients.

In November 2021, at the SITC Meeting, we presented data from the dose-escalation portion of our completed Phase 1A dose-escalation clinical trial of SL-172154 as monotherapy in heavily pretreated platinum-resistant ovarian cancer patients.

As of a September 15, 2021 data cutoff, we had enrolled a total of 15 patients across four dose levels ranging from 0.1 mg/kg to 3 mg/kg.

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The patients treated as of September 15, 2021 were heavily pretreated with a median of five prior lines of systemic therapies.

SL-172154 has been generally well tolerated.

Specifically, we did not observe dose-limiting hemolytic anemia, thrombocytopenia or other cytopenias (toxicities which have limited the development of some CD47 inhibitors) through the 3 mg/kg dose level.

As of October 7, 2021, 14 of the 15 patients treated with SL-172154 in platinum-resistant ovarian cancer had a post-baseline scan at eight weeks and were evaluable for efficacy.

Four patients had stable disease as best response including one patient with stable disease of 16 weeks or greater at 0.3 mg/kg and nine had progressive disease.

Subsequently, we completed our Phase 1A monotherapy dose-escalation clinical trial in patients with platinum-resistant ovarian cancer.

In this clinical trial, 10 mg/kg was defined as the maximum administered dose, and a maximum tolerated dose was not reached.

To date, SL-172154 has been generally well tolerated.

We observed a single dose-limiting toxicity of elevated liver enzymes in a single patient at the 10mg/kg dose level.

We also frequently observed infusion-related reactions, which are manageable by slowing the rate of infusion and/or by the administration of certain premedication(s).

Importantly, however, we have not observed dose-limiting hemolytic anemia, thrombocytopenia or other cytopenias (toxicities which have limited the development of some CD47 inhibitors).

We believe that SL-172154 may have a differentiated safety profile, which may be due to the lack of an Fc gamma receptor binding Fc domain.

We have observed high levels of target occupancy of SL-172154 on both CD47 and CD40 through 10 mg/kg.

As shown in Figure 3, we observed preferential binding of SL-172154 to CD47+ leukocytes compared to red blood cells.

Binding to leukocytes approached near-full CD47 target occupancy at doses of 1 mg/kg or greater.

As shown in Figure 5, we observed preferential binding of SL-172154 to CD47 positive leukocytes compared to red blood cells.

Binding to leukocytes approached near-full CD47 target occupancy at doses greater than 1 mg/kg.

Figure 5—CD47 Targets Occupancy of SL-172154 on White Blood Cells and Red Blood Cells

We have also observed unique pharmacodynamic effects consistent with on-target CD40 activation.

Immediately post-infusion of SL-172154, a rapid, dose-dependent margination of CD40+ B cells and monocytes from the circulation was observed, as shown in Panel A and Panel B of Figure 4.

Immediately post-infusion of SL-172154, a rapid, dose-dependent margination of CD40 positive B cells from the circulation was observed, as shown in Panel A and Panel B of Figure 6.

We also observed an increase in B cell activation markers CD86 and CD95 following each infusion of SL-172154, as shown in Panel C of Figure 6.

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Figure 6—CD40 Activation of SL-172154 with Dose-Dependent Margination and Activation B Cells

In paired biopsies collected from our ongoing clinical trials, we have observed increases in CD68+ macrophages as well as both CD40 and MHC Class II activation markers in the tumor microenvironment, consistent with induction of an innate immune response.

Additionally, we have seen an increase in PD-L1 expression by the combined positive score, suggesting that the increase in tumor-infiltrating CD8+ T cells induced a local interferon response.

We have also observed increases in Ki67+ CD8 T cells and the Granzyme B+ CD8 T cells.

In paired biopsies collected from our Phase 1A clinical trial in patients with platinum-resistant ovarian cancer, we have observed increases in CD68 positive macrophages as well as both CD40 and MHC Class II activation markers in the tumor microenvironment, consistent with induction of an innate immune response.

Additionally, we have seen an increase in PD-L1 expression by the combined positive score, suggesting that the increase in tumor-infiltrating CD8 positive T cells induced a

local interferon response.

We have also observed increases in Ki67 positive CD8 T cells and the Granzyme B positive CD8 T cells.

These findings are consistent with the postulated mechanism of action of SL-172154:

simultaneous CD47 inhibition and CD40 activation bridging an innate to adaptive immune response.

As of October 7, 2021, 14 of the 15 patients treated with SL-172154 in platinum-resistant ovarian cancer had a post-baseline scan at eight weeks and were evaluable for efficacy.

Four patients had stable disease as best response including one patient with stable disease of 16 weeks or greater at 0.3 mg/kg and nine had progressive disease.

We are continuing monotherapy dose escalation at the next dose level of 10 mg/kg.

Clinical Development Strategy

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The secondary objectives include evaluation of the pharmacokinetic and pharmacodynamic profiles and the antitumor activity of SL-172154.

In the ongoing Phase 1A monotherapy dose-escalation trial, three or more patients will be enrolled through each of the dose levels until a maximum tolerated dose or maximum administered dose is defined.

In parallel, we plan to evaluate SL-172154 in a Phase 1B combination dose-escalation and dose-expansion trial in platinum-resistant ovarian cancer in combination with liposomal doxorubicin.

We have completed our Phase 1A monotherapy dose-escalation clinical trial in patients with platinum-resistant ovarian cancer.

In this clinical trial, we reached a maximum administered dose of 10 mg/kg.

We did not reach a maximum tolerated dose.

We are evaluating SL-172154 in a Phase 1B combination dose-escalation and dose-expansion clinical trial in platinum-resistant ovarian cancer in combination with liposomal doxorubicin.

We have selected a starting dose of 3 mg/kg of SL-172154 in this trial.

Our protocol allows for further dose escalation in the combination, if warranted.

Liposomal doxorubicin is a standard-of-care chemotherapy for this patient population.

According to the literature and our internally generated data, liposomal doxorubicin upregulates calreticulin, an endogenous “eat me” signal, on the surface of tumor cells.

We believe that liposomal doxorubicin is an attractive combination partner due to the observed upregulation of calreticulin, which led to potentiation of SL-172154-mediated ovarian cancer cell phagocytosis in in vitro studies .

According to the literature, liposomal doxorubicin upregulates calreticulin, an endogenous “eat me” signal, on the surface of tumor cells.

Consequently, we believe that liposomal doxorubicin is an attractive combination partner due to upregulation of calreticulin and induction of immunogenic cell death.

In in vivo preclinical studies, we observed improved anti-tumor activity with the combination of liposomal doxorubicin and SL-172154 compared to liposomal doxorubicin alone or SL-172154 alone.

Furthermore, because the overall response rate of this patient population to liposomal doxorubicin is approximately 10%, there is significant opportunity for improved response rates in combination with SL-172154, wherein we believe the contribution of SL-172154 will be discernible.

We are evaluating additional combination opportunities in ovarian cancer.

We expect to announce additional data from the ongoing Phase 1A monotherapy dose-escalation trial and initial data from the Phase 1B combination trial in the first half of 2023.

Cutaneous Squamous Cell Carcinoma and Head and Neck Squamous Cell Carcinoma

We conducted a Phase 1 trial of SL-172154 administered intratumorally in patients with locally advanced or metastatic CSCC and HNSCC not amenable to further treatment with surgery, radiation, or standard systemic therapies.

The primary objective of this trial was to assess the safety and tolerability of SL-172154.

The secondary objectives included evaluation of the pharmacokinetic and pharmacodynamic profiles and the antitumor activity of SL-172154.

Based on the totality of the safety and biomarker data collected to date in our ongoing Phase 1A clinical trial in ovarian cancer patients, we have decided to focus development of SL-172154 as an intravenously administered product candidate.

Thus, as of February 24 2022, we ceased enrollment and are in the process of closing this trial.

In addition, we experienced enrollment and operational challenges associated with intratumoral administration trials (which have been exacerbated by the COVID-19 pandemic), further supporting the decision to pursue a registrational strategy via intravenous administration.

Overall, SL-172514 was well tolerated in this trial;

we did not observe dose-limiting toxicities and did not reach a maximum tolerated dose.

We expect to announce data from this trial in the first half of 2022.

We may continue further development in HNSCC and/or CSCC in an intravenous administration trial of SL-172154 following selection of a recommended Phase 2 dose in our ovarian cancer trial.

In addition to our combination strategy of SL-172154 in combination with liposomal doxorubicin, we are evaluating SL-172154 in a Phase 1B combination dose-escalation and dose-expansion clinical trial in platinum-resistant ovarian cancer in combination with mirvetuximab soravtansine, marketed by ImmunoGen, Inc, or ImmunoGen.

Mirvetuximab soravtansine is an antibody-drug conjugate targeting folate receptor alpha, or FRα, which provides for both direct tumor cell killing as well as enhanced macrophage phagocytosis through binding with Fc gamma receptors, and has received accelerated approval for platinum-resistant ovarian cancer patients whose tumors are shown to be FRα positive, defined as ≥75%, as determined by the VENTANA FOLR1 (FOLR1-2.1) Assay, using the PS2+ scoring method.

Pre-clinical studies have shown that both of these mechanisms may be complementary to the mechanism of SL-172154 by enhancing the activity of macrophages to phagocytose FRα- expressing ovarian cancer cells, and that SL-172154 may broaden the activity of mirvetuximab soravtansine, particularly for patients with tumors that express lower levels of FRα.

We intend to enroll patients with broader FRα expression, including those with “high” (greater than ≥75% of tumor cells staining with 2+ intensity), “medium” (≥50% to <75% of tumor cells staining with 2+ intensity), and “low” (≥25% to <50% of tumor cells staining with 2+ intensity) expression of FRα, as determined by the VENTANA FOLR1 (FOLR1-2.1) Assay, using the PS2+ scoring method.

Based on our preclinical data, we believe that the addition of SL-172154 to mirvetuximab soravtansine will increase responses rates in the “medium” and “low” expressors of FRα and/or potentially provide a more durable response across the entire spectrum of FRα expressors.

We expect to announce complete data from the Phase 1A monotherapy dose-escalation trial and initial data from the Phase 1B combination clinical trial with liposomal doxorubicin midyear 2023.

Additionally, we expect to announce initial data from the Phase 1B combination clinical trial with mirvetuximab soravtansine in the second half of 2023.

Acute Myeloid Leukemia and Higher-Risk Myelodysplastic Syndrome

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This ongoing Phase 1 clinical trial will evaluate the safety, tolerability, pharmacokinetics, antitumor activity, and pharmacodynamic effects of SL-172154, as both monotherapy and in combination.

In AML, we plan to evaluate SL-172154 in combination with both azacitidine and venetoclax.

In AML, we plan to evaluate SL-172154 in combination with both

azacitidine and venetoclax.

In both HR-MDS and TP53 mutant AML, we plan to evaluate SL-172154 in combination with azacitidine.

We have initiated the monotherapy Phase 1A dose escalation portion of this trial.

We plan to conduct the Phase 1B dose escalation portion of this trial of SL-172154 in combination with azacitidine in a parallel staggered manner.

We are conducting the Phase 1B dose-escalation portion of this trial of SL-172154 in combination with azacitidine in a parallel staggered manner.

Monotherapy dose-escalation and initial dose-escalation combination cohorts are anticipated to be in a heavily pretreated, predominantly refractory patient population.

Once a recommended dose and schedule have been determined in combination with azacitidine, we plan to enroll patients in expansion cohorts in combination with azacitidine, with or without venetoclax, depending on the indication.

As a class, CD47 inhibitors have demonstrated clinical activity in both AML and HR-MDS.

We see an opportunity for

SL-172154 to continue to differentiate from other compounds in the field due to the combined effects of CD47 blockade and CD40 costimulation.

Specifically, we believe that our preclinical and initial clinical data from our ongoing Phase 1A clinical trial in ovarian cancer indicate that SL-172154 may differentiate from other CD47/SIRPα inhibitors in one or more of the following ways:

As a class, CD47 inhibitors have demonstrated clinical activity in both AML and HR-MDS, in combination with these standard-of-care chemotherapies that provide the requisite “eat me” signals.

We see an opportunity for SL-172154 to continue to differentiate from other compounds in the field due to the combined effects of CD47 blockade and CD40 costimulation.

Specifically, we believe that our preclinical and initial clinical data from our Phase 1A clinical trial in ovarian cancer indicate that SL-172154 may differentiate from other CD47/SIRPα inhibitors in one or more of the following ways:

• Improved overall response rate due to CD40-mediated activation of both innate and adaptive immunity

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• Differentiated safety profile due to the absence of dose-limiting anemia or thrombocytopenia

We expect to announce initial combination data from this trial in the first half of 2023.

To date, we have experienced delays in our clinical trials of SL-172154 because of the ongoing COVID-19 pandemic.

We expect to announce initial data, as monotherapy and in combination, from the dose-escalation portion of this Phase 1A/B trial in the first half of 2023.

Following the COVID-19 pandemic, we have experienced delays in our clinical trials of SL-172154.

In particular, we have experienced:

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difficulty procuring sufficient quantities of raw materials required for our manufacturing processes;

delays as a result of some patients choosing to forego one or more doses in our clinical trials;

and staffing shortages at many clinical trial sites.

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• Dose-dependent increases in multiple anti-cancer cytokines in both non-human primates and by human lymphocytes

• Dose-dependent activation of a CD8+ T cell response, which was responsible for tumor cell killing

• Dose-dependent activation of a CD8 positive T cell response, which was responsible for tumor cell killing

• Superior tumor rejection as compared to CD47 inhibitory antibodies, CD40 agonist antibodies, or the combination thereof, in mouse tumor models

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After two hours, the proportion of tumor cells phagocytosed by human macrophages was determined and reported as the phagocytosis index.

We conducted dose-range finding and repeat dose toxicity studies in nonhuman primates, or NHP, to evaluate the safety and pharmacologic effects of SL-172154.

In these studies, SL-172154 was administered as five once-weekly doses across a dose range of 0.1 mg/kg to 40 mg/kg, followed by a recovery period.

Data from these studies indicated that SL-172154 induced a potent immune response in NHP.

Figure 6 below shows dose-dependent saturation of CD47+ red blood cells, which was durable for greater than seven days.

In addition, SL-172154 bound CD40-expressing B cells in the peripheral blood and stimulated a dose-dependent migration of lymphocytes from the peripheral blood within 24 hours of treatment.

We believe these data are supportive of either a once weekly or every other week dosing schedule.

Histology samples demonstrated that the post-dose decreases in peripheral blood lymphocytes were accompanied by accumulation of proliferating lymphocytes in lymph nodes, spleen and bone marrow.

Whereas other CD47-targeted agents are administered at super-saturating doses, which we believe is intended to establish a concentration gradient that facilitates passive diffusion into tissues, we believe these data suggest that SL-172154 may be actively transported into tissues via CD40 binding, which may lead to a unique dosing profile in humans.

Administration of SL-172154 was also associated with dose-dependent post-treatment increases in multiple serum cytokines, such as CCL2.

Overall, SL-172154 was well tolerated;

however, at the higher dose levels, we observed toxicities that were consistent with cytokine release syndrome in the setting of an anti-drug antibody response, which is expected in NHP because SL-172154 is a human protein construct.

No evidence of anemia was observed.

Figure 6—CD47 Receptor Occupancy following SL-172154 Infusion

Cynomolgus monkeys were treated on Day 1 and 8 with 0.1 mg/kg, 1 mg/kg, 10 mg/kg, and 40 mg/kg of SL-172154 or a vehicle control.

Receptor occupancy was evaluated at the indicated time points by flow cytometry.

SL-172154 occupancy on red blood cell CD47 is plotted as the proportion of total CD47 expression minus the proportion of CD47 detected using an antibody that is prevented from binding when CD47 is occupied by SL-172154.

A Dual PD-1 Blocking and OX40-Activating ARC Compound

Our second product candidate, SL-279252, is a dual-sided, bi-functional fusion protein that both inhibits the PD-/PD-L1 interaction and activates the OX40 costimulatory receptor.

We are evaluating SL-279252 in an ongoing Phase 1 dose-escalation clinical trial in patients with advanced solid tumors.

Clinical Data Observed to Date

In November 2021, at the SITC Meeting, we presented data from the dose-escalation portion of our ongoing Phase 1 clinical trial as monotherapy in late-stage solid tumor cancer patients.

As of June 11, 2021 we had enrolled a total of 43 patients from the first ten dose levels, ranging from 0.0001 mg/kg to 6 mg/kg.

Dose escalation was conducted according to the keyboard design.

Patients received SL-279252 on either a weekly or bi-weekly basis with a 28-day cycle.

The patients treated as of June 11, 2021, were heavily pretreated with a median of three prior lines of systemic therapies and 58% were checkpoint inhibitor experienced.

As of our latest safety data cutoff date of January 19, 2022, SL-279252 has been observed to be well tolerated and has demonstrated monotherapy antitumor activity in some PD-1 inhibitor experienced patients during dose escalation at doses of 1 mg/kg and higher.

Dose escalation is continuing in a primarily PD-1/L1 inhibitor experienced patient population.

Treatment-related adverse events, including immune-related events, have been reported in some patients.

To date, we have observed no Grade 4 or Grade 5 adverse events, and we have not observed any dose-limiting toxicities.

A maximum tolerated dose has not been reached.

As of June 11, 2021, preliminary pharmacodynamic activity has been evaluated in patients treated across a dose range of 0.0001 mg/kg to 6 mg/kg.

Increases in the number of proliferating CD8+ central memory and effector memory T cells were observed in the peripheral blood of some patients at higher peak SL-279252 concentrations corresponding to doses of 1.0 mg/kg or greater.

Post-dose receptor occupancy on OX40+ lymphocytes was observed in a dose-dependent fashion, and the total number of OX40+ cells in the blood declined rapidly post-infusion of SL-279252.

We believe the post-infusion decreases in OX40+ lymphocytes provides evidence of on-target activation.

In NHP, similar post-infusion decreases in lymphocytes were associated with migration of lymphocytes into tissues.

As of June 11, 2021, preliminary pharmacokinetic activity has been evaluated across a dose range of 0.0001 to 6 mg/kg.

A linear increase in SL-279252 Cmax and AUC was observed up to 3.0 mg/kg, while a greater than proportional increase in AUC was observed at 6.0 mg/kg, suggesting potential target saturation at 6 mg/kg.

Within subject exposure was similar on Days 1, 15 and 29, indicating no accumulation or time-dependent changes in pharmacokinetics on either schedule.

The preliminary half-life is approximately 23 hours.

As of October 20, 2021, the best response to therapy has been one confirmed partial response, or PR, in a patient with ocular melanoma who remained on treatment for greater than one year.

This patient was heavily pretreated, with four prior systemic regimens and had progressed on prior PD-1 and CTLA-4 checkpoint inhibitor therapies.

In addition, stable disease, or SD, was seen in an additional 12 patients.

In five of these patients, SD was sustained for greater than 24 weeks.

One unconfirmed PR was observed in a patient with mucosal melanoma of the vulvar who had also progressed on prior PD-1 and CTLA-4 checkpoint inhibitor therapies.

Clinical Development Strategy

We are currently dosing at 12 mg/kg and plan to continue dose escalation to 24 mg/kg in our Phase 1 trial of SL-279252 in patients with advanced solid tumors and we are primarily selecting for patients with PD-L1 expressing tumors.

The primary objective of the Phase 1 trial is to assess the safety and tolerability of SL-279252.

The secondary objectives include evaluation of the pharmacokinetic and pharmacodynamic profiles as well as the antitumor activity of SL-279252.

We are evaluating antitumor response according to immune Response Evaluation Criteria in Solid Tumors or Response Evaluation Criteria in Lymphoma 2017.

These are standard, widely-accepted criteria to evaluate tumor response in oncology clinical trials.

We expect to provide additional data from the dose-escalation portion of this Phase 1 trial in the second half of 2022.

Given the way that the PD-1 inhibitor landscape has evolved, the development path for SL-279252 is first in PD-1 relapsed and refractory patients.

To date, we have experienced delays in our clinical trial of SL-279252 because of the ongoing COVID-19 pandemic.

In particular, we have experienced:

delays with certain third-party vendors supporting this trial, including third-party manufacturers;

difficulty procuring sufficient quantities of raw materials required for our manufacturing processes;

delays as a result of some patients choosing to forego one or more doses in our clinical trials;

and staffing shortages at many clinical trial sites.

We expect to continue to experience some or all of these delays in the future.

Our GADLEN Platform

Our expertise in engineering dual-sided, bi-functional fusion proteins has enabled the development of our GADLEN platform to leverage gamma delta T cells for the treatment of cancer.

The therapeutic utilization of gamma delta T cells represents a novel approach for the treatment of cancer.

This approach may be particularly beneficial in targeting tumors that are not addressable by alpha beta T cells.

A majority of T cells in the human body bear an alpha beta T cell receptor, which recognizes tumor antigens presented on major histocompatibility complex, or MHC, molecules.

Some cancer cells reduce the expression of MHC molecules or tumor antigens, rendering those cancer cells invisible to most alpha beta T cells.

Thus, therapeutics which are designed to display a heterodimer of butyrophilin 2A1 and 3A1 may provide a means of modulating gamma delta T cells in vivo.

We have leveraged our expertise in engineering dual sided bi-functional fusion proteins to develop a suite of heterodimerized butyrophilin proteins connected to antigen-targeted single chain antibody fragments.

GADLEN compounds are comprised of two distinct fusion protein chains, and an engineered Fc linker domain that facilitates heterodimerization between the two chains.

As shown in the left panel of Figure 7 below, the assembled GADLEN compound contains the extracellular domains of heterodimerized butyrophilin proteins on one side and is linked to tumor antigen specific single chain antibody fragments on the opposite side.

The gamma delta T cell receptors recognize and are activated by specific butyrophilin protein heterodimers.

Thus, the GADLEN construct is designed to facilitate targeting of specific gamma delta T cells to tumor cells expressing a defined antigen, as shown in the right panel of Figure 7 below.

Figure 7—GADLEN Platform Overview

In both mice and humans, gamma delta T cells represent approximately 2% to 5% of the total T cell population, as shown in Figure 10 in a murine model.

We treated mice on Days 0, 3, and 6 with the murine GADLEN, mBTNL1/6-Fc-CD19scFv.

We observed dose-dependent expansion of the endogenous gamma delta T cell compartment to approximately 12% of all T cells 24 hours after the second treatment.

Concurrent with expansion, mBTNL1/6-Fc-CD19scFv also caused activation of murine gamma delta T cells, as demonstrated by upregulation of the CD69 activation marker, shown in Figure 10.

Murine B cells express CD19, and therefore were a potential target of gamma delta T cells following treatment with mBTNL1/6-Fc-CD19scFv.

Importantly, when mice with established CD19+ tumors were treated with mBTNL1/6-Fc-CD19scFv, dose-dependent reduction in tumor growth and rejection was observed.

We believe these studies indicate that GADLEN compounds enable therapeutic modulation of gamma delta T cells in vivo, and that GADLEN compounds may be designed to activate tissue-restricted populations of endogenous gamma delta T cells to target specific tumor antigens in both solid and liquid tumors.

Figure 8—Dose Dependent Gamma T Cell Expansion, Activation, and Killing Activity Following Administration of the GADLEN Compound mBTNL1/6-Fc-CD19scFv

To characterize the types of gamma delta T cell subsets that reside within different tumor types, we performed single cell RNA sequencing of patient tumor tissues, including multiple colorectal, melanoma, and non-small cell lung cancer patient tumors to identify the prevalent gamma delta T cell subsets in each tumor type.

As a result of this analysis, we have advanced a number of preclinical GADLEN candidates comprised of butyrophilin heterodimers and tumor antigen specific targeting domains for a number of antigens with therapeutic relevance for both hematologic and solid tumors.

Our preclinical findings with these GADLEN compounds have also revealed that gamma delta T cells, like alpha beta T cells, require costimulation through either costimulatory or natural cytoxicity receptors (NCR) for efficient T cell receptor activation.

The data generated to date suggest these signals can be provided by the tumor cells that express costimulatory ligands and stress ligands that enable efficient activation of gamma delta T cell receptors via GADLEN compounds.

In alignment with our strategy to leverage our expertise to build and expand novel platforms beyond our ARC platform, where dual-sided fusion proteins may provide advantages over existing therapeutic antibodies, we continue to invest in and advance our GADLEN platform.

We also performed standard in vitro tumor cell phagocytosis assays to demonstrate whether SL-172154 enhanced macrophage-mediated phagocytosis across a range of tumor cells expressing varying levels of FRα expression, both alone and in combination with mirvetuximab soravtansine, an antibody drug conjugate, or ADC, composed of a FRα-binding antibody, cleavable linker, and the maytansinoid payload DM4, a potent tubulin-targeting agent, designed to kill the targeted cancer cells.

As shown in Figure 8 below, consistent with the mechanism of action of CD47 blocking agents, SL-172154 significantly enhanced the ability of macrophages to phagocytose tumor cells in the presence of mirvetuximab soravtansine.

Figure 8—In Vitro Tumor Phagocytosis Activity of SIRPα-Fc-CD40L with or without Mirvetuximab Soravtansine

Ovarian cancer cells KB, IGROV1, or MES-OV, that express varying levels of cell surface FRα were cultured with human monocyte derived macrophages in the presence of a vehicle control, SL-172154, mirvetuximab soravtansine, or the combination of SL-172154 and mirvetuximab soravtansine.

After treatment, the proportion of tumor cells phagocytosed by human macrophages was determined and reported as the phagocytosis index.

Collaboration and License Agreements

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On August 8, 2017, we entered into a collaboration agreement with Millennium Pharmaceuticals, Inc., or Takeda, a wholly-owned subsidiary of Takeda Pharmaceutical Company, Ltd., or the Collaboration Agreement.

The Collaboration Agreement was subsequently amended in April 2018, October 2018 and March 2020.

The Collaboration Agreement was

mutually terminated pursuant to the termination agreement, or the Termination Agreement, dated November 8, 2021.

The Collaboration

Agreement was mutually terminated pursuant to the termination agreement, or the Termination Agreement, dated November 8, 2021.

Under the terms of the Termination Agreement, we are not required to satisfy any remaining performance obligations, we will not make any payments to or receive any future milestone or royalty payments from Takeda, and all options to license and rights of first negotiation held by Takeda under the Collaboration Agreement were terminated.

The remaining deferred revenue was recognized as revenue in the fourth quarter of 2021.

Heat License Agreement

In June 2016, we entered into an Exclusive License Agreement, or the Heat License Agreement, with Heat Biologics Inc., or Heat.

The Heat License Agreement was subsequently amended in November 2016, December 2016, and March 2017.

Pursuant to the Heat License Agreement, Heat granted to us (1) a worldwide, sublicensable exclusive license to research, develop, manufacture, and commercialize products under three provisional patent applications, including all patents issuing from such applications, or the Fusion Protein Patent Rights, and (2) a worldwide, sublicensable nonexclusive license to research, develop, manufacture, and commercialize certain know-how owned and controlled by Heat related to the Fusion Protein Patent Rights.

Under the Heat License Agreement, Heat was required to conduct certain research and development services under a mutually-agreed upon research and development plan and Heat was eligible to receive financial support from us for these efforts.

Effective March 2017, Heat completed all research and development services under the Heat License Agreement and assigned to us three patent applications and all data derived from the research and development activities, referred to collectively as the Research Services Inventions.

Pursuant to the terms of the Heat License Agreement, we are obligated to use commercially reasonable efforts to diligently research and develop at least one product covered by the Fusion Protein Patent Rights, including the obligation to file an Investigational New Drug, or IND, application for such product.

Clinical Trial Collaboration and Supply Agreement with ImmunoGen

On February 4, 2022, we entered into a Clinical Trial Collaboration and Supply Agreement, or the Clinical Trial Collaboration Agreement, with ImmunoGen.

Pursuant to the Clinical Trial Collaboration Agreement, ImmunoGen will supply us with a sufficient quantity of mirvetuximab soravtansine for use in our Phase 1B combination cohort evaluating SL-172154 in combination with mirvetuximab soravtansine in patients with platinum-resistant ovarian cancer, or the Study.

We will bear all other costs associated with the conduct of the Study, except that ImmunoGen will reimburse us for $2.0 million of the costs we incur.

We have sole authority over the design, conduct, and control of the Study.

We will provide ImmunoGen with a final study report, or the Final Study Report, relating to the Study promptly following completion thereof.

Unless sooner terminated, the term of the Clinical Trial Collaboration Agreement continues until the delivery of the Final Study Report.

We may terminate earlier upon 60 days’ written notice for any reason;

provided, that if the Study is underway at the time of such notice, such termination will only be effective 60 days following the parties’ mutual agreement on a written plan for the winddown or termination of the Study.

ImmunoGen may terminate earlier if it believes, in good faith, that mirvetuximab soravtansine is being used in the Study in an unsafe manner or that the Study may unreasonably affect patient safety.

In addition, either party may terminate the agreement due to a material breach by the other party (subject to a cure period), if either party determines in good faith, based on a review of the clinical data or other information, that the Study poses imminent danger to patients, if a regulatory authority takes any action that causes it to be unreasonable for, or otherwise prevents, the terminating party from supplying its compound for the Study, or if a party withdraws any applicable regulatory approval for its compound or discontinues development of its compound for any reason.

Nighthawk License Agreement

In June 2016, we entered into an Exclusive License Agreement, or the Nighthawk License Agreement, with Nighthawk Biosciences, Inc.

(f/k/a Heat Biologics Inc.), or Nighthawk.

The Nighthawk License Agreement was subsequently amended in November 2016, December 2016, and March 2017.

Pursuant to the Nighthawk License Agreement, Nighthawk granted to us (1) a worldwide, sublicensable exclusive license to research, develop, manufacture, and commercialize products under three provisional patent applications, including all patents issuing from such applications, or the Fusion Protein Patent Rights, and (2) a worldwide, sublicensable nonexclusive license to research, develop, manufacture, and commercialize certain know-how owned and controlled by Nighthawk related to the Fusion Protein Patent Rights.

Under the Nighthawk License Agreement, Nighthawk was required to conduct certain research and development services under a mutually-agreed upon research and development plan and Nighthawk was eligible to receive financial support from us for these efforts.

Effective March 2017, Nighthawk completed all research and development services under the Nighthawk License Agreement and assigned to us three patent applications and all data derived from the research and development activities, referred to collectively as the Research Services Inventions.

Pursuant to the terms of the Nighthawk License Agreement, we are obligated to use commercially reasonable efforts to diligently research and develop at least one product covered by the Fusion Protein Patent Rights, including the obligation to file an Investigational New Drug, or IND, application for such product.

Our development efforts to date, including the development of SL-279252 and certain other ARC compounds, satisfy these obligations.

In addition, we are to provide annual reports to Heat on or before the anniversary of the effective date of the Heat License Agreement to inform Heat of our progress.

Unless sooner terminated or extended, the term of the Heat License Agreement continues until the later of (1) 20 years following the effective date, and (2) the expiration of the last-to-expire royalty term.

In addition, we are to provide annual reports to Nighthawk on or before the anniversary of the effective date of the Nighthawk License Agreement to inform Nighthawk of our progress.

Unless sooner terminated or extended, the term of the Nighthawk License Agreement continues until the later of (1) 20 years following the effective date, and (2) the expiration of the last-to-expire royalty term.

Either party may terminate the agreement due to a material breach by the other party (subject to a 90-day cure period) or if the other party files for bankruptcy.

In the event we terminate the Heat License Agreement due to a material breach by Heat, Heat must assign to us all right, title, and interest in the patent rights licensed under the Heat License Agreement.

In addition to an upfront payment of $50,000, which we made in 2016, the Heat License Agreement requires us to make further payments to Heat in the future of up to $20.6 million in the aggregate for the achievement of specified development, regulatory, and commercial sale milestones for certain licensed products.

We are also required to pay Heat a percentage of certain upfront fees or other non-royalty payments that are not tied to milestone events which we receive in connection with certain sublicenses of the Fusion Protein Patent Rights.

We are also required to pay Heat a royalty on all worldwide net sales by us, our affiliates, and sublicenses of certain licensed products in the low single digits.

In the event we terminate the Nighthawk License Agreement due to a material breach by Nighthawk, Nighthawk must assign to us all right, title, and interest in the patent rights licensed under the Nighthawk License Agreement.

In addition to an upfront payment of $50,000, which we made in 2016, the Nighthawk License Agreement requires us to make further payments to Nighthawk in the future of up to $20.6 million in the aggregate for the achievement of specified development, regulatory, and commercial sale milestones for certain licensed products.

We are also required to pay Nighthawk a percentage of certain upfront fees or other non-royalty payments that are not tied to milestone events which we receive in connection with certain sublicenses of the Fusion Protein Patent Rights.

We are also required to pay Nighthawk a royalty on all worldwide net sales by us, our affiliates, and sublicenses of certain licensed products in the low single digits.

Royalties are payable, on a product-by-product and country-by-country basis, commencing on the first commercial sale of such product and continuing until the last-to-expire valid patent claim to the licensed patent rights that cover such product in that country.

Manufacturing and Supply

By working with third-party vendors to conduct activities in compliance with current Good Manufacturing Practices, or cGMP, we have invested significant resources to identify and scale up a suitable manufacturing process for ARC compounds, including SL-172154 and SL-279252.

Currently, ARC compounds are produced by mammalian cell lines commonly used in the manufacture of monoclonal antibodies, including Chinese hamster ovary, or CHO, cells.

Both SL-172154 and SL-279252 have achieved cell culture titer greater than two grams per liter, and another ARC compound has achieved titers exceeding seven grams per liter.

SL-172154 has achieved cell culture titer greater than two grams per liter, and another ARC compound has achieved titers exceeding seven grams per liter.

Purification of ARC compounds initially utilizes affinity chromatography directed to the Fc domain for capture, and subsequent chromatography steps are designed to remove process-related impurities including CHO derived DNA and proteins.

To date, we have manufactured bulk drug substance, or BDS, for our product candidates utilizing the services of one third-party contract manufacturer, KBI Biopharma, Inc., or KBI, with whom we maintain a master service agreement, pursuant to which we may manufacture BDS through KBI on a per project basis.

We may terminate the master services agreement at any time for convenience in accordance with the terms of the agreement.

Either KBI or we may also terminate the master services agreement with respect to an uncured breach by the other party in accordance with the terms of the agreement.

To date, we have manufactured bulk drug substance, or BDS, for our product candidates utilizing the services of a limited number of third-party contract manufacturers, with whom we maintain master service agreements, pursuant to which we may manufacture BDS on a per project basis.

We may terminate the master services agreements at any time for convenience in accordance with the terms of the agreement.

These contract manufacturers, or we, may also terminate the master services agreements with respect to an uncured breach by the other party in accordance with the terms of the agreement.

These agreements include confidentiality and intellectual property provisions to protect our proprietary rights related to our product candidates.

the COVID-19 pandemic, we are actively working to make arrangements to procure redundant supply, including engaging with additional third-party manufacturers to identify suitable additional suppliers and building out a facility to support internal process development activities and cGMP manufacturing.

We have recently entered into a master service agreement with Abzena Plc, pursuant to which we may manufacture BDS on a per project basis.

Given the complexity of manufacturing our dual-sided, bi-functional fusion proteins, our increased need for manufacturing driven by multiple clinical trial programs, and the challenges faced by biologics manufacturing facilities during the COVID-19 pandemic, we work to ensure that we have arrangements with multiple contract manufacturers to reduce the risk of single-source procurement of BDS.

Additionally, we built an in-house facility to support our cell line development, manufacturing process development, analytical assay development, and non-GMP manufacturing activities.

We expect to continue to devote significant resources to process development and optimization of the manufacture of our product candidates.

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These generally include immune cell redirecting therapeutics (e.g., T cell engagers), adoptive cellular therapies (e.g., CAR-Ts), antibody drug conjugates, targeted radiopharmaceuticals, targeted immunotoxin, and targeted cancer vaccines.

With respect to our lead product candidate, SL-172154, we are aware of other competing clinical-stage therapeutics that target the CD47 pathway or the CD40 pathway, which include, but are not limited to magrolimab, ALX148, TTI-621, TTI-622, DSP107, and APX005M.

With respect to our second lead product candidate, SL-279252, we are aware of other competing clinical-stage therapeutics, that target the PD-1 pathway or the OX40 pathway, which include, but are not limited to PF-04518600, BMS-986178, INBRX-106, pembrolizumab, nivolumab, avelumab, and atezolizumab.

With respect to our second proprietary platform, the GADLEN platform, we are aware of potentially competing efforts to develop compounds to utilize gamma delta t cells through various modalities for the treatment of certain cancer indications, including, but not limited to, efforts by Adicet Bio, Gamma Delta Therapeutics, ImCheck Therapeutics, and Lava Therapeutics.

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do.

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Our competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we or our collaborators are able to enter the market.

The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of

companion diagnostics, if required, the level of biosimilar or generic competition, and the availability of reimbursement from government and other third-party payors.

The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics, if required, the level of biosimilar or generic competition, and the availability of reimbursement from government and other third-party payors.

Intellectual Property

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In addition, because of the extensive time required for clinical development and regulatory review of a product candidate we may develop, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby limiting the protection such patent would afford the respective product and any competitive advantage such patent may provide.

See “Risk Factors—Risks Related to Our Intellectual Property and Information Technology” for a more comprehensive description of risks related to our intellectual property.

See “Risk Factors—Risks Related to Intellectual Property and Information Technology” for a more comprehensive description of risks related to our intellectual property.

For any individual patent, the term depends on the applicable law in the country in which the patent is granted.

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We generally file patent applications directed to our key technologies and programs in an effort to secure our intellectual property positions.

As of February 1, 2022, we own or exclusively license (i) more than 15 patents and more than 15 pending non-provisional patent applications in the United States and (ii) 3 patents and more than 120 pending patent applications in jurisdictions outside of the United States.

We also own additional pending provisional patent applications in the United States and pending international patent applications

filed under the Patent Cooperation Treaty, or PCT.

As of January 17, 2023, we own or exclusively license (i) more than 20 patents and more than 15 pending non-provisional patent applications in the United States and (ii) 10 patents and more than 120 pending patent applications in jurisdictions outside of the United States.

We also own additional pending provisional patent applications in the United States and pending international patent applications filed under the Patent Cooperation Treaty, or PCT.

Patent prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the U.S.

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SL-172154 Product Candidate

As of February 1, 2022, we own or exclusively license (i) 2 patents and 5 pending non-provisional patent applications in the United States and (ii) 3 patents and more than 35 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to SL-172154.

As of January 17, 2023, we own or exclusively license (i) 5 patents and 5 pending non-provisional patent applications in the United States and (ii) 7 patents and more than 25 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to SL-172154.

These patents and applications originate from several different patent families.

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The terms of individual patents granted in jurisdictions outside of the United States depends on the legal term for patents in those jurisdictions.

SL-279252 Product Candidate

As of February 1, 2022, we own or exclusively license (i) 2 patents and 1 pending non-provisional patent application in the United States (ii) 3 patents and more than 35 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to SL-279252.

These patents and applications originate from two different patent families.

Patents granted in a family generally directed to compositions and methods of treating cancer are expected to expire in the United States in 2036, without taking potential patent term extension or patent term adjustment into account.

Patents granted in another family, generally directed to methods of treating cancer with various combination agents, are expected to expire in the United States in 2039, without taking potential patent term extension or patent term adjustment into account.

The terms of individual patents granted in jurisdictions outside of the United States depends on the legal term for patents in those jurisdictions.

As of February 1, 2022, we own or exclusively license (i) more than 15 patents and 15 pending non-provisional patent applications in the United States and (ii) 3 patents and more than 100 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to the ARC platform.

As of February 1, 2022, these include patents and/or patent applications related to SL‑172154 and SL-279252 (described above) and other ARC compounds combining TIM3, PD‑1, SIRPα, TIGIT, CSF1R, VSIG8, or FLT3L with OX40, CD40L, 4-1BBL, or LIGHT.

As of January 17, 2023, we own or exclusively license (i) more than 15 patents and 15 pending non-provisional patent applications in the United States and (ii) 10 patents and more than 100 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to the ARC platform.

These include patents and/or patent applications related to SL‑172154 and other ARC compounds combining TIM3, PD‑1, SIRPα, TIGIT, CSF1R, VSIG8, or FLT3L with OX40, CD40L, 4-1BBL, or LIGHT.

These patents and applications originate from several different patent families.

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GADLEN Platform

As of February 1, 2022, we (i) own 2 patents and 1 pending non-provisional patent application in the United States and (ii) more than 10 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to the GADLEN platform.

As of January 17, 2023, we (i) own 2 patents and 2 pending non-provisional patent application in the United States and (ii) more than 10 pending patent applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan) that relate to the GADLEN platform.

These patents and applications originate from a family generally directed to compositions and methods of treating cancer.

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We plan to register trademarks in connection with our biological products.

Licensed Intellectual Property from Heat Biologics, Inc.

In June 2016, we entered into an exclusive license agreement with Heat, pursuant to which we received an exclusive (as to the patent rights), non-transferable, sublicensable, worldwide, royalty-bearing, non-field restricted license to certain patent rights and know-how, including rights related to the ARC platform.

We paid Heat an initial license fee of $50,000, and we are obligated to pay Heat fees upon receipt of certain sublicensing income, achievement of certain milestones, and royalties upon sales of commercial products.

The Heat license provides us rights in the patent family including PCT/US16/54598.

As of February 1, 2022, that family includes (i) 10 patents and 3 pending non-provisional patent applications in the United States, and (ii) 2 patents and more than 25 pending applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan).

Licensed Intellectual Property from Nighthawk Biosciences, Inc.

In June 2016, we entered into an exclusive license agreement with Nighthawk, pursuant to which we received an exclusive (as to the patent rights), non-transferable, sublicensable, worldwide, royalty-bearing, non-field restricted license to certain patent rights and know-how, including rights related to the ARC platform.

We paid Nighthawk an initial license fee of $50,000, and we are obligated to pay Nighthawk fees upon receipt of certain sublicensing income, achievement of certain milestones, and royalties upon sales of commercial products.

The Nighthawk license provides us rights in the patent family including PCT/US16/54598.

As of January 17, 2023, that family includes (i) 11 patents and 2 pending non-provisional patent applications in the United States, and (ii) 7 patents and more than 25 pending applications in jurisdictions outside of the United States (including, among others, Australia, Canada, China, Europe, and Japan).

We control prosecution, maintenance, and enforcement of this family of patents and patent applications.

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

• approval by an independent IRB or ethics committee at each clinical site before the trial is commenced;

• approval by an independent institutional review board, or IRB, or ethics committee at each clinical site before the trial is commenced;

• manufacture of the proposed biologic candidate in accordance with cGMPs;

• performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;

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

• preparation of and submission to the FDA of a biologics license application, or BLA, after completion of all pivotal clinical trials;

• satisfactory completion of an FDA Advisory Committee review, if applicable;

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

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day

period, raises safety concerns or questions about the proposed clinical trial.

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

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

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Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace.

The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

The FDA may require

one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

Expedited Development and Review Programs

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Fast track designation applies to the combination of the product and the specific indication for which it is being studied.

The sponsor of a fast track product has opportunities for more frequent interactions with the review team during product development and, once a BLA is submitted,

the product may be eligible for priority review.

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

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

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

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the

time period for FDA review or approval will not be shortened.

In May 2018, the Right to Try Act established a new regulatory pathway to increase access to unapproved, investigational treatments for patients diagnosed with life-threatening diseases or conditions who have exhausted approved treatment options and who are unable to participate in a clinical trial.

The Consolidated Appropriations Act, 2023 strengthens the FDA’s authority to require and regulate post-approval studies of accelerated approval drugs and to expedite the rescission of accelerated approval based on these post-approval studies.

Orphan Drug Designation

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Orphan drug designation must be requested before submitting a BLA.

After the FDA grants

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

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

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

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The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

Failure to comply with these requirements can result in, among other things, adverse publicity,

warning letters, corrective advertising and potential civil and criminal penalties.

Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.

Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.

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Biosimilars and Reference Product Exclusivity

The ACA includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are highly similar, or “biosimilar,” to or interchangeable with an FDA-approved reference biological product.

The Affordable Care Act, or ACA, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are highly similar, or “biosimilar,” to or interchangeable with an FDA-approved reference biological product.

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

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

A product shown to be biosimilar or interchangeable with an FDA-approved reference

biological product may rely in part on the FDA’s previous determination of safety and effectiveness for the reference product for approval, which can potentially reduce the cost and time required to obtain approval to market the product.

A product shown to be biosimilar or interchangeable with an FDA-approved reference biological product may rely in part on the FDA’s previous determination of safety and effectiveness for the reference product for approval, which can potentially reduce the cost and time required to obtain approval to market the product.

Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

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As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.

As discussed below, the Inflation Reduction Act of 2022, or IRA, is a significant new law that intends to foster generic and biosimilar competition and to lower drug and biologic costs.

Other Healthcare Laws and Compliance Requirements

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The AKS has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand, and prescribers and purchasers on the other.

The government often takes the position that to violate the AKS, only one purpose of the remuneration need be to induce referrals, even if there are other legitimate purposes for the remuneration.

The government often takes the

position that to violate the AKS, only one purpose of the remuneration need be to induce referrals, even if there are other legitimate purposes for the remuneration.

There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from AKS prosecution, but they are drawn narrowly and practices that involve remuneration, such as consulting agreements, that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

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Pharmaceutical and other healthcare companies have been prosecuted under these laws for engaging in a variety of different types of conduct that caused the submission of false claims to federal healthcare programs.

Under the AKS,

for example, a claim resulting from a violation of the AKS is deemed to be a false or fraudulent claim for purposes of the FCA.

Under the AKS, for example, a claim resulting from a violation of the AKS is deemed to be a false or fraudulent claim for purposes of the FCA.

The FCA imposes mandatory treble damages and per-violation civil penalties up to approximately $25,000.

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The PHSA also prohibits the introduction into interstate commerce of unlicensed or mislabeled biological products.

federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information related to payments or other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Beginning in 2022, such reporting obligations will be expanded to include payments and other transfers of value provided in 2021 to certain other healthcare professionals, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information related to payments or other transfers of value made to various healthcare professionals including physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Beginning on January 1, 2023, California Assembly Bill 1278 requires California physicians and surgeons to notify patients of Open Payments.

We are also subject to additional similar U.S.

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Decisions regarding whether to cover any of our product candidates, if approved, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis.

Further, no uniform policy for coverage and reimbursement

exists in the United States, and coverage and reimbursement can differ significantly from payor to payor.

Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor.

Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations.

As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical or biological products, medical devices and medical services, in addition to questioning safety and efficacy.

Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product that receives approval.

Decreases in third-party reimbursement for any product or a decision by a third-party not to cover a product could reduce physician usage and patient demand for the product.

For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs.

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government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products.

Decreases in third-party reimbursement for any product or a decision by a third-party not to cover a product could reduce physician usage and patient demand for the product.

The IRA provides CMS with significant new authorities intended to curb drug costs and to encourage market competition.

For the first time, CMS will be able to directly negotiate prescription drug prices and to cap out-of-pocket costs.

Each year, CMS will select and negotiate a preset number of high-spend drugs and biologics that are covered under Medicare Part B and Part D that do not have generic or biosimilar competition.

These price negotiations will begin in 2023.

The IRA also provides a new “inflation rebate” covering Medicare patients that will take effect in 2023 and is intended to counter certain price increases in prescriptions drugs.

The inflation rebate provision will require drug manufacturers to pay a rebate to the federal government if the price for a drug or biologic under Medicare Part B and Part D increases faster than the rate of inflation.

To support biosimilar competition, beginning in October 2022, qualifying biosimilars may receive a Medicare Part B payment increase for a period of five years.

Separately, if a biologic drug for which no biosimilar exists delays a biosimilar’s market entry beyond two years, CMS will be authorized to subject the biologics manufacturer to price negotiations intended to ensure fair competition.

Notwithstanding these provisions, the IRA’s impact on commercialization and competition remains largely uncertain.

Healthcare Reform

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In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded health care programs, and increased governmental control of drug pricing.

The Affordable Care Act, or the ACA, which was enacted in March 2010, substantially changed the way healthcare is financed by both governmental and private insurers in the United States, and significantly affected the pharmaceutical industry.

The ACA, which was enacted in March 2010, substantially changed the way healthcare is financed by both governmental and private insurers in the United States, and significantly affected the pharmaceutical industry.

The ACA contains a number of provisions of particular import to the pharmaceutical and biotechnology industries, including, but not limited to, those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

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

For example, the Tax Act was enacted, which, among other things, removes penalties for not complying with the ACA’s requirement to carry health insurance, known as the “individual mandate,” effective January 1, 2019.

Since the enactment of the Tax Act, there have been additional amendments to certain provisions of the ACA.

In December 2019, the U.S.

District Court for the Fifth Circuit upheld a ruling by a Texas U.S.

District Court Judge that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act.

The Supreme Court heard the case but overturned the decision on the basis that the plaintiffs lacked standing and did not address the constitutionality.

The Supreme Court’s decision left open the opportunity for additional challenges to the ACA.

Other legislative changes have been proposed and adopted since the ACA was enacted, including automatic aggregate reductions of Medicare payments to providers of 2% per fiscal year as part of the federal budget sequestration under the Budget Control Act of 2011.

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In addition, the Bipartisan Budget Act of 2018, among other things, amended the Medicare Act (as amended by the ACA) to increase the point-of-sale discounts that manufacturers must agree to offer under the Medicare Part D coverage discount program from 50% to 70% off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs being covered under Medicare Part D.

Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state measures designed to, among other things, reduce the cost of prescription drugs, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement

methodologies for drug products.

For example, in May 2019, CMS adopted a final rule allowing Medicare Advantage Plans the option to use step therapy for Part B drugs, permitting Medicare Part D plans to apply certain utilization controls to new starts of five of the six protected class drugs, and requiring the Explanation of Benefits for Part D beneficiaries to disclose drug price increases and lower cost therapeutic alternatives, which went into effect on January 1, 2021.

In October 2020, the FDA issued guidance describing procedures for manufacturers to facilitate the importation of FDA-approved biologics manufactured abroad and originally intended for sale in a foreign country into the United States.

Although the Biden administration has stayed the effective dates of some last-minute drug price regulations issued by the Trump administration, Congress and the Biden administration have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Notwithstanding the Inflation Reduction Act, continued legislative and enforcement interest exists in the United States with respect to specialty drug pricing practices.

Specifically, we expect regulators to continue pushing for transparency to drug pricing, reducing the cost of prescription drugs under Medicare, reviewing the relationship between pricing and manufacturer patient programs, and reforming government program reimbursement methodologies for drugs.

Other Government Regulation Outside of the United States

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European Data Laws

The collection and use of personal health data and other personal information in the European Union is governed by the provisions of the European General Data Protection Regulation (EU) 2016/679, or the GDPR, which came into force in May 2018, and related implementing laws in individual EU Member States.

Under the GDPR, personal data can only be transferred to countries outside the EU Member States and the three additional European Economic Area, or EEA, countries (Norway, Iceland and Liechtenstein) that have adopted a national law implementing the GDPR if such cross-border transfers comply with specific conditions.

The GDPR imposes a number of strict obligations and restrictions on the ability to collect, analyze and transfer personal data of individuals within the EU and in the EEA, including health data from clinical trials and adverse event reporting.

The GDPR also includes requirements relating to (i) the consent of the individuals to whom the personal data relates, (ii) the information provided to such individuals prior to processing their personal data, (iii) data processing obligations to the national data protection authorities and (iv) the security and confidentiality of the personal data.

EU Member States may also impose additional requirements.

The GDPR increased responsibility and liability in relation to personal data that we process.

other administrative penalties and a number of criminal offenses (punishable by uncapped fines) for organizations and, in certain cases, their directors and officers;

and civil liability claims from individuals whose personal data was processed.

The collection and use of personal health data and other personal data in the EU is governed by the provisions of the European General Data Protection Regulation (EU) 2016/679, or GDPR, which came into force in May 2018, and related data protection laws in individual EU Member States.

The GDPR imposes a number of strict obligations and restrictions on the

ability to process, including collecting, analyzing and transferring, personal data of individuals, in particular with respect to health data from clinical trials and adverse event reporting.

The GDPR includes requirements relating to the legal basis of the processing (such as consent of the individuals to whom the personal data relates), the information provided to the individuals prior to processing their personal data, the notification obligations to the national data protection authorities, and the security and confidentiality of the personal data.

EU Member States may also impose additional requirements in relation to health, genetic and biometric data through their national legislation.

In addition, the GDPR imposes specific restrictions on the transfer of personal data to countries outside of the EU/EEA that are not considered by the EC to provide an adequate level of data protection (including the United States).

Appropriate safeguards are required to enable such transfers.

Among the appropriate safeguards that can be used, the data exporter may use the standard contractual clauses, or SCCs.

On March 25, 2022, the EC and the United States announced that they have agreed in principle on a new Trans-Atlantic Data Privacy Framework.

Following this statement, on October 7, 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States Signals Intelligence Activities’, which implemented the agreement in principle.

On that basis, the EC prepared a draft adequacy decision and launched its adoption procedure.

While this new EU-U.S.

privacy framework is expected to enter into force in 2023, there is still some uncertainty around the new framework.

Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in significant monetary fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater, other administrative penalties and a number of criminal offenses (punishable by uncapped fines) for organizations and, in certain cases, their directors and officers, as well as civil liability claims from individuals whose personal data was processed.

Data protection authorities from the different EU Member States may still implement certain variations, enforce the GDPR and national data protection laws differently, and introduce additional national regulations and guidelines, which adds to the complexity of processing personal data in the EU.

Guidance developed at both the EU level

and at the national level in individual EU Member States concerning implementation and compliance practices are regularly updated or otherwise revised.

Moreover, there is a growing trend towards required public disclosure of clinical trial data in the EU, which adds to the complexity of obligations relating to processing health data from clinical trials.

Such public disclosure obligations are provided in the new EU Clinical Trials Regulation, European Medical Agency, or the EMA, disclosure initiatives and voluntary commitments by industry.

Guidance developed at both the EU level and at the national level in individual EU Member States concerning implementation and compliance practices are often updated or otherwise revised.

Furthermore, there is a growing trend towards the required public disclosure of clinical trial data in the EU, which adds to the complexity of obligations relating to processing health data from clinical trials.

Such public disclosure obligations are provided in the new EU CTR, EMA disclosure initiatives and voluntary commitments by industry.

Failure to comply with these obligations could lead to government enforcement actions and significant penalties against us, harm to our reputation, and adversely impact our business and operating results.

The uncertainty regarding the interplay between different regulatory frameworks, such as the EU Clinical Trials Regulation and the GDPR, further adds to the complexity that we face with regard to data protection regulation.

The uncertainty regarding the interplay between different regulatory frameworks, such as the CTR and the GDPR, further adds to the complexity that we face with regard to data protection regulation.

With regard to the transfer of data from the EU to the United Kingdom, or UK, personal data may now freely flow from the EU to the UK since the UK is deemed to have an adequate data protection level.

Such adequacy decisions include a ‘sunset clause’ which entails that the decisions will automatically expire four years after their entry into force (June 2025).

Following the UK's withdrawal from the EU and the EEA, companies also have to comply with the UK’s data protection laws (including the GDPR as incorporated into UK national law).

Penalties under this regime are up to the greater of £17.5 million or 4% of global turnover.

However, the adequacy decisions include a ‘sunset clause’ which entails that the decisions will automatically expire four years after their entry into force.

Additionally, following the UK’s withdrawal from the EU and the EEA, companies also have to comply with the UK’s data protection laws (including the GDPR, as incorporated into UK national law), the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover.

Drug and Biologic Development Process

The conduct of clinical trials is currently governed by the EU Clinical Trials Directive 2001/20/EC, or Clinical Trials Directive, and will be replaced by the EU Clinical Trials Regulation (EU) No.

536/2014, or Clinical Trials Regulation, once the latter comes into effect.

The Clinical Trials Regulation introduces a complete overhaul of the existing regulation of clinical trials for medicinal products in the EU.

It entered into force on January 31, 2022.

Under the current regime, which will expire after a transition period of three years (as outlined below in more detail), before a clinical trial can be initiated, it must be approved in each EU Member State where there is a site at which the trial is to be conducted.

Regardless of where they are conducted, all clinical trials included in applications for marketing authorization for human medicines in the European EU/EEA must have been carried out in accordance with EU regulations.

This means that clinical trials conducted in the EU/EEA have to comply with EU clinical trial legislation but also that clinical trials conducted outside the EU/EEA have to comply with ethical principles equivalent to those set out in the EEA, including adhering to international good clinical practice and the Declaration of Helsinki.

The conduct of clinical trials in the EU is governed by the EU Clinical Trials Regulation (EU) No.

536/2014, or CTR, which entered into force on January 31, 2022.

The CTR replaced the Clinical Trials Directive 2001/20/EC, (Clinical Trials Directive) and introduced a complete overhaul of the existing regulation of clinical trials for medicinal products in the EU.

Under the former regime, which will expire after a transition period of one or three years, respectively, as outlined below in more detail, before a clinical trial can be initiated it must be approved in each EU member state where there is a site at which the clinical trial is to be conducted.

The approval must be obtained from two separate entities:

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Any substantial changes to the trial protocol or other information submitted with the clinical trial applications must be submitted to or approved by the relevant NCA and Ethics Committees.

Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the EU Member State where they occur.

A more unified procedure will apply under the new Clinical Trials Regulation.

Under the current regime all suspected unexpected serious adverse

reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the EU member state where they occur.

A more unified procedure will apply under the new CTR.

A sponsor will be able to submit a single application for approval of a clinical trial through a centralized EU clinical trials portal.

One national regulatory authority (the reporting EU Member State proposed by the applicant) will take the lead in validating and evaluating the application consult and coordinate with the other concerned Member States.

One national regulatory authority (the reporting EU member state proposed by the applicant) will take the lead in validating and evaluating the application consult and coordinate with the other concerned EU Member States.

If an application is rejected, it may be amended and resubmitted through the EU clinical trials portal.

If an approval is issued, the sponsor may start the clinical trial in all concerned Member States.

However, a concerned EU Member State may in limited circumstances declare an “opt-out” from an approval and prevent the clinical trial form being conducted in such Member State.

The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting, and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the EU Database.

After several postponements of the effective date of the Clinical Trials Regulation, or CTR, due to technical difficulties with the underlying IT systems, the “go live” date of these systems and, accordingly, the coming into force of the regulation, occurred on January 31, 2022.

If an approval is issued, the sponsor may start the clinical trial in all concerned EU Member States.

However, a concerned EU member state may in limited circumstances declare an “opt-out” from an approval and prevent the clinical trial from being conducted in such member state.

The CTR also aims to streamline and simplify the rules on safety reporting, and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the EU Database.

The CTR foresees a three-year transition period.

Member States will work in CTIS immediately after the system has gone live.

For one year, until January 31, 2023, clinical trial sponsors can still choose whether to submit an initial clinical trial application in line with the current system (Clinical Trials Directive) or via CTIS.

After January 31, 2023, submission of initial clinical trial applications via CTIS becomes mandatory and by January 31, 2025, all ongoing trials approved under the current Clinical Trials Directive will be governed by the new Clinical Trials Regulation and have to be transitioned to CTIS.

Under both the current regime and the new Clinical Trials Regulation, national laws, regulations, and the applicable Good Clinical Practice and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use, or ICH, guidelines on Good Clinical Practice, or GCP, and the ethical principles that have their origin in the Declaration of Helsinki.

During the development of a medicinal product, the EMA and national regulators within the EU provide the opportunity for dialogue and guidance on the development program.

EU Member States will work in CTIS immediately after the system has gone live.

On January 31, 2023, submission of initial clinical trial applications via CTIS became mandatory, and by January 31, 2025, all ongoing trials approved under the former Clinical Trials Directive will need to comply with the CTR and have to be transitioned to CTIS.

Under both the former regime and the new CTR, national laws, regulations, and the applicable Good Clinical Practice, or GCP, and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use, or ICH, guidelines on Good Clinical Practice and the ethical principles that have their origin in the Declaration of Helsinki.

During the development of a medicinal product, the European Medical Agency, or EMA and national regulators within the EU provide the opportunity for dialogue and guidance on the development program.

At the EMA level, this is usually done in the form of scientific advice, which is given by the Committee for Medicinal Products for Human Use, or CHMP, on the recommendation of the Scientific Advice Working Party, or SAWP.

A fee is incurred with each scientific advice procedure, but is significantly reduced for

designated orphan medicines.

A fee is incurred with each scientific advice procedure, but is significantly reduced for designated orphan medicines.

Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs.

Advice is not legally binding with regard to any future marketing authorization application of the product concerned.

Advice is not legally binding with regard to any future Marketing Authorization Application, or MAA, of the product concerned.

Drug Marketing Authorization

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ATMPs comprise gene therapy products, somatic cell therapy products and tissue engineered products, which are genes, cells or tissues that have undergone substantial manipulation and that are administered to human beings in order to cure, diagnose or prevent diseases or regenerate, repair or replace a human tissue.

We anticipate that our gene therapy development products will be regulated as ATMPs in the European Union under the EU Regulation (EC) No 1394/2007 on advanced therapy medicinal products, or ATMP Regulation.

Pursuant to the ATMP Regulation, the Committee on Advanced Therapies, or CAT, is responsible in conjunction with the CHMP for the evaluation of ATMPs.

The CHMP and CAT are also responsible for providing guidelines on ATMPs.

the manufacturing and control information that should be submitted in a marketing authorization application;

and post-approval measures required to monitor patients and evaluate the long term efficacy and potential adverse reactions of ATMPs.

Although such guidelines are not legally binding, compliance with them is often necessary to gain and maintain approval for product candidates.

In the EEA, after completion of all required clinical testing, medicinal products may only be placed on the market after a related Marketing Authorization, or MA, has been granted.

MAs can be obtained through, amongst others, a centralized procedure, which is compulsory for certain medicinal products such as ATMPs.

The centralized procedure provides for the grant of a single MA by the European Commission, or EC, that is valid for all 27 EU Member States and, after respective national implementing decisions, in the three additional EEA Member States (Iceland, Norway, and Liechtenstein).

The centralized procedure is compulsory for certain medicinal products, including medicinal products derived from biotechnological processes, orphan medicinal products, ATMPs and products with a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.

It is optional for medicinal products containing a new active substance not yet authorized in the EEA before May 20, 2004, that constitute significant therapeutic, scientific or technical innovations, or for which the grant of a MA through the centralized procedure would be in the interest of public health at EU level.

The timeframe for the evaluation of an application under the centralized procedure is 210 days, excluding clock stops.

Typically, the overall process takes a year or more unless the application is eligible for an accelerated assessment.

Applications may be eligible for accelerated assessment if the CHMP decides the product is of major interest for public health and therapeutic innovation.

On request, the CHMP can reduce the time frame to 150 days if the applicant provides sufficient justification for an accelerated assessment.

These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of ATMPs and include, among other things, the preclinical studies required to characterize ATMPs manufacturing and control information that should be submitted in a In the EU and in Iceland, Norway and Liechtenstein (together the European Economic Area, or EEA), after completion of all required clinical testing, pharmaceutical products may only be placed on the market after obtaining a Marketing Authorization, or MA.

To obtain an MA of a drug under European Union regulatory systems, an applicant can submit an Marketing Authorization Application, or MAA, through, amongst others, a centralized or decentralized procedure.

Centralized Authorization Procedure

The centralized procedure provides for the grant of a single MA that is issued by the European Commission, or EC, following the scientific assessment of the application by the European Medicines Agency, or EMA, that is valid for all EU Member States as well as in the three additional EEA Member States.

The centralized procedure is compulsory for specific medicinal products, including for medicines developed by means of certain biotechnological processes, products designated as orphan medicinal products, advanced therapy medicinal products, or ATMP, and medicinal products with a new active substance indicated for the treatment of certain diseases (AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases).

For medicinal products containing a new active substance not yet authorized in the EEA before May 20, 2004 and indicated for the treatment of other diseases, medicinal products that constitute significant therapeutic, scientific or technical innovations or for which the grant of a MA through the centralized procedure would be in the interest of public health at EU level, an applicant may voluntarily submit an application for a marketing authorization through the centralized procedure.

Under the centralized procedure, the Committee for Medicinal Products for Human Use, or CHMP, established at the EMA, is responsible for conducting the initial assessment of a drug.

The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing

authorization.

Under the centralized procedure, the timeframe for the evaluation of an MAA by the EMA’s CHMP is, in principle, 210 days from receipt of a valid MAA.

However, this timeline excludes clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP, so the overall process typically takes a year or more, unless the application is eligible for an accelerated assessment.

Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation.

Upon request, the CHMP can reduce the time frame to 150 days if the applicant provides sufficient justification for an accelerated assessment.

The CHMP will provide a positive opinion regarding the application only if it meets certain quality, safety and efficacy requirements.

However, the EC has final authority for granting the MA within 67 days after receipt of the CHMP opinion.

The decentralized marketing authorization procedure permits companies to file identical applications for a marketing authorization to the competent authorities in several EU Member States simultaneously for a pharmaceutical product that has not yet been authorized in any EU Member State.

This opinion is then transmitted to the EC, which has the ultimate authority for granting MA within 67 days after receipt of the CHMP opinion.

Decentralized Authorization Procedure

Medicines that fall outside the mandatory scope of the centralized procedure have three routes to authorization:

(i) they can be authorized under the centralized procedure if they concern a significant therapeutic, scientific or technical innovation, or if their authorization would be in the interest of public health;

(ii) they can be authorized under a decentralized procedure where an applicant applies for simultaneous authorization in more than one EU member state;

or (iii) they can be authorized in an EU member state in accordance with that state’s national procedures and then be authorized in other EU countries by a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization (mutual recognition procedure).

The decentralized procedure permits companies to file identical MA applications for a medicinal product to the competent authorities in various EU Member States simultaneously if such medicinal product has not received marketing approval in any EU Member State before.

This procedure is available for pharmaceutical products not falling within the mandatory scope of the centralized procedure.

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The competent authorities of the other EU Member States, the concerned member states, are subsequently required to grant a marketing authorization for their territories on the basis of this assessment.

The only exception to this is where the competent authority of an EU Member State considers that there are concerns of potential serious risk to public health related to authorization of the product.

In these circumstances the matter is submitted to the Heads of Medicines Agencies, or CMDh, for review.

All new marketing authorization applications must include a Risk Management Plan, or RMP, describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product.

The only exception to this is where the competent authority of an EU Member State considers that there are concerns of potential serious risk to public health, the disputed points are subject to a dispute resolution mechanism and may eventually be referred to the EC, whose decision is binding for all EU Member States.

Risk Management Plan

All new MAAs must include a Risk Management Plan, or RMP, describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product.

RMPs are continually modified and updated throughout the lifetime of the medicine as new information becomes available.

An updated RMP must be submitted:

(i) at the request of EMA or a national competent authority, or (ii) whenever the risk-management system is modified, especially as the result of new information being received that may lead to a significant change to the benefit-risk profile or as a result of an important pharmacovigilance or risk-minimization milestone being reached.

The regulatory authorities may also impose specific obligations as a condition of the MA.

RMPs and Periodic Safety Update Reports, or PSURs, are routinely available to third parties requesting access, subject to limited redactions.

Additionally, the holder of a marketing authorization for an ATMP must put in place and maintain a system to ensure that each individual product and its starting and raw materials, including all substances coming into contact with the cells or tissues it may contain, can be traced through the sourcing, manufacturing, packaging, storage, transport and delivery to the relevant healthcare institution where the product is used.

MAs have an initial duration of five years.

The authorization may subsequently be renewed for an unlimited period on the basis of a reevaluation of the risk-benefit balance unless the EC or the national competent authority grants only a five-year

renewal on justified grounds relating to pharmacovigilance.

MA Validity Period

Marketing Authorizations have an initial duration of five years.

After these five years, the authorization may subsequently be renewed on the basis of a reevaluation of the risk-benefit balance.

Once renewed, the MA is valid for an unlimited period unless the EC or the national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with only one additional five-year renewal.

Applications for renewal must be made to the EMA at least nine months before the five-year period expires.

Additionally, the holder of a MA for an ATMP must put in place and maintain a system to ensure that each individual product and its starting and raw materials, including all substances coming into contact with the cells or tissues it may contain, can be traced through the sourcing, manufacturing, packaging, storage, transport and delivery to the relevant healthcare institution where the product is used.

Exceptional Circumstances/Conditional Approval

Similar to accelerated approval regulations in the United States, conditional MAs can be granted in the EU in exceptional circumstances.

A conditional MA can be granted for medicinal products where, although comprehensive clinical data referring to the safety and efficacy of the medicinal product have not been supplied, a number of criteria are fulfilled:

(i) the benefit/risk balance of the product is positive, (ii) it is likely that the applicant will be in a position to provide the comprehensive clinical data, (iii) unmet medical needs will be fulfilled by the grant of the MA 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 MA must be renewed annually.

Data and Market Exclusivity

As in the United States, it may be possible to obtain a period of market and/or data exclusivity in the EU that would have the effect of postponing the entry into the marketplace of a competitor’s generic, hybrid or biosimilar product (even if the pharmaceutical product has already received a marketing authorization) and prohibiting another applicant from relying on the marketing authorization holder’s pharmacological, toxicological and clinical data in support of another marketing authorization for the purposes of submitting an application, obtaining MA or placing the product on the market.

As in the United States, it may be possible to obtain a period of market and / or data exclusivity in the EU that would have the effect of postponing the entry into the marketplace of a competitor’s generic, hybrid or biosimilar product (even if the pharmaceutical product has already received a MA) and prohibiting another applicant from relying on the MA holder’s pharmacological, toxicological and clinical data in support of another MA for the purposes of submitting an application, obtaining MA or placing the product on the market.

New Chemical Entities, or NCE, approved in the EU qualify for eight years of data exclusivity and 10 years of marketing exclusivity.

An additional non-cumulative one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10-year marketing exclusivity period), the MA holder obtains an authorization for one or more new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies.

The data exclusivity period begins on the date of the product’s first marketing authorization in the EU.

After eight years, a generic product application may be submitted and generic companies may rely on the marketing authorization holder’s data.

However, a generic product cannot launch until two years later (or a total of 10 years after the first marketing authorization in the EU of the innovator product), or three years later (or a total of 11 years after the first marketing authorization in the EU of the innovator product) if the marketing authorization holder obtains marketing authorization for a new indication with significant clinical benefit within the eight-year data exclusivity period.

Additionally, another noncumulative one-year period of data exclusivity can be added to the eight years of data exclusivity where an application is made for a new indication for a well-established substance, provided that significant preclinical or clinical studies were carried out in relation to the new indication.

The data exclusivity period begins on the date of the product’s first MA in the EU.

After eight years, a generic product application may be submitted and generic companies may rely on the MA holder’s data.

However, a generic product cannot launch until two years later (or a total of 10 years after the first MA in the EU of the innovator product), or three years later (or a total of 11 years after the first MA in the EU of the innovator product) if the MA holder obtains MA for a new indication with significant clinical benefit within the eight-year data exclusivity period.

Additionally, another noncumulative one-year period of data exclusivity can be added to the eight years of data exclusivity where an application is made for a new indication for a well-established substance, provided that significant pre-clinical or clinical studies were carried out in relation to the new indication.

Another year of data exclusivity may be added to the eight years, where a change of classification of a pharmaceutical product has been authorized on the basis of significant pre-trial tests or clinical trials (when examining an application by another applicant for or holder of market authorization for a change of classification of the same substance the competent authority will not refer to the results of those tests or trials for one year after the initial change was authorized).

Products may not be granted data exclusivity since there is no guarantee that a product will be considered by the European Union’s regulatory authorities to include a NCE.

Even if a compound is considered to be a NCE and the MA applicant is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the medicinal product if such company can complete a full marketing authorization application with their own complete database of pharmaceutical tests, preclinical studies and clinical trials and obtain MA of its product.

Even if a compound is considered to be a NCE and the MA applicant is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the medicinal product if such company can complete a full MAA with their own complete database of pharmaceutical tests, preclinical studies and clinical trials and obtain MA of its product.

Orphan Designation and Exclusivity

The criteria for designating an orphan medicinal product in the European Union are similar in principle to those in the United States.

The EMA grants orphan drug designation if the medicinal product is intended for the diagnosis, prevention or treatment of (i) a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the European Union (prevalence criterion).

The EMA grants orphan drug designation if the medicinal product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no more than five in 10,000 persons in the European Union (prevalence criterion).

In addition, Orphan Drug Designation can be granted if, for economic reasons, the medicinal product would be unlikely to be developed without incentives and if there is no other satisfactory method approved in the European Union of diagnosing, preventing, or treating the condition, or if such a method exists, the proposed medicinal product is a significant benefit to patients affected by the condition.

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Designated orphan medicines are eligible for conditional marketing authorization.

The EMA’s Committee for Orphan Medicinal Products reassesses the orphan drug designation of a product in parallel with the review for a marketing authorization;

The EMA’s Committee for Orphan Medicinal Products, or COMP, reassesses the orphan drug designation of a product in parallel with the review for a marketing authorization;

for a product to benefit from market exclusivity it must maintain its orphan drug designation at the time of marketing authorization review by the EMA and approval by the EC.

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During the 10-year period of market exclusivity, with a limited number of exceptions, the regulatory authorities of the EU Member States and the EMA may not accept applications for marketing authorization, accept an application to extend an existing marketing authorization or grant marketing authorization for other similar medicinal products for the same therapeutic indication.

A similar medicinal product is defined as a medicinal product containing a similar active substance or substances as

contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication.

An orphan medicinal product can also obtain an additional two years of market exclusivity for an orphan-designated condition when the results of specific studies are reflected in the Summary of Product Characteristics, or SmPC, addressing the pediatric population and completed in accordance with a fully compliant PIP.

A similar medicinal product is defined as a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication.

population and completed in accordance with a fully compliant Pediatric Investigation Plan, or PIP.

No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.

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Pediatric Development

In the European Union, companies developing a new medicinal product are obligated to study their product in children and must therefore submit a PIP together with a request for agreement to the EMA.

In the EU, companies developing a new medicinal product are obligated to study their product in children and must therefore submit a PIP together with a request for agreement to the EMA.

The EMA issues a decision on the PIP based on an opinion of the EMA’s Pediatric Committee, or PDCO.

Companies must conduct pediatric clinical trials in compliance with the PIP approved by the EMA, unless a deferral (e.g.

until enough information to demonstrate its effectiveness and safety in adults is available) or waiver (e.g., because the relevant disease or condition occurs only in adults) has been granted by the EMA.

The marketing authorization application for the product must include the results of all pediatric clinical trials performed and details of all information collected in compliance with the approved PIP, unless a waiver or a deferral has been granted, in which case the pediatric clinical trials may be completed at a later date.

Products that are granted a marketing authorization on the basis of the pediatric clinical trials conducted in accordance with the approved PIP are eligible for a six month extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity.

Companies must conduct pediatric clinical trials in accordance with the PIP approved by the EMA, unless a deferral (e.g.

until enough information to demonstrate its effectiveness and safety in adults is available) or waiver (e.g.

because the relevant disease or condition occurs only in adults) has been granted by the EMA.

The MAA for the medicinal product must include the results of all pediatric clinical trials performed and details of all information collected in compliance with the approved PIP, unless a waiver or a deferral has been granted, in which case the pediatric clinical trials may be completed at a later date.

Medicinal products that are granted a marketing authorization, or MA, on the basis of the pediatric clinical trials conducted in accordance with the approved PIP are eligible for a six month extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity.

This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the approved PIP are developed and submitted.

An approved PIP is also required when a marketing-authorization holder wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized and covered by intellectual property rights.

An approved PIP is also required when a MA holder wants to add a new indication, medicinal form or route of administration for a medicine that is already authorized and covered by intellectual property rights.

PRIME Designation

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It includes control of compliance with EU good manufacturing practices rules, manufacturing authorizations, pharmacovigilance rules and requirements governing advertising, promotion, sale, and distribution, recordkeeping, importing and exporting of medicinal products.

Failure by us or by any of our third-party partners, including suppliers, manufacturers and distributors to comply with EU laws and the related national laws of individual EU Member States governing the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal products and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements may result in administrative, civil or criminal penalties.

These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or

variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

The holder of a marketing authorization for a medicinal product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinal products.

Failure by us or by any of our third-party partners, including suppliers, manufacturers and distributors to comply with EU laws and the related national laws of individual EU Member States governing the conduct of clinical trials, manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of MA, statutory health insurance, bribery and anti-corruption or other applicable regulatory requirements may result in administrative, civil or criminal penalties.

These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

The holder of a MA for a medicinal product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinal products.

These pharmacovigilance rules can impose on holders of MAs the obligation to conduct a labor intensive collection of data regarding the risks and benefits of marketed medicinal products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies or post-authorization safety studies to obtain further information on a medicine’s safety, or to measure the effectiveness of risk-management measures, which may be time consuming and expensive and could impact our profitability.

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If the EC agrees with the opinion, it can adopt a decision varying the existing MA.

Failure by the marketing authorization holder to fulfill the obligations for which the EC’s decision provides can undermine the ongoing validity of the MA.

Failure by the MA holder to fulfill the obligations for which the EC’s decision provides can undermine the ongoing validity of the MA.

More generally, non-compliance with pharmacovigilance obligations can lead to the variation, suspension or withdrawal of the MA for the product or imposition of financial penalties or other enforcement measures.

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All advertising and promotional activities for the product must be consistent with the approved SmPC and therefore all off-label promotion is prohibited.

Direct-to-consumer advertising of prescription-only medicines is also prohibited in the European Union.

Direct-to-consumer advertising of prescription-only medicines is also prohibited in the EU.

Violations of the rules governing the promotion of medicinal products in the European Union could be penalized by administrative measures, fines and imprisonment.

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Payments made to physicians in certain EU Member States also must be publicly disclosed.

Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her regulatory professional organization, and/or the competent authorities of the individual EU Member States.

Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her regulatory

professional organization, and/or the competent authorities of the individual EU Member States.

These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the individual EU Member States.

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Shattuck Employees

As of December 31, 2021, Shattuck employed 85 full-time employees at two locations in the United States, including Austin, TX and Durham, NC.

As of December 31, 2022, Shattuck employed 105 full-time employees at two locations in the United States in Austin, TX and Durham, NC.

During 2022, we expanded our capabilities across the two sites by hiring 34 new employees.

These employees were hired to support our clinical development, preclinical research and development, and efforts associated with operating as a public company.

We expect to continue to hire additional employees in 2022 and beyond with a focus on increasing expertise and bandwidth in preclinical and clinical research and development and in-house process development and manufacturing, as well as expanding our in-house general and administrative functions.

The Company continually evaluates business needs and opportunities, with a hiring philosophy that balances in-house expertise with outsourced services.

We may continue to hire additional employees in 2023 and beyond with a focus on increasing expertise and bandwidth in preclinical and clinical research and development and in-house process development and manufacturing.

The Company continually evaluates business needs and opportunities, with a hiring philosophy that balances in-house expertise with outsourced services, and management of overall operating expense.

Currently, we outsource clinical trial work to clinical research organizations and drug manufacturing to contract manufacturers.

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

What changed 10-K

Item 1. Business