EDGAR 10-K Filing

Company CIK: 1851657
Filing Year: 2022
Filename: 1851657_10-K_2022_0001562762-22-000139.json

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ITEM 1. BUSINESS
Item 1. Business.
Overview
We
are a purpose-driven biotechnology company
committed to democratizing healthcare across the
globe. Our vision is
to disrupt the
existing treatment
paradigm for chronic
diseases, increasingly
dominated by
drugs, particularly monoclonal
antibodies (“mAbs”), which
suffer
from
prohibitive
costs
and
cumbersome
administration.
We
believe
our
synthetic
peptide
vaccine
platform
(“Vaxxine
Platform”) has the potential
to enable
a new
class of
therapeutics that will
improve the quality
and convenience of
care, reduce
costs
and increase access to
treatments for a wide
range of indications. Our
Vaxxine
Platform is designed to
harness the immune system
to
convert the
body into
its own
“drug factory,”
stimulating the
production of
antibodies with
a therapeutic
or protective
effect. While
traditional vaccines have been
able to leverage this
approach against infectious diseases, they
have historically been unable
to resolve
key challenges in the fight
against chronic diseases. We
believe our Vaxxine
Platform has the potential to
overcome these challenges,
and has the potential
to bring the efficiency
of vaccines to a
whole new class of
medical conditions. Specifically,
our technology uses
synthetic peptides to
mimic and optimally
combine biological epitopes
in order to
selectively activate the
immune system, producing
antibodies against only the desired
targets, including self- antigens, making
possible the safe and effective treatment
of chronic diseases
by vaccines. The modular
and synthetic nature of
our Vaxxine Platform generally provides significant speed and
efficiency in candidate
development and has
generated multiple product
candidates that we
are designing to
have safety and
efficacy equal to
or greater than
the
standard-of-care treatments
for many
chronic diseases,
with
more convenient
administration and
meaningfully lower
costs. Our
current pipeline
consists of
five chronic
disease product
candidates from
early to
late-stage development
across multiple
therapeutic
areas, including
Alzheimer’s Disease
(“AD”), Parkinson’s Disease
(“PD”), migraine
and hypercholesterolemia.
Additionally, we believe
our Vaxxine
Platform may be used to disrupt the treatment paradigm for a
wide range of other chronic diseases, including any that are
or could
potentially be
successfully treated
by mAbs.
We
also will
opportunistically pursue
infectious disease
treatments. When
the
COVID-19
pandemic
struck
the
world
in
March
2020,
we
quickly
reallocated
our
resources
to
develop
vaccine
candidates
for
the
condition. We
have assembled an
industry-leading team with
extensive experience developing
and commercializing successful
drugs
that is
committed to
realizing our
mission of
democratizing healthcare.
Our website
address is
www.vaxxinity.com.
The information
contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this Report.
Limitations of the Current Healthcare Paradigm
The current healthcare paradigm favors the development of drugs that are primarily intended for
the U.S. market, for niche indications
and
for
treatment
of
disease
rather
than
prevention.
Furthermore,
these
drugs
are
expected
to
be
sold
at
price
points
that
are
only
accessible to healthcare systems
in developed countries. One
class of drugs in
particular exemplifies the current
environment: biologics,
particularly mAbs. In 2019,
biologics represented eight
of the ten top
selling drugs in the
United States, of which
seven were mAbs. The
global
market
for
mAbs
totaled
approximately
$163 billion
in
2019,
representing
approximately
70%
of
the
total
sales
for
all
biopharmaceutical products.
While mAbs can provide life-altering care with generally favorable safety characteristics and significant health benefits
for the patients
who receive them, regular
in-office transfusions and annual
treatment costs, which can
exceed hundreds of thousands
of dollars, present
challenges to both patients and payors. These price
and administration hurdles cause mAb treatments to be available
to only a fraction
of the population who could benefit from them. Furthermore, mAbs are often restricted
to moderate to severe disease and to later lines
of treatment due to their high cost. Based on internal estimates, less
than 1% of the worldwide population is on mAbs. Meanwhile, the
alternative to
mAbs treatments
tends to
be small
molecules, which
are accessible
to most
patients, but
are often
comparatively less
effective with
more significant
side effects.
Collectively,
this perpetuates
a profound
inequity in
healthcare access,
domestically but
even more so globally, that we believe represents a tremendous social and market opportunity.
Our Solution
Monoclonal antibodies are developed, produced and purified outside the body and then transfused into
the patient on a regular basis, as
frequently as bi-weekly. Therefore,
mAbs are inherently
less efficient than
vaccines, which instead
stimulate antibody
production within
the patient’s immune system, requiring both less active material and less frequent treatments. However, while traditional vaccines have
historically been
successful addressing
infectious diseases,
previous attempts
to utilize
vaccines to
address chronic
disease have
not
achieved both acceptable
safety and efficacy. This limitation is
driven by a traditional
vaccine’s inability to either stimulate
the requisite
antibody response
against harmful
self-antigens, that
is, break
immune tolerance,
or produce
acceptable levels
of reactogenicity,
the
physical manifestation of
the immune response
to vaccination. Our
Vaxxin
e
Platform technology contains
modular components custom-
designed to
mimic select
biology and
activate the
immune system, enabling
our product
candidates to
break immune
tolerance when
targeting self- antigens, a property observed across multiple clinical and pre-clinical studies. Our Vaxxine Platform depends heavily on
intellectual property licensed
from UBI and
its affiliates, a
related party and
a commercial partner
for us, who
first developed the
peptide
vaccine technology utilized
by our Vaxxine Platform. The formulation
of peptide-based medicines
is also complex,
requiring significant
expertise from UBI, its affiliates and our other contract manufacturers to produce our product candidates.
We
believe
our
Vaxxine
Platform
has
the
potential
to
generate
product
candidates
with
attributes
that
collectively
offer
significant
advantages over both mAbs and small molecule therapeutics:
•
Cost
:
Monoclonal
antibodies
require
costly
and
complex
biological
manufacturing
processes.
Our
manufacturing process
is chemically
based and
highly scalable
and requires
lower capital expenditures.
In addition, we
designed our
product
candidates to
generate
antibody
production
in
the
body,
thus
requiring
meaningfully
less
drug
substance
relative
to
mAbs,
leading to commensurately lower costs.
•
Administration
:
Our
product
candidates
are
designed
to
be
injected
in
quarterly
or
longer
intervals
via
intramuscular injection similar to a flu shot. We believe this offers
considerable convenience compared to mAbs, which can require up
to bi-weekly dosing via intravenous infusion or subcutaneous injections, and small molecules, which often require daily dosing.
•
Efficacy
: In
our clinical
trials conducted
to date,
our product
candidates have
yielded high
response rates
(95% or above at target dose levels)
for UB-311, UB-312 and UB-612,
high target-specific antibodies against self-antigens (as seen in
UB-311 and UB-312
clinical trials) and long
durations of action for
UB-311 (based on
titer levels remaining elevated
between doses)
and UB-612 (based
on half-life). See
our descriptions of
these clinical trials
under “-Our Product
Candidates.” We
also believe that
the improved convenience of our product candidates as compared to mAbs has the potential to lead to increased adherence by patients.
Furthermore, our
Vaxxine
Platform enables
the combining
of target
antigens into
a single
formulation. For
indications that
could be
treated more effectively with a multivalent approach, we believe our Vaxxine Platform would have an advantage over other modalities.
Finally,
because our
Vaxxine
Platform is
designed to
elicit endogenous
antibodies, we
believe our
product candidates
may lessen
or
avoid altogether the phenomenon of anti-drug antibodies which has limited the efficacy of certain mAbs over time.
•
Safety
:
Based
on
our
clinical
trials
to
date,
our
product
candidates
have
been
well
tolerated,
with
safety
profiles comparable to placebo.
We
aim to offer
product candidates with
safety profiles at least
comparable to the
competing mAb or
small molecule alternative for the relevant disease.
Our Pipeline
The following chart reflects our current product candidate pipeline:
As used in the chart above, “IND” signifies a program has begun investigational new drug (“IND”)-enabling studies.
Our pipeline
consists of five
lead programs focused
on chronic
disease, particularly neurodegenerative
disorders, in
addition to other
neurology and cardiovascular indications.
Neurodegenerative Disease Programs:
•
UB-311
: Targets toxic forms of aggregated amyloid-b
(“Ab”) in the brain to
fight AD. Phase 1,
Phase 2a and
Phase 2a
Long Term
Extension (“LTE”)
trials have
shown UB-311
to be
well tolerated
in mild-to-moderate
AD subjects
over three
years of
repeat dosing,
with a
safety profile
comparable to
placebo, with
no cases
of amyloid-
related imaging
abnormalities-edema
(“ARIA-E”) observed in the Phase 2a trial, and immunogenic, with a high responder rate and antibodies that bind to the desired target.
We expect to initiate a Phase 2b early AD efficacy trial in the second half of 2022.
•
UB-312
: Targets toxic forms of aggregated α-synuclein in the brain to fight PD and
other synucleinopathies,
such as Lewy body dementia (“LBD”)
and multiple system atrophy (“MSA”). The first part of a Phase 1 trial in
healthy volunteers has
shown UB-312
to be
well tolerated,
with no
significant safety
findings, and
immunogenic, with
a high
responder rate
and antibodies
that cross the
blood-brain barrier (“BBB”). No
serious adverse events
were observed in
Part A of
the Phase 1
trial. We
have initiated
the second part of this Phase
1 trial in PD subjects,
and anticipate the completion of an end-of-treatment
analysis in the second half of
2022.
•
Anti-tau
:
We
are
developing
an
anti-tau
product
candidate
that
has
the
potential
to
address
multiple
neurodegenerative
conditions,
including
AD,
by
targeting
abnormal
tau
proteins
alone
and
in
potential
combination
with
other
pathological proteins such as Aβ
to combat multiple pathological processes
at once. We
expect to identify a
lead product candidate in
the next two years.
Next Wave Chronic
Disease Programs:
•
UB-313
:
Targets
Calcitonin
Gene-Related
Peptide
(“CGRP”) to
fight
migraines.
We
have
initiated
IND-
enabling studies and expect to begin a first-in-human Phase 1 clinical trial in 2022.
•
Anti-PCSK9
: Targets proprotein convertase subtilisin/kexin type 9 serine protease (“PCSK9”) to lower low-
density
lipoprotein
(“LDL”) cholesterol
and
reduce
the
risk
of
cardiac
events.
We
expect
to
initiate
IND-enabling
studies
for
this
program in 2022.
Given the global COVID-19 pandemic
and our Vaxxine
Platform’s applicability to
infectious disease, we also have
advanced product
candidates that address SARS-CoV-2.
COVID-19
•
UB-612
:
Employs
a
“multitope”
approach
to
neutralizing
the
SARS-CoV-2
virus,
meaning
the
product
candidate is designed to activate both antibody and cellular immunity against multiple viral epitopes.
Phase 1 and Phase 2 trials of UB-
612 have shown
UB-612 to be
well tolerated, with
no significant safety
findings to date
(over 7,500 doses
have been administered
to
over 3,750 subjects).
No serious adverse
events were observed in
the Phase 1
trial. In the
Phase 2 trial,
twenty serious adverse
events
were observed
through interim
analysis. Only
one led
to discontinuation
of the
study,
and none
were considered
UB-612-related. In
these trials we observed
that UB-612 generated antibodies
that can bind to
the S1-RBD protein and
neutralize SARS-CoV-2, in addition
to driving
T-lymphocytes
(“T-cell”)
response. An
emergency use
authorization (“EUA”)
application for
UB-612 was
denied by
the
Taiwan Food and Drug Administration (“TFDA”) in August 2021, but, in collaboration with our partner United Biomedical, Inc., Asia
(“UBIA”),
we
are
appealing
that
decision.
At
the
same
time,
we
are
still
pursuing
approval
of
UB-612
elsewhere,
including
as
a
heterologous boost (boosting the immunity of a subject who has already received a different vaccine). In collaboration with University
College London
and VisMederi
,
we analyzed
sera from
subjects immunized
with a
booster dose
of UB-612.
Data demonstrated
that
UB-612
elicited
a
broad
IgG
antibody
response
against
multiple
SARS-CoV-2
variants
of
concern,
including
Alpha,
Beta,
Delta,
Gamma,
and Omicron,
and higher
levels of
neutralizing antibodies
against Omicron
than
reported with
three doses
of
an approved
mRNA vaccine.
We
believe our Vaxxine
Platform has application across a
multitude of chronic and infectious
disease indications beyond our
existing
pipeline. We
also are
developing additional product
candidates that we
believe may
address significant unmet
needs both
within and
beyond our current pipeline’s therapeutic areas.
Our Team
We
have assembled an
experienced group of
executives with deep
scientific, business and
leadership expertise in
pharmaceutical and
vaccine
discovery
and
development,
manufacturing,
regulatory
and
commercialization.
Mei
Mei
Hu,
our
co-founder
and
Chief
Executive Officer, has
been a
member of the
executive committee
of UBI since
2010. Our
board of
directors is
chaired by
our co-founder
Louis
Reese,
who
has
been
a
member
of
the
executive
committee
of
UBI
since
2014.
Our
research
efforts
are
guided
by
highly
experienced
scientists
and
physicians
on
our
leadership
team
including
Dr.
Ulo
Palm,
our
Chief
Medical
Officer,
and
Dr.
Farshad
Guirakhoo,
our
Chief
Scientific
Officer.
Our
leadership
team
contributes
a
diverse
range
of
experiences
from
leading
companies
including
Acambis,
Allergan,
Amgen,
Dendreon,
Eli
Lilly,
Merck,
Novavax,
Novartis,
Sanofi,
and
Schering-Plough,
and
were
executives in multiple successful
mAb and vaccine launches,
including Dupixent, Kevzara, Provenge,
PreveNile, Ervebo, Imojev and
Dengvaxia. As of December 31, 2021, we have
assembled an exceptional team of approximately 86 employees, the majority of
whom
hold
Ph.D.,
M.D.,
J.D.
or
Master’s
degrees,
and
we
are
regularly
hiring
additional
personnel.
We
also
have
a
highly
experienced
scientific advisory board consisting of 13 doctors and scientists.
Our Strategy
Our mission is
to develop product
candidates that
improve the
quality of care
for chronic diseases
and are accessible
to all patients
across
the globe. In order to achieve this mission, we seek to:
•
Advance our chronic disease pipeline through
clinical stage development
: We
plan to advance UB-311 and
UB-312
through
clinical
stage
development
for
the
treatment
of
neurodegenerative
disorders.
In
addition,
we
are
conducting
IND-
enabling studies
on multiple
pre-clinical product
candidates that
are focused
on the
treatment of
chronic migraines,
hypercholesterolemia
and additional neurodegenerative disorders. We
believe that our differentiated Vaxxine
Platform will enable our product candidates, if
successful, to
potentially disrupt
the treatment
paradigm for
their respective
indications. However,
there can
be no
guarantee that
we
will achieve commercialization of any such product candidates.
•
Expand our pipeline of product candidates
: Chronic diseases are prevalent globally and expected to worsen
over the next several decades. In furtherance of our mission, we plan to expand our pipeline
by developing new product candidates that
address additional indications. In
expanding our pipeline,
we rely on
our proprietary filtering
methodology, which
evaluates potential
product
candidates
across
five
principal
criteria
-
(i)
probability
of
technical
and
regulatory
success,
(ii)
addressable
market,
(iii)
development cost, (iv) competitive dynamics and (v) disruptive potential.
•
Opportunistically develop
treatments for infectious
diseases
: While
our core
mission focuses
on the
treatment
of chronic diseases, we are committed to bringing accessible medicines to people around the world
and will address infectious diseases
opportunistically. For example, when the COVID-19 pandemic struck the world, we rapidly deployed resources in pursuit of a product
candidate currently embodied in UB-612.
•
Expand
and
scale
our
existing
capabilities
:
We
are
investing
in
our
operational
processes,
facilities
and
human capital to accelerate the speed with which we can bring product candidates
through the development pipeline, and to expand the
capacity for developing more product candidates simultaneously.
•
Continue to
improve our
Vaxxine
Platform
: In
addition to,
and in
conjunction with,
our product
candidate
development
efforts,
we
are
continuously
working
to
improve
and
enhance
the
richness,
breadth
and
effectiveness
of
our
Vaxxine
Platform. As
our Vaxxine Platform further
develops, we
believe that
we can
both increase
the number
of product
candidates in
concurrent
development and accelerate the process of advancing product candidates through pre-clinical and clinical development.
•
Maximize the value
of our product candidates
through potential partnerships
: We currently retain
worldwide
rights for the majority of our product
candidates and will consider entering into development and
commercialization partnerships with
third parties that align with our mission on an opportunistic basis.
Background
and Limitations of Traditional Vaccines
and Monoclonal Antibodies
The immune
system, the
body’s
mechanism for
fighting off
potential threats,
is comprised
of cells
that form
the innate
and adaptive
immune responses.
The main
purpose of
the innate
immune system
is to
immediately prevent
the spread
and movement
of
foreign
pathogens throughout the body. The adaptive immune response is specific
to the pathogen presented to T-cells and B lymphocytes (“B-
cells”) and leads to an enhanced
response upon future encounters with those
antigens. Antibodies represent an important
tool within the
adaptive immune system’s arsenal. Upon
detection of a potential
threat, B-cells produce antibodies
that recognize, bind
to and eliminate
the threatening pathogen. Over
time, the immune system
develops the ability to
produce countless types of
antibodies, each finely tuned
against a specific threat.
Generally, the immune system is able to function effectively by neutralizing
viruses, bacteria and even self-generated cells and
proteins
from within our own bodies that could
cause harm if unchecked. However,
as powerful as the immune system is,
there are threats that
it
cannot
overcome
on
its
own,
generating
the
need
for
medicine.
Conventional
forms
of
medicine
include
small
molecules
(e.g.,
antibiotics), which
can inhibit or
promote action within
the body by, for
instance, binding
to a receptor
on the surface
of a cell,
or directly
inducing toxic effects
upon bacteria. These
medicines do not
necessarily modulate the
immune system directly
in order to
work. Instead,
they work alongside it.
While small molecules have
provided substantial benefits to
human health, they are
not designed to interact
with
the immune system. They may also have limited
efficacy in cases where an immune response
to a target can be used
against a chronic
condition.
Vaccines
In the first
part of the
twentieth century,
vaccines revolutionized healthcare
by directly interacting
with, and modulating,
the immune
system - training
it to recognize
a dangerous pathogen
by introducing the
immune system
to a relatively
harmless form
of the pathogen,
its toxins
or one
of its
surface proteins,
thereby promoting
the body’s
own production
of binding
antibodies. Once
immunized
to a
specific pathogen, the immune system can recognize it and generate the antibodies to fight it more quickly and robustly.
Traditional vaccine technologies have generally
focused on the prevention of bacterial and
viral infections and not on chronic disease.
In
chronic
disease
settings,
the
disease-causing
agents
frequently
come
from
within
the
body.
These
self-antigens
are
proteins
that
become too abundant, misfolded or aggregated such
that they can no longer perform their
healthy function and even may induce
toxic
effects.
The body
can
sometimes produce
antibodies
against
such proteins,
but
this often
falls
short of
providing
the right
types of
antibodies in the
right concentrations to
ward off disease.
Historically, vaccine technologies developed
to target these
proteins have been
unable to
break immune
tolerance -
that is,
the immune
system’s
general avoidance
of reactivity
towards self-antigens
- with
an
acceptable level of reactogenicity.
The challenges faced by prior efforts to
advance vaccine technologies for chronic diseases included
low response rates, low titer levels, off-
target responses and other safety concerns such as T-cell mediated inflammation.
Monoclonal Antibodies
The first
mAbs were
developed in
the later
part of
the twentieth
century.
In contrast
to vaccines,
which prompt
the body
to produce
antibodies, mAbs are antibodies manufactured outside of the patient’s body and then injected or infused into the body to recognize and
eliminate
harmful
targets.
Monoclonal
antibodies
have
revolutionized
the
standard-of-care
treatment
for
many
chronic
diseases.
However, manufacturing mAbs
is often
an expensive
and complex
process and
administering mAbs
is cumbersome,
sometimes requiring
infusions as
frequently as
bi-weekly.
These factors
have generally
limited mAbs’
availability to
moderate-to-severe disease,
to later
lines of therapy and to wealthier geographies, thus denying access to a substantial portion of the patients who could benefit from them.
Finally,
patients
on
mAbs
often
experience
a
loss
of
effectiveness
over
time
due
to
a
phenomenon
known
as
anti-drug
antibodies,
whereby the
immune system
begins to
recognize therapeutic
mAbs as
foreign, and
mounts a
response against
them, eventually
mitigating
their efficacy.
Our Vaxxine Platform
Our Vaxxine
Platform is designed to stimulate the patient’s own immune system to generate antibodies and overcome the limitation of
traditional
vaccines
to
effectively
and
safely
target
self-antigens
in
chronic
diseases.
Our
product
candidates
have
broken
immune
tolerance against self-antigens consistently. As described in the
section titled “Our Product Candidates”
below, across six clinical trials,
we have consistently observed
that our product candidates
have stimulated the development
of antibodies against the
desired target at
relevant doses in clinical trial subjects, including the elderly. We have observed favorable tolerability and reactogenicity of our product
candidates
across
studies of
UB-311,
UB-312
and
UB-612,
with
no
significant
safety findings
to
date.
We
aim
to
develop
product
candidates
that
possess
clinical
advantages
against,
and
safety
profiles
at
least
comparable
to,
relevant
mAbs
and
small
molecule
treatments. We
believe our product candidates have the potential to
eventually capture meaningful market share from mAbs and small
molecules, and to provide therapeutic benefit
to large patient populations who
currently receive neither form of
treatment. This would
represent
an
unprecedented
shift
in
the
treatment
paradigm,
potentially
providing
better
global
access
to
treatments
that
have
been
previously limited
to
the wealthiest
nations.
In particular,
we believe
our
treatments for
chronic disease
could reflect
the
following
benefits as compared with the relevant mAbs and small molecule alternatives:
Characteristics of our Product Candidates versus Monoclonal Antibodies and Small Molecules
History and Design
Our Vaxxine Platform utilizes a peptide vaccine technology first developed by UBI and subsequently
refined over the last two decades,
with more than three billion doses of animal vaccines sold to date. UBI initiated the development of this technology for human
use; the
business
focused
on
human
use
was
then
separated
from
UBI
through
two
separate
transactions:
a
spin-out
from
UBI
in
of
operations focused on developing chronic
disease product candidates that resulted
in United Neuroscience, a Cayman
Islands exempted
company (“UNS”),
and a
second spin-out
from UBI
in 2020
of operations
focused on
the development
of a
COVID-19 vaccine
that
resulted in C19 Corp., a
Delaware corporation (“COVAXX”)
.
Our current company,
Vaxxinity,
Inc., was incorporated under the laws
of the State of Delaware on February 2, 2021 for the purpose of acquiring UNS and COVAXX in March of 2021.
On March 2,
2021, in
accordance with
a contribution
and exchange
agreement among Vaxxinity,
UNS, COVAXX
and the
UNS and
COVAXX stockholders party thereto (the “Contribution and
Exchange Agreement”), the
existing equity holders
of UNS and COVAXX
contributed their equity interests
in each of
UNS and COVAXX
in exchange for equity
interests in Vaxxinity
(the “Reorganization”).
In
connection
with
the
Reorganization,
(i) all
outstanding
shares
of
UNS
and
COVAXX
preferred
stock
and
common
stock
were
contributed to
Vaxxinity
and exchanged
for like
shares of
stock in
Vaxxinity,
(ii) the outstanding options
to purchase
shares of
UNS
and COVAXX
common stock were terminated and substituted with options to purchase shares of Class A common stock in Vaxxinity,
(iii) the outstanding
warrant to
purchase shares
of
COVAXX
common stock
was cancelled
and
exchanged for
a warrant
to acquire
Class A common
stock in
Vaxxinity,
and (iv) the
outstanding convertible
notes
and a
related party
not payable
were contributed
to
Vaxxinity
and the former holders of such notes received Series A preferred stock in Vaxxinity.
UBI has used
its capabilities in peptide
technology for innovations across
an array of
business endeavors: antibody
testing for human
diagnostics, animal health vaccines and the manufacture of
medical products. Its innovative products include one of
the first approved
peptide-based blood antibody tests in
the world (for HIV), one
of the first approved peptide
vaccines against an infectious disease
in the
world in animal health (for a food-and-mouth disease virus) and one of the first approved peptide vaccines against a self-antigen in the
world in
animal health
(an anti-luteinizing
hormone-releasing hormone
(“LHRH”) vaccine
used for
the immunocastration
of swine).
Grant funding from the
National Institutes of Health
supported some of UBI’s
work in the fields
of vaccines and antibody
testing. To
commercialize its
animal health vaccine
business, UBI and
its affiliates scaled
up GMP vaccine
manufacturing to over
500 million doses
per
year
and
partnered
with
a
top-ten
animal
health
company
for
commercialization
of
its
anti-LHRH
vaccine;
all
together,
UBI’s
technology platform is utilized for the vaccination of approximately 25% of the global swine population annually.
We are
advancing our peptide-based Vaxxine
Platform to develop product candidates that target chronic diseases and COVID-19.
Our
Vaxxine
Platform
comprises
a
custom,
rationally
designed
antigen
capable
of
evoking
an
immune
response
(an
“immunogen”)
formulated with
a proprietary
CpG oligonucleotide.
The immunogen
contains several
advanced synthetic
peptides, including
B-cell
epitopes, T-helper
(“Th”) antigen carrier constructs and epitope linker configurations. This composition enables us
to achieve a highly
specific immune response
to the target
antigen, with limited
inflammation and off-target
effects that
could cause reactogenicity.
This
design process has evolved into a repeatable series of well-defined steps, which has enabled the development of our current pipeline of
product candidates.
Key Elements of our Vaxxine Platform Constructs and Formulations
When developing a
product candidate, we
use publicly available
information and sophisticated
bioinformatics tools to
investigate the
entire protein structure of a target in a comprehensive manner to identify functional B-cell epitopes that may provide
optimal antigens.
We then synthesize custom
peptides that mimic
these identified antigens
to elicit highly
specific antibodies
against these B-cell
epitopes.
To yield favorable tolerability profiles, we design our product
candidates such that they lack
T-cell epitopes and screen them for lack of
T-cell mediated inflammation and toxicity,
as well as reactogenicity. Such screening tests include the measuring of immunogenicity of
each B-cell
antigen with
and without
conjugation to
a Th
carrier peptide (a
response only
when conjugated to
a Th
carrier peptide is
desired), epitope mapping assays
and in vivo and
ex vivo tests of
lymphocyte proliferation, pro-inflammatory cytokine release
and T-
cell infiltration. To
enhance effectiveness, we seek to optimize the size
and sequence of our custom peptides to elicit a
robust, specific
antibody response when linked to a carrier molecule.
We
then
attach
a
proprietary
carrier
molecule,
an
artificial
Th
carrier
peptide
that
delivers
the
synthetic
peptide
into
cells.
Carrier
molecules used in traditional vaccines often elicit a strong T-cell mediated immune response, resulting in significant off-target activity.
In our
pre-clinical trials
and clinical
trials to
date, our
product candidates
have displayed
specific immunogenicity,
or the
ability to
stimulate
an
immune
response,
thereby
greatly
reducing
potential
off-target
effects
and
increasing
the
potential
for
our
product
candidates to
be well
tolerated and
efficacious. We
have observed
that our
carrier molecules
have produced
consistent results
across
multiple
species
and
against
multiple
targets
in
our
six
human
clinical
trials
to
date.
Traditional
vaccines
have
faced
challenges
in
achieving specific responses because
they rely on conjugating
the antigen to a
large toxoid molecule
carrier protein, to which
most of
the antibody response is directed, causing off-target effects such as inflammation.
Our Product Candidate Does not Induce an Antibody Response against its Carrier Molecule
The graph
above illustrates
that our
peptide carriers
induce a
strong immune response
against the
target antigen, and
a minimal
immune
response against themselves, as compared to traditional vaccines formulated with other types of carrier molecules.
Our peptide
carriers have
short sequence
lengths, which
contribute to
their immunosilence
and ability
to avoid
a direct
response by
cytotoxic T-cells. However,
the carriers’ sequences mirror those found in naturally ubiquitous pathogens, so they are easily recognized
by T-helper
cells. This encourages robust T-helper
cell exposure to the
carrier peptide and promotes activation
of other immune cells.
In turn,
B-cells are
exposed to
the B-cell
antigen and
begin antibody
production against
the antigen,
while avoiding
exposure to
the
carrier peptide, which avoids antibody response to the carrier. We believe that B-cell exposure to the carrier peptide is avoided because
of its relatively small size
and its high affinity
to T-helper
cells, such that T-helper
cells are exposed to the
carrier peptide rapidly and
robustly,
more so than
other cell types.
UBI first developed
a library of
such peptide carriers,
which contain various
Th cell
epitopes
and are of critical importance to our vaccine configuration. Our library of peptide carriers
enables the use of different carrier molecules
or different combinations
of carrier molecules,
which allows us
to potentially regulate the
speed of immune
response onset as
well as
the magnitude and
duration of
that response. For
example, a longer
duration of
response would allow
for less
frequent dosing.
Other
variables that can
be adjusted to
modulate the immune
response include dosing
and formulation optimization. In
the case of
vaccines
targeting
infectious diseases, T-cell mediated activity is desirable, while in the case of chronic diseases, it is not. Our Vaxxine Platform
affords
the
flexibility
to
design
immunogen
constructs
that
specifically
promote
cytotoxic
T-cell
activity
when
warranted
(e.g.,
for
infectious diseases).
We utilize our linker construct to
attach our peptide
carriers with our
custom antigens. In
addition to their binding
function, these linkers
also enhance the immune system response further by enabling conformational changes
to optimize presentation of the B-cell epitope to
antigen-presenting cells (“APCs”), such as B-cells and dendritic cells (“DC”).
Our Vaxxine Platform also enables the construction of
multitope configurations, whereby we
can attach multiple immunogens
targeting
multiple
B-cell
epitopes
simultaneously,
each
with
different
targets,
within
a
single
product
candidate.
Combinations
of
therapies
targeting
different
molecular
mechanisms
are
common
in
treating
neurologic,
cardiovascular,
psychiatric,
metabolic,
respiratory,
infectious and oncologic disease. Our Vaxxine
Platform’s favorable cost of goods
and efficient manufacturing process could allow for
viable combinations
of targeted
therapies in
a single
formulation. This
concept could
be applied
in an
array of
potential therapeutic
areas. Our current
pipeline has candidates
against amyloid-β, α-synuclein
and tau; combinations
of two or
more of these
might prove
more effective than
any single therapy
in some patients.
Pre-clinical data to
date suggests that
we can elicit
antibody titers against
all
three targets
in a
single formulation.
For mAb-based
treatments, such
combinations might
require the
individual dosing
of multiple
separate mAb therapies, thereby compounding cost and administration burdens.
Immunogenicity of Single- Versus Combination-Target
Formulations in Guinea Pigs
Guinea
pigs
(three
per
dose)
were
tested
with
either
single-target
or
combination-target
formulations,
then
serum
was
drawn
and
antibody titers compared via enzyme immunoassays
(“EIA”). Combination-target formulations elicited similar titer
levels against each
target as
corresponding single-target
formulations. This suggests
we can
create product
candidates with multiple
neurodegenerative
targets in a single formulation and achieve sustainable titer levels.
Product Candidate Formulations
In
addition
to
our
immunogen
construct,
each
product
candidate
formulation
includes
custom
CpG
oligonucleotides
and
adjuvant
selection. CpG
oligonucleotides are
negatively charged, and
we utilize
proprietary CpG
configurations to
stabilize the
positively charged
peptides.
This
stabilization
acts
to
optimize
display
of
the
B-cell
epitope
to
APCs.
In
this
way,
the
primary
function
of
CpG
oligonucleotides in our formulations is that of an excipient, even though it has the secondary function of an adjuvant.
A potential secondary
function of CpG
is that of
an adjuvant. Certain
CpG configurations are known
to act as
immunostimulants and
promote direct
cytotoxic T-cell activity, while others
do not.
Accordingly, our selection
of the
specific CpG
modality is
highly dependent
on the target indication. For
infectious disease indications, the T-cell
response generated by the CpG configuration
is independent and
in addition to that of the T-cell response generated by the peptide carrier.
The final formulation includes the addition
of an adjuvant, such as a well-recognized,
alum-derived Adju-Phos or Alhydrogel to further
enhance
the
immunogenicity
of
our
product
candidate.
Alum-derived
adjuvants
are
commonly
used
in
vaccines
to
enhance
the
stimulation of an
immune response. This
is not the
same adjuvant used
in other companies’
failed neurodegenerative
vaccine candidates.
How our Product Candidates Function
Our immunogens
stimulate the
body’s
adaptive immune
system to
produce antibodies
against a
variety of
antigen targets,
including
secreted
peptides
or
proteins,
degenerative
or
dysfunctional
proteins
and
membrane
proteins,
as
well
as
infectious
pathogens.
The
mechanism of action involves the following sequence of steps:
1.
The immunogen is taken up
by an APC, such as
a DC. Antigen uptake leads
to DC maturation and
migration
to the draining lymph nodes where the DCs interact with CD4+ T-helper cells.
2.
DCs engulf and process the
antigen internally and present the
T-helper
epitope on major histocompatibility
complex (“MHC”)
Class II
molecules. The
presentation activates
immunogen-specific CD4+
T-helper
cells causing
them to
mature,
proliferate and promote B-cell stimulatory activity.
3.
B-cells with receptors that recognize the target B-cell
epitope bind, internalize and process the immunogen.
The binding of the B-cell receptor to the immunogen provides the first activation signal to the B-cells.
4.
When B-cells
function as
APCs and
present the
T-helper
epitope on
MHC Class
II molecules,
interaction
with immunogen-specific CD4+
T-helper
cells provides a
second activation signal
to B-cells, which
causes them
to differentiate
into
plasma cells.
5.
B-cell
epitope-specific plasma
cells produce
high
affinity
antibodies
against the
target
B-cell
epitope. Of
particular importance for neurodegeneration targets, these antibodies are produced in sufficient concentrations to cross the BBB.
Overview of How our Product Candidates Function
Importantly, from both
clinical trials and pre-clinical studies, we have
observed the rapid expansion of antibodies upon
administration
of a booster of our
product candidates. Based on
the available data to
date, we can infer that
while antibody titers decline with
time after
administration, a small number of memory B-cells
and antibody secreting cells are maintained
in the lymphoid organs, spleen or
bone
marrow. We believe this is important because if a
patient misses a dose
of our product candidate,
they may be able
to recall the antibody
response, and therefore the therapeutic effect of the antibodies, with a single booster, even after a long period of time has passed.
Vaxxine
Platform Immunogenicity upon Re-dosing
As shown
in the
above graph,
a repeatable
immune response
elicited from
our product
candidates has been
observed with
a booster
dose over one year after the priming regimen.
Furthermore, the antibodies elicited
by our product candidates
have different properties than those
of mAbs targeting similar pathology.
In general,
we aim
to achieve
binding affinity,
specificity and
functionality similar
or improved
compared to
mAbs targeting
similar
pathology.
We
use Bio-Layer
Interferometry (ForteBio®)
to compare
kon, koff
and kD
values of
antibodies elicited
by our
product
candidates versus mAbs. We
also use Western
blot or slot blot to
evaluate the binding specificity of antibodies
elicited by our product
candidates against the toxic, misfolded or aggregated forms of the target protein, and avoidance of monomers
or healthy forms. We use
immunohistochemical analyses to observe the binding of antibodies to pathological inclusions on brain sections of patients. Moreover,
we use cell-based models and animal models to measure the induced antibodies’ functionality. Additionally, a major challenge in mAb
drug
discovery
is
that
mAbs
are
prone
to
induce
an
immune
response
against
themselves,
resulting
in
a
potential
inactivation/neutralization of the mAb by
the host (i.e., the patient).
This is not a concern
with our vaccine approach as
each patient will
produce its own antibodies against the target. Finally,
mAbs have a potential for off-target binding, which
could result in non- specific
safety and toxicity issues. We believe that this is
unlikely to happen using our vaccine
approach since antibodies elicited by
our product
candidates come
from the
body’s
own B-cells
and are
therefore unlikely
to induce
antibodies against
other self-proteins
as a
foreign
antibody may.
Product Candidate Selection Process
Because our Vaxxine Platform may
have applicability across
a range of
chronic diseases, we
employ a proprietary
filtering methodology
to best identify new product candidates for development. We evaluate potential product candidates across five principal criteria:
•
Probability
of
technical
and
regulatory
success
:
We
examine
the
probability
of
success
for
a
product
candidate based on stage of
development and therapeutic area, and
then make target-
specific adjustments for design
difficulty, industry
knowledge and
clarity of biological
mechanism, general
safety risk and
estimated titer
level required
for therapeutic
effect. This criterion
accounts for the known validity of a given target in the relevant disease context.
•
Market
opportunity
:
We
account
for
the
prevalence,
unmet
need
and
drug
market
size
for
each
likely
indication associated with a given target, as well as the number of potential indications.
•
Development cost
: We
estimate the
cost of
development through
BLA submission,
the time
to submission
and the number of patient-years to proof-of-concept.
•
Competitive advantages
: We
evaluate the extent to which the advantages of
our Vaxxine
Platform compare
to the current and potential future standard of care, including convenience, dosing, safety, efficacy and cost.
•
Disruptive opportunities
: We evaluate the extent to which the potential disruptive properties of our Vaxxine
Platform may play
a role in
treatment paradigms, including
the ability to
“leap-frog” mAbs
and treat patients
in earlier lines
of treatment,
to be used as a prophylactic, to combine multiple targets into a single formulation and to be used as an adjuvant therapy.
After assigning values to
each criterion for a
given product candidate, we
weight each criterion according
to a confidential algorithm,
and thereby prioritize product candidates for development. We update these values on a regular basis based on new scientific
literature,
trial results and our Vaxxine Platform advancements.
As an example, in light of these criteria, AD and other neurodegenerative
diseases that involve misfolded proteins are an attractive area
for development. First, as the field has gained knowledge and clinical experience
around the biology of targeting aberrant proteins with
antibodies, the relative
technical, safety and
regulatory risk has
decreased. AD and
PD have high
prevalence worldwide, and
large unmet
need with
no disease-modifying
products readily
available to
patients. Moreover, the
underlying pathologies
often begin
years or
decades
before symptoms may appear
and as a
result, early intervention in
the disease state, as
well as prevention or
delay of onset strategies,
may be optimal
and more practically
achievable with a
vaccine approach. While
mAbs can target
the pathology, they face
the limitations
of high cost, cumbersome and inefficient administration and limited access, and are not suited for early treatment or
prevention, which
we believe provides a disruptive opportunity for our Vaxxine Platform.
We
do not
currently evaluate
oncology and
infectious diseases
through the
above framework.
We
generally do
not pursue
oncology
targets given
the hyper-segmentation
of subjects
common in
clinical development
efforts in
oncology that
leads to
relatively narrow
labels, and
due to
the strengths
of other
new modalities
such as
cell-based therapy
in this
area. We
only consider
infectious disease
opportunistically. However, our approach with respect to oncology and infection diseases could change in the future.
We believe that our Vaxxine
Platform, and our strategy more generally, will create a significant opportunity for drug development well
beyond our current
pipeline of clinical
and pre-clinical indications,
in therapeutic areas
including allergy
(e.g., chronic rhinosinusitis,
atopic
dermatitis,
food
allergy),
autoimmune
disease
(e.g.,
psoriasis,
psoriatic
arthritis,
Crohn’s
disease),
pain
(e.g.,
peripheral
neuropathy, diabetic neuropathy) and bone and muscle atrophy (e.g., sarcopenia of aging, osteopenia).
Underlying Drivers of Our Platform Advantages
Our Vaxxine Platform’s properties drive the unique
combination of attributes
that we believe
will be reflected
in our product
candidates:
•
Cost
: Our reliance on chemically
linked, custom peptide sequences fuels cost
efficiencies that we expect to
enable
broad
accessibility
to
our
product
candidates.
Foremost
among
these
relates
to
dosing.
Monoclonal
antibodies
require
more
physical material for annual dosing because the patient needs to
be delivered the externally manufactured therapeutic antibodies, which
have high molecular weight. In
contrast, our product candidates
are designed to stimulate the
body’s immune system to produce its own
antibodies and
have relatively
low molecular weight.
While an
annual supply
of mAbs
doses may
include grams
or tens
of grams
of
drug substance, our current product candidates only require 1 to 2 milligrams each, or even less, leading to a relatively low annual cost
of goods. In our
development programs to date,
we have achieved a
cost of goods amounting
to a small fraction
of the typical
cost of
mAbs (as low as <1%).
•
Administration
: Administration of our product
candidates generally requires three
priming doses, each in the
range of several
hundred micrograms, followed
by booster doses
of a similar
magnitude 2 to
4 times per
year. As described in
the section
titled “Our
Product Candidates”
below,
in clinical
trials we
have observed
that our
product candidates
elicited a
sustained antibody
response, with elevated antibody
levels lasting six
months or longer. We believe this presents a
meaningful advantage over
many mAbs,
which commonly require either bi-weekly
or monthly injections, or
monthly or quarterly infusions, and
many small molecules, which
commonly require a daily pill.
•
Safety
: The
antibodies generated by
our product
candidates are
designed to
be highly
specific to the
target
antigen and to
avoid an off-target
immune response to
the peptide carrier,
thereby limiting inflammation and
other off-target
activity.
We
believe these
characteristics have
yielded the
high tolerability
observed in
the clinical
studies of
our product
candidates to
date.
Furthermore, the
titer response
to our
product candidates
is naturally
titrated, which
may reduce
the likelihood
of an
antibody Cmax
safety side effect, and is naturally reversible, thus avoiding an uncontrolled or permanent immune response.
•
Efficacy
: In
our clinical
trials conducted
to date,
our product
candidates have
yielded comparatively
high
response
rates (95%
or
above at
target
dose levels)
for UB-311,
UB-312 and
UB-612, high
target-
specific antibodies
against
self-
antigens (as
seen in
UB-311 and UB-312
clinical trials)
and long
durations of
action for
UB-311 (based on
titer levels
remaining elevated
between doses)
and UB-612
(based on
half-life). Furthermore,
our Vaxxine
Platform enables
the combining
of target
antigens into
a
single formulation. For indications that
could be treated more effectively
with a multivalent approach, we
believe our Vaxxine Platform
would have an advantage over other modalities. Finally, because our Vaxxine
Platform is designed to elicit endogenous antibodies, we
believe our product candidates may
lessen or avoid altogether the
phenomenon of anti-drug antibodies which
has limited the efficacy of
certain mAbs over time.
Additionally,
our Vaxxine
Platform possesses
important benefits
reflected at
the platform
level, as
opposed to
the product
candidate
level:
•
Product Candidate Discovery
: Our Vaxxine
Platform enables the efficient iteration of product candidates in
the discovery phase
through rapid, rational
design and formulation.
We
are able to
screen in high
throughput rapidly and
at low cost.
Upon nominating
a target
for drug
discovery,
we can
formulate several
dozen product
candidate compounds
for preliminary
in vivo
immunogenicity and cross-reactivity
screening within 2 to
3 months. This process
allows nonviable product
candidates to “fail fast”
and
allows
us
to
carry
top
product
candidates
forward
through
subsequent
pre-clinical
development
to
lead
identification.
In
contrast,
biologics require the maintenance and
adjustment of living cultures to design,
formulate and iterate, and therefore discovery
and early
development is inherently less efficient.
•
Process Development
: Scaling the formulation of a drug product from research grade
to clinical grade, then
to commercial grade, typically
consumes a great deal
of resources. This, together
with the development of
assays for quality control
and
quality assurance,
comprise process
development. Through
our manufacturing
partnership with
UBI and
certain of
its affiliates,
we
leverage their
experience scaling
the manufacture
of both
clinical and
commercial compounds
that use
our Vaxxine Platform technology.
Unlike process development
for mAbs, which
has inherent challenges
such as risk
of contamination in
cell culture or
bioreactors and
time-consuming adjustments
to cell
lines for
any formulation
adjustment, our
peptide platform
relies on
chemical synthesis
which is
more reproducible and scalable, and relatively quick to manipulate for any modifications.
Our Product Candidates
Neurodegenerative Disease Programs
Neurodegenerative diseases are a collection of conditions defined by progressive nervous system dysfunction, degeneration or death of
neurons, which can cause cognitive decline,
functional impairment and eventually death. Neurodegeneration
represents one of the most
significant unmet medical needs of our time due to an aging population and lack of effective therapeutic options.
Two of the most common
neurodegenerative diseases are
AD and PD.
In the United
States, currently more
than six million people
suffer
from
AD,
and
approximately
one million
people
suffer
from
PD
according
to
estimates
from
the
Alzheimer’s
Association
and
the
Parkinson’s Disease
Foundation, respectively.
As a result,
AD and PD
bring a heavy
burden on our
society’s cost
of care. The
direct
costs of caring for individuals with AD and
other dementias in the United States were estimated at
$305 billion in 2020 according to a
study
published
by
the
American
Journal of
Managed
Care,
and
are
projected
to
increase to
$1.1
trillion by
according
to
the
Alzheimer’s Association. The financial burden of PD exceeded $50 billion in the United States in 2019. Many more people around the
world suffer from these two diseases and their related social and economic implications.
UB-311
An Overview of Alzheimer’s Disease
Alzheimer’s disease
is a
progressive neurodegenerative disorder
that slowly destroys
memory and cognitive
skills and
eventually the
ability to
carry out
simple tasks.
Its symptoms
include cognitive
dysfunction, memory
abnormalities, progressive
impairment in
activities
of daily
living and
a host
of other
behavioral and
neuropsychiatric symptoms.
The exact
cause of
AD is
unknown, but
genetic and
environmental
factors
are
established
contributors.
AD
affects
more
than
six million
people
in
the
United
States
and
44 million
worldwide. The economic burden of AD is expected to surpass $2.8 trillion by 2030.
Many molecular and cellular changes take place in the brain of a person with AD. Aβ plaques and neurofibrillary tangles of tau
protein
in the brain are the pathological hallmarks of the disease.
These abnormal depositions lead to loss of neurons and
neuronal connectivity
and the signs and symptoms of AD.
The Aβ
protein involved
in AD
comes in
several different
molecular forms
that accumulate
between neurons.
One form,
Aβ 42,
is
thought to be especially
toxic. In the brains
of patients with AD,
abnormal levels of this naturally
occurring protein clump together
to
form plaques that collect between neurons and disrupt cell function.
Research is ongoing to better understand how, and at what stage of
the disease, the various forms of Aβ influence AD.
Neurofibrillary tangles are
abnormal accumulations of
a protein called
tau that collect
inside neurons. Healthy
neurons are
supported
internally,
in part,
by structures called
microtubules, which help
to guide nutrients
and molecules from
the cell
body to
the axon
and
dendrites. In healthy neurons, tau normally
binds to and stabilizes microtubules. In
AD, abnormal chemical changes cause tau
to detach
from microtubules and to
stick to other tau
molecules, forming threads that
eventually join to form
tangles inside neurons. These
tangles
block the neuron’s transport system, which harms the synaptic communication between neurons.
Converging
lines of
evidence suggest
that AD-related
brain changes
may result
from a
complex interplay
among abnormal
tau, Aβ
proteins and several other
factors. It appears that
abnormal tau accumulates in
specific brain regions involved
in memory. Concurrently,
Aβ clumps into
plaques between
neurons. As the
level of
Aβ reaches a
tipping point,
tau rapidly spreads
throughout the
brain. In addition
to the spread of Aβ and tau,
chronic inflammation and its effect on the
cellular functions of microglia and astrocytes,
as well as changes
to the vasculature, are thought to be involved in AD’s pathology and progression.
Limitations of Current Therapies
Two
classes
of
small
molecules
approved
for
the
treatment
of
AD’s
symptoms
are
acetylcholinesterase
inhibitors
(“AChEIs”)
and
glutamatergic
modulators.
AChEIs
are
designed
to
slow
the
degradation
of
the
neurotransmitter
acetylcholine,
helping
to
preserve
neuronal communication and function
temporarily. Glutamatergic
modulators are designed to
block sustained, low-level
activation of
the
N-methyl-D-aspartate
(“NMDA”)
receptor,
without
inhibiting
the
normal
function
of
the
receptor
in
memory
and
cognition.
However,
these therapeutic
products only
address the
symptoms of
AD and
do not
modify or
alter the
progression of
the underlying
disease.
Aducanumab, marketed under the trade name Aduhelm, is
a mAb developed by Biogen, Inc. (“Biogen”) that
targets aggregated forms
of Aß. The FDA approved
aducanumab in June 2021, making
it the first approved immunotherapy
for AD, the first new
FDA-approved
treatment since 2003 and, importantly, the first to receive accelerated
approval based on a biomarker. By approving aducanumab
on the
basis of
biomarker evidence,
we believe
the FDA
set a
precedent for
developers of
anti-Aβ immunotherapies.
Soon after
the FDA’s
decision, Eli
Lilly and
Company (“Lilly”)
announced that
it would
file for
approval of
its anti-Aβ
mAb, donanemab,
in 2022
on the
basis
of
Phase
data.
Despite
the
milestone
in
the
treatment
of
AD
that
aducanumab’s
approval
represents,
the
drug
has
several
limitations. Approximately one-third of
patients experience ARIA-E related adverse
events, which can manifest
as symptoms ranging
from headaches
to confusion
to coma.
In addition,
the drug
must be
administered monthly via
intravenous infusion
in locations
with
healthcare professionals trained
to administer infusion
therapies in facilities
specifically configured to
support an hours-long
infusion
process, creating a
burden for patients
and additional costs
resulting from the
complex administration process.
Because of the
risk of
developing
ARIA-E,
physicians
who
prescribe
aducanumab
must
titrate
dosing
and
carefully
monitor
each
patient
using
magnetic
resonance imaging (“MRI”). This process is costly and burdensome, and thus expected to limit the prescribing of and regular access to
aducanumab. In addition, aducanumab launched at a price
of $56,000 annually for the drug product
only, not including
administration
and ongoing monitoring costs such
as positron emission topography
(“PET”) and MRI scans.
Since that time, Biogen has
reduced the
price of Aduhelm.
The combination of price,
side effects, extra
costs and extra
administration burden highlight the
challenges of, and
have limited access to, this mAb.
Our Product Candidate: UB-311
We are developing a novel product candidate,
UB-311, as a potential disease-modifying
therapy for the treatment
of AD. We completed
a Phase 1 open label trial (V118-AD) and a Phase 2a randomized, double-blinded, placebo-controlled trial (the “Phase 2a Main Trial”)
in 2021 and believe
that UB-311 may offer several
differentiators versus aducanumab, including
the preferential targeting of
aggregated
Aβ oligomers over
monomers with modest
clearance of Aβ
plaques, and a
tolerability profile comparable
to placebo. No
signs of ARIA-
E related adverse events were reported in the Phase 2a Main Trial
despite more than two-thirds of the study participants being APOE4
carriers.
Post hoc
exploratory analyses
of UB-311’s
Phase 2a
clinical data
also suggest
that quarterly
dosing of
UB-311
might slow
cognitive decline in some
subjects by up to
50% when compared to
placebo, as measured by
Clinical Dementia Rating Sum of
Boxes
(“CDR-SB”), Alzheimer’s Disease Assessment Scale - Cognitive Subscale (“ADAS-Cog”), Alzheimer’s Disease Cooperative Study -
Activities of Daily Living (“ADCS-ADL”) and Mini-Mental State Examination (“MMSE”) scores, all clinically validated measures of
cognition or
function in
AD. In
this small
Phase 2a
study,
these were
secondary measures,
as the
study was
not designed
to assess
cognitive decline.
Although our
Phase 2a
trial was
a proof-of-concept
study,
not powered
to demonstrate
significant changes
in any
endpoint, we believe the data are suggestive of potential therapeutic efficacy and may lead to clinical benefit.
UB-311
is
formulated
for
intramuscular
administration
on
a
dosing
schedule
of
every
three
or
six
months.
In
addition,
lower
manufacturing costs may support meaningfully lower pricing. We
believe such advantages of UB-311,
if ever approved for use, could
position it not only to disrupt the emerging mAb-based treatment for early AD as both
a monotherapy and adjuvant therapy to existing
mAbs, but also to open up a new paradigm (i.e., for potential prophylactic use to delay or interrupt early disease onset).
Clinical Development
We
completed a randomized, double-blind, placebo-controlled Phase 2a
trial of two dosing regimens of
UB-311 in subjects with
mild
AD. The primary objective
of this trial was
to assess safety and
immunogenicity. Secondary measures for exploratory analyses
included
assessment of
changes in
the ADAS-Cog,
CDR-SB, ADCS-ADL
and MMSE
ratings, along
with amyloid
PET imaging
evaluations.
This study was
intended for proof-of-concept,
so no statistical
hypothesis testing was
planned, and exploratory
analyses were performed
to evaluate trends as described below.
A total
of 43
patients diagnosed
with mild
AD were
randomized (1:1:1)
to one
of three
treatment groups:
UB-311
high- frequency
(quarterly dosing, or “Q3M”) receiving a total of seven doses, UB-311 low-frequency (every six month dosing, or “Q6M”) receiving a
total of
five doses,
and placebo.
The high-frequency
cohort, which
included 14
subjects, received
an initial
regimen of
three 300μg
injections, one
injection at
the trial
start, one
at week
4 and
the final
at week
12, followed
by four
single 300μg
booster doses
administered
in three-month
intervals over
the subsequent
months. The
low-frequency cohort,
which included
subjects, involved
the same
initial schedule
of
three 300μg
injections administered
over
the
first
12-week
period,
followed by
the
administration of
two
300μg
booster doses given at six-month intervals. The placebo group comprised 14 subjects.
In the Phase
2a Main Trial,
UB-311 generated
an immune response
as measured by
ELISA in 28
out of 29
subjects. Across this
trial
and the
Phase 1
trial, 47
of the
48 subjects
(98%) that
received UB-311
registered an
immune response
(which we
define as
a 95%
confidence interval separation from placebo) as measured by ELISA. The intramuscular injection produced appreciable antibody titers
against
Aβ.
The antibody
titers
remained
elevated
through the
trial’s
duration.
Moreover,
in vitro
studies demonstrate
that
UB-311
generated serum anti-Aβ
antibody titers against
oligomers, the components
that form Aβ,
comparable or greater
than those measured
after maximum
therapeutic dosing
with aducanumab.
We
believe these
results underscore
the significant
promise of
our therapeutic
approach.
Generation of Antibodies Repeatable Across Clinical Studies, and Antibodies Bind Target with High
Specificity as Compared to Monoclonal Antibody
Across Phase
1 and Phase
2a trials, UB-311
generated an over
95% response
rates in subjects.
In a comparative
in vitro
study with
aducanumab, we observed that UB-311 elicited titer levels comparable to mAbs.
Our Phase
1 and
Phase 2a
trials demonstrated
a repeatable
anti-Aβ titer
response. In
an in
vitro comparison
of titers
in serum
from
subjects dosed
with UB-311 versus
pre-immune serum
spiked with
aducanumab at
the published
Cmax concentration
following 10mg/kg
administration (183μg/mL),
antibodies generated
by UB-311 bond
to Aβ oligomers
similarly to or
greater than aducanumab
as measured
by EIA.
Exploratory analyses
of clinical and
imaging measures
were conducted.
Trends of changes
in disease assessment
scores suggest showing
of cognitive decline.
Changes in the
CDR-SB assessment at
week 78 of
the Phase 2a
Main Trial
showed a 48%
slowing in cognitive
decline from baseline relative to the placebo group; changes in ADAS-Cog measurements showed a 50% slowing in decline relative to
placebo and showed a 54% slowing in decline in ADCS-ADL relative to placebo.
UB-311 Phase 2a Suggests Slowing of Cognitive Decline in Mild Alzheimer’s Subjects (mITT)
UB-311 Phase 2a secondary endpoint data suggested possible slowing of clinical
decline by up to 50% in subjects with
mild AD. These
are exploratory analyses and no statistical inference was performed.
In addition,
functional MRI
suggested marginal
increases in
connectivity in
some brain
regions and
PET imaging
showed a
modest
reduction in
amyloid plaque
burden as
measured by
standard uptake
value ratio.
We
believe these
clinical and
biomarker endpoints
suggest a causal
effect of UB-311 impacting
the underlying
molecular pathology
of the disease
and slowing
of clinical
decline. Together,
these findings offer
some evidence that UB-311 may exhibit disease-modifying effects.
UB-311 Phase 2a Analysis of Clinical and Biomarker Endpoints Suggests Overall Disease-Modifying Effect
Compared to placebo,
UB-311
low-frequency dosing and
high-frequency dosing demonstrated
slowing of overall disease progression
in an independent analysis conducted by Pentara Corporation.
In addition to the
composite above, Pentara Corporation
performed a post hoc
analysis to estimate the
performance of UB-311
on the
integrated Alzheimer’s Disease Rating Scale (“iADRS”) versus placebo in the Phase 2a trial. The results of this analysis suggested
that
the UB-311 target dosing regimen (quarterly dosing) on average slowed decline versus placebo by approximately 59% over 78 weeks.
iADRS Change from Baseline over Time vs. Placebo (Exploratory Analysis)
Compared to placebo, UB-311 (quarterly dosing) declined less on an iADRS-like clinical endpoint over
78 weeks in mild-moderate AD
subjects in
the Phase
2a Main
Trial. This analysis
was performed
by Pentara
Corporation. The
UB-311 Q6M group showed
26% decline
versus placebo which is not shown on the plot.
We
have
provided
a
side-by-side
summary
table
of
subject
baseline
characteristics below,
with
anti-Aβ
mAbs
using
data
from
the
exploratory endpoints of the Phase 2a Main
Trial, in particular CDR-SB, as
well as using the post hoc
iADRS-like endpoint (no head-
to-head clinical trials of UB-311 against mAbs
have been performed). We
believe the performance of aducanumab and donanemab on
CDR-SB and iADRS change from baseline over time, the respective primary
endpoints from the pivotal trials of those mAbs, represent
meaningful references.
Post hoc
side-by-side analyses suggested that UB-311 has
the potential to perform comparably to aducanumab
on
CDR-SB
change
from
baseline
over
time,
and
comparably
to
donanemab
on
iADRS
change
from
baseline
over
time,
in
an
appropriately powered
study, noting that
the UB-311 Phase
2a Main
Trial was a
proof-of-concept study
not powered
to detect
statistically
significant changes, and these are indirect comparisons with aducanumab and donanemab
trials. We have
provided an overview of the
sample sizes and baseline characteristics of the UB-311 Main Trial and various anti-Aβ mAb trials below.
Baseline Characteristics of Various Anti-Aβ Immunotherapy Clinical Trials
The Phase
2a Main
Trial recapitulated
the safety
and tolerability
profile of
UB-311 that
was observed
in an
earlier Phase
1 trial.
No
subjects discontinued trial
participation due to
a treatment emergent
adverse effect (“TEAE”).
No ARIA-E was
observed in quarterly
MRI
scans.
Aβ-related
imaging
abnormalities
related
to
microhemorrhages
or
hemosiderosis
seemed
similar
between
the
UB-311
treatment groups and placebo group. In the Phase 2a Main Trial, six serious adverse events were observed, including three in
the Q6M
dosing arm and one in the Q3M dosing arm. None was deemed related or likely related to UB-311.
Titers generated by UB-311 ramped up gradually over the
course of several months, as
opposed to titers following the
administration of
anti-Aβ mAbs,
which immediately
reach Cmax.
We
believe this
lead to
the relatively
low rates
of ARIA-E
observed in
our clinical
studies of UB-311 as compared to those observed in clinical studies of mAbs. No meningoencephalitis was observed.
Summary of Safety Data from UB-311 Phase 1 and Phase 2a Trials
As depicted
in the
table above,
UB-311 was well
tolerated across Phase
1 and
Phase 2a
trials. The
most common
TEAE was
site injection
reactivity, and there
were no discontinuations or withdrawals due to TEAEs
An
extension
of
the
Phase
2a
Main
Trial,
the
Phase
2a
LTE
trial,
involved
the
continued
participation
by
of
the
subjects
who
participated in the Phase 2a Main Tri
al for an additional 78 weeks. The objectives of
the Phase 2a LTE
trial were to assess the longer-
term tolerability of extended treatment with UB-311. Following a non-treatment period of up to 26 weeks, participants in the LTE
trial
were segmented
into two
groups: those
previously on drug
in the
Phase 2a
Main Trial
would receive
two placebo
doses and
a single
300μg priming dose at the start of the LTE
treatment period and those previously on placebo would receive three 300μg priming doses
over an
initial 12-week
period. Due
to an
error by
the CRO
responsible for
administering blinded
placebo and
active doses
to trial
subjects, which reduced the confidence of subsequently collected data, we decided to discontinue the LTE trial, having determined that
we had collected
sufficient data on
UB-311’s tolerability and immunogenicity. Analysis of
the data collected
before trial discontinuation
indicated that
UB-311 was
well tolerated,
with return
of anti-Aβ
antibody titers to
peak levels
achieved after
a gap of
as much
as 12
months between
doses and
a continued
trend toward evidence
of disease
modification. In
the Phase
2a LTE
trial, six
serious adverse
events were observed. One case of ARIA-E was observed in the Phase 2a LTE
trial. None was deemed related or likely related to UB-
311,
and all
such events
were recovered/resolved
by the
end of
the study.
Exploratory analyses
of the
clinical data
generated in
this
portion of the trial suggested that subjects in
the treatment cohorts showed sustained improvement, as
measured by the change in CDR-
SB from baseline.
We completed an open-label Phase 1 trial of UB-311 in 19 subjects with mild-to-moderate AD between the ages of 51 to 78 years. The
primary objective
of the
trial was
to assess
safety and
tolerability.
Secondary measures
included UB-311
antibody titers
along with
changes in the ADAS-Cog,
MMSE and the Alzheimer’s
Disease Cooperative Study-Clinician’s
Global Impression of Change
disease
assessment ratings. The 24-week,
open label trial was
designed as three intramuscular
injections of 300μg, the first
dose administered
at the start of the trial, a second at week four and a third at week 12. An observation study included additional follow-up visits up to 48
weeks after the
first injection to
assess the long-term
immunogenicity and safety
of UB-311.
In this trial,
UB-311 was
well tolerated,
with the most common TEAE being injection site redness and swelling. No TEAE resulted in the discontinuation or withdrawal of any
study participant in
the trial. In
the Phase 1
trial, one serious
adverse event was
observed: a case
of herpes zoster
deemed unlikely related
to UB-311.
Anti-Aβ
antibody
titers,
recorded
among
all
study
participants,
approached
a
100-fold
increase
during
weeks
to
after
administration of
the third
300μg injection
at week
12, demonstrating
the ability
of UB-311 to
elicit a
strong immune
response. Durability
of the response was reflected in elevated anti-Aβ antibody titers measurable well beyond the 24-week duration of the trial.
In a Western blot assay, we observed that UB-311 elicited antibody titers specific to toxic
forms of Aβ with minimal binding
to normal,
non-plaque-causing, forms of Aβ.
Pre-Clinical Data
Pre-clinical trials of UB-311
included multiple antibody titer studies involving
mice, guinea pigs, macaques and baboons. Application
of
specific
transgenic
animal
models
was
intended
to
emulate
both
therapeutic
and
preventive
treatment
paradigms.
These
trials
demonstrated that UB-311 generated high
antibody titers across
multiple species that selectively
target aggregated Aβ and
both slow the
accumulation of and reduce existing Aβ pathology.
We also observed the ability of UB-311
induced antibodies to penetrate the BBB, as well as preferentially bind to toxic Aβ aggregates.
In our study of UB-311 in cynomolgus
monkeys, we tested five escalating
dose levels of UB-311: 0μg, 30μg, 100μg,
300μg and 900μg.
Each dose level was
administered on weeks zero,
three and six by
intramuscular injection and the
cerebrospinal fluid (“CSF”): serum
ratio of
UB-311
calculated on
week eight
(two weeks
after the
last dose).
This analysis
concluded that
UB-311
antibody titers
were
detectable in the CSF in a
dose-dependent manner with CSF: serum
antibody ratios of 0.1% to
0.2%, ratios similar to published
data for
mAbs in development for neurodegenerative diseases.
UB-311 Shows Dependent Response in CSF in Pre-Clinical Study
The above graphs demonstrates that UB-311 achieved CSF: serum ratios in the 0.1% to 0.2% range across five doses in a pre
-clinical
study involving cynomolgus monkeys.
Development Plans for UB-311
We have completed a pre-Phase 3 meeting with the FDA and obtained guidance on the further development of UB-311.
Subject to the FDA’s review,
we expect to conduct a
randomized, double-blinded, placebo-controlled Phase
2b efficacy trial of UB-311
in approximately
670 subjects
with early
AD. The
Phase 2b
trial will
include subjects
diagnosed with
early AD
with MMSE
scores
between 22 and 30.
We will also screen to enrich
for positive amyloid
PET, positive tau PET and
positive plasma p-tau181, in
quantities
consistent with an early AD population. Subjects in the active arm will receive UB-311 as three 300μg priming doses at weeks 0, 4 and
12, followed by four 300μg
booster doses every three months
thereafter. The
primary objective of this trial will
be to assess the
effect
of
UB-311
on
the
decline
of
cognitive
and
functional
performance
as
measured
by
the
iADRS
over
the
78-week
treatment
period.
Secondary endpoints
will include
the changes
from baseline
measurements of
other validated
clinical outcomes
scores. The
effect of
UB-311 on specific AD biomarkers will also
be evaluated, including neurofilament light
arm (“NfL”), p-tau, total-tau, brain amyloid
as
measured by PET, Aβ-40 and Aβ-42, hippocampal volume and whole brain volume as measured by MRI, and an assessment of certain
CSF biomarkers. We expect to initiate this trial in the second half of 2022.
Assuming positive results in the
Phase 2b trial, we expect
to initiate a Phase 3
trial in subjects with early
AD. The Phase 3 program
may
involve one, but more
likely two, clinical trials,
conducted at multiple international
sites. Assuming positive
results in the Phase
2b trial,
we may also seek
FDA approval under the
accelerated approval pathway,
which allows for earlier
approval of drugs that
treat serious
conditions, and that fill an unmet medical need based on a surrogate endpoint.
We expect that together, the Phase 2b trial and the Phase
3 program, if successful, will provide sufficient data to enable BLA filing with the FDA, but there can be no guarantee that we will not
need to conduct additional trials or studies prior to a BLA filing with the FDA.
We believe UB-311 could
also have
a potential
therapeutic benefit
in a
prophylactic setting
for the
prevention of
AD in
high-risk patients.
We may seek to further develop UB-311
for the prevention of AD.
UB-312
An Overview of Parkinson’s
Disease
Parkinson’s disease currently affects approximately
one million people in
the United States
and more than
10 million people worldwide.
The economic burden of
PD is estimated at
$52 billion in the United
States alone. PD
is a chronic and
progressive neurodegenerative
disorder that affects
predominately dopamine-producing (“dopaminergic”) neurons
in the substantia
nigra area of
the brain. Although
the
mechanisms responsible
for
the
dopaminergic
cell
loss in
PD
are not
fully
elucidated, several
lines
of
evidence
suggest
that
α-
synuclein plays a central role in the neurodegenerative process.
Alpha-synuclein
is
a
protein
highly
expressed
in
neurons,
mostly
at
presynaptic
terminals,
suggesting
a
role
in
synaptic
vesicle
trafficking,
synaptic
functions
and
in
regulation
of
neurotransmitter
release
at
the
synapse.
Duplications,
point
mutations
or
single
nucleotide polymorphisms
in the
gene encoding
α-synuclein are
known to
cause or
increase the
risk of
developing PD
or LBD.
Mutations
have been shown to primarily alter the
secondary structure of α-synuclein, resulting in misfolded and aggregated
forms of α-synuclein
(i.e., pathological
forms). While
mutations in
the α-synuclein
gene are rare,
aggregates of
α-synuclein in
the form
of Lewy bodies
(“LB”)
and Lewy neurites are common neuropathological hallmarks of
both familial and sporadic PD, suggesting a
key role of α-synuclein in
PD
neuropathogenesis.
Moreover,
preformed
fibrils
of
α-synuclein
can
induce
the
formation
of
LB-like
inclusions
and
cellular
dysfunction in
cell-based assays
as well
as in
pre-clinical animal
models. Together, these data
strongly suggest
that targeting
pathological
forms of α-synuclein has therapeutic potential.
Limitations of Current Therapies
Most approved
therapeutic products
are aimed
at compensating
for the
dopaminergic deficits
and only
provide symptomatic
relief. While
existing products can indeed
provide meaningful symptomatic relief,
they often produce significant
side effects and lose their
beneficial
effects overtime. On the other hand, there are no currently approved disease-modifying therapeutics for PD.
Immunotherapy approaches targeting
α-synuclein have been
shown to ameliorate
α-synuclein pathology as
well as functional
deficits
in mouse models of PD
and are now being investigated in
the clinic. These include passive immunization
therapy using humanized or
human anti-α-synuclein mAbs or active immunization therapy aimed at inducing a humoral response against pathological α-synuclein.
These approaches have thus far demonstrated good tolerability profiles in Phase 1 clinical trials. A Phase 2 clinical trial in PD subjects
with prasinezumab, a
mAb that preferentially
recognizes oligomeric and
fibrillar forms of
α-synuclein significantly reduced
subjects’
motor function decline and delayed clinically meaningful worsening or motor symptoms, compared with placebo. Despite encouraging
preliminary data
observed with
this mAb,
we expect
that mAbs,
even if
approved as
therapeutic for
PD, would
be burdened
by the
general challenges of cost and administration.
Our Product Candidate: UB-312
We are developing UB-312,
an anti-α-synuclein product candidate, as a treatment for PD and other synucleinopathies. We
believe that
UB-312 has
the potential
to be
established as
a disease-modifying
treatment modality
for PD,
and possibly
for LBD
and MSA.
Pre-
clinical data indicated
that UB-312 elicits
antibodies that preferentially
recognize pathological forms
of a-synuclein and
improves motor
performance in
mouse models
of α-synucleinopathies.
Preliminary clinical
data from
our ongoing
Phase 1
trial indicate
that UB-312
elicits antibody levels
sufficient to
cross the BBB
(i.e., detectable in
CSF). In 2018,
the European Medical
Agency (“EMA”) granted
UB-312 orphan designation for MSA.
Clinical Development
We have conducted Part A of a randomized, placebo-controlled, double-blind, dose-escalating, single- center Phase 1 clinical trial of
UB-312 in which 50 healthy volunteers between the ages of 40 and 85 years received three intramuscular doses of either UB-312 or
placebo. During this 44-week Part A trial, subjects received three doses (on weeks 1, 5 and 13) with escalating doses ranging from
40μg to 2,000μg. Immunogenicity was evaluated by measuring changes in serum anti-α-synuclein antibody concentrations during
the
course of the study. Data from Part A indicated that UB-312 is generally well tolerated, with no significant safety findings. Data from
Part A also suggested that UB-312 is highly immunogenic, with all individuals in the 300μg/dose group showing detectable anti-α-
synuclein antibodies in both serum and CSF samples. CSF: serum ratios appeared similar to those observed in UB-311 non-human
primate studies (approximately 0.2%), and to those observed in clinical trials of mAbs. Based on these results, we are now evaluating
two dosing regimens of UB-312 in Part B of the Phase 1 trial: three doses of 300μg, and one dose of 300μg followed by two doses of
100μg. Part B will evaluate UB-312 and placebo in 20 PD subjects and began enrollment in January 2022. In addition to the endpoints
evaluated in Part A, an exploratory endpoint involving a clinical assessment using the Movement Disorder Society - Unified
Parkinson’s Disease Response Score will be used.
The Michael J. Fox Foundation (“MJFF”) is funding a 2-year collaborative project between Vaxxinity,
Mayo Clinic, and University of
Texas Houston using CSF collected from individuals enrolled in Part B of the Phase 1 trial of UB-312.
This work will evaluate the
potential of protein misfolding cyclic amplification (“PMCA”) to assess target engagement and will also aim to characterize the anti-
α-synuclein antibodies produced after immunization with UB-312. Demonstrating whether pathological forms of α-synuclein are
detectable in the CSF of PD subjects, and whether UB-312-derived antibodies prevent the formation of α-synuclein seeds measured by
PMCA, might provide a meaningful surrogate marker of target engagement.
UB-312 Demonstrated Dose-Dependent Response in Phase 1 Part A Trial Including Penetration of Titers into CSF
Across
four cohorts,
UB-312 demonstrated
a dose-dependent
immunogenic response.
Antibodies generated
by UB-312
were
readily
detectable in CSF,
indicating BBB penetration with a CSF: serum ratio of approximately 0.2%.
We paused dosing in high dose
cohorts in Part A
of the trial after
one subject developed
an adverse effect (“AE”)
of special interest
(i.e.,
Grade 3 flu-like
symptoms) shortly after
receiving the second
1000μg dose of
UB-312. Although this AE
was transient and
not a serious
adverse event (“SAE”), data collected
until that point suggested that
the 100μg and 300μg dose
levels were well tolerated and
yielded
relatively high anti-α- synuclein titers.
During the evaluation of the AE,
the COVID-19 pandemic was becoming
increasingly pervasive
throughout Europe, increasing the risk to healthy
volunteers participating in the trial. We
therefore did not resume dose escalation and
selected 100μg and 300μg doses for Part B in PD subjects.
Pre-Clinical Data
We
have
conducted
pre-clinical
studies
of
UB-312
across
multiple
animal
species,
including
mice
and
guinea
pigs.
These
trials
demonstrated that
our product
candidates, including
UB-312, generated
high antibody
titers to
α-synuclein across
animal species.
In
addition, in vitro studies provided
evidence that anti-α-synuclein antibodies produced
after UB-312 immunization are highly
selective
to pathological α-synuclein, and do not bind to normal α-synuclein.
UB-312 Demonstrates Selective Binding Towards α-Synuclein Fibrils and Ribbons
This in vitro slot blot analysis of sera from guinea pigs dosed with UB-312 demonstrates that antibodies induced by UB-312 bind to α-
synuclein fibrils
and ribbons,
the toxic
forms of
α-synuclein believed
to underlie
PD, more
strongly than
they bind
to monomers,
the
normal form of α-synuclein in
the body. We believe this preference
will allow UB-312 antibodies to
avoid target-mediated clearance by
monomers and bind selectively to the toxic species
(Nimmo et al., Alzheimers Res Ther. 2020;12:159).
Anti-α-synuclein
antibodies
produced
by
UB-312
immunization
specifically
bind
pathogenic
species
of
α-synuclein,
including
aggregated fibrils, oligomers
and ribbons, while
demonstrating low affinity
for the monomer.
This species selectivity
contrasted with
Syn-1, a commercial research mAb used as a control, which failed to differentiate the toxic variants.
In an in vivo study of UB-312 using a transgenic mouse model of PD, we demonstrated prevention
of motor deficits in treated animals,
which was associated with significant
reduction of brain oligomeric forms
of α- synuclein. We
believe this data supports the
potential
of UB-312 to prevent behavioral motor deficits and reduce toxic forms of α-synuclein.
UB-312 Demonstrates Improvement in Motor Symptoms in Pre-Clinical Study
UB-312
immunization
in a
transgenic mouse
model
(α-synuclein
overexpression)
demonstrates
improvement
in
beam
test
and
wire
hanging test, and reductions in α-synuclein oligomers in various brain regions (Nimmo et al., Acta Neuropathol. 2022;143:55-73).
We
have also observed
by immunohistochemistry that
serum antibodies from
guinea pigs dosed
with UB-312 can
bind to aberrant
α-
synuclein in PD, LBD and MSA brain sections.
Finally,
antibodies
derived
from
UB-312
showed
no
off-target
binding
on
human
tissue
sections.
UB-312-treated
transgenic
mice
showed no signs of neuroinflammation,
and GLP toxicity studies
in rats indicated a
good non-clinical safety and
tolerability profile. We
believe
our
preclinical
data
suggest
that
UB-312
may
potentially
induce
a
well-tolerated,
strong
and
specific
IgG
response
against
pathological forms of
a-synuclein
in PD subjects.
Development Strategy
While certain portions of
this Phase 1 trial
were interrupted by the
COVID-19 pandemic, Part
A in 50 healthy
volunteers was completed
in 2020,
and we
began dosing
PD subjects
in Part
B in
early 2022.
In Part
B we
expect to
include exploratory
endpoints potentially
relevant to
PD, such
as total
and free
α-synuclein in
serum and
CSF, in addition
to T-cell ELISpot analyses
and antibody
characterization.
Upon the completion of
the Phase 1
trial, we expect
to advance UB-312
into further clinical development,
which may comprise
trials
for various synucleinopathies.
Other Neurodegeneration Programs
We are
actively engaged in additional initiatives related to neurodegenerative disorders. One of these programs focuses specifically on
tau-protein pathology
and its
involvement in
diseases such
as AD
and related
tauopathies. We believe
that targeting
different pathological
tau variants simultaneously may enhance treatment efficacy,
which will most likely require targeting
multiple epitopes concomitantly.
Using
our
Vaxxine
Platform,
we
have
constructed
combination
product
candidates
that
target
these
multiple
epitopes
and
have
successfully demonstrated their utility to raise therapeutic antibody titers in in vitro studies as well as early in vivo animal models.
We are also investigating the use of a combination of product candidates targeting Aβ, α-synuclein, tau and C9ORF79 dipeptide repeat
proteins, as multiple proteins could be implicated in neurodegenerative diseases.
Next Wave Chronic Disease Treatments
Pathological
endogenous
proteins
(“self-proteins”)
drive
a
wide
range
of
chronic
diseases.
While
mAbs
and
small
molecules
have
provided therapeutic
benefits in
the treatment
of these
diseases, inherent
limitations of
these drug
classes have
restricted access
and
adherence to these treatment modalities globally.
Our next
wave chronic disease
program is
initially focused on
migraine and
hypercholesterolemia. Monoclonal antibodies
have been
approved in both therapeutic areas; however, their high costs have limited access and generally limited use to relatively severe disease.
We aim to develop product candidates in these therapeutic areas that could offer similar efficacy as mAbs at a meaningfully lower cost
and
improved
administrative
convenience
to
patients,
thereby
potentially
allowing
for
access
to
broader
patient
populations
versus
mAbs, and greater efficacy than small molecules.
UB-313
An Overview of Migraine
Migraine
is
a
chronic
and
debilitating disorder
characterized by
recurrent attacks
lasting four
to
hours
with
multiple symptoms,
including typically
one-sided, pulsating
headaches of
moderate to
severe pain
intensity that
are associated
with nausea
or vomiting,
sensitivity to sound
and sensitivity to
light. Over 90%
of the patients
are unable to
function normally during
a migraine attack. Many
experience comorbid conditions such as depression, anxiety and insomnia.
The Migraine Research
Foundation ranks migraine
as the world’s third
most prevalent illness.
The disease affects
39 million individuals
in the
United States and
approximately one billion individuals
globally.
Patients generally suffer
from chronic or
episodic migraines.
Chronic migraine is defined
as 15 headache days or
more per month, while
episodic migraine is defined
as fewer than 15 headache
days
per month. Both acute and prophylactic treatments are used to address chronic and episodic migraines.
CGRP’s
Role in Migraine
CGRP
is
a
neuropeptide
found
throughout
the
body,
including
in
the
spinal
cord.
CGRP
activates
CGRP
receptor
in
the
trigeminovascular system, which is
located within pain-signaling pathways,
intracranial arteries and mast
cells. Activation of the
CGRP
receptor has been demonstrated to induce migraine in migraineurs. Multiple anti-CGRP therapies
have been approved for the treatment
of migraine.
Limitations of Current Therapies
Since the early 1990s,
there has been minimal
improvement in the standard
treatment for migraine. Treatments are
characterized as elite
acute or prophylactic.
Triptans are
the current first-line
prescription therapy for
the acute treatment
of migraine, with
over 15 million
annual prescriptions written in the United States.
Prophylactic medications
approved for migraine
include beta
blockers, such
as propranolol, topiramate,
sodium valproate
and botulinum
toxin,
branded
as
Botox.
However,
many
of
these
medications
provide
limited
clinical
benefit.
In
addition,
they
are
often
not
well
tolerated, with AEs such as cognitive impairment, nausea, fatigue and sleep disturbance.
Therapeutics targeting
the CGRP pathway
represent an emerging
treatment paradigm. Three
anti-CGRP mAbs were
approved by the
FDA in
2018 for
the prophylactic
treatment of
migraine in
adults. These
mAbs, erenumab-aooe
(Aimovig), fremanezumab-vfrm
(Ajovy)
and
galcanezumab-gnlm
(Emgality),
are
all
administered
subcutaneously.
Their
side
effects
are
generally
mild,
including
pain
and
redness at the
site of injection,
nasal congestion and
constipation. Studies show that
these mAbs reduce
the number of
headache days
by 50% or more in approximately 50% of patients. Sales for marketed and clinical-stage anti-CGRP therapeutics are projected to reach
approximately $7.4 billion by
2026. Despite the commercial
success that this
class represents, many
of these treatments
require frequent
administration, creating inconvenience for patients.
Our Product Candidate: UB-313
We are developing UB-313
as a prophylactic treatment initially for chronic migraine. We
believe UB-313 has the potential to improve
upon the current
treatments for chronic
migraine in multiple
aspects: we expect
UB-313 will require
administration quarterly to
annually
in
contrast
to
monthly
to
quarterly
for
currently
marketed
mAbs
and
frequent
administration
for
small
molecules.
Furthermore,
a
potential long durability of response may offer physicians and patients
the option to administer UB-313 in an office setting, which
can
potentially improve adherence. We expect the cost of UB-313 treatment, if approved, to be lower than that of mAbs for migraine.
Pre-Clinical Studies
We
have completed both
in vitro
and in vivo
pre-clinical studies of
UB-313. We
used an
in vivo proof-of-concept
capsaicin-induced
dermal blood flow model in
mice to demonstrate target engagement
of the marketed CGRP-targeting mAbs.
In this model, we observed
similar rates in reduction of dermal blood flow as fremanezumab in a head-to-head comparison against fremanezumab.
UB-313 Reduces Capsaicin-Induced Dermal Blood Flow in Mice
**Dunnett’s:
Ctl vs Vac
1p < 0.05; Ctl vs Vac
2 p < 0.05
In this preliminary study, dermal blood flow measurements were
taken 17 weeks following the first dose of UB-313. There were 3 to 11
animals per treatment group. Reduced dermal blood flow indicates target engagement with CGRP.
UB-313 reduced dermal blood flow
versus the control with an approximately similar magnitude to fremanezumab, which was administered 24 hours prior to the capsaicin
test.
We observed similar results in a capsaicin / dermal blood flow model in rats, comparing a rat version of UB-313 head-to-head against
galcanezumab.
Our
in vivo
studies of
UB-313 have
involved multiple
animal species.
High immunogenicity
was observed
in all
pre-clinical species
tested. Characterization of the antibodies produced after
immunization with UB-313 indicated that they have
limited, if any,
off-target
potential, are primarily IgG1
and IgG2, potently bind
to CGRP and potently
block CGRP activity
in vitro
. We
refer to potency
as the
amount
of
drug
required
to
produce
a
pharmacological
effect
of
given
intensity
and
is
not
a
measure
of
therapeutic
efficacy.
In
a
comparison
of
binding
affinities
with
fremanezumab
and galcanezumab,
UB-313-induced
IgG
antibodies
demonstrated
comparable
binding affinities.
UB-313 Demonstrated Induced Antibodies Comparable to Approved CGRP mAbs
We evaluated UB-313 formulations with two different
adjuvants in comparison to
fremanezumab and galcanezumab; both
formulations
demonstrated comparable IgG to these two approved CGRP mAbs.
Additional
in vitro
studies using human
SK-N-MC cells demonstrated
that UB-313-induced IgG
antibodies also had
comparable
in vitro
activity to CGRP-targeted mAbs.
UB-313 Induced IgGs Have Comparable In Vitro Activities to Marketed CGRP mAbs
In a cyclic AMP
(“cAMP”) production assay
conducted in human SK-N-MC
cells, antibodies taken from
the serum of guinea
pigs 15
weeks following the first injection of UB-313 demonstrated similar properties to two approved CGRP mAbs.
Moreover, the binding potency of UB-313 was determined to be comparable to these mAbs.
UB-313 Induced IgGs Demonstrate Comparable Binding Potencies to Marketed CGRP mAbs
Antibodies taken from the serum
of guinea pigs 15
weeks following the first
injection of UB-313 demonstrated
similar binding potencies
to two approved CGRP mAbs as measured by ELISA.
Development Strategy
We
have identified
a lead
candidate and
anticipate submitting
a clinical
trial application
(“CTA”)
or an
IND in
2022. While
we are
currently developing
UB-313 as
a potential
treatment of
chronic migraine,
depending on
successful clinical
results, we
may seek
to
address episodic migraine and cluster headaches as well.
PCSK9
An Overview of Hypercholesterolemia
Hypercholesterolemia is
the presence
of high
levels of
cholesterol in
the blood
and typically
results from
a combination
of environmental
and genetic
factors. Cholesterol
is transported
in the
blood plasma
within particles
called lipoproteins.
Lipoproteins are
classified by
their density:
very low-density
lipoprotein, intermediate
density lipoprotein,
LDL and
high density
lipoprotein (“HDL”).
All lipoproteins
carry
cholesterol,
but
elevated
levels
of
lipoproteins
other
than
HDL,
particularly
LDL,
are
associated
with
the
development
of
cardiovascular disease.
Approximately 2 billion
people worldwide
have elevated
levels of
LDL, potentially
putting
them at
risk for
cardiovascular disease.
Although hypercholesterolemia itself is asymptomatic, elevation of serum cholesterol can over time
lead to atherosclerosis. Over many
years, elevated
serum cholesterol
contributes to
formation of
atheromatous plaques
in the
arteries. These
plaque deposits
can in
turn
lead to progressive narrowing of the
involved arteries. Smaller plaques may rupture
and cause a clot to form and
obstruct blood flow. A
sudden blockage of a coronary artery may result in a heart attack. A blockage of an artery supplying the brain can cause a stroke. If the
development
of
the
stenosis
or
occlusion
is
gradual,
blood
supply
to
the
tissues
and
organs
slowly
diminishes until
organ
function
becomes impaired.
PCSK9 is mainly expressed in
the liver and, to a
lesser extent, in the small intestine,
kidney, pancreas and
the central nervous system.
The LDL receptors (“LDLR”) at the cell surface bind and initiate ingestion of LDL particles from extracellular fluid into cells, leading
to a reduction in serum LDL
levels. PCSK9 protein plays a
major regulatory role in cholesterol
homeostasis, mainly by reducing LDLR
levels on the plasma membrane, which leads
to decreased metabolism of LDL by the
cells. Inhibition of PCSK9 prevents this reduction
in LDLR levels
on the plasma
membrane, and in
consequence the cellular
process of internalizing
LDL particles, resulting
in a reduction
of LDL.
Limitations of Current Therapies
Statins are the
most commonly used
drugs to treat
hypercholesterolemia and result
in a pronounced
reduction in LDL.
The unambiguous
benefits of
statins, together with
the prevalence of
coronary heart disease,
have made statins
the most highly
prescribed drug
class in
developed countries. However,
many patients are
unable to achieve
targeted lipid levels
despite intensive statins
therapy.
In addition,
continued patient adherence to statin therapy,
which is necessary to maintain a lower risk for cardiac events, is variable but
considered
to be low - as low as 30% to
40% after two years in persons following a
myocardial infarction. Importantly, at the transcriptional level,
statins
up-regulate
not
only
LDLR,
but
also
PCSK9,
causing
the
so-called
paradox
of
statin
treatment.
Although
statins
induce
a
beneficial increase in LDLR, they also increase
PCSK9, thus leading to LDLR degradation, which
indirectly increases LDL, mitigating
the overall LDL
reduction that statins
otherwise cause. Given
the limitations in
efficacy and adherence,
targeting PCSK9 in
combination
with statins treatment is an emerging treatment paradigm for hypercholesterolemia.
Two
mAbs
that
inhibit
activity
have
received
FDA
approval,
alirocumab
(Praluent)
and
evolocumab
(Repatha).
These
drugs
were
initially approved
to treat
the genetic
condition heterozygous
familial hypercholesterolemia,
although the
approved indications
were
expanded after
the publication
of studies
demonstrating that
the use
of a
PCSK9 inhibitor
in conjunction
with a
statin significantly
reduced the risk for major cardiovascular events, including heart attack, stroke, unstable angina requiring hospitalization or death from
coronary heart disease. In addition,
inclisiran (Leqvio), an siRNA
inhibitor of PCSK9 synthesis,
was approved by the EMA
in late 2020
for the treatment of heterozygous familial hypercholesterolemia in addition to other dyslipidemia.
While alirocumab
and evolucumab
have demonstrated clinical
benefit, their commercial
potential has been
limited by their
pricing. Both
launched
with
a
wholesale
acquisition
price
exceeding
$14,000
annually,
but
prices
for
both
were
subsequently
reduced
in
2018.
Nevertheless, this drug
class generated sales
of approximately $1.3 billion
in 2020 and
is expected to
grow to approximately
$5.2 billion
by 2026, including the addition of inclisiran to the market. In addition,
both must be administered bi-weekly, which represents what we
believe to be a
frequent and inconvenient administration schedule for
patients. While inclisiran represents an
improved administration
schedule compared
to alirocumab
and evolucumab, as
it must
be administered
only twice
annually,
we believe
that it
may encounter
similar pricing challenges due to the published cost effectiveness price.
Our Hypercholesterolemia Program
We
are developing an anti-PCSK9 product candidate
to treat hypercholesterolemia. Our program is
dedicated to developing a product
candidate that has long-acting treatment duration,
which we believe will offer
a more convenient treatment regimen of
every six to 12
months compared to
the up to
bi-weekly dosing required
by some mAbs.
We believe that lower manufacturing
costs commensurate with
the requirement of meaningfully less drug substance relative to mAbs, coupled with our ability to achieve commercial
scale production
rapidly may promote expanded use
of this drug class
as a first-line therapy treating
a greater number of hypercholesterolemia
patients
than currently treated with mAbs.
Pre-Clinical Studies
Pre-clinical
studies
of
our
anti-PCSK9
vaccine
indicate
that
our
product
candidate
generates
therapeutic titer
levels
of
anti-PCSK9
antibodies. These studies
also indicate that it
produces a high
response rate among dosed
animals. We
achieved proof-of-concept in a
guinea pig
model, reducing
LDL cholesterol
by more
than 30%
over the
15-week treatment
duration, comparable
to the
reductions
observed with the use of anti-PCSK9 mAbs.
Anti-PCSK9 Product Candidate Reduces LDL by 30 to 50% Over 15 Weeks in Guinea Pigs (n=6)
Development Strategy
We plan to initiate IND-enabling studies of a lead anti-PCSK9 candidate in 2022.
Next Stage Development Candidates
In addition to
our initial focus
on migraines and
hypercholesterolemia, we
believe our Vaxxine Platform can
generate product candidates
for
a
range
of
chronic
diseases.
We
are
evaluating
opportunities
across
multiple
disease
areas,
including
allergy
(e.g.,
chronic
rhinosinusitis, atopic
dermatitis, food
allergy), autoimmune (e.g.,
psoriasis, psoriatic
arthritis), pain
(e.g., peripheral
neuropathy, diabetic
neuropathy) and bone
and muscle deterioration
(e.g., osteopenia, sarcopenia
of aging) indications
as they may
apply to geriatrics
and
space travel health.
COVID-19 Program
An Overview of COVID-19
COVID-19, caused
by SARS-CoV-2, has rapidly
swept throughout
the world.
The WHO
declared COVID-19
a public
health emergency
of international concern. As
of February 22, 2022, there
have been more than
420 million laboratory-confirmed COVID-19
patients and
more than 5.8 million deaths worldwide. Common symptoms of COVID-19 are fever, cough, lymphocytopenia and chest radiographic
abnormality. A proportion of
patients recovering from
COVID-19 continue shedding
virus for days,
and asymptomatic carriers
may also
transmit SARS-CoV-2, indicating a
risk of
a continuous
and long-term
pandemic. According
to Our
World in Data (ourworldindata.org),
as of March 2, 2022, approximately 87% of people in low-income countries have not received a single dose of a COVID-19 vaccine.
SARS-CoV-2
is an
enveloped, single-stranded,
positive-sense RNA
virus belonging
to the
family
Coronavidae
within the
genus β-
coronavirus. The genome of SARS-CoV-2 encodes one large Spike (“S”) protein that plays a pivotal role during
viral attachment to the
host receptor, angiotensin converting enzyme 2 (“ACE2”), and
entry into host cells. The S protein is the major principal antigen
target
for
vaccines
against
human
coronavirus,
including
SARS-Co-V-2.
Neutralizing
antibodies
targeting
the
receptor
binding
domain
(“RBD”) subunit
of the S
protein block the
virus from
binding to
host cells.
Over 90% of
all neutralizing
antibodies produced
in response
to infection are directed to the RBD subunit, and mAbs that have shown therapeutic activity target epitopes on the RBD.
More than twenty vaccines are
authorized for use in one
or more countries around the
world, including three in the
United States. These
vaccines are
based on
the S
protein of
the SARS-CoV-2, but rely
on different mechanisms
for presentation
or expression
of the
S antigen,
including whole inactivated
virus, defective adenovirus
vectors (three different
types) or mRNA.
All have been
shown to be
safe and
effective in placebo- controlled clinical trials. Antiviral drugs and mAbs have limited availability and effectiveness.
COVID-19 Vaccine Market
Disparities in
COVID-19 vaccine
availability and distribution
continue to grow
despite the
myriad of
procurement efforts
underway.
There exists a shortfall
in the supply of
COVID-19 vaccines globally
for primary immunization,
driven by supply constraints
along with
substantial challenges
around distribution,
delivery and
poor logistical
capacity to
administer doses.
This primary
immunization shortfall
is
disproportionately pronounced
in low-
and middle-income
countries (“LMICs”).
We
estimate
that in
order
for
these
countries to
approach herd immunity (modeled at 70% vaccinated), there remains
a shortfall of hundreds of millions of doses
(excluding India and
China).
Furthermore,
as
knowledge of
SARS-CoV-2
and
its
circulating variants
(e.g.,
Omicron)
and
vaccination
efforts
grow,
the
need
for
booster immunizations has become more apparent. We estimate that the size of the COVID-19 vaccine booster dose market globally in
2022 will exceed 1.5 billion
doses. We
expect the need for heterologous
booster vaccines with low reactogenic
profiles, broad variant
coverage, durable immunity and mechanisms of action different from presently authorized vaccines to continue through 2022.
UB-612: Our COVID-19 Vaccine Initiative
We are
developing UB-612 as a product candidate for the prevention of COVID-19. UB-612 is
designed to activate both antibody and
cellular immunity against multiple viral targets. The vaccine is composed of a recombinant S1-RBD-sFc fusion protein combined with
rationally designed
synthetic Th
and CTL
epitope peptides
selected from
the S2
domain of
the spike,
membrane (“M”),
and nucleocapsid
(“N”) proteins. These peptides bind
to MHC I and II
without significant genetic restriction, so
that they may be recognized
by the entire
human population. Our mixture of peptides is designed to elicit T-cell activation, memory recall and effector
functions similar to those
of natural COVID-19. The
S1-RBD-sFc fusion protein
incorporates essential B-cell
epitopes that promote the
generation of neutralizing
antibodies to
the RBD of
SARS-CoV-2.
UB-612 is
formulated with
Adju-Phos, an
adjuvant widely used
in many
approved vaccines
globally. For
added safety,
synthetic peptides in UB-612
are adsorbed by our
propriety CpG1 excipient, a
Toll-like
receptor 9 agonist
molecule, known to
help to stimulate
balanced T-cell immunity in humans.
UB-612 can be
stored and shipped
at 2° to
8°C (conventional
cold chain
refrigerated temperatures).
An EUA
application for
UB-612 was
denied by
the TFDA
in August
2021 because
the neutralizing
antibody response generated by UB-612, as compared to a designated adenovirus vectored vaccine, did not meet the TFDA’s
specified
evaluation criteria but, in collaboration with UBIA, we are appealing the decision. We are now also pursuing paths to authorization for
UB-612 as a heterologous boost and have agreement with a high income regulator about our development approach.
Components of the UB-612 Multitope Vaccine Product Candidate
UB-612’s
construct contains an S1-RBD-sFc fusion protein
for the B-cell epitopes, plus five synthetic
Th/CTL peptides for class I and
II MHC molecules derived from
SARS-CoV-2 S2, M and
N proteins, and the UBITh1a
peptide. These components are formulated with
CpG1, which
binds the
positively charged
(by design)
peptides by
dipolar interactions
and also
serves as
an adjuvant,
which is
then
bound to Adju-Phos adjuvant to constitute the UB-612 product candidate.
Clinical Development
In
March
2022,
Vaxxinity
initiated
a
Phase
pivotal
study
to
compare
the
immune
responses
stimulated
by
mRNA
(BNT162b2),
adenovirus (ChAdOx1-S),
inactivated virus
(Sinopharm BIBP)
COVID-19 vaccines,
and UB-612,
when delivered
as third
dose boosters.
This is an
active-controlled, randomized, multicenter
study being conducted
in several countries
under a platform
protocol which enrolls
subjects 16
years and
older who
completed a
two-dose primary
immunization with
one or
more of
the vaccines
mentioned above.
Eligible
subjects will be
randomized into one
of two treatment
arms to receive
a single dose
of UB-612 or
an active comparator.
The primary
objective of
the study
is to
determine non-inferiority
of UB-612-stimulated
neutralizing antibodies
against the
comparator vaccines.
Additionally, Omicron
neutralizing antibodies, non-neutralizing antibodies and
T cell responses will
be analyzed as part
of secondary
and exploratory objectives.
We expect that, if successful,
this study may
enable conditional approval
of UB-612 in
multiple high income
countries and LMICs.
3-Dose Data: Phase 1 Extension Trial
In early 2021, we completed an open-label dose escalation Phase 1 clinical trial to evaluate the safety, tolerability and
immunogenicity of UB-612 in healthy adults in Taiwan. This trial consisted of three cohorts of 20 subjects each. The first cohort
received two intramuscular injections of 10μg doses of UB-612, the second cohort received two 30μg
doses and the third cohort
received two 100μg doses. The first dose in each cohort was administered at the start of the trial, with the second dose administered
on day 28.
In a Phase 1 extension trial, 50 subjects from Phase 1 received a third booster dose of UB-612 approximately 7-9 months after their
second dose (100µg).
After one and two doses in the Phase 1 trial, UB-612 was considered to be generally safe and well tolerated, with a low frequency of
solicited and unsolicited AEs, which were all Grade 1 (mild) in severity.
We selected the highest dose (100μg) to take into the Phase
2 trial.
Similarly, in the Phase 1 extension trial, UB-612 was generally well tolerated after a third dose, with no vaccine-related SAEs
reported.
Local and Systemic Solicited Adverse Events Following 1, 2, and 3 Doses of UB-612 at Varying Dose Levels
Solicited adverse event data from Phase 1 and Phase 1 extension (n=50) suggests UB-612 is well tolerated after each of three doses
across varying dose levels.
Immunogenicity and safety data from the Phase 1 extension suggests that UB-612 elicits a multi-fold increase in neutralizing
antibody titers upon third dose, significantly exceeding those observed in human convalescent sera, and that the third dose is well
tolerated with no vaccine-related SAEs reported.
Published studies have shown a correlation between efficacy in randomized
controlled trials and the ratio of neutralizing titers in sera from vaccinated subjects to titers in human
convalescent sera.
UB-612 Neutralizing Antibodies Against Wuhan
Strain of SARS-CoV-2
(GMT, WHO International Units)
UB-612 Phase 1 extension (n=50) demonstrated that a dose of 100μg UB-612 following three doses of various sizes of UB-612 elicits
a multi-fold increase in neutralizing antibody titers.
In collaboration with University College London and VisMederi,
we analyzed sera from subjects immunized with three doses of UB-
612. Data demonstrated that UB-612 elicited a broad IgG antibody response against multiple SARS-CoV-2 variants of concern,
including, Alpha, Beta, Delta, and Gamma, and Omicron, and higher levels of neutralizing antibodies against Omicron than three
doses of an approved mRNA vaccine.
IgG Binding to RBD by Variant of Concern after 2 and 3 Doses of UB-612
IgG binding titers against SARS-CoV-2 major variants of concern in sera collected 28 days after 2 doses and 14 days after 3 doses of
UB-612 (100µg) from Phase 1 trial participants (n=15).
The loss of antibody bindings to RBD of variants compared with the original
RBD (Wuhan) remains stable between 2 doses and 3 doses of UB-612 vaccine, along with a high overall increase in levels of binding
antibodies to RBD.
Third immunization with UB-612 Produces Neutralizing Antibodies Against Omicron
Phase 1 extension subjects (n=15) received primary series with UB-612 100µg. Serum is taken 28 days after the second dose and 14
days after the third booster immunization administered 7-9 months after the primary series. Live virus neutralization test against
Wuhan and Omicron are
performed at VisMederi; results are
expressed as virus neutralization antibody GMT ± 95% CI.
2-Dose Data: Phase 2 Trial
A randomized, placebo-controlled,
multi-center Phase 2
trial of UB-612
in 3,850 healthy
volunteers aged 12
to 85 is ongoing
in Taiwan.
Subjects in this trial receive
two doses of 100μg UB-612, or
placebo, 28 days apart. The
objectives of this trial include
the analysis of
safety
and
immunogenicity
of
UB-612,
in
particular,
antigen-specific
antibodies
to
UB-612,
the
seroconversion
rate
and
lot-to-lot
consistency of antibody responses. An interim analysis of data from this Phase 2 trial in healthy volunteers 18 years and
older based on
the data cut-off
date of June 27,
2021 was submitted
to the TFDA
as part of
a filing for
an EUA in
Taiwan.
The EUA was
denied in
August 2021 by the TFDA, but, in collaboration with UBIA, we are appealing that decision.
In data from over 3,750 subjects, UB-612 appears well tolerated, with no significant safety findings to date. AEs were generally
mild, and no related SAEs were observed. Local injection site AEs occurred in half of the subjects, the most frequent being injection
site pain. Systemic AEs occurred in less than half of the subjects, and the incidence was similar in the active and placebo groups,
except for muscle pain which was more frequent in the active group. Aside from muscle pain, systemic reactions were comparable
across the active and placebo groups, with less than 10% of subjects in either group experiencing fever or chills. Systemic AEs were
similar after the first and second doses. The vast majority of AEs were mild (Grade 1), and all were self-limited. No subject had a
severe (Grade 3) local reaction. The incidence of severe (Grade 3) systemic reactions was <0.1%.
The Phase 2 interim
analysis suggests that Phase 1
observations on immunogenicity,
neutralizing titers and tolerability are
repeatable,
with an overall seroconversion rate of
94.7% one month after the second
dose. In a live virus (Wuhan) neutralization test,
sera collected
from UB-612 vaccinated
younger adults (19-64
years, n=322), 28
days after the
second dose (day
57) were estimated
to reach geometric
mean titers (“GMT”) of
102 of 50% virus-neutralizing
antibodies (VNT
).
Sera collected from a
subset of subjects (n=48)
28 days after
the second immunization was
shown to neutralize several
SARS-CoV-2
variants, with the loss
of neutralization activity against
Delta
estimated at 1.39-fold when compared to the neutralizing antibodies against the parental Wuhan virus.
Immunogenicity Results from Phase 2 & Phase 1 were Consistent:
Live Virus Neutralization Versus
Convalescent Sera
Phase 1 (n=20 in 100μg dose group) and Phase 2 (n=322) sera (taken 28 days after the second dose) titer neutralizing activity, versus
a panel of human convalescent
serum titers taken from patients hospitalized with
COVID-19, as measured by a live virus
neutralization
test, VNT50, shows that two doses of UB-612 may yield neutralizing antibodies comparable to those found in convalescent patients.
Immunization with UB-612 in both
Phase 2 and Phase
1 studies led to
detectable T-cell
responses observed in a
subset of subjects. In
Phase 2, a total
of 88 subjects receiving UB-612
and 12 receiving placebo were
tested for T cell
responses at baseline and on
Day 57.
Preliminary results of ELISpot
(Interferon-γ and IL-4) and
intracellular cytokine staining indicate
robust responses to UB-612,
with a
strong
Th1
orientation.
Intracellular
cytokine
staining
(ICS)
confirmed
the
Th1
orientation
of
T
cell
responses.
UB-612
induced
measurable CD8+ T cell responses and CD107a+/Granzyme secreting cells, which are putative cytotoxic T cells.
UB-612 stimulates T-cell responses with predominately Th1 polarity
Top panel: ELISPOT analysis of PBMCs collected on day 57 Phase 2 study. Bottom panels (A, B and C): ICS analysis of PBMCs
collected on day 57 Phase 2 study. Placebo (n=14) subjects without IgG ELISA, ACE2 and neutralizing antibody responses. UB-
612 n=86 subjects. Statistical analysis was performed using Mann-Whitney t test. (* p<0.05; ** p<0.01; ***p<0.001; ****
p<0.0001).
2-Dose Data: Phase 1 Trial
In early 2021, we completed an open-label dose escalation Phase 1 clinical trial to evaluate the safety, tolerability and immunogenicity
of UB-612 in healthy volunteers between
the ages of 20 and 55 in
Taiwan. This six-month trial consisted of three cohorts of 20
subjects
each. The first cohort received two intramuscular
injections of 10μg doses of UB-612, the
second cohort received two 30μg doses and
the third cohort received two 100μg doses. The first dose
in each cohort was administered at the start of the
trial, with the second dose
administered
on
day
28.
The
mean
titer
of
antigen-specific
antibodies
to
UB-612
and
the
seroconversion
rate
was
be
evaluated
throughout
the
six-month
duration
of
the
study
to
determine
the
humoral
immune
response
and
persistence
of
immunogenicity.
In
addition, T-cell responses were evaluated by interferon-γ ELISpot assay and intracellular cytokine staining by flow cytometry.
The Phase 1 clinical trial was sponsored by UBIA. UBIA
conducted the trial on our behalf in accordance with one
of our related party
master services agreements.
After one
and two
doses, UB-612
was considered
to be
generally safe
and well
tolerated, with
a low
frequency of
solicited and
unsolicited
AEs, which
were all
Grade 1
(mild) in
severity.
After each
vaccination, the
most common
AE was
injection site
pain, with
no clear
difference in reactogenicity between dose levels. In all dose groups, there was a trend towards
increased reactogenicity with increase in
dose.
Three
cases
of
mild
allergic
reactions
were
reported
(e.g.,
itching
at
vaccine
site),
which
were
all
resolved
within
1-3
days.
Importantly, and
in distinction to certain
vaccines authorized for emergency
use, no other increase
in AEs was seen
at second dose as
compared to first injection. We selected the highest dose (100μg) to take into the Phase 2 trial.
In an
anti-S1-RBD ELISA assay,
we observed that
all three dose
levels of UB-612
induced titer levels
comparable to or
greater than
those in sera
from patients hospitalized with
COVID-19. Furthermore, in a
cytopathic effect viral
neutralization assay (CPE VNT50),
we observed neutralizing titers comparable to those in sera from patients hospitalized with COVID-19.
Since September 2020, a number of
genotypic variants of SARS-CoV-2
have emerged and contributed to
epidemic spread in multiple
countries. Notable among these
are the Alpha or B.1.1.7
(United Kingdom), Beta or B.1.351
(South Africa), Gamma or
P.1 (Brazil) and
the Delta
or B.1.617.2
variant (India)
and Omicron
(B.1.1.529).
Some SARS-CoV-2
variants containing
mutations in
the S
protein,
especially the N-terminal domain
and the RBD, show
reduced neutralization by antibody
against the Wuhan
strain, evidenced both in
persons
naturally
infected
and
in
vaccinated
individuals.
The
Beta
(South
Africa)
and
Omicron
variants
show
the
highest
level
of
resistance, with 13-fold
to over 30-fold
reduction in neutralization,
respectively,
and vaccines have
shown reduced protection
against
these variants.
Neutralizing activities of sample
sera from the Phase 1
trial were assessed against
live virus variants at the
Viral and Rickettsial Disease
Laboratory of the
California State Department
of Public
Health. The
results indicate
that UB-612
induces viral neutralizing
antibody
titers against the Alpha, Gamma and Delta variants of SARS-CoV-2, close to the neutralizing titer level against the original (wild-type,
WT) Wuhan
strain, while
the titer
level against
the Beta
variant is
lower in
comparison. The
latter finding
is anticipated
by
results
published for other COVID-19
vaccines, as pointed out
above. These data align
with observations taken from
a cynomolgus macaque
study of UB-612 as well.
We measured viral-neutralizing antibody titers
up to 154 days after the second dose (day 196) in the
Phase 1 trial of UB-612; the level
of VNT50 antibodies remained
at 52% of the
maximum level observed following
the second dose, on
average. Based on the
interim six-
month cutoff, the UB-612-specific neutralizing antibody half-life was estimated to be 195 days using an exponential model.
Time Course of SARS-CoV-2 Antibody Neutralization Responses after Vaccination
Data from a
micro-neutralization assay of
sera from subjects
who received two
100μg doses
of UB-612
yielded an
estimated neutralizing
titer half-life of 195 days (CI: 136, 349) using an exponential model.
Pre-Clinical Study Results for UB-612
Initial work to select
the S1-RBD-sFc antigen
was performed in
guinea pig immunogenicity
studies, which demonstrated
the superiority
of S1-RBD-sFc over other protein
designs tested. Product candidate dose
and formulation were explored in
rat immunogenicity studies,
which allowed the
selection of the current
formulation of UB-612.
Efficacy studies were
carried out in mouse
and nonhuman primate
models, in which
UB-612 showed protective
efficacy against
live viral challenge.
In a nonhuman
primate model challenge
study,
we
observed full protection against SARS-CoV-2.
A GLP toxicology study
in rats demonstrated an
acceptable safety profile and
enabled clinical testing of
UB-612. In addition to
these
studies, a Developmental and Reproductive Toxicity study yielded no significant findings.
Development Strategy
Based on UB-612 three-dose
titer data from the
Phase 1 extension, and
our belief in UB-612’s potential utility
as a heterologous booster
dose
(boosting
the
immunity
of
a
subject
who
has
already
received
a
different
vaccine),
we
are
pursuing
accelerated
pathways
to
authorization with regulators
in multiple jurisdictions,
including high income
countries and LMICs
based on a
heterologous booster trial
of UB-612 beginning in
the first half of
2022, with the first dose
administered in the U.S. in
the first quarter of 2022
under
FDA IND
clearance.
COVID-19 Diagnostics Program
We have developed an ELISA test that can quickly detect antibodies
in human sera or plasma to
determine if a patient has had a
SARS-
CoV-2 infection post fourteen days of onset. It
employs synthetic peptides derived
from the M, S and
N proteins of SARS-CoV2 for
the
detection
of
IgG
antibodies
to
SARS-CoV2
in
human
sera
or
plasma.
These
synthetic
peptides
bind
antibodies
specific
to
highly
antigenic segments of SARS- CoV2 structural
M, N and S proteins and
constitute the solid phase antigenic immunosorbant. The
FDA
issued an EUA for our ELISA test in January 2021. We are not actively pursuing commercialization of our ELISA tests at this time.
Competition
The
pharmaceutical
industry
is
characterized
by
rapidly
advancing
technologies,
intense
competition
and
a
strong
emphasis
on
proprietary
products.
While
we
believe
that
our
technology,
the
expertise
of
our
executive
and
scientific
teams,
research,
clinical
capabilities, development experience and scientific knowledge
provide us with competitive advantages, we face
increasing competition
from multiple
sources, including
pharmaceutical and
biotechnology companies,
academic institutions,
governmental agencies
and public
and private research institutions.
Vaccines
The global
vaccine market
is highly
concentrated among
a small
number of
multinational pharmaceutical
companies: Pfizer,
Merck,
GlaxoSmithKline and Sanofi together control most
of the global vaccine market.
Other pharmaceutical and biotechnology companies,
academic institutions, governmental agencies and public and private research institutions are also working toward new solutions
given
the continuing global unmet need.
More than twenty COVID-19
vaccines are currently authorized
for use in one
or more countries around
the world, including three
in the
United States. All have
been shown to be
safe and effective in
placebo-controlled clinical trials. All these
vaccines are based on
the S
protein of the
SARS-CoV-2
virus, but rely
on different
mechanisms for presentation
or expression of
the S antigen,
including whole,
inactivated virus, defective adenovirus vectors (three different types) or mRNA.
Neurodegenerative Disorders
We
expect
that,
if
approved,
our
product
candidates
will
compete
with
the
currently
approved
therapies
for
management
of
neurodegenerative diseases, such as AD and
PD. In AD, four drugs are
currently approved by the FDA for the
treatment of symptoms
of AD, based on
acetylcholinesterase (“AChE”) inhibition and NMDA receptor
antagonism. In addition to the
marketed therapies, we
are
aware
of
several
companies
currently
developing
therapies
for
AD,
including
Eisai,
Eli
Lilly,
Hoffman-LaRoche,
Otsuka
Pharmaceuticals, Novartis
and Biohaven
Pharmaceuticals. Biogen’s
aducanumab was
approved by
the FDA
in June
2021 under
the
accelerated approval pathway,
which allows for
earlier approval of
drugs that
treat serious
conditions, and that
fill an
unmet medical
need based on a surrogate endpoint. Regulatory approval of aducanumab is pending in Europe and Japan.
Pharmaceutical treatments for PD address its symptoms
only and do not treat the underlying causes
of PD. The majority of prescription
drugs
are
dopaminergic
medications
and
act
by
increasing
dopamine,
a
neurotransmitter.
We
are
aware
of
several
companies
with
product
candidates
at
various
stages
of
clinical
development,
including
Sanofi,
Kyowa
Kirin,
Cerevel
Therapeutics
and
Hoffman
LaRoche. Hoffman LaRoche is developing prasinezumab, a mAb, as a potential treatment for PD.
CGRP-Directed Migraine Treatments
Six migraine treatments have been approved by the FDA that target
CGRP.
Four of these therapeutics are mAbs and were approved to
prevent or reduce
the number of
migraine episodes. These
medications are galcanezumab
(Emgality), which was
developed by Lilly;
erenumabb (Aimovig), which was developed by Amgen in collaboration
with Novartis; fremanezumab (Ajovy), which was developed
by
Teva;
and
eptinezumab
(Vyepti),
which
was
developed
by
Alder,
acquired
by
Lundbeck.
Ubrogepant
(Ubvelvy),
developed
by
Allergan, was
approved for
the treatment
of acute
migraine episodes;
rimegepant (Nurtec),
also approved
for the
treatment of
acute
migraine, is sold by Biohaven.
PCSK-9 Inhibitors
Two
companies currently
have
PCSK-9
inhibitors
approved by
the
FDA
to
treat
hypercholesterolemia. Both
are mAbs.
Regeneron
Pharmaceuticals
developed
alirocumab
(Praluent),
in
collaboration
with
Sanofi,
and
Amgen
developed
evolocumab
(Repatha).
The
Medicines Company,
a
subsidiary of
Novartis, is
developing inclisiran,
an
RNAi construct,
to down-regulate
synthesis of
PCSK-9.
Inclisiran was approved by the EMA in December 2020.
Collaborations
From time
to time,
we may
enter into
licensing and
commercialization agreements
when they
align with
our mission,
including the
Platform
License
Agreement
described
under
“-Intellectual
Property-Platform
License
Agreement”
and
the
agreement
with
our
partner Aurobindo.
Aurobindo License Agreement
In
December
2020,
we
entered
into
an
exclusive
license
agreement
with
Aurobindo
(as
amended,
the
“Aurobindo
Agreement”)
to
develop and
commercialize UB-612
to India
and other
territories. Pursuant
to the
Aurobindo Agreement,
we granted
Aurobindo an
exclusive license (with
certain rights reserved
to us) to
develop, manufacture and
commercialize UB-612 in India
and other countries
through
UNICEF
and
a
non-exclusive
license
to
develop,
manufacture
and
commercialize
UB-612
in
other
selected
emerging
and
developing markets.
The Aurobindo Agreement may be terminated
(i) by Aurobindo, without cause at any
time after three years following the effective date
or
prior
to
such
time
if
UB-612
fails
to
meet
clinical
end-points
or
fails
in
development,
(ii)
by
us,
(a)
if
Aurobindo
disputes
the
patentability, enforceability or validity of our patent rights related to the UB-612 technology,
(b) in case of a suit alleging Aurobindo’s
use of
the licensed intellectual
property infringes a
third party’s
intellectual property rights
if we
reasonably believe the
license is no
longer commercially reasonable in light of such claim or (c) without cause at any time
after four years following the effective date, (iii)
by either
party in
the event
of the
other party’s
material breach
of its
obligations under
the Aurobindo
Agreement (subject
to a
cure
period) or (iv) by either party in the event of the other party’s insolvency.
Manufacturing
The manufacture of
our product candidates
encompasses both
the manufacture
of custom components
and the formulation,
fill and finish
of the final product.
We
do not currently own
or operate manufacturing facilities
for these processes. We
currently rely upon contract
manufacturing organizations, including those mentioned below, to produce our product candidates for both pre-clinical and clinical use
and will
continue to
rely upon
these relationships
for commercial
manufacturing if
any of
our product
candidates obtain
regulatory
approval. Although
we rely
upon contract
manufacturers, we
also have
personnel with
extensive manufacturing
experience that
can
oversee the relationships with our manufacturing partners.
Historically,
we
have
depended
heavily
on
UBI
and
its
affiliates
for
our
business
operations,
including
the
provision
of
research,
development
and
manufacturing
services.
Currently,
UBIA
provides
testing
services
for
UB-312
and
UB-612,
UBI
Pharma
Inc.
(“UBIP”)
provides
testing
relating
to
formulation-fill-finish
services
for
UB-312,
and
United
BioPharma,
Inc.
(“UBP”)
is
the
sole
manufacturer of protein for UB-612. Our commercial arrangements with UBI and its affiliates are described in more detail below.
Formulation-fill-finish services for UB-612 are provided by multiple contract manufacturers to ensure adequate capacity and minimize
supply
chain
risks.
For
supply
of
our
other
custom
components,
in
addition
to
protein
manufacturing
conducted
by
UBP,
we
have
engaged third party CMOs, including
C S Bio Co. (“CSBio”)
as our primary peptide supplier for
UB-612 peptides and Wuxi
STA
for
process development and manufacturing services of oligonucleotides.
UBI Group Manufacturing Partnership
We
primarily rely
on our
relationships with
third-party contract
manufacturing organizations
to produce
product candidates
for our
clinical trials. Historically, we have heavily depended on UBI as a
manufacturing partner for these efforts. In support
of our COVID-19
program (UB-612), we have entered into a
master services agreement with UBP and
an additional master services agreement with
UBI,
UBIA and UBP.
Pursuant to these agreements, UBI
and its affiliates have
provided research, development, testing
and manufacturing
services to us
and continue to
provide manufacturing services
for our protein.
Payment terms are
mutually agreed in
connection with
each work order relating
to services rendered. Our
agreement with UBP will
expire on the later
of March 2024 and
the completion of
all services
under the
last work
order executed
prior to
such scheduled
expiration and our
agreement with UBI,
UBIA and
UBP will
expire on
the later
of September
2023 and
the completion
of all
services under
the last
work order
executed prior
to such
scheduled
expiration. We also have
a management services
agreement with
UBI pursuant to
which UBI has
provided research and
prior back office
administrative services to us and acts as our agent with respect
to certain matters relating our COVID-19 program. UBI is compensated
for its services on a cost-plus basis. The agreement terminates upon mutual agreement between the parties.
In support of our
chronic disease pipeline,
we have entered into
master service agreements with
each of UBI, UBIA
and UBIP. Pursuant
to these agreements, UBI currently provides limited research services to us on a cost-plus basis, UBIA provides
testing services related
to UB-312 clinical trial material already manufactured
and UBIP has provided manufacturing, quality control,
testing, validation, GMP
warehousing and
supply services
to us
for UB-312
on payment
terms agreed
in connection
with work
orders relating
to the
services
rendered. UBI and its
affiliates no longer provide
clinical or manufacturing services for
other programs. These agreements
may all be
terminated for convenience upon 180 days’ notice or less.
We have
also entered into a research and development services agreement
with UBI. Pursuant to this agreement, UBI and
its affiliates
provide research and development services to us. Service fees payable by
us to UBI for research and development projects undertaken
in accordance with the research and development plan
will be determined by a joint steering
committee and set forth in a research and
development plan. The
aggregate services fees payable
by us under
the research and
development services agreement are
subject to a
quarterly cap throughout the term of the agreement. The research and development services agreement expires in August
2026.
Intellectual Property
Our ability to
obtain and maintain
intellectual property protection
for our product
candidates and core
technologies is fundamental
to
the
long-term
success
of
our
business.
We
rely
on
a
combination
of
intellectual
property
protection
strategies,
including
patents,
trademarks, trade secrets, license agreements, confidentiality policies and procedures, nondisclosure agreements, invention assignment
agreements and technical
measures designed to
protect the intellectual
property and commercially
valuable confidential information
and
data used in our business.
In summary, our patent estate includes issued patents and patent applications which claims cover our
Vaxxine
Platform and each of our
product candidates. As of December 31, 2021, our patent estate included ten U.S. issued patents, twelve U.S. patent applications, three
U.S. provisional patent
applications, four pending
Patent Cooperation Treaty
(“PCT”) patent applications,
98 issued non-U.S.
patents
and 194 pending non-U.S. patent applications.
For our
product candidates
targeting the
prevention and
treatment of
neurodegenerative disease,
including claims
covering UB-311,
UB-312, patent rights are provided by patents and patent applications, the majority of which are being prosecuted in the
United States,
Australia,
Brazil,
Canada,
China,
the
EPO,
Hong
Kong,
Indonesia,
India,
Israel,
Japan,
the
Republic
of
Korea,
Mexico,
Russia,
Singapore,
South
Africa,
Taiwan
and
the
United
Arab
Emirates
directed
to
peptide
vaccines
for
the
prevention
and
treatment
of
neurodegenerative diseases.
These issued
patents and
patent applications,
if issued,
are expected
to expire
between 2022
and 2039,
excluding any patent term adjustments or patent term extensions.
For our product candidates directed to peptide immunogens targeting CGRP and formulations thereof
for the prevention and treatment
of migraine, including
UB-313, patent rights
may be provided
by a patent
family being prosecuted
in the United
States, Australia, Brazil,
Canada, China,
India, Indonesia,
Japan, Mexico, Russia,
the Republic
of Korea, Singapore,
Taiwan and the United
Arab Emirates. These
patent applications, if issued, are expected to expire in 2039, excluding any patent term adjustments or patent term extensions.
For
our
product
candidates
targeting
cholesterol
and
cardiovascular
disease,
including
our
anti-PCSK9
product
candidate
targeting
PCSK9
and
formulations
thereof
for
prevention
and
treatment
of
PCSK9-mediated
disorders,
we
are
in
the
process
of
acquiring
a
pending patent application in Taiwan and a pending PCT patent application. This Taiwanese
patent application, if issued, and any U.S.
or non-U.S. patent issuing from this PCT
patent application, if such patent is issued,
is expected to expire in 2041, excluding
any patent
term adjustment or patent term extension.
For our product
candidates targeting SARS-CoV-2,
including UB-612 for
COVID-19, we have
pending patent applications
in Brazil,
Pakistan and Taiwan,
one pending PCT patent
application and three provisional
patent applications in the
United States. These patent
applications, if issued, and any U.S. or
non-U.S. patent issuing from this PCT or
provisional patent application, are expected to expire
between 2041 and 2042, excluding any patent term adjustments or patent term extensions.
For each product candidate utilizing
the Vaxxine
platform, additional patent rights directed
to artificial T helper
cell epitopes and to a
CpG delivery system are provided by
patents and patent applications, the majority
of which are being prosecuted in
the United States,
Australia, Austria,
Belgium, Brazil,
Canada, Chile,
China, Colombia,
Denmark, the
EPO, France,
Germany,
Hong Kong,
Indonesia,
India, Ireland, Israel, Italy, Japan, Mexico, the Netherlands, New Zealand, Peru, Philippines, the Republic of Korea, Russia, Singapore,
South
Africa,
Spain,
Sweden,
Switzerland/Liechtenstein,
Taiwan,
Thailand,
the
United
Arab
Emirates,
the
United
Kingdom
and
Vietnam. These
issued patents and patent
applications, if issued, are
expected to expire between
2023 and 2039, excluding
any patent
term adjustments or patent term extensions.
The term of
individual patents
depends on the
countries in which
they are obtained.
The patent
term is 20
years from the
earliest effective
filing date of a
non-provisional patent application in most
of the countries in
which we file, including the
United States. In the United
States, a
patent’s
term may
be lengthened
by patent
term adjustment,
which compensates
a patentee
for administrative
delays by
the
USPTO in
examining and granting
a patent, or
may be shortened
if a patent
is terminally disclaimed
over an earlier
filed patent. The
term of a patent that
covers a drug or biological product
may also be eligible for patent
term extension when FDA approval is
granted
for a
portion of
the term
effectively lost
as a
result of
the FDA
regulatory review
period, subject
to certain
limitations and
provided
statutory and regulatory requirements are met.
In addition to our reliance on patent protection for our inventions, products and technologies, we also seek to protect
our brand through
the procurement of trademark rights.
We
own registered trademarks and pending
trademark applications for our brands,
including our
“Vaxxinity”, “United Neuroscience” and “COVAXX” brands and
other related names
and logos, in
the United States
and certain
foreign
jurisdictions.
Furthermore, we
rely upon
trade secrets
and know-how
and continuing
technological innovation
to develop
and maintain
our competitive
position. However, trade
secrets and know-how can be
difficult to protect. We
generally control access to and
use of our trade
secrets
and know-how, through
the use
of internal
and external
controls, including
by entering
into nondisclosure
and confidentiality
agreements
with
our
employees
and
third
parties.
We
cannot
guarantee,
however,
that
we
have
executed
such
agreements
with
all
applicable
counterparties, that such agreements will not be breached or that these agreements will afford us adequate protection of our intellectual
property and
proprietary rights.
Furthermore, although
we take
steps to
protect our
proprietary information
and trade
secrets, third
parties
may independently develop
substantially equivalent proprietary
information and techniques
or otherwise gain
access to our trade
secrets
or disclose our technology. As a result, we may not be able to meaningfully protect our trade secrets. For further discussion of the risks
relating to intellectual property, see “Risk Factors-Risks Related to Our Intellectual Property Rights.”
Platform License Agreement
In August 2021, Vaxxinity
entered into a license
agreement (the “Platform License
Agreement”) with UBI and
certain of its affiliates
(collectively, the “Licensors”) that
expanded intellectual
property rights previously
licensed under
the Original
UBI Licenses (as
defined
below). Pursuant
to the
Platform License
Agreement, Vaxxinity
obtained a
worldwide, sublicensable
(subject to
certain conditions),
perpetual, fully paid-up, royalty-free (i) exclusive license (even as to the Licensors) under all patents owned or otherwise controlled by
the Licensors or their affiliates
existing as of the effective
date of the Platform License
Agreement, (ii) exclusive license (except
as to
the Licensors) under all patents owned or otherwise controlled by the Licensors or their affiliates arising after the effective
date during
the term of the Platform License Agreement, and (iii) non-exclusive
license under all know-how owned or otherwise controlled by the
Licensors or their affiliates existing as of the
effective date or arising during the term of
the Platform License Agreement, in each of
the
foregoing
cases,
to
research,
develop,
make,
have
made,
utilize,
import,
export,
market,
distribute,
offer
for
sale,
sell,
have
sold,
commercialize or otherwise exploit peptide-based vaccines in the field of all
human prophylactic and therapeutic uses, except for such
vaccines related to human
immunodeficiency virus (HIV), herpes
simplex virus (HSE) and
Immunoglobulin E (IgE). The
patents and
patent applications licensed
under the Platform
License Agreement inclusde
claims directed to
a CpG delivery
system, artificial T
helper
cell
epitopes
and
certain
designer
peptides
and
proteins
utilized
in
UB-612.
As
partial
consideration
for
the
rights
and
licenses
we
received pursuant to the Platform License Agreement, we granted UBI a warrant to purchase 1,928,020 shares of our Class A common
stock (“UBI Warrant”). The UBI
Warrant is exercisable at an
exercise price of
$12.45 per share
(subject to adjustment
pursuant thereto),
is not subject to vesting, and has a term of five years.
Vaxxinity
has the first right to control the filing, prosecution, maintenance and enforcement of the licensed patents
at Vaxxinity’s
own
expense, subject to the
Licensors’ right to comment on
and review any patent filings.
The Platform License Agreement shall
continue
until the parties mutually consent in writing to terminate the agreement. Upon such termination, all licenses granted
under the Platform
License Agreement shall
terminate and Vaxxinity
will assign any
regulatory documentation previously
assigned to Vaxxinity
back to
the Licensors.
Coverage and Reimbursement
Sales of
our product
candidates in
the United
States will
depend, in
part, on
the extent
to which
third- party
payors, including
government
health programs such
as Medicare and
Medicaid, commercial insurance
and managed health
care organizations provide
coverage and
establish
adequate
reimbursement levels
for
such
product
candidates.
The
process
for
determining whether
a
third-party payor
will
provide coverage for a pharmaceutical
or biological product is typically separate
from the process for setting
the price of such a
product
or for establishing the reimbursement rate
that the payor will pay for
the product once coverage is
approved, and we may also
need to
provide
discounts
to
purchasers,
private
health
plans
or
government
healthcare
programs,
as
increasingly,
third-party
payors
are
requiring that
drug companies provide
them with
predetermined discounts from
list prices and
are challenging the
prices charged
for
medical products.
As a
result, a
third-party payor’s
decision to
provide coverage
for a
pharmaceutical or
biological product
does not
imply that the reimbursement rate will be adequate for commercial viability, and inadequate reimbursement rates, including significant
patient
cost
sharing
obligations,
may
deter
patients
from
selecting
our
product
candidates.
Obtaining
coverage
and
reimbursement
approval of a
product from a
third-party payor is
a time-consuming and
costly process that
could require us
to provide to
each payor
supporting scientific, clinical
and cost-effectiveness data
for the use
of our product
on a payor-by-payor
basis, with no
assurance that
coverage and adequate reimbursement will
be obtained. Third-party payors may limit
coverage to specific products on an
approved list,
also known as a formulary, which might not include all of the approved products for a particular indication.
Further,
no uniform
policy for
coverage and
reimbursement exists
in the
United States,
and coverage
and reimbursement
can differ
significantly from
payor to payor. In
general, factors
a payor
considers in
determining coverage
and reimbursement
are based
on whether
the product is a covered benefit under its health plan; safe, effective,
and medically necessary, including its regulatory approval
status;
medically appropriate for the specific
patient; cost-effective; and neither experimental
nor investigational. 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 such,
one third-party payor’s
decision to cover a
particular medical product
or service does not ensure that other payors will also
provide coverage for the medical product or service, and the level
of coverage and
reimbursement can differ significantly from payor to payor. Even if favorable coverage and reimbursement status is attained for one or
more products for which
we receive regulatory approval,
less favorable coverage
policies and reimbursement
rates may be implemented
in the future.
Product Approval and Government Regulation
Government authorities in the United States, at the
federal, state and local level, and other countries extensively
regulate, among other
things,
the
research,
development,
testing,
manufacture,
quality
control,
approval,
labeling,
packaging,
storage,
record-keeping,
promotion, advertising, distribution,
post-approval monitoring and
reporting, marketing and
export and import
of products such as
those
we are
developing. Any
product candidate
that we
develop must
be approved
by the
FDA before
it may
be legally
marketed in
the
United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries.
U.S. Drug Development Process
In the United States,
the development, manufacturing and marketing
of human drugs and vaccines
are subject to extensive
regulation.
The FDA
regulates drugs
under the
Federal Food,
Drug and
Cosmetic Act
(“FDCA”) and
implementing regulations,
and biological
products, including vaccines, under provisions of the FDCA and the
Public Health Service Act. Drugs and vaccines are also subject
to
other federal, state
and local statutes
and regulations. The
process of obtaining
regulatory approvals and
the subsequent compliance
with
appropriate federal, state, local and foreign statutes and regulations
require the expenditure of substantial time and financial resources.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after
approval, may
subject an
applicant to
administrative or
judicial sanctions.
FDA sanctions
could include
refusal to
approve pending
applications, withdrawal of
an approval, clinical
hold, warning
letters, product recalls,
product seizures, total
or partial suspension
of
production or distribution, injunctions, fines,
refusals of government contracts, debarment,
restitution, disgorgement or civil or criminal
penalties. Any agency
or judicial enforcement
action could have
a material adverse
effect on us.
The process required
by the FDA
before
a drug or biological product may be marketed in the United States generally involves the following:
•
completion
of
nonclinical
laboratory
tests,
animal
studies
and
formulation
and
stability
studies
according
to
GLP
or
other
applicable regulations;
•
submission to the FDA of an application for an IND, which must become effective before human clinical trials may begin;
•
performance of adequate
and well-controlled human
clinical trials according
to the FDA’s
regulations commonly referred
to
as GCPs to establish the safety and efficacy of the proposed drug for its intended use;
•
submission to the FDA of an NDA or BLA for a new drug;
•
satisfactory completion of
an FDA inspection
of the manufacturing
facility or facilities
where the drug
is produced to
assess
compliance
with
the
FDA’s
cGMP,
to
assure
that
the
facilities,
methods
and
controls
are
adequate
to
preserve
the
drug’s
identity, strength, quality and purity;
•
potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the NDA or BLA; and
•
FDA review and approval of the NDA or BLA.
The
lengthy process
of
seeking required
approvals and
the continuing
need for
compliance with
applicable statutes
and
regulations
require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds
with potential therapeutic value
in humans, the product
candidate enters the pre-clinical
study stage. Pre-
clinical tests, also
referred to as
nonclinical studies, include
laboratory evaluations of
product chemistry,
toxicity and formulation,
as
well as
animal studies
to assess
the potential
safety and
activity of
the product
candidate. The
conduct of
the pre-clinical
tests must
comply with federal regulations and requirements including GLP. The sponsor must submit the results of the pre-clinical tests, together
with manufacturing information, analytical data, any available clinical data
or literature and a proposed clinical protocol, to the FDA as
part of the
IND. The IND
automatically becomes effective
30 days after
receipt by the
FDA, unless the
FDA imposes a
clinical hold
within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical
trial can begin. The FDA may also impose clinical holds on
a product candidate at any time before or during clinical trials due to safety
concerns or non-compliance. Accordingly,
we cannot be sure that
submission of an IND will result
in the FDA allowing clinical trials
to begin, or that, once begun, issues will not arise that suspend or terminate such trial.
Clinical trials
involve the
administration of
the product
candidate to
healthy volunteers or
patients under
the supervision
of qualified
investigators,
generally
physicians
not
employed
by
or
under
the
trial
sponsor’s
direct
control.
Clinical
trials
are
conducted
under
protocols detailing, among other
things, the objectives of
the clinical trial, dosing
procedures, subject selection and
exclusion criteria,
and the parameters to be used to monitor subject safety. Each protocol must be submitted to
the FDA as part of the IND. Clinical trials
must be conducted in accordance
with the FDA’s regulations comprising the good clinical practices requirements. Further, each
clinical
trial must be reviewed and approved by
an independent IRB at or servicing each
institution at which the clinical trial will
be conducted.
An IRB is charged
with protecting the
welfare and rights
of trial participants
and considers such
items as whether
the risks to
individuals
participating in the clinical trials
are minimized and are reasonable
in relation to anticipated benefits.
The IRB also approves the
form
and content
of the
informed consent
that must
be signed
by each
clinical trial
subject or
his or
her legal
representative and
provide
oversight for the clinical trial until completed.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
•
Phase 1
. The drug is initially introduced into healthy human subjects and tested for safety, dosage
tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases,
especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may
be
conducted in patients;
•
Phase 2
.
The
drug is evaluated in a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal
dosage and dosing schedule; and
•
Phase 3
. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an
expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish
the overall
risk/benefit ratio of the product and provide an adequate basis for product labeling. Generally, a well-controlled Phase 3 clinical trial is
required by the FDA for approval of an NDA or BLA.
Post-approval clinical trials, sometimes referred
to as Phase 4
clinical trials, may be
conducted after initial marketing approval.
These
clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
During all
phases of
clinical development,
regulatory agencies
require extensive
monitoring and
auditing of
all clinical
activities, clinical
data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and
written IND safety reports must
be promptly submitted to the
FDA and the investigators for
serious and unexpected adverse events or
any finding from
tests in laboratory
animals that suggests
a significant risk
for human subjects.
Phase 1, Phase
2 and Phase
3 clinical
trials may
not be
completed successfully
within any
specified period,
if at
all. The
FDA or
the sponsor
or its
data safety
monitoring
board may
suspend a clinical
trial at
any time on
various grounds, including
a finding that
the research subjects
or patients
are being
exposed to
an unacceptable
health risk.
Similarly,
an IRB
can suspend
or terminate
approval of
a clinical
trial at
its institution
if the
clinical trial
is not being
conducted in accordance
with the IRB’s requirements
or if the
drug has been
associated with
unexpected serious
harm to patients.
Concurrently with clinical
trials, companies usually
complete additional animal
studies and must
also develop additional
information
about the chemistry and
physical characteristics of the drug
as well as finalize
a process for manufacturing
the product in commercial
quantities in
accordance with
cGMP requirements.
The manufacturing
process must
be capable
of consistently
producing quality
batches
of the product candidate and, among other things, must
develop methods for testing the identity, strength, quality and purity of the final
drug. Additionally,
appropriate packaging must be selected and
tested, and stability studies must
be conducted to demonstrate that
the
product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
Assuming successful completion of all required
testing in accordance with all applicable
regulatory requirements, the results of product
development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
tests conducted on
the
chemistry
of
the
drug,
proposed
labeling
and
other
relevant
information
are
submitted
to
the
FDA
as
part
of
an
NDA
or
BLA
requesting approval to market the product.
The submission of an NDA or BLA
is subject to the payment of substantial
fees; a waiver of
such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or
BLA or supplement to an NDA or BLA must contain data
to assess
the safety
and effectiveness
of the
drug for
the claimed
indications in
all relevant
pediatric subpopulations
and to
support
dosing and administration for each
pediatric subpopulation for which
the product is safe and
effective. The FDA may grant
deferrals for
submission of data
or full or
partial waivers. Unless
otherwise required by
regulation, PREA does
not apply to
any drug for
an indication
for which orphan designation has been granted.
The FDA reviews all NDAs or
BLAs submitted to determine if they
are substantially complete before it accepts
them for filing. If the
FDA determines that an
NDA or BLA is
incomplete or is found
to be non-navigable, the
filing may be refused
and must be re-submitted
for consideration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals
and policies agreed to by the FDA under
the Prescription Drug User Fee Act (“PDUFA”),
the FDA has 10 months from acceptance of
filing in which to complete its initial review of a
standard NDA or BLA and respond to the applicant, and
six months from acceptance
of filing for a priority
NDA or BLA. The FDA does
not always meet its PDUFA
goal dates. The review process
and the PDUFA
goal
date
may
be
extended
by
three
months
or
longer
if
the
FDA
requests
or
the
NDA
or
BLA
sponsor
otherwise
provides
additional
information or clarification regarding information already provided in the submission before the PDUFA goal date.
After the NDA or BLA submission
is accepted for filing, the
FDA reviews the NDA or BLA
to determine, among other things,
whether
the proposed product is
safe and effective for
its intended use, and
whether the product is
being manufactured in accordance
with cGMP
to assure and preserve the product’s identity,
strength, quality and purity. The FDA may
refer applications for novel drug or biological
products or drug
or biological products
which present difficult
questions of safety
or efficacy to
an advisory committee,
typically a panel
that includes clinicians
and other experts,
for review, evaluation and
a recommendation as
to whether the
application should be
approved
and
under
what
conditions.
The
FDA
is
not
bound
by
the
recommendations
of
an
advisory
committee,
but
it
considers
such
recommendations carefully when making decisions.
During the drug approval
process, the FDA also
will determine whether a
REMS
is necessary to assure the safe use of the drug. If the FDA concludes a REMS
is needed, the sponsor of the NDA or BLA must submit
a
proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required.
Before approving an NDA or BLA, the FDA
will inspect the facilities at which the product
is manufactured. The FDA will not approve
the product unless
it determines that
the manufacturing processes
and facilities are
in compliance with
cGMP requirements and
adequate
to assure consistent
production of the
product within required
specifications. The FDA requires
vaccine manufacturers to
submit data
supporting
the
demonstration
of
consistency
between
manufacturing
batches,
or
lots.
The
FDA
works
together
with
vaccine
manufacturers to develop
a lot release
protocol, the tests
conducted on each
lot of vaccine
post-approval. Additionally, before approving
an NDA
or BLA, the
FDA will
typically inspect
the sponsor
and one
or more
clinical sites
to assure that
the clinical
trials were conducted
in
compliance
with
IND
study
requirements.
If
the
FDA
determines
that
the
application,
manufacturing
process
or
manufacturing
facilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information.
The NDA
or BLA
review and
approval process
is lengthy
and difficult
and the
FDA may
refuse to
approve an
NDA or
BLA if
the
applicable regulatory criteria
are not satisfied
or may require
additional clinical data
or other data
and information. Even
if such data
and information
is submitted,
the FDA
may ultimately
decide that
the NDA
or BLA
does not
satisfy the
criteria for
approval. Data
obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
The
FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA. The complete
response letter usually
describes
all of
the
specific deficiencies
in the
NDA or
BLA
identified by
the FDA.
The deficiencies
identified may
be minor,
for
example, requiring
labeling changes,
or major,
for example,
requiring additional
clinical trials.
Additionally,
the complete
response
letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete
response letter is issued,
the applicant may either
submit new information, addressing
all of the deficiencies
identified in the letter,
or
withdraw the application.
If a product receives regulatory
approval, the approval may be
significantly limited to specific diseases
and dosages or the
indications
for use may otherwise be
limited, which could restrict the commercial
value of the product. Further,
the FDA may require that
certain
contraindications, warnings or
precautions be included
in the product
labeling. In addition,
the FDA may
require post-marketing clinical
trials, sometimes referred to as Phase 4 clinical trials, which are
designed to further assess a product’s safety and effectiveness and may
require testing and surveillance programs to
monitor the safety of approved
products that have been commercialized. In
addition, new
government requirements, including those
resulting from new legislation,
may be established, or
the FDA’s
policies may change, which
could impact the timeline for regulatory approval or otherwise impact ongoing development programs.
Expedited Development and Review Programs
The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet
certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-
threatening condition and preclinical
or clinical data
demonstrate the potential to
address unmet medical needs
for the condition.
Fast
track designation
applies to
the combination of
the product and
the specific indication
for which
it is
being studied. The
sponsor can
request the FDA to designate the
product for fast track status any
time before receiving NDA or BLA
approval, but ideally no later than
the pre-NDA or pre-BLA meeting.
Additionally,
a
drug
or
biologic
may
be
eligible
for
designation
as
a
breakthrough
therapy
if
the
product
is
intended,
alone
or
in
combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and
preliminary clinical evidence
indicates
that
the
product
may
demonstrate
substantial
improvement
over
currently
approved
therapies
on
one
or
more
clinically
significant endpoints.
The benefits
of breakthrough
therapy designation
include the
same benefits
as fast
track designation,
plus intensive
guidance from the FDA to facilitate an efficient drug development program.
Any product
submitted to
the FDA for
marketing, including under
a fast track
or breakthrough therapy
designation program,
may be
eligible for
other types
of FDA
programs intended
to expedite
development and
review, such as
priority review
and accelerated
approval.
Any product is eligible
for priority review if
it treats a serious or
life-threatening condition and, if
approved, would provide a
significant
improvement
in
safety
and
effectiveness
compared
to
available
therapies.
Priority
review
reduces
the
review
time
for
an
initial
or
supplemental marketing application by four months.
A product may be
eligible for accelerated
approval if it
treats a serious
or life-threatening condition
and generally provides
a meaningful
advantage over available therapies based on an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a
clinical endpoint that
can be measured
earlier than irreversible
morbidity or mortality
("IMM") that is
reasonably likely to
predict an
effect on IMM
or other clinical
benefit. As a
condition of accelerated approval,
the FDA requires
that a sponsor of
a drug or
biologic
receiving
accelerated
approval
subsequently
provide
additional
data
confirming
the
anticipated
clinical
benefit,
for
example
by
performing adequate and well-controlled post-marketing clinical
trials. If clinical benefit is not confirmed,
accelerated approval may be
revoked. If the FDA concludes that a drug
or biologic shown to be effective can be safely
used only if distribution or use is restricted,
it
may require such post-marketing restrictions, as it deems necessary to assure safe use of the product.
Fast
track designation,
breakthrough therapy
designation, priority
review,
and accelerated
approval do
not
change the
standards for
approval but may expedite the development or approval process.
EUA Approval
The Commissioner
of the
FDA, under
delegated authority from
the Secretary of
the U.S. Department
of Health
and Human
Services
(“DHHS”) may,
under certain circumstances,
issue an EUA
that would permit
the use of
an unapproved drug
product or unapproved
use of an approved
drug product. Before
an EUA may be
issued, the Secretary
must declare an emergency
based on one of
the following
grounds:
•
a
determination
by
the
Secretary
of
the
Department
of
Homeland
Security
that
there
is
a
domestic
emergency,
or
a
significant potential for a domestic
emergency, involving a heightened risk of attack with
a specified biological, chemical,
radiological or nuclear agent or agents;
•
a determination by the
Secretary of the Department
of Defense that there
is a military emergency, or a significant
potential
for a military
emergency, involving a heightened
risk to U.S.
military forces
of attack with
a specified
biological, chemical,
radiological or nuclear agent or agents; or
•
a determination by the Secretary of the DHHS that a
public health emergency that affects, or has
the significant potential
to affect, national security and that involves a
specified biological, chemical, radiological or nuclear agent or agents, or
a
specified disease or condition that may be attributable to such agent or agent.
In order to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available,
it is
reasonable to
believe that
the product
may be
effective in
diagnosing, treating
or preventing
a disease
attributable to
the agents
described above, that the
product’s potential
benefits outweigh its potential
risks and that
there is no adequate
approved alternative to
the product.
Although an EUA cannot
be issued until after
an emergency has been
declared by the Secretary
of DHHS, the FDA
strongly encourages
an entity with a
possible candidate product,
particularly one at an
advanced stage of
development, to contact the
FDA center responsible
for the candidate
product before a determination
of actual or potential
emergency. Such an entity may submit
a request for consideration
that includes data to
demonstrate that, based on
the totality of scientific
evidence available, it is
reasonable to believe that
the product
may be
effective
in diagnosing,
treating or
preventing the
serious or
life-threatening disease
or condition.
This is
called a
pre-EUA
submission and
its purpose
is to
allow FDA
review considering
that during
an emergency,
the time
available for
the submission
and
review of an EUA request may be severely limited.
Post-Approval Requirements
Any drug or
biological products for
which we or
our collaborators receive
FDA approvals are
subject to continuing
regulation by the
FDA, including,
among other
things, record-keeping
requirements, reporting
of adverse
experiences with
the product,
providing the
FDA with updated safety and efficacy
information, product sampling and distribution requirements, complying with
certain electronic
records and
signature requirements
and complying
with FDA
promotion and
advertising requirements, which
include, among
others,
standards for
direct-to-consumer advertising,
promoting drugs
for uses
or in
patient populations
that are
not described
in the
drug’s
approved
labeling
(known
as
“off-label
use”),
industry-sponsored
scientific
and
educational
activities,
and
promotional
activities
involving the internet.
Failure to comply
with FDA requirements
can have negative
consequences, including adverse
publicity,
enforcement letters from
the
FDA,
mandated
corrective
advertising
or
communications
with
doctors,
and
civil
or
criminal
penalties.
Although
physicians
may
prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.
Manufacturers of
our product
candidates are
required to
comply with
applicable FDA
manufacturing requirements
contained in
the
FDA’s
cGMP
regulations.
cGMP
regulations
require,
among
other
things,
quality
control
and
quality
assurance
as
well
as
the
corresponding maintenance of records and documentation. Following approval, the FDA
continues to monitor vaccine quality through
real-time monitoring of lots by requiring manufacturers to submit certain information for each vaccine lot. Vaccine manufacturers may
only distribute a lot following release by the
FDA. Drug manufacturers and other entities involved
in the manufacture and distribution
of
approved drugs
are required
to register
their establishments
with the
FDA and
certain state
agencies, and
are subject
to periodic
unannounced inspections by the
FDA and certain state
agencies for compliance with
cGMP and other laws.
Accordingly, manufacturers
must continue to expend time, money and effort
in the area of production and quality
control to maintain cGMP compliance. Discovery
of problems with a product after approval may result in restrictions on a product, manufacturer or holder
of an approved NDA or BLA,
including withdrawal of
the product
from the
market. In
addition, changes
to the
manufacturing process generally
require prior
FDA
approval before being implemented, and other types of changes to the approved product, such as adding new indications and additional
labeling claims, are also subject to further FDA review and approval.
Taiwan Drug Development Process
The regulatory processes in Taiwan are generally similar with those in the United States, and include:
•
Extensive
pre-clinical
laboratory
tests,
pre-clinical
animal
studies
and
formulation
studies
in
accordance
with
applicable
regulations.
•
Submission to the
TFDA of
an IND, which
must be
approved by the
TFDA before human
clinical trials may
begin. Human
clinical trials in Taiwan typically include:
•
Phase
I
trials.
The
new
drug
product
is
initially
introduced
into
healthy
human
subjects
and
tested
for
safety,
dosage
tolerance,
absorption,
metabolism
and
side
effects
associated
with
increasing
doses.
If
possible,
early
evidence
of
effectiveness of the new drug product is collected as well.
•
Phase II trials. The new drug product is evaluated for its
efficacy and proposed indication in a limited patient population,
as well as its adverse effects and safety risks.
•
Phase III trials. The new drug
product is further evaluated for dosage
tolerance, efficacy and safety in an expanded
patient
population.
•
Submission to the TFDA
of an NDA, which
generally requires two Phase
III trials, unless the
NDA otherwise qualifies for
exemptions as provided by the TFDA.
In
addition
to
information
and
data
collected
from
the
pre-clinical
and
clinical
trials
of
the
new
drug
product,
chemistry
data
and
information regarding
manufacturing and
controls serve
as significant
considerations during
the course
of the
TFDA review
and approval
process. Where
a new
drug product
will be
manufactured in
facilities located
in Taiwan,
the TFDA
has the
authority to
inspect and
assess compliance with the Pharmaceutical Inspection Co-operation Scheme GMP regulations to ensure that the facilities,
methods and
controls are adequate to
preserve the drug’s
identity, strength,
quality and purity.
Further, the TFDA
may audit the pre-clinical
and/or
clinical trial
sites that
generated the
data in
support of
the NDA.
Finally,
the TFDA
must review
and approve
the NDA
prior to
any
commercial marketing or sale of the drug in Taiwan.
Regulation in Europe and Other Regions
In addition
to regulations
in the
United States
and Taiwan,
we and
our collaborators
are subject
to a
variety of
regulations in
other
jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products.
Whether or
not we
or our
collaborators obtain
FDA approval
for a
product, we
must obtain
the requisite
approvals from
regulatory
authorities in
foreign countries
prior to
the commencement
of
clinical trials
or marketing
of
the product
in those
countries. Certain
countries outside
of the
United States
have a
similar process
that requires
the submission
of a
clinical trial
application much
like the
IND
prior
to
the
commencement
of
human
clinical
trials.
In
the
European
Union,
for
example,
a
CTA
must
be
submitted
to
each
country’s national
health authority and
an independent ethics committee,
much like the
FDA and IRB,
respectively. Once
the CTA
is
approved in accordance with a country’s requirements, clinical trial development may proceed.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country
to country.
In all cases,
the clinical trials
are conducted in
accordance with GCPs
and the
applicable regulatory requirements
and the
ethical principles that have their origin in the Declaration of Helsinki.
To
obtain regulatory
approval of
an investigational
drug or
biological product
under European
Union regulatory
systems, we
or our
strategic partners must submit a marketing authorization application.
The application in the European Union is
similar to that required
in the United States, with the exception of, among other things, country-specific document requirements.
For other countries
outside of the
European Union, such
as countries in
Asia, Europe and
Latin America, the
requirements governing
the conduct of clinical trials, product licensing,
pricing and reimbursement vary from country
to country. In all cases, again, the clinical
trials are conducted in
accordance with GCPs and
the applicable regulatory requirements
and the ethical principles
that have their origin
in the Declaration of Helsinki.
Employees and Human Capital Resources
As of December 31, 2021, we employed 89 full-time employees
and no part-time employees. Of these 89 full-time employees,
69 were
located in the United States, 5 were located in Taiwan and 5 were located in Ireland. None of our employees are represented by a labor
union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages.
Compensation, Benefits, Recruitment and Retention Strategy
We aim to focus on attracting,
motivating and retaining
talented employees with
relevant experience who
can contribute to the
sustained
performance of the Company and its day-to-day operations.
We believe our total compensation package helps recruit
and retain our employees.
We strive to provide compensation and benefits that
are competitive to market
and create incentives
to attract and retain
employees. Our compensation
package includes market-competitive
pay,
broad-based stock
grants, health
care and
401(k) plan
benefits, paid
time off
and family
leave, among
others. We
also provide
annual incentive bonus opportunities that are
tied to both company performance
as well as individual performance
to foster a pay-for-
performance culture.
Scientific Advisory Board
We have assembled a highly qualified scientific
advisory board composed of advisors
who have deep expertise
in the fields of biologics
and
vaccine
development,
as
well
as
in
the
relevant
therapeutic
areas
for
our
product
candidates.
Our
scientific
advisory
board
is
composed of George Siber,
M.D.; Donna Ambrosino, M.D.; Brad
Boeve; Nick Fox, M.D.;
Richard Mohs, Ph.D.; Eric Reiman,
M.D.;
Jeffrey Cummings, M.D., ScD.; Barney
Graham, M.D., Ph.D.; Peter
A. Patriarca, M.D.; Stanley A.
Plotkin, M.D.; Sharon Lewin, A.O.,
FRACP.,
Ph.D., FAHMS,
Wayne Koff, Ph.D. and Thomas P.
Monath, M.D.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Investing in our Class
A common stock
involves a high
degree of risk.
The following information
sets forth risk
factors that could cause
our actual results to differ materially from those contained in forward-looking statements
we have made in this Annual Report on Form
10-K
and those
we may
make from
time to
time. You
should carefully
consider the
risks described
below,
in addition
to the
other
information contained in this Report
and our other public
filings, before you decide
to purchase shares of
our Class A common
stock.
Our business, financial condition or
results of operations could
be harmed by any
of these risks. The
risks and uncertainties described
below are not
the only ones
we face. Additional
risks not presently
known to us
or other factors
not perceived by
us to present
significant
risks to our business at this time also may impair our business operations.
Summary Risk Factors
Our business is
subject to a
number of risks,
including risks
that may prevent
us from achieving
our business
objectives or may
adversely
affect our business, financial condition, results of operations
and prospects. These risks are discussed
more fully under Part II, Item 1A.
“Risk Factors.” The following is a summary of some of the principal risks we face:
•
clinical drug development involves a lengthy and expensive process, and if
our pre-clinical development or clinical trials
are prolonged or delayed or do not achieve expected results, we may be unable to commercialize our product candidates;
•
we depend on intellectual property
licensed from UBI and its
affiliates, the termination of which could
result in the loss of
significant rights;
•
even if
we obtain
regulatory approval
of any
of our
product candidates
in Taiwan
or other
jurisdictions, we
may never
obtain approval for or commercialize our product candidates in other jurisdictions;
•
after receipt
of regulatory
approval for
a product
candidate, our
products will
remain subject
to regulatory
scrutiny and
post-marketing requirements, which may include burdensome post-approval study or risk management requirements;
•
if we
are able to
commercialize any product
candidate, the successful
commercialization of such
product candidate will
depend
on
the
extent
governmental
authorities,
private
health
insurers
and
other
third-party
payors
provide
coverage,
adequate reimbursement levels and favorable pricing policies;
•
the manufacture of peptide-based medicines is complex and manufacturers often encounter difficulties in production;
•
we have no history of commercializing
pharmaceutical products, which may make
it difficult to evaluate the prospects for
our future viability;
•
the regulatory
landscape that
will govern
our product candidates
is uncertain, and
changes in
regulatory requirements
could
result in delays or discontinuation of development of our product candidates or unexpected costs;
•
developments by competitors may
render our products or technologies
obsolete or non-competitive or
may reduce the size
of our markets;
•
our capital resources
may not be
sufficient to successfully
complete the
development and
commercialization of
our product
candidates, which could delay, limit, reduce or terminate our development or commercialization efforts;
•
we have incurred significant losses
since inception, and we expect
to incur losses for the
foreseeable future and may never
achieve or maintain profitability;
•
conflicts of interest and disputes exist and may further arise between us and UBI and its affiliates, and these conflicts and
disputes might ultimately be resolved in a manner unfavorable to us;
•
we will need to
expand our organization, and
we may experience difficulties
in managing this growth,
which could disrupt
our operations;
•
the
dual-class
structure
of
our
common
stock
and
the
Voting
Agreement
(as
defined
below)
will
have
the
effect
of
concentrating voting power, which will significantly limit your ability to influence significant corporate decisions;
•
we rely on contract manufacturers
for the manufacture of raw
materials for our research programs,
pre-clinical studies and
clinical
trials
and
we
do
not
have
long-term
contracts
with
many
of
these
parties,
which
could
impact
our
ability
to
commercialize our products;
•
undetected errors or defects in our production could harm our reputation or expose us to product liability claims;
•
we rely on in-licensed intellectual
property and technology,
and the loss of
such rights, our licensors’ inability
or refusal
to
enforce
or
defend
such
rights,
and
the
requirement
to
pay
royalties,
milestones
and
other
amounts
could
harm
our
business;
•
the degree
of protection
afforded
by our
intellectual property
rights is
uncertain because
such rights
offer
only limited
protection and may not adequately protect our rights or permit us to gain or keep a competitive advantage;
•
we have identified significant deficiencies and material weaknesses,
and have previously identified material weaknesses,
in our
internal control
over financial
reporting and
if we
are unable
to remediate
our existing
deficiencies and
material
weaknesses and otherwise develop and
maintain an effective system
of internal control over financial
reporting, we may
not be able to
accurately report our financial results
or prevent fraud, and
as a result, shareholders
could lose confidence
in our financial and other public reporting, which would harm
our business and the trading price of our Class
A common
stock;
•
cyberattacks
or
other
failures
in
our
or
our
third-party
vendors’,
contractors’
or
consultants’
telecommunications
or
information
technology
systems
could
result
in
information
theft,
compromise,
or
other
unauthorized
access,
data
corruption and significant disruption of our business operations, and could harm our reputation and subject us to liability,
lawsuits and actions from governmental authorities; and
•
we are
subject to
privacy,
tax, anti-corruption
and other
stringent laws,
regulations, policies
and contractual
obligations
across multiple jurisdictions and changes
in, or our failure to
comply with, such laws, regulations,
policies and contractual
obligations could adversely affect our business, financial condition, results of operations and prospects.
Risks Related to the Discovery and Development of Product Candidates
Clinical drug development
involves a lengthy and
expensive process with uncertain
timelines and uncertain outcomes,
and results
of earlier studies and trials may not be predictive of future results. If
our pre-clinical development or clinical trials are prolonged
or
delayed, or
if we
do not
or cannot
achieve the
results we
expect, we
may be
unable to
obtain required
regulatory approvals,
and
therefore be unable to commercialize our product candidates on a timely basis or at all.
Our business is
dependent on the
successful development, regulatory approval
and commercialization of
product candidates based
on
our
Vaxxine
Platform.
If
we
and
our
collaborators
are
unable
to
obtain
approval
for
and
effectively
commercialize
our
product
candidates, our business
would be significantly
harmed. Even if
we complete the
necessary pre-clinical studies
and clinical trials,
the
regulatory
approval
process
is
expensive,
time-
consuming
and
uncertain,
and
we
may
not
be
able
to
obtain
approvals
for
the
commercialization of any product candidates we may develop. Changes in regulatory approval policies, changes in or the enactment of
additional statutes or
regulations, or changes
in regulatory review
processes, may cause
delays in the
approval of a
particular product
candidate or rejection
of an
application for a
particular product candidate.
We
have not obtained
regulatory approval for
any product
candidate to date, and
it is possible that
none of our existing
product candidates or any
product candidates we may
seek to develop in
the future will ever obtain regulatory approval. Any regulatory
approval we ultimately obtain may be limited or subject to
restrictions,
including labeling requirements,
or post-approval commitments
that render the
approved product not
commercially viable. While
our
enzyme-linked immunosorbent
assay (“ELISA”)
test has
received an
EUA from
the FDA,
there can
be no
assurance that
any of
our
product candidates will receive
an EUA or regulatory
approval or that there
will not be changes
in formulation, whether required
by any
regulatory
authority
or
at
our
determination
for
operational
or
scientific
reasons,
affecting
the
use
of
our
products.
Further,
some
countries may not rely on an
EUA or regulatory approval issued
by another jurisdiction, and we
may be required to seek
separate EUAs
or regulatory approval from different regulatory authorities in different jurisdictions. See
“Risk Factors-Even if we obtain approval of
any of
our product
candidates in
one jurisdiction,
we may
never obtain
approval for
or commercialize
any of
our products
in other
jurisdictions, which would limit our ability to realize their full market potential.”
To obtain
the requisite regulatory approvals to
market and sell any
of our product candidates, we
must demonstrate through extensive
pre-clinical studies and clinical trials
that our products are safe
and effective in humans. Clinical
testing is expensive and can take
many
years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of
pre-clinical studies and early clinical
trials of our product candidates
may not be predictive
of the results of later-stage clinical
trials and
results from post-hoc data analysis
may not be predictive of
final results and may not
support product approval. Product candidates in
later stages
of clinical
trials may
fail to
show the
desired safety
and efficacy
characteristics despite
having progressed
through pre-
clinical
studies
and
initial
clinical
trials.
For
example,
an
EUA
for
UB-612
was
denied
by
the
TFDA
in
August
because
the
neutralizing antibody
response generated
by UB-612,
as compared
to a
designated adenovirus
vectored vaccine,
did not
meet the
TFDA’s
specified evaluation criteria, but,
in collaboration with UBIA,
we are appealing the decision.
The outcome of that appeal
remains highly
uncertain. If
results from
our clinical
trials differ
from previous
reports or
market expectations,
such as
a potential
development of
market expectations that COVID-19 boosters or vaccines be developed specifically to address certain variants which we fail
to satisfy,
or
if we
fail to
obtain a
required regulatory
approval, the
price of
our Class
A common
stock could
decrease substantially.
Several
companies in
the biopharmaceutical
industry have
suffered significant
setbacks in
advanced clinical
trials due
to lack
of efficacy
or
adverse safety profiles, notwithstanding promising results in earlier trials. Our ongoing and future clinical trials may not be successful.
Further, while we have conducted limited
head-to-head comparisons in pre-clinical studies of UB-313, we have not
conducted a head-
to-head comparison
of any
competing products
to any
of our
product candidates
in any
clinical trial
to date.
We
have compared
the
published data for certain of our competitors’ products to the clinical trial results of certain of our product candidates. Accordingly, the
value of comparisons
of our product
candidates to any
alternative products in
this report may
be limited because
they are not
derived
from a
head-to-head trial,
rather
they
are from
trials that
were
conducted under
different
protocols, at
different
sites, with
different
patient populations,
at different
times and
results were
analyzed using
non-standardized assays
performed internally
or by
different
clinical research
organizations (“CROs”).
Without head-to-head
data, we
will be
unable to
make comparative
claims for
our product
candidates, if any such product
candidate is approved. Future clinical
trials may not confirm the comparisons
or analyses we have made
to date.
Clinical trials must be conducted in
accordance with applicable regulatory authorities’
legal requirements, regulations or guidelines and
are subject
to oversight
by these
governmental agencies
as well
as Institutional
Review Boards
(“IRBs”) at
the medical
institutions
where the clinical trials are
conducted. In addition, clinical trials
must be conducted with supplies
of our product candidates produced
in
accordance
with
current
good
manufacturing
practices
(“cGMP”)
and
other
legal
and
regulatory
requirements.
Defects
in
manufacturing of
a clinical
trial batch
or
a failure
of
a batch
to meet
all quality
control test
specifications could
result in
delays to
initiation of
our clinical
trials. We
depend on
medical institutions
and CROs
to conduct
our clinical
trials in
compliance with
good
clinical
practice
(“GCP”),
and
other
applicable
laws
and
regulations.
Failure
to
follow
and
document
adherence
to
such
laws
and
regulations may
lead to significant
delays in the
availability of product
for our clinical
trials, result in
the termination of
or a
clinical
hold being
placed on
one or
more of
our clinical
trials, or
delay or
prevent submission
or approval
of marketing
applications for
our
product candidates.
To the extent our CROs fail
to enroll participants
for our clinical trials,
fail to conduct the
trial in accordance with
the trial protocol GCP
or are
delayed for
a significant
time in
the execution
of trials,
including achieving
full enrollment,
we may
be affected
by increased
costs, program
delays or
both, which
may harm
our business
and delay
our ability
to seek
approval for
our product
candidates. For
example, due to an error by
the CRO responsible for administering
blinded placebo and active doses
to trial subjects, which reduced
the
confidence
of
subsequently
collected
data,
we
decided
to
discontinue
a
Phase
2a
LTE
trial
for
UB-311.
In
that
case,
however,
we
determined that we had collected sufficient data
on UB-311’s tolerability and immunogenicity. To
date, we have not completed clinical
trials sufficient for obtaining marketing approvals for any of our product candidates. Our most advanced
candidates are UB-612, which
initiated a Phase 3
pivotal study in March
2022 and has an
ongoing Phase 2 clinical
trial, and UB-311,
which is in Phase
2 of clinical
development. Our
product candidate UB-312
is in
Phase 1
of clinical
development and
UB-313 is
undergoing IND-enabling
studies.
All of our other research programs are in the pre-clinical development stage.
The completion of clinical trials for our clinical product candidates may be delayed, suspended or terminated because of
many factors,
including but not limited to:
•
the delay or refusal of regulators or IRBs to authorize us to commence a clinical trial at a prospective trial site;
•
changes in regulatory requirements, policies and guidelines;
•
delays or failure to reach agreement
on acceptable terms with prospective
CROs and clinical trial sites, the
terms of which
can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
•
delays in patient enrollment and variability in the number and types of patients available for clinical trials;
•
negative or
inconclusive results,
which may
require us
to conduct
additional pre-clinical
or clinical
trials or
to abandon
product candidates that we expect to be promising;
•
delays in manufacturing and control of clinical trial materials;
•
shortages of materials required for the production of our product candidates;
•
disruptions from events surrounding the Russia-Ukraine conflict
•
the timing, scope and effectiveness of U.S. and international governmental, regulatory, fiscal, monetary and public health
responses to the COVID-19 pandemic;
•
safety or tolerability concerns
causing us to suspend
or terminate a trial
if it is determined
that the participants are
being
exposed to unacceptable health risks;
•
lower than anticipated retention rates of patients and volunteers in clinical
trials and difficulty in maintaining contact with
patients after treatment, resulting in incomplete data;
•
failure of us, our CROs or clinical trial sites to comply with regulatory requirements;
•
failure of our CROs or clinical trial sites to meet their contractual obligations to us in a timely manner, or at all, deviating
from the clinical trial protocol or dropping out of a trial;
•
delays relating to adding new clinical trial sites;
•
delays in establishing necessary pre-clinical or clinical data;
•
the occurrence of unexpected severe or serious product-related adverse events in a clinical trial;
•
the quality or stability of the product candidate falling below acceptable standards;
•
the inability to produce
or obtain sufficient quantities of
the product candidate to
complete clinical trials on
time, or delays
in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;
•
supply chain constraints and inflationary pressures;
•
the lack of adequate funding to continue the clinical trial;
•
developments
observed
in
trials
conducted
by
competitors
for
related
technology
that
raises
general
concerns
from
regulatory authorities about risk to patients of similar vaccine technology;
•
the determination that a product candidate will not be producible in relevant quantities at the manufacturing stage;
•
the failure of regulatory authorities such as the FDA or the TFDA to approve our manufacturing processes or
facilities or
those of contract manufacturers with which we contract for clinical and commercial supplies; and
•
the transfer of manufacturing
processes to larger-scale
facilities operated by contract
manufacturers or by us,
and delays
or failure by our contract manufacturers or us to make any necessary changes to such manufacturing process.
In addition,
pre-clinical and
clinical data
are often
susceptible to
varying interpretations
and analyses
and results
from post-hoc
data
analysis
may
not
be
predictive
of
final
results
and
may
not
support
product
approval.
Many
companies
that
believed
their
product
candidates performed
satisfactorily in
pre-clinical studies
and clinical
trials have
nonetheless failed
to obtain
marketing approval
for
their product candidates. Regulatory authorities have substantial discretion in
the approval process and in determining when or whether
regulatory approval will be
obtained for any of
our product candidates. Additionally,
the FDA typically does not
accept post-hoc data
analyses as
support for
regulatory approval.
Even if
we believe
the data
collected from
clinical trials
of
our product
candidates are
promising, such data may not be
sufficient to support approval by regulatory
authorities. Regulatory authorities may disagree with the
design or implementation
of our clinical trials
and may disagree
with our interpretation
of data from
pre-clinical studies or
clinical trials.
In
some
instances,
there
can
be
significant
variability
in
safety
and/or
efficacy
results
between
different
trials
of
the
same
product
candidate due to
numerous factors, including
changes in trial
procedures set forth
in protocols, differences
in the size
and type of
the
patient populations, adherence to the dosing regimen and
other trial procedures and the rate of dropout
among clinical trial participants.
Further, none
of our trials
to date of
UB-311 and
UB-312 have been
large enough to
determine whether their
assessments of efficacy
were statistically significant. Therefore, we are
able to report potential trends on
such measures, but we will not
be able to make more
definitive
statements
about
the
efficacy
of
our
product
candidates
until
we
complete
clinical
trials
that
are
adequately
powered
to
demonstrate statistical significance of clinically meaningful results.
Moreover, for AD,
given the difficulties in
assessing whether a product candidate
is disease-modifying in terms of
delaying cognition
and other symptoms of
AD, we plan to include
in our trial designs for
UB-311 biomarker endpoints and, if our
trial results warrant, may
apply for regulatory approval based on biomarker data. While the FDA recently
approved aducanumab based on biomarker data, there
is no assurance that the FDA will accept biomarker data for other product candidates, including UB-311, in the future.
Even if we obtain approval of any of our product candidates
in one jurisdiction, we may never obtain approval for
or commercialize
any of our products
in other jurisdictions,
which would limit
our ability to realize
the full market
potential of our
product candidates.
To
market
any
products,
we
must
establish
and
comply
with
numerous
and
varying
regulatory
requirements
in
different
countries
regarding safety and efficacy and obtain relevant approvals to market our product candidates. As discussed in another risk factor above
(“
Clinical drug
development involves
a lengthy
and expensive
process…
”) an
EUA for
UB-612 was
denied by
the TFDA
in August
2021, which decision we have appealed in collaboration with UBIA. Approval by the TFDA or by another foreign regulatory authority
in any
other jurisdiction
does not
ensure approval
by comparable
regulatory authorities
in other
countries or
jurisdictions, including
approval by the FDA in the
United States. The failure to obtain
approval in one jurisdiction may delay or
otherwise negatively impact
our
ability
to
obtain
approval
elsewhere.
In
addition,
clinical
trials
conducted
in
one
country
may
not
be
accepted
by
regulatory
authorities in
other countries.
Approval procedures
vary among
countries and
even if
we have
obtained approval
in one
country, approval
in other countries can involve additional product testing and validation and additional administrative review periods.
Seeking
regulatory
approvals
in
different
countries
could
result
in
additional
and
unexpected
costs
for
us,
including
as
a
result
of
additional required pre-clinical studies or clinical trials which would be costly and time-consuming.
Satisfying regulatory requirements
is costly,
time-consuming, uncertain and may
be subject to unanticipated
delays. In addition, our
failure to obtain regulatory
approval
in any country may delay or have negative
effects on the process for regulatory approval in
other countries. Apart from our ELISA test,
which
has
been
approved
for
sale
by
the
FDA
through
an
EUA,
we
do
not
have
any
product
candidates
approved
for
sale
in
any
jurisdiction, including international markets. We
do not have experience in obtaining regulatory approval in international markets, and
we
will
be
relying
on
our
collaboration
partners
such
as
UBIA
to
assist
us
in
this
process.
If
we
fail
to
comply
with
regulatory
requirements in international markets or to obtain and maintain required approvals, our ability
to realize the full market potential of our
products will be harmed.
Interim, “top-line” and preliminary
data from our clinical trials
that we announce or publish
from time to time may
change as more
patient data become available and are also
subject to audit and verification procedures that could
result in material changes in the
final data.
From time to
time, we may
publicly disclose
preliminary or top-line
data from our
pre-clinical studies and
clinical trials, which
are based
on a preliminary analysis of then-available data, and
the results and related findings and conclusions are
subject to change following a
more comprehensive review of the
data related to the particular
study or trial. We also may make assumptions,
estimations, calculations
and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all
data.
As
a
result,
the
top-line
or
preliminary
results
that
we
report
may
differ
from
future
results
of
the
same
studies,
or
different
conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also
remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data
we previously published. As a result, top-line data should be viewed with caution until the final data are available.
From time to
time, we may
also disclose interim
data from our
pre-clinical studies and
clinical trials. Interim
data from clinical
trials
that we
may complete
are subject
to the
risk that
one or
more of
the clinical
outcomes may
materially change
as patient
enrollment
continues
and more
patient
data
become
available or
as patients
from our
clinical
trials continue
other
treatments for
their
disease.
Adverse
differences
between
preliminary
or
interim
data
and
final
data
could
significantly
harm
our
business
prospects.
Further,
disclosure of interim data by us or by our competitors could result in volatility in the price of our Class A common stock.
Further, others, including regulatory
authorities, may not accept or agree with
our assumptions, estimates, calculations, conclusions or
analyses
or
may
interpret or
weigh
the
importance of
data
differently,
which
could
impact
the
value
of
the particular
program,
the
approvability
or
commercialization
of
the
particular
product
candidate
or
product
and
the
Company
in
general.
In
addition,
the
information
we
choose
to
publicly
disclose
regarding
a
particular
study
or
clinical
trial
is
based
on
what
is
typically
extensive
information, and you or others may
not agree with what we determine
is material or otherwise appropriate information
to include in our
disclosure.
If we encounter difficulties enrolling patients in our clinical trials, our clinical
development activities could be delayed and result in
increased costs and longer development periods or otherwise be adversely affected.
We
will be
required to
identify and
enroll a
sufficient number
of patients
for our
planned clinical
trials. Trial
participant enrollment
could be
limited in
future trials
given that
many potential
participants may
be ineligible
because of
pre-existing conditions,
medical
treatments
or
other
reasons.
For
example,
trial
participant
enrollment
for
UB-612
could
be
negatively
impacted
as
COVID-19
vaccination rates continue to
increase and the number
of potential unvaccinated participants
continues to decrease. Similarly,
the next
phase of
our UB-311
trial could
be affected
by worldwide
effects
resulting from
the Russia-Ukraine
conflict and
other geopolitical
factors. We may not be able to
initiate or continue clinical
trials required by applicable
regulatory authorities or any
of our other product
candidates that we
pursue if we
are unable to
locate and enroll
enough eligible patients
or volunteers to
participate in these
clinical trials.
Patient enrollment is
affected by other
factors, as well,
including the incidence
and severity of
the disease under
investigation; the design
of the clinical trial
protocol; the size and
nature of the patient
population; the eligibility criteria
for the trial in
question; the perceived
risks and benefits of the product candidate under trial; the perceived safety and tolerability
of the product candidate; the proximity and
availability of
clinical trial sites
for prospective
patients; the availability
of competing therapies
and clinical
trials; effects of
the COVID-
19 pandemic on our clinical trial sites; our ability to monitor patients adequately during and after treatment; patient referral
practices of
physicians; clinicians’ and
patients’ perceptions as
to the potential
advantages of
the drug being
studied in relation
to other
available
therapies, including standard-of-care
and any new
drugs that may
be approved for
the indications we
are investigating; and
efforts to
facilitate timely enrollment in clinical trials.
We
also may
encounter difficulties
in identifying
and enrolling
such patients
with a
stage of
disease appropriate
for our
ongoing or
future clinical
trials. In
addition, the
process of
finding and
diagnosing patients
may prove
costly.
Our inability
to enroll
a sufficient
number of
patients for
any of
our clinical
trials would
result in
significant delays
or may
require us
to abandon
one or
more clinical
trials.
Even if
we obtain
regulatory approval
for a
product candidate,
our products
will remain
subject to
regulatory scrutiny
and post-
marketing requirements.
Any regulatory approvals that we
may receive for our product
candidates will require the submission
of reports to regulatory authorities
and ongoing surveillance to monitor the safety and efficacy
of the product candidate, may contain significant limitations related to use
restrictions for specified
age groups, warnings,
precautions or contraindications,
and may include
burdensome post-approval study
or
risk management
requirements. For
example, the
FDA may
require a
Risk Evaluation
and Mitigation Strategy
(“REMS”) to
approve
our
product
candidates,
which
could
entail
requirements
for
a
medication
guide,
physician
training
and
communication
plans
or
additional elements
to ensure safe
use, such
as restricted distribution
methods, patient registries
and other risk
minimization tools. In
addition, if
one of
our product
candidates is
approved in
the United
States or
abroad, it
will be
subject to
ongoing regulatory
requirements
for manufacturing, labeling,
packaging, storage, advertising,
promotion, sampling, record-keeping,
conduct of post-marketing
studies
and
submission
of
safety,
efficacy
and
other
post-
market
information.
Manufacturers
and
manufacturers’
facilities
are
required
to
comply with
extensive requirements
by regulatory
authorities, including
ensuring that
quality control
and manufacturing
procedures
conform to cGMP regulations. As such,
we and our contract manufacturers will
be subject to continual review and inspections
to assess
compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with
whom
we
work
must
continue
to
expend
time,
money
and
effort
in
all
areas
of
regulatory
compliance,
including
manufacturing,
production and quality control.
If a
regulatory authority
such as
the FDA
discovers previously
unknown problems
with a
product, such
as adverse
events of
unanticipated
severity
or
frequency,
or
problems
with
product
quality
or
the
facility
where
the
product
is
manufactured,
or
disagrees
with
the
promotion,
marketing or
labeling of
a product,
such regulatory
authorities may
impose restrictions
on
that
product or
us,
including
requiring withdrawal of
the product from
the market. If
we fail to
comply with applicable
regulatory requirements, a
regulatory authority
or
enforcement
authority
may,
among
other
things:
issue
warning
letters;
impose
civil
or
criminal
penalties;
suspend
or
withdraw
regulatory approval; suspend any of our clinical trials; refuse to approve pending applications or supplements to approved applications
submitted
by
us;
impose
restrictions
on
our
operations,
including
closing
our
contract
manufacturers’
facilities;
or
seize
or
detain
products, or require a product recall.
Any government
investigation of
alleged violations of
law could
require us
to expend
significant time
and resources
in response
and
could
generate
negative
publicity.
Any
failure
to
comply
with
ongoing
regulatory
requirements
may
adversely
affect
our
ability
to
commercialize and generate revenue from our
products. If regulatory sanctions are applied or
if regulatory approval is withdrawn, our
business will be seriously harmed. Further,
if a regulatory authority identifies previously unknown problems with our
platform, any or
all of our product candidates may also be affected.
Furthermore, the burden of these requirements may outweigh any benefit
or revenue that we could generate from product sales. Even if
we obtain
regulatory approval
for a
product candidate,
compliance with
the many
post-approval regulations
may be
so costly
that it
becomes
financially
prudent
to
abandon
the
product
or
sell
ownership
of
the
underlying
intellectual
property
at
prices
that
are
not
sufficient to recoup our investment in developing the product.
Moreover, the policies of regulatory authorities may change, and additional government regulations may be enacted that could prevent,
limit or delay
regulatory approval of
our product candidates.
We cannot predict the likelihood,
nature or extent
of government regulation
that may arise
from future legislation
or administrative or
executive action, either
in the United
States or abroad.
If we are
slow or unable
to adapt to changes in
existing requirements or the
adoption of new requirements
or policies, or if
we are not able to
maintain regulatory
compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
We have no history of
commercializing pharmaceutical
products, which may
make it difficult to
evaluate the prospects
for our future
viability.
We commenced operations
through UNS
and COVAXX in 2014
and 2020,
respectively, and as
Vaxxinity in March 2021.
Our operations
to date
have been
limited to
organizing and
staffing Vaxxinity,
business planning,
raising capital,
developing our
Vaxxine
Platform,
identifying
and
testing
potential
product
candidates
and
conducting
clinical
trials.
We
have
a
limited
track
record
of
successfully
conducting late-stage clinical trials,
obtaining marketing approvals, manufacturing
a commercial-scale product, or
arranging for a third-
party
to
do
so
on
our
behalf,
or
conducting
sales
and
marketing
activities
necessary
for
successful
product
commercialization.
Accordingly, you
should consider our prospects
considering the costs, uncertainties,
delays and difficulties frequently
encountered by
companies in the early stages
of development, especially clinical-stage biopharmaceutical
companies such as ours. Any
predictions you
make about our future
success or viability may not
be as accurate as
they could be if we
had a longer operating history
or a history of
successfully developing and commercializing pharmaceutical products.
We
may
encounter
unforeseen
expenses,
difficulties,
complications,
delays
and
other
known
or
unknown
factors
in
achieving
our
business objectives.
We will eventually need
to transition from
a company
with a development
focus to a
company capable
of supporting
commercial activities. We may not be successful in such a transition.
We
expect our financial
condition and operating
results to continue
to fluctuate significantly
from quarter to
quarter and year
to year
due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any
quarterly or
annual periods as indications of future operating performance.
Our product
candidates may
cause undesirable
side effects that
could delay
or prevent
their regulatory
approval, limit
the commercial
profile of an approved label or result in significant negative consequences following regulatory approval, if any.
Undesirable
side
effects
that
may
be
caused
by
our
product
candidates could
cause us,
our
collaboration partners
or
the
regulatory
authorities to
interrupt, delay
or halt
clinical trials
and could
result in
a more
restrictive label
or the
delay or
denial of
approval by
regulatory authorities. Results
of our trials
could reveal a
high and unacceptable
severity and prevalence
of side effects.
In such an
event,
our trials could be suspended or terminated and regulatory authorities could
order us to cease further development of or deny approval
of our
product candidates
for any
or all
targeted indications.
The product-related
side effects
could affect
patient recruitment
or the
ability of enrolled
patients to complete
the trial or
result in potential
product liability claims. Any
of these occurrences
may harm our
business, financial condition, results of operations and prospects significantly.
Clinical trials assess a sample of the potential patient population.
With a limited number of patients
and duration of exposure, rare and
severe side
effects of our
product candidates
may only
be uncovered
with a significantly
larger number of
patients exposed
to the
product
candidate. If our product candidates receive
an EUA or regulatory approval and
we or others identify undesirable side
effects caused by
such product candidates (or any other similar products)
after such approval, a number of potentially significant negative
consequences
could result, including:
•
regulatory authorities may withdraw
or limit their approval
of such product candidates
and require us to
take our approved
product(s) off the market;
•
regulatory authorities may require the addition of labeling statements, such
as a “boxed” warning or a contraindication, or
submission of field alerts to physicians and pharmacies;
•
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
•
we may be required to change
the way such product candidates
are distributed or administered, conduct
additional clinical
trials or change the labeling of the product candidates;
•
actual or potential drug-related side effects could negatively affect patient recruitment or the ability of enrolled
patients to
complete a trial for our products or product candidates;
•
market
acceptance
of
our
products
by
patients
and
physicians
may
be
reduced
and
sales
of
the
product
may
decrease
significantly;
•
regulatory
authorities
may
require
a
REMS
plan
to
mitigate
risks,
which
could
include
medication
guides,
physician
communication plans, or
elements to assure
safe use, such
as restricted distribution methods,
patient registries and
other
risk minimization tools;
•
we may be subject to regulatory investigations and government enforcement actions;
•
we may decide or be required to remove such product candidates from the marketplace;
•
we could be sued and potentially held liable for injury caused to individuals exposed to or taking our product candidates;
•
sales of the product(s) may decrease substantially; and
•
our reputation may suffer.
Any of
these events
could prevent
us from
achieving or
maintaining market
acceptance of
the affected
product candidates
and could
substantially increase
the costs
of commercializing
our product
candidates, if
approved, and
therefore could
have a
material adverse
effect on our business, financial condition, results of operations and prospects.
The regulatory landscape that will govern our product candidates is uncertain. Regulations that impact our
product candidates are
still
developing, and
changes in
regulatory requirements
could result
in delays
or discontinuation
of development
of our
product
candidates or unexpected costs in obtaining regulatory approval.
The regulatory requirements to which our product
candidates will be subject are complex
and uncertainties exist. Even with respect to
more established vaccine
products, the regulatory
landscape is still
developing, especially as
it relates to
novel adjuvants in
vaccines,
such as CpG1,
which we use
at low concentration
in UB-612. Although
regulatory authorities decide
whether individual clinical
trial
protocols may proceed, the review process and determinations of other reviewing bodies can impede or delay the initiation
of a clinical
trial, even if another
regulatory authority has reviewed
the trial and authorizes
its initiation. The FDA,
for example, can place
an IND
on clinical hold even if other regulatory agencies have provided a favorable review. In addition, adverse developments in clinical trials
involving novel adjuvants in vaccines, such as CpG1, conducted by others may cause regulatory
authorities to change the requirements
for approval of any of our product candidates.
Complex regulatory environments exist in other jurisdictions in which we might consider seeking regulatory approvals for our product
candidates, further
complicating the
regulatory landscape.
For example,
in the
European Union
a special
committee called
the Committee
for Advanced Therapies was established within the European Medicines
Authority in accordance with Regulation (EC) No 1394/2007
on
advanced-therapy medicinal
products
(“ATMPs”),
to
assess
the
quality,
safety
and
efficacy
of
ATMPs,
and
to
follow
scientific
developments in the field.
These various regulatory review committees and advisory groups and new or revised
guidelines that they promulgate from time to time
may lengthen the regulatory
review process, require us
to perform additional studies,
increase our development costs,
lead to changes
in
regulatory
positions
and
interpretations,
delay
or
prevent
approval
and
commercialization
of
our
product
candidates
or
lead
to
significant post-approval limitations or
restrictions. We may face even more cumbersome and
complex regulations than those emerging
for novel
adjuvants. Furthermore,
even if
our product
candidates obtain
required regulatory
approvals, such
approvals may
later be
withdrawn because of changes in regulations or the interpretation of regulations by applicable regulatory authorities.
Even if we receive
regulatory approval to
market any of
our product candidates,
we will be subject
to ongoing obligations
and continued
regulatory review, which may materially
adversely affect our business,
financial condition, results
of operations and
prospects. We have
not
previously
submitted
a
biologics
license application
(“BLA”)
to
the
FDA,
or
similar
regulatory
approval
filings
to
comparable
foreign authorities, for any product candidate
and never received regulatory approval for
any of our product candidates. Further,
other
jurisdictions may consider our product candidates
to be new drugs, not biologics or
medicinal products, and require different marketing
applications. Even if a regulatory authority
approves any of our product candidates,
the manufacturing processes, labeling, packaging,
distribution, product sampling,
adverse event reporting,
storage, advertising, marketing,
promotion and recordkeeping
for the product
will be
subject to
extensive and
ongoing regulatory
requirements. These
requirements include
submissions of
safety and
other post-
marketing information and reports and registration,
as well as continued compliance with
cGMPs and GCPs for any clinical
trials that
we conduct post-approval,
all of which
may result in
significant expense and
limit our ability
to commercialize such
products. There
also
are
continuing,
annual
program
user
fees
for
any
marketed
products.
In
the
United
States,
biologic
manufacturers
and
their
subcontractors
are
required
to
register
their
establishments
with
the
FDA
and
certain
state
agencies
and
are
subject
to
periodic
unannounced
inspections
by
the
FDA
and
certain
state
agencies
for
compliance
with
cGMP,
which
impose
certain
procedural
and
documentation requirements upon us and our contract manufacturers. Changes to the manufacturing process are strictly regulated, and,
depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting requirements upon us and
any contract manufacturers
that we may
decide to
use. Accordingly, manufacturers
must continue
to expend
time, money
and effort in
production and
quality control
to maintain compliance with cGMP and other aspects of regulatory compliance.
Any regulatory approvals that we receive
for our product candidates may also
be subject to limitations on
the approved indicated uses
for which the product may
be marketed or to
the conditions of approval, or
contain requirements for potentially costly post-marketing
testing and surveillance to monitor the
safety and efficacy of the product. For
example, the FDA has the authority
to require a REMS as
part of a
BLA or after
approval, which may
impose further requirements
or restrictions on
the distribution or
use of an
approved product,
such
as
limiting prescribing
to
certain physicians
or
medical centers
that have
undergone
specialized training,
limiting treatment
to
patients who meet certain safe-use criteria and requiring treated patients to
enroll in a registry.
Later discovery of previously unknown
problems
with
a
product,
including
adverse
events
of
unanticipated
severity
or
frequency,
or
with
our
contract
manufacturers
or
manufacturing processes, or failure to comply with regulatory requirements may result in, among other things:
•
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
•
fines, warning letters, untitled letters or holds on clinical trials;
•
refusal by regulatory authorities to
approve pending applications or supplements to
approved applications, or suspension
or revocation of product approvals;
•
requirements
to
conduct
additional
clinical
trials,
change
our
product
labeling
or
submit
additional
applications
or
application supplements;
•
product seizure or detention, or refusal to permit the import or export of products;
•
mandated modification of promotional materials and labeling and the issuance of corrective information;
•
consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;
•
the
issuance
of
safety
alerts,
Dear
Healthcare
Provider
letters,
press
releases
and
other
communications
containing
warnings or other safety information about the product; or
•
injunctions or the imposition of civil or criminal penalties.
In addition, regulatory policies may change
or additional government regulations or legislation
may be enacted that could prevent,
limit
or delay regulatory
approval of our product
candidates, particularly in countries
where elections may result
in changes in government
administration. If we fail to
comply with existing requirements, are
slow or unable to
adapt to changes in existing
requirements or the
adoption of new requirements or policies, or
if we are not able to maintain regulatory
compliance, we may lose any regulatory approval
that we
may have
obtained or
face regulatory
or enforcement
actions, which
may materially
adversely affect
our business,
financial
condition, results of operations and prospects.
The FDA strictly
regulates the promotional claims
that may be
made about prescription products
in the United
States. In particular,
a
product may not be promoted for
uses that are not approved
by the FDA as reflected
in the product’s
approved labeling. If we receive
marketing approval for
a product candidate,
physicians may nevertheless
prescribe it to
their patients in
a manner that
is inconsistent
with the approved label. If we
are found to have promoted such
off-label uses, we may become subject to significant
liability. The FDA
and other agencies actively enforce the laws
and regulations prohibiting the promotion of
off-label uses, and a company that is found to
have improperly
promoted off-label
uses may
be subject
to significant
sanctions. Federal
and state
government agencies
have levied
large civil and criminal fines against companies for
alleged improper promotion and has enjoined several companies from engaging
in
off-label
promotion.
The
FDA
has
also
requested
that
companies
enter
into
consent
decrees
or
permanent
injunctions under
which
specified promotional conduct is changed or curtailed.
Any government
investigation of
alleged violations of
law could
require us
to expend
significant time
and resources
in response
and
could generate negative publicity.
Any failure to comply with
ongoing regulatory requirements may significantly
and adversely affect
our ability to commercialize our product candidates.
A
breakthrough
therapy
designation
or
fast
track
designation
by
the
FDA
for
a
product
candidate
may
not
lead
to
a
faster
development or regulatory
review or approval
process, and it
would not increase
the likelihood that
the product candidate
will receive
marketing approval.
We may
in the future seek a breakthrough therapy designation or fast track designation for
one or more product candidates eligible for
such designation. A breakthrough therapy is defined
as a product candidate that is intended,
alone or in combination with one
or more
other
drugs,
to
treat
a
serious
or
life-threatening
disease
or
condition,
and
preliminary
clinical
evidence
indicates
that
the
product
candidate may
demonstrate substantial
improvement over
existing therapies
on one
or more
clinically significant
endpoints, such
as
substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough
therapies, interaction and communication between
the FDA and the sponsor
of the trial can help
to identify the most efficient
path for
clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as
breakthrough therapies by the FDA are also eligible for priority review if supported
by clinical data at the time of the submission of the
BLA.
Designation as
a breakthrough
therapy is
within the
discretion of
the FDA.
Accordingly,
even if
we believe
that one
of our
product
candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree
and instead determine not to make such
designation. In
any event,
the receipt
of a
breakthrough therapy
designation for
a product
candidate may
not result
in a
faster development
process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would
not assure ultimate approval by the FDA. In addition, even if one or more
of our product candidates qualify as breakthrough therapies,
the FDA may
later decide that
the product candidate
no longer meets
the conditions
for qualification or
it may decide
that the time
period
for FDA
review or
approval will
not be
shortened. Further,
certain of
our product
candidates, including
UB-612, are
not eligible
for
breakthrough therapy designation, and we will be unable to take advantage of such designation for such product candidates.
Fast track designation is designed to
facilitate the development and expedite the review
of therapies to treat serious
conditions and fill
an
unmet
medical
need.
Programs
with
fast
track
designation
may
benefit
from
early and
frequent
communications with
the
FDA,
potential priority review and the ability to submit
a rolling application for regulatory review.
Fast track designation applies to both the
product candidate
and the
specific indication
for which
it is
being studied.
However,
even if
one or
more of
our product
candidates
qualify for fast
track designation, we
may not be
able to meet
the criteria of
the fast track designation,
or if our clinical
trials are delayed,
suspended or terminated, or put on clinical
hold due to unexpected adverse events or issues
with clinical supply, we will not receive the
benefits associated
with the
fast track
program. Furthermore,
fast track
designation does
not change
the standards
for approval.
Fast
track designation alone does not guarantee qualification for the FDA’s
priority review procedures. Fast track designation also does not
guarantee our product candidate will be approved in a timely manner, if at all.
We
are currently attempting to secure approval
of certain product candidates through
the use of an accelerated
approval pathway.
If we are
unable to obtain
such approval, we
may be required
to conduct additional
pre-clinical studies or
clinical trials beyond
those
that we contemplate, which could increase the expense of obtaining,
and delay the receipt of, necessary marketing approvals. Even
if our product
candidates receive accelerated
approval from regulatory
authorities, if our
confirmatory trials do
not verify clinical
benefit,
or
if
we
do
not
comply
with
rigorous
post-marketing
requirements,
such
regulatory
authorities
may
seek
to
withdraw
accelerated approval.
We are developing certain
product candidates
for the
treatment of
serious or
life-threatening conditions,
including UB-311, and
therefore
may decide to seek approval of such product candidates under the FDA’s
accelerated approval pathway. A product may be eligible
for
accelerated approval
if
it is
designed to
treat a
serious or
life-threatening disease
or
condition and
generally provides
a meaningful
advantage over available therapies
upon a determination that
the product candidate has
an effect on a surrogate
endpoint or intermediate
clinical endpoint that
is reasonably likely
to predict clinical
benefit. The FDA
considers a clinical
benefit to be
a positive therapeutic
effect that
is clinically
meaningful in
the context
of a
given disease,
such as
irreversible morbidity
or mortality.
For the
purposes of
accelerated approval, a
surrogate endpoint is
a marker,
such as a
laboratory measurement, radiographic
image, physical sign
or other
measure that is
thought to predict
clinical benefit but
is not itself
a measure of
clinical benefit. An
intermediate clinical endpoint
is a
clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that
is reasonably likely to predict an
effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval
pathway may be used
in cases in which
the advantage of a
new drug over available
therapy may not
be a direct
therapeutic advantage
but is
a clinically
important improvement
from a
patient and
public health
perspective. If
granted, accelerated
approval is
usually contingent
on the
sponsor’s agreement
to conduct,
in a
diligent manner, additional
post-approval confirmatory
studies
to verify and
describe the drug’s clinical benefit.
If the sponsor
fails to conduct
such studies in
a timely manner, or
if such post- approval
studies fail to validate the drug’s predicted clinical benefit, the FDA may withdraw its approval of the drug on an expedited basis.
If we decide to
submit a BLA seeking accelerated
approval or receive an expedited
regulatory designation for our product
candidates,
there can be no
assurance that such submission or
application will be accepted or
that any expedited development, review or
approval
will be granted on a timely
basis, or at all. Failure to
obtain accelerated approval or any other
form of expedited development, review
or
approval for a product candidate would result in a longer time period to commercialization of such product candidate, if any, and could
increase the cost of
development of such product
candidate, which could harm
our competitive position in
the marketplace. An EUA
for
UB-612 was denied by the TFDA in
August 2021. If we do not
receive an EUA from regulatory authorities for product
candidates for
which we request
such approval, we
may be required
to conduct further
clinical trials which
could increase the
expense of obtaining,
and delay
the receipt
of, marketing
approvals in
any jurisdiction
where we
do not
receive an
EUA. Some
regulatory authorities,
including
the
FDA,
have
ceased
granting
EUAs
for
product
candidates
targeting
COVID-19
or
otherwise,
which
could
delay
our
ability
to
commercialize product candidates.
Because we are developing product candidates for the treatment or prevention of diseases in which there is little clinical experience
using new technologies, there
is increased risk that the
FDA, the TFDA or other
foreign regulatory authorities may
not consider the
endpoints of our clinical trials to provide clinically meaningful results and that these results may be difficult to analyze.
As we are developing novel treatments and preventative
measures for diseases in which we believe there is
limited clinical experience
with new endpoints and methodologies, there is heightened risk
that the applicable regulatory authorities may not consider the
clinical
trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. It is
difficult to determine how
long it will take, if
ever, or how
much it will cost to
obtain regulatory approvals for our
product candidates
in the United States, Taiwan or other jurisdictions, if ever. Further, approvals by one regulatory authority may not be indicative of what
other regulatory authorities may require for approval.
During the regulatory
review process, we
will need to identify
success criteria and
endpoints such that
regulatory authorities will
be able
to determine the clinical efficacy
and safety profile of any product
candidates we may develop. Because our
initial focus is to identify
and develop product candidates
to treat or prevent
diseases in which there
is little clinical experience
using new technologies, there
is
heightened risk that regulatory authorities may
not consider the clinical trial endpoints that
we propose to provide clinically meaningful
results. In addition, the resulting clinical data and results may be difficult to analyze.
In the United States, the
FDA also weighs the benefits
of a product against its
risks, and the FDA may
view the efficacy results
in the
context of safety as not being supportive of regulatory approval.
The TFDA and other foreign regulatory authorities may make similar
comments with respect
to these endpoints
and data. Any
product candidate we
may develop will
be based on
a novel technology
that
makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval.
We and our collaboration partners have conducted and intend
to conduct additional clinical trials
for selected product candidates at
sites outside the United States, and for any of our product
candidates for which we seek approval in the United States, the
FDA may
not accept data from trials conducted in such locations or may require additional U.S.-based trials.
We
and our collaboration partners
have conducted, currently are
conducting and intend in
the future to conduct,
clinical trials outside
the United States, particularly in Taiwan where we have reported interim results of our UB-612 Phase 2 clinical trial.
Although the FDA may
accept data from clinical
trials conducted outside the
United States, acceptance
of these data is
subject to certain
conditions imposed by the FDA. For example, the clinical trial must be conducted by qualified investigators in accordance with GCPs,
and the FDA must be able to validate the trial data through an on-site inspection, if necessary. Generally, the patient population for any
clinical trial conducted outside of
the United States must be
representative of the population for
which we intend to seek
approval in the
United States. There can be
no assurance that the FDA
will accept data from trials
conducted outside of the United
States. If the FDA
does not accept the data from any clinical trials that
we or our collaboration partners conduct outside the United States, it
would likely
result in the need for additional
clinical trials, which would be costly
and time-consuming and delay or permanently halt
our ability to
develop and
market these
or other
product candidates
in the
United States.
In other
jurisdictions, for
instance, in
Taiwan,
there is
a
similar risk regarding the acceptability of clinical trial data conducted outside of that jurisdiction.
In addition, there
are risks inherent
in conducting clinical trials
in multiple jurisdictions,
inside and outside
of the United
States, such
as:
•
regulatory and administrative requirements
of the jurisdiction
where the trial is
conducted that could
burden or limit our
ability to conduct our clinical trials;
•
foreign exchange fluctuations;
•
manufacturing, customs, shipment and storage requirements;
•
cultural differences in medical practice and clinical research; and
•
the risk that the patient
populations in such trials are
not considered representative as compared to
the patient population
in the target markets where approval is being sought.
If any of our
product candidates receive an
EUA or regulatory approval,
such products may not
achieve broad market acceptance
among government agencies, physicians, patients, the medical community and third-party payors, in which case revenue generated
from their sales would be limited.
The
commercial
success
of
our
product
candidates
and
our
ability
to
generate
revenues
from
our
products
will
depend
upon
their
acceptance
among
government
agencies,
physicians,
patients
and
the
medical
community.
The
degree
of
market
acceptance
of
our
product candidates will depend on a number of factors, including:
•
limitations
or
warnings
contained
in
the
approved
labeling
for
a
product
candidate
and
any
other
product
insert
requirements of regulatory authorities;
•
changes in the standard of care for the targeted indications for any of our product candidates;
•
limitations in the approved clinical indications for our product candidates;
•
demonstrated clinical safety and efficacy compared to other products;
•
the impact of disease variants, such as the Delta variant of SARS-CoV-2, on the efficacy and marketability of our product
candidates targeting such diseases;
•
lack of significant adverse side effects, and the prevalence and severity of any side effects;
•
sales, marketing and distribution support;
•
availability of coverage and extent of reimbursement from managed care plans and other third-party payors;
•
timing of market introduction and perceived effectiveness of our products as well as competitive products;
•
continued projected growth of the markets in which our products compete;
•
the degree of cost-effectiveness of our product candidates;
•
the impact of past product price increases and limitations on future price increases for our products;
•
availability of alternative therapies;
•
whether the product is designated
under physician treatment guidelines as
a first-line therapy or
as a second or third-line
therapy for particular diseases;
•
whether the product can be used effectively with other therapies to achieve higher response rates;
•
adverse publicity about our product candidates or favorable publicity about competitive products;
•
if and when we are able to obtain regulatory approvals for indications for our products;
•
our ability to establish and maintain a continuous supply of our products for commercial sale;
•
potential or perceived advantages or disadvantages of our products over alternative treatments;
•
convenience and ease of administration of our products; and
•
the effect of current and future healthcare laws.
If any of
our product candidates are
approved, but do
not achieve an
adequate level of
acceptance by government
agencies as well
as
physicians, patients and the medical community, we may not generate sufficient revenue from these products, and we may not
become
or
remain
profitable.
In
addition,
efforts
to
educate
the
medical
community
and
third-party
payors
on
the
benefits
of
our
product
candidates may require significant resources and may never be successful.
We
may
focus
on
potential
product
candidates
that
may
prove
to
be
unsuccessful
and
such
focus
may
require
us
to
forego
opportunities to develop other product candidates that may prove to be more successful.
We may choose to
focus our efforts
and resources
on a potential
product candidate
that ultimately
proves to be
unsuccessful, or to
license
or purchase
a marketed
product that
does not
meet our
financial expectations.
Furthermore, we
have limited
financial and
personnel
resources and
are placing
significant focus
on the
development of
our lead
product candidates,
and as
such, we
may forgo
or delay
pursuit of
opportunities with
other future
product candidates
that later
prove to
have greater
commercial potential.
Our spending
on
current and future
research and development
programs and other
future product candidates
for specific indications
may not yield
any
commercially viable future product candidates and
could result in spending on
raw materials that cannot be
repurposed. As a result of
our resource
allocation decisions,
we may
fail to capitalize
on viable commercial
products or
profitable market
opportunities, be
required
to forego
or delay
pursuit of
opportunities with
other product
candidates or
other diseases
that may
later prove
to have
greater commercial
potential,
fail
to
identify
novel
product
candidates
that
may
be
successful,
or
relinquish
valuable
rights
to
such
product
candidates
through
collaboration,
licensing
or
other
arrangements
in
cases
in
which
it
would
have
been
advantageous
for
us
to
retain
sole
development
and
commercialization rights.
If
we
are
unable
to
identify
and
successfully
commercialize additional
suitable
product
candidates, or if
the additional
product candidates
we do identify
and develop
prove to be
ineffective, incapable of
being commercialized
on a large scale
or otherwise fail
to achieve market
success, this would
adversely impact our
business strategy and
our financial position.
Risks Related to Our Financial Position and Need for Additional Capital
We cannot
assure you of the adequacy of our
capital resources to successfully complete the development and
commercialization of
our product candidates, and a
failure to obtain additional capital,
if needed, could force us
to delay, limit, reduce
or terminate one
or more of our product development programs or commercialization efforts.
As of December 31, 2021, we had cash and cash equivalents amounting to $144.9 million. We
believe that we will continue to expend
substantial resources
for the
foreseeable future
developing our
proprietary product
candidates. These
expenditures will
include costs
associated with research
and development, conducting
pre-clinical studies and
clinical trials, seeking
regulatory approvals, as
well as
launching
and
commercializing
products
approved
for
sale
and
costs
associated
with
manufacturing
products.
In
addition,
other
unanticipated costs
may arise.
Because the
outcomes of
our anticipated
clinical trials
are highly
uncertain, we cannot
reasonably estimate
the actual amounts necessary to successfully complete the development and commercialization of our proprietary product candidates.
Our future funding requirements will depend on many factors, including but not limited to:
•
the numerous risks and uncertainties associated with developing product candidates and maintaining our platform;
•
the number and characteristics of product candidates that we pursue;
•
the rate of
enrollment, progress, cost
and outcomes of
our clinical trials,
which may or
may not meet
their primary end-
points;
•
the timing of, and cost involved in, conducting non-clinical studies that are regulatory prerequisites to conducting
clinical
trials of sufficient duration for successful product registration;
•
the cost of manufacturing clinical supply and establishing commercial supply of our product candidates;
•
the costs
and timing
of preparing,
filing and
prosecuting patent
applications, maintaining
and enforcing
our intellectual
property rights and defending any intellectual property-related claims;
•
tax and
other compliance
costs associated
with operating
in foreign
jurisdictions (including
any withholding
requirements);
•
the timing
of, and
the costs
involved in,
obtaining regulatory
approvals for
our product
candidates if
clinical trials
are
successful;
•
the timing of, and costs involved in, conducting post-approval studies that may be required by regulatory authorities;
•
the cost of commercialization activities for our product candidates, including product manufacturing, pharmacovigilance,
marketing and distribution
of product candidates
generated from our
platform and any
other product opportunity
for which
we receive marketing approval in the future;
•
the terms and timing
of any collaborative, licensing
and other arrangements
that we are currently
party to or may
establish,
including any required milestone and royalty payments thereunder and any non-dilutive funding that we may receive;
•
the costs
involved in
preparing, filing,
prosecuting, maintaining,
defending and
enforcing patent
claims, including
litigation
costs, if any, and the outcome of any such litigation;
•
the timing, receipt and amount
of sales of, or royalties
or milestones on, our future
products, if any,
including the risk of
potential nonpayment by buyers of our future products, if any;
•
the costs to recruit and build the organization including key executives needed to
transform to a commercial organization;
and
•
the costs of operating as a public company, including hiring additional personnel.
In addition, our
operating plan may
change as a
result of many
factors currently unknown
to us. As
a result of
these factors, we
may
need additional funds sooner than planned. We expect to finance future cash needs primarily through public or private equity offerings,
strategic collaborations and debt financing. If sufficient funds on acceptable terms are not available when needed, or at all, we could be
forced to significantly
reduce operating
expenses and
delay, limit, reduce or
terminate one
or more
of our
product development
programs
or
commercialization
efforts,
which
would
have
a
negative
impact
on
our
business,
financial
condition,
results
of
operations
and
prospects.
We
have incurred
significant losses
since our
inception, and
we expect
to incur
losses for
the foreseeable
future and
may never
achieve or maintain profitability.
We
have incurred significant losses
since our inception. We
had net losses
of approximately $137.2 million
and $40.0 million for
the
years
ended
December
31,
and
2020,
respectively.
As
of
December
31,
2021,
our
consolidated
accumulated
deficit
was
$229.5 million.
Our
expectation is
that we
will
continue
to
incur
losses as
we
continue our
research
and
development of,
and
seek
regulatory approvals for, our product candidates and maintain and
develop new platforms, prepare for and begin to commercialize any
approved product candidates and
add infrastructure and personnel
to support our product
development efforts and operations
as a public
company. We
have devoted substantially all
of our financial resources
and efforts to
research and development, including pre-clinical
studies and clinical trials and we anticipate that our expenses will continue to increase over the next several years as we continue these
activities. The net losses and negative cash flows incurred to date, together
with expected future losses, have had, and may continue to
have, an adverse effect on our working capital. The amount of future net losses will depend, in part, on the rate of future growth of our
expenses and our ability to generate revenue.
Because of the numerous
risks and uncertainties associated
with biopharmaceutical product development, we
are unable to accurately
predict the timing or
amount of increased expenses
or when, or if,
we will be able
to achieve profitability.
For example, our expenses
could increase if we
are required by regulatory
authorities such as the
FDA to perform trials
in addition to those
that we currently expect
to perform,
or if there
are any
delays in
completing our
currently planned
clinical trials,
the partnering
process for
our proprietary
product
candidates or in the development of any of our proprietary product candidates.
Our revenue
to date
has been
generated from
the sales
of our
ELISA test
and the
sale of
an option
to negotiate
a license
with UNS
(which option has expired).
Our ability to generate
revenue and achieve profitability in
the future depends in
large part on
our ability,
alone or with our collaborators, to achieve milestones and to
successfully complete the development of, obtain the necessary
regulatory
approvals for,
and commercialize,
our product
candidates and
Vaxxine
Platform. We
may never
succeed in
these activities
and may
never generate revenue from product sales that is significant enough
to achieve profitability. Even if
we successfully obtain regulatory
approvals to market one or more of our product candidates, our revenues will be dependent, in part, upon the size of the markets
in the
territories for which we gain regulatory
approval and have commercial rights.
If the markets for patient subsets
that we are targeting are
not as significant as we
estimate, we may not
generate significant revenues from
sales of such products, if
approved. Even if we
achieve
profitability in the future, we may not be able to sustain profitability in
subsequent periods. Our failure to become or remain profitable
could depress our market value
and could impair our ability
to raise capital, expand our
business, develop other product candidates
or
continue our operations. A decline in our value could also cause you to lose all or part of your investment.
Raising additional capital
may cause dilution
to our shareholders,
restrict our operations
or require us
to relinquish rights
to our
technology or product candidates.
We expect our expenses to continue to increase in connection
with our planned operations. To the extent that we
raise additional capital
through the sale of our Class A common stock, convertible securities or other equity securities, your ownership interest will be diluted,
and the
terms of
these securities could
restrict our
operations or
include liquidation or
other preferences
and anti-dilution
protections
that could adversely affect your rights as a stockholder. The issuance of additional equity securities, or the possibility of such issuance,
may cause the
market price
of our Class
A common stock
to decline.
In addition,
debt financing, if
available, may
result in fixed
payment
obligations and may
involve agreements that
include restrictive covenants
that limit our
ability to take
specific actions, such
as incurring
additional debt, making
capital expenditures, creating liens,
redeeming shares or
declaring dividends, that
could adversely impact our
ability to conduct our business. Securing financing could require a
substantial amount of time and attention from our management and
may divert a disproportionate amount of their attention away
from day-to-day activities, which may adversely affect our management’s
ability to oversee the development of our product candidates.
If we raise additional funds through collaborations or marketing,
distribution or licensing arrangements with third parties, we may
have
to relinquish valuable rights
to our technologies, future
revenue streams or product
candidates or grant licenses
on terms that may
not
be favorable to us. If we are unable
to raise additional funds when needed, we may be
required to delay, limit,
reduce or terminate our
product
development
or
future
commercialization
efforts
or
grant
rights
to
develop
and
market
product
candidates
that
we
would
otherwise prefer to develop and market ourselves.
We cannot be
certain that additional funding will be available on acceptable terms, or at all. If
we are unable to raise additional capital
in sufficient
amounts or on
terms acceptable to
us, we may
have to
significantly delay,
scale back or
discontinue the development
or
commercialization of
our product
candidates or
other research
and development
initiatives. Our
current or
future license
agreements
may also be terminated if we are unable to meet the payment or other obligations under the agreements.
Changes in or
reinterpretations of tax
laws and regulations,
including their application
to us or
our customers as
reviewed by the
relevant tax authorities, may
have a material adverse
effect on our business,
results of operations, financial
condition and prospects.
We are
subject to complex and evolving tax laws and regulations. New income, sales, use or
other tax laws, statutes, rules, regulations
or ordinances could be
enacted at any time,
which could affect the
tax treatment of any
of our future domestic
and foreign earnings. Any
new
taxes
could
adversely
affect
our
domestic
and
international
business
operations,
and
our
business
and
financial
performance.
Further, existing tax
laws, statutes, rules, regulations or
ordinances could be interpreted,
changed, modified or applied
adversely to us
or our customers. Future
changes in applicable tax laws
and regulations, or their
interpretation and application, could have
an adverse
effect on our business, financial conditions, results of operations and prospects.
In addition,
our determination
of our
tax liability
is subject
to review
by applicable
tax authorities.
Any adverse
outcome of
such a
review could harm our results of operations, cash flow and overall financial condition.
The determination of our tax liabilities requires
significant
judgment
and,
in
the
ordinary
course
of
business,
there
are
many
transactions
and
calculations
where
the
ultimate
tax
determination is complex and uncertain.
Our ability
to use
our net
operating loss
carryforwards and
other tax
attributes to
offset future
taxable income
may be
subject to
certain limitations.
As of December 31, 2021, we
had U.S. federal net operating
loss carryforwards (“NOLs”) of $134.6 million,
which may be available to
offset future taxable income,
if any,
and have no expiration date
but are limited in
their usage to an
annual deduction equal to 80%
of
annual taxable
income. In
general, under
Sections 382
and 383
of the
Internal Revenue
Code of
1986, as
amended (the
“Code”), a
corporation that
undergoes an
“ownership change,”
generally defined
as a
greater than
50% change
by value
in its
equity ownership
over a three-year period, is subject to limitations on its ability to utilize its pre-change NOLs and its research and other tax attributes to
offset
future
taxable
income.
Our
existing
NOLs
and
tax
attributes
may
be
subject
to
limitations
arising
from
previous
ownership
changes, and if
we undergo future ownership
changes, our ability
to utilize NOLs
and research and
tax attributes could
be further limited
by Sections 382 and
383 of the Code.
For these reasons, we
may not be able
to utilize a portion
of our existing NOLs
or research and
tax attributes.
Risks Related to the Manufacturing of Our Product Candidates
The formulation of peptide-based medicines is complex and manufacturers
often encounter difficulties in production. If we, UBI or
any
of
our
other
contract
manufacturers
encounter
difficulties,
our
ability
to
provide
product
candidates
for
clinical
trials
or
products, if approved, to patients or future customers could be delayed or halted.
The
formulation
of
peptide-based
medicines
is
complex
and
requires
significant
expertise
and
capital
investment,
including
the
development of
advanced manufacturing
techniques and
analytics. We
are currently
dependent on
contract manufacturers,
including
UBI,
its
affiliates,
WuXi
STA
and
CSBio,
to
conduct
the
manufacturing
and
supply
activities
for
our
product
candidates
and
the
underlying
component
parts,
but
may
choose
to
conduct
these
manufacturing
activities
ourselves
in
the
future.
If
our
contract
manufacturers are unable to manufacture our product candidates in clinical quantities or, when necessary, in commercial quantities and
at
sufficient
yields,
then
we
will
need
to
identify
and
reach
supply
arrangements with
additional
third
parties.
Further,
our
product
candidates may be
in competition with other
products for access to
these facilities and may
be subject to delays
in manufacture if our
contract manufacturers give
other products
higher priority.
We
and our
contract manufacturers must
comply with
cGMP,
regulations
and guidelines for the manufacturing
of our product candidates used
in pre-clinical studies and clinical
trials and, if approved, marketed
products. If
we or
our contract
manufacturers do
not receive
any regulatory
approvals, or
lose existing
approvals,
required to
manufacture
our
product
candidates,
production
and
fulfilment
of
orders
will
be
delayed,
which
may
materially
adversely
affect
our
business.
Manufacturers
of
biotechnology
products
often
encounter
difficulties
in
production,
particularly
in
scaling
up
and
validating
initial
production. Furthermore, if
microbial, viral or
other contaminations are
discovered in our
product candidates or
in the manufacturing
facilities
where
our
product
candidates
are
made,
such
manufacturing
facilities
may
be
closed
for
an
extended
period
of
time
to
investigate and
remedy the
contamination. Shortages
of raw
materials may
also extend the
period of time
required to
develop our
product
candidates.
Manufacturing
these
products
requires
facilities
specifically
designed
for
and
validated
for
this
purpose
and
sophisticated
quality
assurance
and
quality
control procedures
are necessary.
Slight deviations
anywhere
in
the
manufacturing process,
including filling,
labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product
recalls or spoilage. Further,
delays in our clinical
trials or in any
regulatory approvals may result
in the expiration of
manufactured product, which could
in turn lead
to further delays.
When changes are
made to the
manufacturing process, we
may be required
to provide pre-clinical
and clinical data
showing
the
comparable
identity,
strength,
quality,
purity
or
potency
of
the
products
before
and
after
such
changes.
The
use
of
biologically derived
ingredients can
also lead
to allegations
of harm,
including infections
or allergic
reactions, or
closure of
product
facilities due to possible contamination.
In addition,
there are
risks associated
with large
scale manufacturing
for clinical
trials or
commercial scale
including, among
others,
cost overruns,
potential problems
with process
scale-up, process
reproducibility, stability issues, compliance
with cGMP, lot consistency
and timely availability of raw materials. Even if we obtain marketing approval for
any of our product candidates, there is no assurance
that we or our manufacturers will be able to manufacture the approved product to specifications acceptable to regulatory authorities, to
produce it in sufficient quantities
to meet the requirements
for the potential commercial
launch of the product
or to meet potential
future
demand. If
we or
our manufacturers
are unable
to produce
sufficient quantities
for clinical
trials, advance
purchase commitments
or
commercialization, more generally,
our development and commercialization efforts
would be impaired, which
would have an adverse
effect on our business, financial condition, results of operations and prospects.
We cannot assure you that any disruptions or other issues relating to the manufacture of any of our product candidates will not occur in
the future. Any delay
or interruption in the supply
of clinical trial supplies
could delay the completion
of planned clinical trials,
increase
the costs
associated with
maintaining clinical
trial programs
and, depending
upon the
period of
delay,
require us
to commence
new
clinical trials at additional
expense or terminate clinical
trials completely.
Any adverse developments affecting
clinical or commercial
manufacturing
of
our
product
candidates
or
products
may
result
in
shipment
delays,
inventory
shortages,
lot
failures,
product
withdrawals or recalls or other interruptions in
the supply of our product candidates. We may also have to take inventory
write-offs and
incur other
charges and
expenses for
product candidates
that fail
to meet
specifications, undertake
costly remediation
efforts or
seek
more costly manufacturing
alternatives. Accordingly, failures or
difficulties faced at
any level of
our supply chain
could delay or
impede
the development and
commercialization of any
of our product
candidates and could
have an adverse
effect on
our business, financial
condition, results of operations and prospects.
We
and our
contract manufacturers and
suppliers could be
subject to
liabilities, fines, penalties
or other
sanctions under federal,
state,
local
and
foreign
environmental,
health
and
safety
laws
and
regulations
if
we
or
they
fail
to
comply
with
such
laws
or
regulations or otherwise incur costs that could have a material adverse effect on our business.
We currently rely on
and expect
to continue
to rely
on contract
manufacturers for
the manufacturing
and supply
of our
product candidates
and custom
components. We
and these
contract manufacturers
are subject
to various
federal, state,
local and
foreign environmental,
health
and
safety
laws
and
regulations,
including
those
governing
laboratory
procedures
and
the
generation,
handling,
labeling,
transportation, use, manufacture, storage,
treatment and disposal of
hazardous materials and wastes
and worker health and
safety. We
do
not
have
control
over
a
manufacturer’s
or
supplier’s
compliance
with
environmental,
health
and
safety
laws
and
regulations.
Liabilities they incur pursuant to these laws and regulations could result in significant costs or in certain circumstances, an interruption
in operations, any of which could adversely affect our business, financial condition, results of operations and prospects.
With respect
to any
hazardous materials or
waste which
we are
currently,
or in
the future
will be,
generating, handling,
transporting,
using, manufacturing, storing, treating or disposing of, we
cannot eliminate the risk of contamination or
injury from these materials or
waste, including
at third-party
disposal sites.
In the
event of
such contamination
or injury,
we could
be held
liable for
any resulting
damages and liability. We also could be subject to significant civil or criminal fines
and penalties, cessation of operations, investigation
or remedial costs
or other sanctions
for failure to
comply with applicable
environmental, health and
safety laws. In
addition, we may
incur substantial costs in order to comply with current or future environmental,
health and safety laws and regulations. These current or
future laws and regulations may impair our research, development or production
efforts or otherwise have a material adverse effect
on
our business.
Undetected errors or defects in our production could harm our reputation or expose us to product liability claims.
Undetected errors and defects in the cGMP materials used in the production of our product candidates could result
in a lower quality of
any products we produce, and could give rise to
reputational harm to us and to the contract manufacturers with
whom we work. If any
such errors
or defects
are discovered,
we may
incur significant
costs, the
attention of
our key
personnel could
be diverted,
or other
significant problems
may arise.
We
may also
be subject
to warranty
and liability
claims for
damages related
to errors
or defects
in
products made with our cGMP materials. In addition, if we do not meet
industry or quality standards, if applicable, such products may
be subject to
recall. A material
liability claim, recall
or other occurrence
that harms our
reputation or decreases
market acceptance of
such products could harm our business and operating results.
Risks Related to Our Reliance on UBI, Collaborators and Other Third Parties
Conflicts of interest and disputes
have and may arise
between us and UBI and
its affiliates, and these
conflicts and disputes might
ultimately be resolved in a manner unfavorable to us.
UBI is
our largest
stockholder,
the licensor
of certain
of our
intellectual property
and is
a commercial
partner for
the Company.
In
addition, Dr. Chang Yi Wang,
UBI’s founder, holds shares of our common stock.
Our co-founders (Mei Mei Hu and
Louis Reese), one
of their affiliates and
UBI (collectively, our “principal
stockholders”), are party
to a voting
agreement (the “Voting Agreement,”), which
provides Mei Mei Hu
with the authority (and
irrevocable proxies) to vote
the shares of capital
stock held by
the stockholders party to
the Voting
Agreement at her discretion on all matters
to be voted upon by stockholders.
Our CEO, Mei Mei Hu, and
two of our other
directors, Louis Reese and James Chui, also serve on and constitute a majority of the board of directors of UBI.
UBI’s equity interests
in the Company, and the overlapping directorships, could give rise to conflicts of interest, in particular when a decision could favor the
interests of UBI (or its affiliates)
or us over the other.
Further, we have historically depended
heavily on UBI and its affiliates
for our
business
operations,
including
the
provision
of
research,
development
and
manufacturing
services.
While
we
have
taken
steps
to
separate our
operations from
those of
UBI and
currently anticipate
taking additional
steps to
lessen our
dependence, we
still have
ongoing
commercial
relationships
with
UBI
and
its
affiliates.
With
respect
to
our
UB-612
program,
we
have
partnered
with
UBIA
for
the
development of UB-612 in
Taiwan, UBIP for the formulation-fill-finish services,
and UBP as the
sole manufacturer of protein.
Relating
to our
chronic disease pipeline,
we continue to
work with UBI
on certain early
stage research activities,
and UBIP and
UBIA for the
production and testing of clinical material for our UB-312 program.
Conflicts of
interest may arise
with respect to
existing or possible
future commercial arrangements
between us and
UBI or
any of
its
affiliates in which the terms and conditions of the arrangements are subject to
negotiation or dispute. For example, conflicts of interest
could arise over matters such as:
•
disputes over
the cost
or quality
of the
manufacturing and
testing services
provided to
us by
UBI with
respect to
our product
candidates;
•
the allocation of UBI’s resources as between our business objectives and UBI’s own objectives;
•
a
decision
whether
to
engage
UBI
or
its
affiliates
in
the
future
to
manufacture,
test
and
supply
of
additional
custom
components or product candidates for us;
•
decisions as to which particular product candidates we will commit sufficient development efforts to; or
•
business opportunities unrelated to our current products that may be attractive both to us and to the other company.
We
also cannot
guarantee conflicts
of interest
will not
arise in
connection with
the negotiation
or execution
of any
future agreement
with UBI, its affiliates or any other related party.
Further, we have been advised that there is currently
an ongoing dispute within UBI between Dr. Wang
and the other four members of
UBI’s board of directors relating to
certain corporate governance matters,
including the overall management
and control of UBI,
as well
as its relationship with the Company. Specifically, we have been advised that Dr. Wang attempted to replace the UBI board of
directors
in July and
August 2021
and is
currently asserting
that she
is the
majority shareholder
of UBI,
which we
understand UBI’s other
directors
dispute as invalid and incorrect, respectively.
This dispute has created risks
and uncertainties for us, and this
dispute or any resolution
of it
could negatively
impact us,
including, without
limitation, by
impairing our
ability to
work with
UBI and
its affiliates
as a
commercial
partner in the future and/or otherwise adversely affecting other existing arrangements with or involving
UBI or its affiliates. Late in the
day
on
November 9,
2021,
counsel
to
the
Company
received
correspondence
on
behalf
of
Dr.
Wang
(the
“Correspondence”).
The
Correspondence outlined
Dr.
Wang’s
concerns that
the preliminary
prospectus for
our initial
public offering,
subject to
completion,
dated November 5, 2021 did not accurately describe the relationship between the Company and UBI, namely
the Company’s ability to
operate independently from UBI.
The Correspondence also relayed
Dr. Wang’s
concerns that the preliminary
prospectus did not fully
describe
the
disruption
to
the
Company’s
business
that
could
result
from
the
abovementioned
dispute,
including
with
respect
to
intellectual property
agreements among
the Company
and UBI
and its
affiliates. Various
other claims
have been
made by
Dr.
Wang
regarding
UBI’s
corporate
governance,
the
operations
of
the
Company
and
the
disclosures
for
our
initial
public
offering,
and
the
Company cannot predict
the course of
this dispute. However,
the Company has
carefully considered Dr.
Wang’s
concerns and, based
on the disclosures included in
the preliminary prospectus and in
the final prospectus for our
initial public offering and
the Company’s
diligence efforts, the Company remains confident in the appropriateness and accuracy of its disclosures.
We
will
rely
on
contract
manufacturers
for
the
manufacture
of
raw
materials
for
our
research
programs,
pre-clinical studies and clinical trials and we do not have
long-term contracts with many of these parties. This reliance on
contract
manufacturers increases
the risk
that we
will not
have sufficient
quantities of
such materials
or product
candidates that
we may
develop and commercialize, or that such supply will not be available to us at an acceptable cost or on an acceptable timeline, which
could delay, prevent or impair our development or commercialization efforts.
We rely on contract manufacturers, including UBI and its affiliates, for the manufacture of raw materials for our
clinical trials and pre-
clinical and clinical development. We
do not have a long-term agreement with
some of the contract manufacturers we currently
use to
provide
pre-clinical
and
clinical
raw
materials.
Certain
of
these
manufacturers
are
critical
to
our
production,
and
the
loss
of
these
manufacturers to one of
our competitors or otherwise,
or an inability to
obtain quantities at an
acceptable cost or quality,
could delay,
prevent
or
impair
our
ability
to
timely
conduct
pre-clinical
studies
or
clinical
trials,
and
would
materially
adversely
affect
our
development and commercialization efforts.
We expect to continue to
rely on contract
manufacturers for the
commercial supply of
any of our
product candidates for
which we obtain
marketing approval, if any. We may be unable to maintain or
establish long-term agreements with contract
manufacturers or to do so
on
acceptable terms. Even
if we are
able to establish
agreements with contract
manufacturers, reliance on
contract manufacturers entails
additional risks, including:
•
the failure
of the
contract manufacturer
to manufacture
our product
candidates according
to our
schedule, or
at all,
including
if our contract manufacturers
give greater priority to the
supply of other products
over our product candidates
or otherwise
do not satisfactorily perform according to the terms of the agreements between us and them;
•
the reduction or termination of production or deliveries by suppliers, or the raising of prices or renegotiation of terms;
•
the termination
or nonrenewal
of arrangements
or agreements
by our
contract manufacturers
at a
time that
is costly
or
inconvenient for us;
•
the breach by the contract manufacturers of our agreements with them;
•
the failure of contract manufacturers to comply with applicable regulatory requirements;
•
the failure of the contract manufacturer to manufacture our product candidates according to our specifications;
•
the
mislabeling
of
clinical
supplies,
potentially
resulting
in
the
wrong
dose
amounts
being
supplied
or
active
drug
or
placebo not being properly identified;
•
clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug
supplies not
being distributed to commercial vendors in a timely manner, resulting in lost sales; and
•
the misappropriation or
unauthorized disclosure of
our intellectual property
or other proprietary
information, including our
trade secrets and know-how.
We
do not have
complete control over
all aspects of
the manufacturing process
of, and are
dependent on, our
contract manufacturing
partners
for
compliance
with
cGMP
regulations
for
manufacturing
both
custom
components
and
finished
products.
Contract
manufacturers may not be able to comply
with cGMP regulations or similar regulatory requirements
outside of the United States. If our
contract
manufacturers
cannot
successfully
manufacture
material
that
conforms
to
our
specifications
and
the
strict
regulatory
requirements of applicable regulatory authorities, they will not
be able to secure and/or maintain authorization
for their manufacturing
facilities. In
addition, we do
not have
full control over
the ability of
our contract manufacturers
to maintain adequate
quality control,
quality assurance and
qualified personnel.
Further, our manufacturing
partners may
be unable to
successfully increase
the manufacturing
capacity for any of
our product candidates in a
timely or cost-effective manner,
or at all, and quality
issues may arise during any
such
scale-up activities.
If regulatory
authorities do
not authorize
these facilities
for the
manufacture of
our product
candidates or
if they
withdraw
any
such
authorization
in
the
future,
we
may
need
to
find
alternative
manufacturing facilities,
which
would
significantly
impact our ability to develop, obtain marketing
approval for or market our product candidates,
if approved. Our failure, or the failure
of
our
contract
manufacturers,
to
comply
with
applicable
regulations
could
result
in
sanctions
being
imposed
on
us,
including
fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
product candidates
or drugs, operating restrictions and criminal prosecutions, any of which could significantly and
adversely affect supplies of our product
candidates or drugs and harm our business and results of operations.
We
depend
on
strategic
partnerships,
collaborations
and
license
agreements
in
connection
with
the
research,
development
and
commercialization of our Vaxxine Platform and product candidates. If our existing or future partners, collaborators or licensees do
not perform as
expected, if we
fail to maintain
any of these
strategic partnerships, collaborations or
license agreements, or
if they
are not
successful, our
ability to
commercialize our
product candidates
successfully and
to generate
revenues may
be materially
adversely affected.
We
have
established
and
intend
to
continue
to
establish
strategic
partnerships,
collaborations,
licensing
agreements,
or
other
arrangements with third parties. For our research, development and commercialization activities, we have
depended, and will continue
to depend, on our partners to design and conduct their own clinical studies. As a result, these
activities may not be able to be conducted
in the manner or on the time schedule we currently contemplate, which may negatively impact our business operations. While we have
certain contractual rights to information about pre-clinical and clinical developments and results under certain of our collaboration and
license
agreements,
including
our
agreements
with
UBIA
and
Aurobindo,
we
cannot
be
certain
that
clinical
trials
conducted
in
connection with
such collaboration
programs will
be conducted
in a
manner consistent
with the
best interests
of our
business. In
addition,
if any
of our
partners, collaborators or
licensees withdraw support
for these programs
or proposed products
or otherwise
impair their
development, our business
could be negatively
affected. Also, our inability
to find a partner
for any of our
product candidates may
result
in our termination of that specific product candidate program or evaluation of a product candidate in a particular indication. Because of
contractual restraints and the limited
number of contract manufacturers
with the expertise, required
regulatory approvals and facilities
to manufacture
our product
candidates on
a commercial
scale, replacement
of
a contract
manufacturer may
be expensive
and time-
consuming and may
cause interruptions in
the production of
our product candidates,
which could delay
our clinical trials
or interrupt
our potential future
commercial sales. Even
if we find
or establish a
strategic partner,
collaborator or licensee
for one or
more of our
product candidates, there is no assurance
that upon the approval of one or
more of such product candidates that such
product candidates
will be successfully commercialized.
Furthermore, our licenses and collaboration
agreements impose, and any
future agreement we enter
into may also impose, restrictions
on our ability to license certain of our intellectual property to third parties or to develop or commercialize certain product candidates or
technologies ourselves.
In the future, we may enter into additional collaborations or license agreements to fund our development programs
or to gain access to
sales, marketing
or distribution
capabilities of
other parties.
While certain
of our
existing collaboration
and license
agreements, including
our agreements with Aurobindo, impose development or commercialization obligations on our collaborators or
licensees, we cannot be
certain that our
collaboration partners will
allocate sufficient resources
or attention to
our collaboration programs,
that they will
progress
our collaboration
programs consistent
with the
best interests
of our
business or
that they
will otherwise
meet their
obligations under
these agreements in
a timely manner
or at all.
Our existing collaborations
and licenses, and
any future collaborations
and licenses we
enter into, therefore may pose a number of risks, including the following:
•
collaborators or licensees may have
significant discretion in determining the
efforts and resources that
they will apply to
developing
or
commercializing
our
product
candidates,
and
they
may
not
sufficiently
fund
the
development
or
commercialization of a product candidate;
•
collaborators and licensees may not perform their obligations as expected by us or by health authorities,
such as the FDA,
the TFDA or comparable foreign regulatory authorities;
•
collaborators and licensees may dissolve, merge, be bought or may otherwise become unwilling to fulfill the initial terms
of the collaboration with us, or we may be unwilling to continue our arrangement following such an occurrence;
•
collaborators and licensees
may fail to
perform their obligations
under their agreements
or may be
slow in performing
their
obligations;
•
collaborations and licensees may be terminated for
the convenience of the collaborator or
licensee and, if terminated, we
could be required to raise additional capital to pursue further development or commercialization of the applicable product
candidates;
•
collaborators and licensees may not pursue commercialization of any product candidates that achieve regulatory approval
or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes
in the collaborators’
or licensees’ strategic
focus or available
funding, or external
factors, such as
an acquisition, that
divert
resources or create competing priorities, or due to the actual or perceived competitive situation in a specific indication;
•
collaborators and licensees may delay clinical trials, stop a
clinical trial or abandon a product candidate, repeat or conduct
additional clinical trials or may require a new formulation of a product candidate for clinical testing;
•
collaborators and licensees could
independently develop, or develop with
third parties, products that
compete directly or
indirectly with our products or product candidates if the collaborators believe that competitive
products are more likely to
be successfully developed or can be commercialized under terms that are more economically attractive than ours;
•
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own
product candidates or
products, which may
cause collaborators to
cease to devote
resources to the
commercialization of
our product candidates;
•
disagreements with collaborators or licensees, including disagreements over
proprietary rights, contract interpretation and
breach of contract claims, payment obligations or the preferred course of development, might cause delays or termination
of
the
research,
development
or
commercialization
of
products
or
product
candidates,
might
lead
to
additional
responsibilities,
including
financial
obligations
for
us
with
respect
to
products
or
product
candidates,
or
delays
or
withholding of payments due to us or might result in litigation
or arbitration, any of which would be time-
consuming and
expensive, and could limit
our ability to execute
on our strategies and
delay or prevent our
ability to devote resources
to
other product candidates;
•
collaborators or licensees
may not properly
obtain, maintain, enforce
or defend our
intellectual property or
may use our
proprietary
information
in
such
a
way
that
could
jeopardize
or
invalidate
our
intellectual
property
or
proprietary
information or expose us to potential litigation; and
•
collaborators may infringe,
misappropriate or otherwise
violate the intellectual
property of third
parties, which may
expose
us to litigation and potential liability.
If our collaborations and licenses related to the research, development and commercialization of product candidates do not result in the
successful
development
and
commercialization
of
our
product
candidates,
or
if
one
of
our
collaborators
or
licensees
terminates
its
agreement with us, we may not
receive any future research funding or
milestone or royalty payments under the
collaboration or license,
and we may be unable to continue the development and commercialization of the product candidate. Further, even if our collaborations
and licenses do result in successful development and commercialization of products, if
one of our collaborators breaches its obligations
under its
agreement with us
or enters bankruptcy
or insolvency,
there may be
a material delay
in our receipt
of payments under
such
agreements, or we
may never
receive such
payments. If
we do
not receive
the payments
we expect
under these
agreements, our own
development and commercialization
activities could be
delayed or prevented
altogether, and we may
need to secure
additional resources
to develop our proprietary product candidates. Moreover, maintaining our relationships with our collaborators and
licensees may divert
significant time and effort of
our scientific staff and management team,
which may harm our ability
to effectively allocate our resources
to multiple
internal and
other projects.
All of
the risks
relating to
product development,
regulatory approval
and commercialization
described in this report also apply to the activities of our collaborators and licensees.
Additionally, subject
to its contractual obligations to us,
if one of our collaborators or
licensors is involved in a
business combination,
merger,
acquisition
or
other
similar
transaction,
the
collaborator
or
licensor
might
deprioritize
or
terminate
the
development
or
commercialization of any product
candidate licensed to it
by us. If one
of our collaborators or
licensors terminates its agreement
with
us, we
may be
unable to
attract new
collaborators in
a timely
manner or
at all,
which may
delay or
prevent our
ability to
develop or
commercialize one or more of our product candidates.
We rely on third parties to conduct our pre-clinical
studies and clinical trials and
perform other tasks for us.
If these third parties do
not successfully carry
out their contractual
duties, meet expected
deadlines, or comply
with legal and
regulatory requirements, we
may not be able to obtain regulatory approval for or commercialize our
product candidates and our business could be substantially
harmed.
We have relied upon and plan to continue to
rely upon CROs to execute
certain of our pre-clinical and
clinical trials, and to monitor
and
manage data for our ongoing pre-clinical and clinical programs and to provide us with significant data and other information related to
our projects, pre-clinical studies and clinical
trials. If such third parties provide
inaccurate, misleading or incomplete data,
our business,
financial condition and results of operations and
prospects could be materially adversely affected. We have control over limited aspects
of our CROs’ activities; nevertheless,
we are responsible for,
and our reliance on
CROs does not relieve us
of our responsibilities for,
ensuring that each
of our trials
is conducted in
accordance with the
applicable protocol, legal,
regulatory, scientific and ethical
standards.
We
and our
CROs and
other vendors
are required
to comply
with cGMP,
GCP,
Good Laboratory
Practice (“GLP”)
and other
laws,
regulations and guidelines
enforced by applicable
regulatory authorities for
all of our
product candidates during
both pre-clinical and
clinical
development.
Regulatory
authorities
enforce
these
regulations
through
periodic
inspections
of
study
sponsors,
principal
investigators, trial sites and other contractors. If we or any of our CROs
or vendors fail to comply with applicable regulations, the data
generated in our
pre-clinical and clinical
trials may be
deemed unreliable and
regulatory authorities may
require us to
perform additional
pre-clinical
and
clinical
trials
before
approving
our
marketing
applications.
We
cannot
assure
you
that
upon
inspection
by
a
given
regulatory
authority,
such
regulatory
authority
will
determine
that
all
of
our
clinical
trials
comply
with
cGCP
regulations
or
other
applicable laws
and regulations.
Our failure
to comply with
applicable laws
and regulations may
require us
to repeat clinical
trials, which
would delay the regulatory approval process and require significant additional expenditures, which we may be unable to meet.
If any of our relationships with
these CROs terminates, we may not
be able to enter into arrangements
with alternative CROs or do so
on commercially reasonable terms or in a timely manner. We
would also incur additional costs and delays while engaging a new CRO,
which we
may not
be able
to engage
on commercially
reasonable terms
or at
all. In
addition, our
CROs are
not our
employees, and
except for remedies available to us
under our agreements with such CROs,
we cannot control whether or not
they devote sufficient time
and
resources
to
our
ongoing
pre-clinical
and
clinical
programs.
If
CROs
do
not
successfully
carry
out
their
contractual
duties
or
obligations, meet
expected deadlines,
conduct our
studies in
accordance with
regulatory requirements
or our
stated study
plans
and
protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to
our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not
be able to
obtain regulatory approval
for or successfully
commercialize our product
candidates in a
timely manner or
at all. For
example,
due to
an error
by the
CRO responsible
for administering
blinded placebo
and active
doses to
trial subjects,
which reduced
the confidence
of subsequently collected data, we
decided to discontinue a Phase
2a LTE
trial for UB-311.
In that case, however,
we determined that
we had collected
sufficient data on
UB-311’s tolerability and immunogenicity. CROs
or any of
our other collaborators
may also
generate
higher costs than
anticipated. As a
result, our results
of operations and
the commercial prospects
for our product
candidates could be
harmed, our costs could increase and our ability to generate revenue could be delayed.
Though we carefully
manage our relationships
with our CROs,
there can be
no assurance that
we will not
encounter challenges or
delays
in the future
or that these
delays or challenges
will not have
a material adverse
impact on our
business, financial condition,
results of
operations and prospects.
We
do not have multiple
sources of commercial supply
for some of the
components used in our
product candidates, nor long-term
supply contracts with our existing suppliers, and
certain of our suppliers are critical to
our production. If we were to lose
a critical
supplier or if an approved supplier
experiences delays due to raw
material constraints, it could have
a material adverse effect on our
ability to complete the
development of our product
candidates. If we obtain regulatory
approval for any of
our product candidates,
we cannot guarantee that our suppliers will be able to meet our increased demands for supply.
We do not have multiple sources
of commercial supply
for each of the
components used in the
manufacturing of our
product candidates,
nor do we have long-term supply
agreements with all of our
component suppliers. Manufacturing suppliers
are subject to cGMP quality
and regulatory requirements, covering manufacturing, testing,
quality control and record keeping relating to
our product candidates and
are
subject
to
ongoing
inspections
by
applicable
regulatory
authorities.
Manufacturing
suppliers
are
also
subject
to
licensing
requirements as well as local, state and
federal regulations and regulations in foreign jurisdictions
in which they operate. Failure by any
of our suppliers to comply with all applicable regulations and requirements may result in long delays and interruptions
in supply.
The number of suppliers of the raw material components
of our product candidates is limited. In the event it is
necessary or desirable to
acquire supplies from
alternative suppliers, we
might not be
able to obtain
such supply on
commercially reasonable terms,
if at all.
It
could also require significant time and expense
to redesign our manufacturing processes to work
with another company and redesign of
processes can trigger the need
for conducting additional studies such as
comparability or bridging studies. Additionally,
certain of our
suppliers are critical to
our production, and the
loss of these suppliers
to one of our
competitors or otherwise would
materially adversely
affect our development
and commercialization efforts. Further,
if such critical suppliers
experience delays in their
ability to supply of
components due
to limited availability
of raw materials
or other difficulties
which may be
beyond our
or their control,
our manufacturing
efforts may be materially adversely affected.
As part of any marketing approval, regulatory authorities conduct inspections that must be successful prior to the approval
of a product
candidate. Failure of manufacturing suppliers to successfully complete these regulatory inspections will result in
delays. If supply from
the approved supplier is interrupted, an alternative vendor would need to be qualified through an NDA amendment or supplement, and
this
could result
in
significant disruption
in commercial
supply.
Regulatory authorities
may
also require
additional studies
if
a new
supplier is relied upon for commercial production. Switching vendors may
involve substantial costs and is likely to result
in a delay in
our desired clinical and commercial timelines.
If we are unable to obtain the supplies we need at a reasonable price or on a timely basis, it could have a material adverse effect on our
ability
to
complete
the
development
of
our
product
candidates
or,
if
we
obtain
regulatory
approval
for
our
product
candidates,
to
commercialize them.
Risks Related to Our Intellectual Property Rights
We depend on intellectual
property licensed
from UBI
and its
affiliates, the termination
of which
could result
in the
loss of
significant
rights, which would harm our business.
We
are dependent on
technology,
patents, know-how and
proprietary information, both
our own and
those licensed from
UBI and its
affiliates. We
entered into the Platform License Agreement in August 2021 pursuant
to which we obtained a worldwide, sublicensable
(subject to
certain conditions),
perpetual, fully
paid-up, royalty-free
(i) exclusive
license (even
as to
the Licensors)
under all
patents
owned or otherwise controlled
by the Licensors or
their affiliates existing
as of the effective
date of the Platform
License Agreement,
(ii) exclusive
license (except
as to
the Licensors)
under all
patents owned
or otherwise
controlled by
the Licensors
or their
affiliates
arising after the effective date
during the term of the Platform
License Agreement, and (iii) non-exclusive license under
all know-how
owned
or
otherwise controlled
by
the
Licensors or
their
affiliates
existing
as
of
the
effective
date
or arising
during the
term
of
the
Platform License
Agreement, in
each of
the foregoing
cases, to
research, develop,
make, have
made, utilize,
import, export,
market,
distribute, offer for
sale, sell,
have sold, commercialize
or otherwise
exploit peptide-based
vaccines in the
field of all
human prophylactic
and therapeutic uses, except for such vaccines related to human immunodeficiency virus, herpes simplex virus and Immunoglobulin E.
The patents licensed to us under the Platform License Agreement include patents directed to a CpG delivery system,
artificial T helper
cell epitopes
and certain
designer peptides
and proteins,
each of
which is
utilized in
UB-612. Any
termination of
these licenses
will
result in the loss of significant rights and will restrict our ability to develop and commercialize our product candidates.
Our
reliance
on
in-licensed
intellectual
property
and
technology
results
in
a
number
of
risks
to
the
development
and
commercialization of our
product candidates, including
the loss of
such rights,
our licensors’ inability
or refusal to
enforce or defend
such rights, and the requirement to pay royalties, milestones, and other amounts.
Agreements under which we
license intellectual property or
technology to or from
UBI, its affiliates
and from other third
parties may
be complex,
and certain
provisions in
such agreements
may be
susceptible to
multiple interpretations. The
resolution of
any contract
interpretation disagreement that
may arise could
narrow what we
believe to be
the scope of
our rights to
the relevant intellectual
property
or technology or increase what
we believe to be our
financial or other obligations under
the relevant agreement, either of
which could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations
and
prospects.
Moreover,
if
disputes
over
intellectual property that we
have licensed prevent or
impair our ability to
maintain our current licensing
arrangements on commercially
acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates. Our business
may also
suffer if any
current or future licensors
fail to abide by
the terms of the
license, if the licensors
fail to enforce licensed
patents against
infringing third parties, if the licensed patents or
other rights are found to be
invalid or unenforceable, or if we are
unable to enter into
necessary licenses on acceptable terms or at
all. In the event of a
bankruptcy by one of our licensors, our
intellectual property licenses
could
also
be
affected.
For
example,
while
the
U.S.
Bankruptcy
Code
allows
a
licensee
to
retain
its
rights
under
its
license
notwithstanding the
bankrupt licensor’s
rejection of
such license,
such protections
may not
be available
to us
in the
event a
licensor
declares bankruptcy in a
foreign jurisdiction. Our licensors may
also own or control
intellectual property that has not
been licensed to
us and,
as a
result, we
may be
subject to
claims, regardless of
their merit, that
we are
infringing or otherwise
violating the
licensors’
rights.
Furthermore, while we cannot currently determine the amount of the royalty obligations we would be required to pay on
sales of future
products,
if
any,
the
amounts may
be
significant.
The
amount
of
our
future
royalty
obligations
will
depend
on
the
technology
and
intellectual property
we use
in products
that we
successfully develop
and commercialize,
if any.
Therefore, even
if we
successfully
develop and commercialize products, we may be unable to achieve or maintain profitability.
We believe
the growth of our business may depend in part on our ability to acquire or
in-license additional intellectual property rights,
including to advance our research or
allow commercialization of our product candidates. If
we are unable to obtain additional
licenses
we need to
develop and commercialize
our product candidates,
or if we
obtain such licenses
and they are
terminated, we may
be required
to expend considerable time and resources in an attempt to develop
or license replacement technology. We
may also need to cease use
of the compositions or methods covered by such third-party intellectual property rights, and our ability
to license or develop alternative
approaches that do not infringe
on such intellectual property
rights may entail significant additional
costs and development delays, even
if we were able to develop or license such alternatives, which may not be feasible.
The
licensing
and
acquisition
of
third-party
intellectual
property
rights
is
a
competitive
practice,
and
companies
that
may
be
more
established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property
rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may
have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization
capabilities. There can be no assurance that we will
be able to successfully complete such negotiations and
ultimately acquire the rights
to the intellectual property
surrounding the additional product
candidates that we may
seek to acquire. Even
if we are able
to obtain a
license under such intellectual property rights, any such license may be non-exclusive, which may allow our competitors’ access to the
same technologies licensed to us.
Licensing of intellectual property
is of critical importance
to our business and
involves complex legal, business
and scientific issues and
is complicated by the rapid pace of scientific discovery in our industry. Disputes may also arise between us and our licensors regarding
intellectual property subject to a license agreement, including those relating to:
•
the scope of rights granted under the license agreement and other interpretation-related issues;
•
whether and the extent
to which our technology
and processes infringe on intellectual
property of the licensor
that is not
subject to the license agreement;
•
our right to sublicense patent and other rights to third parties under collaborative development relationships;
•
our compliance with reporting, financial or other obligations under the license agreement;
•
the amount and timing of payments owed under license agreements; and
•
the allocation of ownership of inventions and know-how resulting from the creation or use of intellectual property by our
licensors and by us and our partners.
We
may
also
not
be
able
to
fully
protect
our
licensed
intellectual
property
rights
or
maintain
our
licenses
under
our
licensing
arrangements. Our existing
and future licensors
could retain the
right to prosecute,
maintain, defend and
enforce the intellectual
property
rights licensed to us, in which case we
would depend on the ability and will of
our licensors to do so. Our licensors may
take different
approaches to
prosecuting patents
than we
would, and
it is
possible our
inability to
control such
activities could
harm our
business.
Furthermore, our
licensors may
determine not
to pursue
litigation against
other companies
or may
pursue such
litigation less
aggressively
than we would. We
may also rely upon
obtaining the consent of
our licensors to settle
legal claims. If our
licensors do not adequately
protect or enforce such licensed intellectual property, competitors may be able to use such intellectual
property and erode or negate any
competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit
our ability
to commercialize our products and product candidates and delay or render impossible our achievement of profitability.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable
terms or
at all,
we may
be unable
to successfully
develop and
commercialize the
affected product
candidates. We
are
generally also subject to all of the same risks with respect to protection of intellectual property that
we license as we are for intellectual
property that we own, which are described below.
If we or our licensors fail to adequately protect
this intellectual property, our
ability
to develop or commercialize our products could suffer.
Furthermore, our existing license agreements may impose,
and we expect that future license agreements
will impose, various diligence,
milestone payment, royalty and
other obligations on us
and if our licensors,
licensees or collaborators conclude
that we have failed
to
comply with our
obligations under these
agreements, including due
to the impact
of the COVID-19
pandemic on our
business operations
or our use of the intellectual property licensed to us in a manner the licensor believe is unauthorized, or we are subject to a bankruptcy,
we may be required to pay damages and
the licensor may have the right to
terminate the license. Any of the foregoing
could result in us
being unable to
develop, manufacture and
sell products that
are covered by
the licensed technology
or enable a
competitor to gain
access
to the
licensed technology.
We
might not
have the
necessary rights
or the
financial resources
to develop,
manufacture or
market our
current or future product candidates
without the rights granted under
our licenses, and the loss of
sales or potential sales in such
product
candidates could have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover,
our rights
to our
in-licensed patents
and patent
applications may
depend, in
part, on
inter- institutional
or other
operating
agreements between the joint owners
of such in-licensed patents and
patent applications or the owners
of such in-licensed patents and
patent applications and their
affiliates. We may not be aware
of each party’s rights and
obligations under such inter-institutional
or other
operating agreements and, as such, the ownership of our in-licensed patents and
patent applications may be uncertain. If one or more of
these
owners
breaches
such
inter-institutional
or
other
operating
agreements,
our
rights
to
such
in-licensed
patents
and
patent
applications may be adversely affected. In addition, the development of certain of our product candidates may be funded by grants that
impose certain
pricing limitations
on such
product candidates
and limit
our ability
to commercialize
such product
candidates and
to
achieve
or
maintain
profitability.
Any
of
the
foregoing
could
have
a
material
adverse
effect
on
our
competitive
position,
business,
financial conditions, results of operations and prospects.
We
may
be
required
to
license
or
obtain
rights
to
use
third
party
intellectual
property
or
technology
in
connection
with
the
development and commercialization of our product candidates.
We
may not
be aware
of all
technologies developed
or under
development by
third parties,
and other
pharmaceutical companies
or
academic institutions may also have filed or may be planning
to file patent applications potentially relevant to our business and
product
candidates. The technologies
used in
connection with the
formulations of our
product candidates may
also be
covered by
intellectual
property rights held by
others. From time to time,
in order to avoid
infringing these third-party patents, we
may be required to license
technology from additional third parties to further
develop, manufacture, use, sell or commercialize our product
candidates, or that we
otherwise deem necessary
for our
business operations. We
may fail
to obtain
any such
licenses at
a reasonable
cost or
on reasonable
terms, if
at all,
and as
a result
we may
be unable
to develop
or commercialize
the affected
product candidates,
and we
may have
to
abandon development of the relevant research programs or product candidates, which would harm our business.
If we are unable to obtain and
maintain intellectual property protection for
our products or product candidates, or
if the duration or
scope of
our intellectual
property protection
is not
sufficiently broad,
our ability
to commercialize
our product
candidates successfully
and to compete effectively may be materially adversely affected.
Our success depends
on our ability to
obtain and maintain
patent and other
intellectual property protection
in the United
States and other
countries with
respect to
our current
and future
proprietary product
candidates. We
rely upon
a combination
of patents,
trade secret
protection
and
confidentiality
agreements
to
protect
the
intellectual
property
related
to
our
technology,
manufacturing
processes,
products and
product candidates.
We,
UBI and
our other
collaborators and
licensors have
primarily sought
to protect
our proprietary
positions by filing
patent applications in
the United States
and abroad related
to our proprietary
technology, manufacturing
processes
and product candidates
that are important
to our business.
Despite our or
our third party
collaborators’ or licensors’
efforts to
protect
these proprietary rights, unauthorized parties
may be able to obtain
and use information that we
regard as proprietary. Third parties may
also seek to invalidate our patents or those of our licensors. If
we are unable to obtain rights to required third-party intellectual
property
rights or
maintain the
existing intellectual
property rights
we have,
we may
be required
to expend
significant time
and resources
to
redesign our technology,
product candidates or
the methods for manufacturing
them or to
develop or license
replacement technology,
all of which may not
be feasible on a technical
or commercial basis. We could also lose expected
revenues under license agreements we
maintain
with
third
parties.
If
we
are
unable
to
obtain
or
maintain
our
intellectual
property,
we
may
be
unable
to
develop
or
commercialize the affected technology and
product candidates or could
lose revenue, either of
which could harm our business,
financial
condition, results of operations and prospects significantly.
The patent prosecution
process is expensive
and time-consuming, and
we may not
be able to
file and prosecute
all necessary or
desirable
patent applications at
a reasonable cost
or in a
timely manner or
in all jurisdictions
where protection may
be commercially advantageous.
It is also possible
that we may fail
to identify patentable aspects
of our research and
development output before it
is too late to
obtain
patent protection.
In addition, we, UBI or our
other collaborators and licensors, may
only pursue, obtain or maintain patent
protection in a limited number
of countries. Because patent applications in
the United States, Europe and many
other foreign jurisdictions are typically not
published
until 18 months after filing, or in some cases not at all, and because publications of discoveries in scientific literature lag behind actual
discoveries, we cannot be certain that we or our
licensors were the first to make the inventions claimed in
any of our owned or any in-
licensed issued patents or
pending patent applications, or
that we or our
licensors were the first
to file for protection
of the inventions
set forth in our
patents or patent applications.
As a result, we
may not be able
to obtain or maintain
protection for certain inventions,
and
there
can
be
no
assurance
that
the
patents
we
file,
or
those
that
are
issued,
will
not
be
vulnerable
to
claims
of
invalidity
or
unenforceability.
Even if
patents do
successfully issue,
our owned
or in-licensed
patents may
not adequately
protect our
intellectual property,
provide
exclusivity for
our products
or product
candidates, prevent
others from
designing around
our claims
or otherwise
provide us
with a
competitive advantage. Competitors may use our technologies in
jurisdictions where we have not obtained or are unable
to adequately
enforce patent protection to develop
their own products and, further,
may export otherwise infringing products
to territories where we
have patent protection, but enforcement is not as strong as that in the United States
and Europe. These products may compete with our
products, and our patents
or other intellectual property
rights may not be
effective or sufficient to prevent
them from competing with
us.
We also cannot offer any
assurances about which,
if any, patents will
issue, the breadth
of any such
patents or whether
any issued patents
will
be
found
invalid
or
unenforceable
or
will
be
threatened
by
third
parties.
In
addition,
third
parties
may
challenge
the
validity,
enforceability, ownership, inventorship or scope of any of
our patents. Any successful challenge
to any of our patents or
our in-licensed
patents could
deprive us
of rights
necessary for
the successful
commercialization of
any product
candidate that
we may
develop and
could impair or eliminate our ability to collect future revenues and royalties with respect to such products or product candidates. If any
of our
patent applications
with respect
to our
product candidates
fail to
issue as
patents, if
their breadth
or strength
of protection
is
narrowed or
threatened, or
if they
fail to
provide meaningful
exclusivity or
competitive position,
it could
dissuade companies
from
collaborating with us or otherwise adversely affect our competitive position.
In addition,
patents have
a limited
lifespan. In
the United States,
for example,
the natural expiration
of a
patent is
generally 20
years
after its effective filing date. Various
extensions may be available, however,
the life of a patent and the
protection it affords is limited.
Given the amount of time required for the development, testing, regulatory review and approval of new
product candidates, our patents
protecting such candidates might expire before
or shortly after such candidates are commercialized.
If we encounter delays in obtaining
regulatory approvals, the period
of time during which
we could market a
product under patent protection
could be further reduced.
Even
if patents covering our
product candidates are obtained, once
such patents expire, or
if such patents are waived
or suspended, we may
be vulnerable to competition from similar
or biosimilar products. For example, in
2021, the Biden administration indicated its
support
for a proposal at the World Trade Organization to waive patent rights with respect to COVID-19 vaccines. The current proposal is for a
temporary waiver of intellectual property rights that cover COVID-19 vaccines, however,
the ultimate timing and scope of the waiver,
if approved, is unknown. The scope and
timing of such waiver will likely be
subject to extensive negotiations given the complexity of
the
matter,
which
may result
in prolonged
uncertainty and
therefore could
adversely affect
our business.
Any expiration,
waiver
or
suspension of our patent or other intellectual property protection by the U.S. or other foreign governments could lead to the launch
of a
similar or biosimilar version of one of our
products and would likely result in an immediate
and substantial reduction in the demand for
our product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may not be able to protect or
enforce our intellectual property
rights in all jurisdictions,
and we cannot guarantee that
the patent
rights we have will prevent others from competing with us.
The
patent
position
of
pharmaceutical
companies
is
generally
uncertain
because
it
involves
complex
legal,
scientific
and
factual
considerations for
which legal
principles remain
unsolved. The
standards applied
by the
United States
Patent and
Trademark Office
(“USPTO”) and foreign
patent offices in
granting patents are
not always applied
uniformly or predictably, and
can change. Additionally,
the laws
of some
foreign countries do
not protect intellectual
property rights
to the
same extent
as the
laws of
the United States,
and
many companies have encountered significant challenges in protecting and defending such rights in foreign jurisdictions. We may face
similar challenges.
The legal
systems of
certain countries,
particularly certain
developing countries,
do not
favor the
enforcement of
patents and other
intellectual property rights,
particularly those relating
to biotechnology,
which could make
it difficult
for us
to stop
the
infringement,
misappropriation
or
other
violation
of
our
patents
or
other
intellectual
property,
including
the
unauthorized
reproduction of our manufacturing or other know-how or the marketing
of competing products in violation of our intellectual property
rights generally.
Any of these outcomes could
impair our ability to prevent
competition from third parties, which
may have a material
adverse effect on our business, financial condition, results of operations and prospects.
Further, the
existence of
issued patents
does not
guarantee our
right to
practice the
patented technology
or commercialize
a patented
product candidate. Third
parties may design
around our
patents, or have
or obtain
rights to
patents which they
may use to
prevent or
attempt to prevent us from practicing our
patented technology or commercializing any of our patented
product candidates. As a result,
we could be prevented from selling our products unless we were able to obtain a license under such third-party patents, which may not
be available on
commercially reasonable terms
or at all.
In addition, third
parties may seek
approval to market
their own products
similar
to or
otherwise competitive
with our
products and
such products
may not
violate our
patent rights.
We
may also
need to
assert our
patents against third parties, including by filing lawsuits alleging patent infringement. In any such proceeding, a third party may assert,
and a court
or agency of
competent jurisdiction may
find, our asserted
patents to be
invalid or unenforceable.
Any of the
foregoing could
have a material adverse effect on our business, financial condition, results of operations and prospects.
There is a substantial amount
of intellectual property litigation
in the biotechnology and pharmaceutical
industries, and we may become
party to, or threatened
with, litigation or other
adversarial proceedings regarding intellectual property rights.
Proceedings to defend or
enforce our patent
rights, whether or
not successful and
whether or not
meritorious, could result
in substantial
costs and divert
our efforts
and attention from other aspects of our business, could put our patents at risk of being invalidated or held unenforceable, or interpreted
more narrowly. There can be no assurance that
we will have sufficient financial or
other resources to file and
pursue such claims, which
often last for years before they are concluded. Some claimants may have substantially greater resources than we do and may be able to
sustain the costs of complex intellectual
property litigation to a greater
degree and for longer periods of
time than we could. In addition,
patent holding companies that
focus solely on extracting
royalties and settlements by
enforcing patent rights may
target us, especially
as we gain greater visibility and market exposure as a public company. In addition, our enforcement of our patent rights could provoke
third parties to
assert counterclaims against
us. Third parties
also may raise
similar claims before
administrative bodies in
the United
States or abroad, even
outside the context of
litigation. We may not prevail in
any lawsuits or administrative
proceedings that we initiate
and the
damages or
other remedies
awarded, if
any,
may not
be commercially
meaningful. If
a third
party were
to prevail
on a
legal
assertion of invalidity or
unenforceability, we
could lose part or
all of the patent
protection on one or
more of our product
candidates,
which could result
in our competitors
and other third
parties using our
technology to compete
with us. An
adverse outcome in
a litigation
or administrative proceeding involving our patents could limit our ability to
assert our patents against competitors, affect our ability to
receive royalties or
other licensing consideration
from our licensees,
and may curtail
or preclude our
ability to exclude
third parties from
making, using
and selling
similar or
competitive products.
Any of
these occurrences
could have
a material
adverse effect
on our
business,
financial condition, results
of operations and
prospects. Accordingly,
our efforts to
enforce our intellectual
property rights around
the
world may be
inadequate to obtain
a significant commercial
advantage from the
intellectual property that
we develop, acquire
or license.
Many countries, including certain countries in Asia, have compulsory licensing laws under which a patent owner may be
compelled to
grant licenses to third
parties. In addition,
many countries limit
the enforceability of
patents against government
agencies or government
contractors. In these countries, the patent owner may have
limited remedies, which could materially diminish the value of
such patent.
If we
or any
of our
licensors is
forced to
grant a
license to
third parties
with respect
to any
patents relevant
to our
business, our
competitive
position may
be impaired,
and our
business, financial
condition, results
of operations
and prospects
may be
adversely affected.
Our
owned and in-licensed patents may be
subject to a reservation of rights
by one or more third parties.
For example, the research resulting
in certain
of our
licensors’ patents
and technology,
including patents
and technology
relating to
UB-612, was
funded in
part by
the
Taiwanese government. As a result, the Taiwanese government may have certain rights to such patent rights and technology.
Furthermore, certain of our patents and technology, including patents and technology relating to UB-312, were funded
in part by grants
from
nonprofit
third
parties, including
the
MJFF.
We
are required
to
fulfill certain
contractual obligations
with
respect
to
products
created using such grant funding, including certain reporting requirements. We also have submitted grant proposals relating to our UB-
612 product candidate. If these grant
proposals are awarded, or if we
receive funding from other nonprofit third
parties in the future, we
may be required to fulfill other contractual obligations, such as publishing the
results of our scientific studies, making certain products
available at an affordable price in
a list of clearly defined low
and lower-middle income countries and ensuring
that certain products are
available in geographic regions where there has been an outbreak of an infectious disease at certain reduced economic rates.
If we or
our licensors infringe,
misappropriate, or otherwise
violate intellectual property
of third parties,
we may face
increased costs
or we may be unable to commercialize our product candidates.
Many of our current
and former employees, consultants
and independent contractors including
our senior management, were
previously
employed at universities or
at other biotechnology or
pharmaceutical companies, including
some which may be
competitors or potential
competitors.
Although
we
try
to
ensure
that
our
employees,
consultants
and
independent
contractors
do
not
use
the
proprietary
information
or
know-how
of
others
in
their
work
for
us,
we
may
be
subject
to
claims
that
we
or
these
employees,
consultants
or
independent contractors have
used or
disclosed intellectual property,
including trade secrets
or other proprietary
information, of such
individual’s current or former employers, or that patents and applications we have filed to
protect inventions of these individuals, even
those related to one or more
of our current or future
product candidates, are rightfully owned
by their former or concurrent
employer. In
addition, while we typically require our employees, consultants
and independent contractors who may be involved in
the development
of intellectual property to execute
agreements assigning such intellectual property to us,
we may be unsuccessful in
executing such an
agreement with each party
who in fact develops
intellectual property that we
regard as our own,
or such agreements may
be breached
or alleged
to be ineffective,
and the assignment
may not be
self-executing, which may
result in claims
by or
against us related
to the
ownership of such intellectual property or may result in such intellectual property becoming assigned to third parties.
Third parties have, and
may in the future
have, U.S. and non-U.S.
issued patents and
pending patent applications relating
to compounds,
methods of manufacturing compounds
or methods of use
for the treatment of
the disease indications for
which we are developing
our
product candidates that may cover our product candidates.
For example, we are aware of
certain third-party U.S. and non-U.S. patents
and patent applications, including those of our competitors, that relate to anti-alpha synuclein binding molecules that may
be construed
to cover the
technology used in our
anti-alpha synuclein vaccine product
candidate. We
are also aware of
certain third-party U.S. and
non-U.S. patents
and patent
applications, including
those of
our competitors,
that relate
to coronavirus
vaccines and
treatments and
vaccines against other infectious diseases and
we expect such third parties to
have filed additional patent applications, which
have not
yet been published and to file additional patent applications in the future.
In the event that any of these
patent rights were asserted against us,
we believe that we have defenses
against any such action, including
that such patents would not
be infringed by our product
candidates and/or that such patents
are not valid. However,
if any such patent
rights were to
be asserted against
us and our
defenses to such
assertion were unsuccessful, unless
we obtain a
license to such
patents,
we could be liable for damages, which
could be significant and include treble damages
and attorneys’ fees if we are found
to willfully
infringe such patents.
We
could also be
precluded from commercializing any
product candidates that
were ultimately held
to infringe
such patents, any of which
could have a material adverse
effect on our business, financial condition,
results of operations and prospects.
Uncertainties resulting from
our participation in
patent litigation or other
proceedings could have a
material adverse effect on
our ability
to
compete
in
the
marketplace.
Furthermore,
because
of
the
substantial
amount
of
discovery
required
in
certain
jurisdictions
in
connection
with
intellectual
property
litigation,
there
is
a
risk
that
some
of
our
confidential
information
could
be
compromised
by
disclosure during this type of
litigation. There could also be
public announcements of the results of
hearings, motions or other interim
proceedings or developments. If securities analysts
or investors perceive these results to
be negative, the perceived value of
our product
candidates or
intellectual property
could be
diminished. Accordingly,
the market
price of
our Class
A common
stock could
decline.
Uncertainties resulting from the initiation
and continuation of patent litigation
or other proceedings could have
a material adverse effect
on our business, financial condition, results of operations and prospects.
Changes to
the patent law
in the
United States and
other jurisdictions could
increase the uncertainties
and costs surrounding
the
prosecution of our patent applications and the enforcement or
defense of our issued patents, thereby impairing our
ability to protect
our technologies and product candidates.
As is the case with
other biopharmaceutical companies, our success
is heavily dependent on intellectual property,
particularly patents.
Obtaining and
enforcing patents
in the
biopharmaceutical industry
involves both
technological and
legal complexity
and is
therefore
costly,
time-consuming and
inherently uncertain.
Changes in
either the
patent laws
or interpretation
of the
patent laws
in the
United
States or
abroad could increase
the uncertainties and
costs surrounding the
prosecution of patent
applications and the
enforcement or
defense of
issued patents. For
example, recent U.S.
Supreme Court rulings
have narrowed
the scope of
patent protection available
in
certain
circumstances
and
weakened
the
rights
of
patent
owners
in
certain
situations.
Specifically,
these
decisions
stand
for
the
proposition that
patent claims
that recite
laws of
nature are
not themselves
patentable unless
those patent
claims have
sufficient additional
features
that
provide
practical
assurance
that
the
processes
are
genuine
inventive
applications
of
those
laws.
What
constitutes
a
“sufficient” additional feature
is uncertain. Furthermore,
in view of
these decisions, since
December 2014, the
USPTO has
published
and continues
to publish
revised guidelines
for patent
examiners to
apply when
examining process
claims for
patent eligibility.
This
combination of
events has
created uncertainty with
respect to
the validity
and enforceability
of patents,
even once
they are
obtained.
Depending on future actions by the U.S. Congress, the federal courts
and the USPTO, the laws and regulations governing patents could
change in
unpredictable ways. In
addition, the
complexity and uncertainty
of European
and Asian
patent laws
have also
increased in
recent years.
For example,
in October
2020, China
adopted amendments
to its
patent law
(the “Amended
PRC Patent
Law”), which
became
effective
on
June 1,
2021.
The
Amended
PRC
Patent
Law
contains
both
patent
term
extension
and
a
mechanism
for
early
resolution of
patent disputes.
However,
the provisions
for patent
term extension
and an
early resolution
mechanism are
unclear and
remain subject to
the approval of
implementing regulations that
have yet to
be finalized, leading
to uncertainty about
their scope
and
implementation. Complying with
these laws and
regulations could have
a material adverse
effect on
our existing patent
portfolio and
our ability to protect and enforce our intellectual property in the future.
Obtaining and maintaining our
patent protection, including patents
licensed from third parties,
depends on compliance with
various
procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and
our patent protection
could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees,
renewal fees,
annuity fees
and various
other governmental
fees on
patents and
patent applications will
be
due to
be paid
to the
USPTO and
various government
patent agencies
outside the
United States
over the
lifetime of
our patents
and
patent applications and any patent rights we may own or license in the future. Additionally, the USPTO and various government patent
agencies
outside
the
United
States
require
compliance
with
a
number
of
procedural,
documentary,
fee
payment
and
other
similar
provisions during the patent application process. In certain cases, an inadvertent lapse can be cured
by payment of a late fee or by other
means in accordance
with rules applicable
to the particular
jurisdiction. However, there are
situations in which
noncompliance can result
in
abandonment
or
lapse
of
the
patent
or
patent
application,
resulting
in
partial
or
complete
loss
of
patent
rights
in
the
relevant
jurisdiction. For example,
certain of our
patents which include
claims utilized in
our UB-311 anti-Aβ vaccine
product candidate recently
lapsed in certain European and Asian countries due to non-payment of fees. Noncompliance events that could
result in abandonment or
lapse of a patent or patent application include failure to respond to official communications within prescribed time limits, non-payment
of
fees and
failure to
properly legalize
and submit
formal documents.
If we
or our
licensors fail
to maintain
the patents
and patent
applications
covering or
otherwise
protecting our
technologies or
our product
candidates, our
competitors may
be
able
to
enter
the
market with similar
or identical products
or technology without
infringing our patents,
which could have
a material adverse
effect on
our business.
In addition,
to the
extent that
we have
responsibility for
taking any
action related
to the
prosecution or
maintenance of
patents or patent
applications in-licensed from
a third party, any
failure on our
part to maintain
the in-licensed intellectual
property could
jeopardize our rights under
the relevant license and
may have a material
adverse effect on
our business, financial condition,
results of
operations and prospects.
If we do not obtain
patent term extensions and data exclusivity for
each of our product candidates, our
business may be materially
harmed.
Depending upon the timing, duration
and specifics of any FDA
marketing approval in the United
States of any product
candidates we
may develop, one or more of our
U.S. patents may be eligible for limited
patent term extension under the Drug Price
Competition and
Patent Term Restoration Action of 1984
(“Hatch-Waxman Amendments”). The Hatch-Waxman Amendments permit a patent
extension
term of up to five years as
compensation for patent term lost during
the FDA regulatory review process. A
patent term extension cannot
extend the
remaining term
of a
patent beyond
a total
of 14
years from
the date
of product
approval, only
one patent
applicable to
an
approved drug may
be extended and
only those claims
covering the approved
drug, a method for
using it, or a
method for manufacturing
it may be extended. The length of the patent term extension
is typically calculated as one half of the clinical trial period
plus the entire
period of time during the
review of the NDA
or BLA by the
FDA, minus any time of
delay by the applicant during
these periods. We
might not be
granted a patent
term extension at
all, because of,
for example, failure
to apply within
the applicable period,
failure to apply
prior to the expiration of relevant patents or otherwise failure to satisfy any of the numerous applicable requirements.
In the
European Union,
a maximum
of five
and a
half years
of supplementary
protection can
be achieved
for an
active ingredient
or
combinations of active ingredients of
a medicinal product protected by
a basic patent, if
a valid marketing authorization exists
(which
must be
the first authorization
to place the
product on the
market as a
medicinal product) and
if the product
has not already
been the
subject of supplementary
protection. Although all
countries in Europe
must provide supplementary
protection certificates, there
is no
unified legislation among
European countries and
so supplementary protection
certificates must be
applied for and
granted on a
country-
by-country basis. This can lead to a substantial cost to apply for
and receive these certificates, which may vary among countries or not
be provided at all. Further, we may not
receive an extension because of, for
example, failing to exercise due
diligence during the testing
phase or regulatory review process, failing to apply within applicable deadlines, failing to apply
prior to expiration of relevant patents,
or otherwise failing
to satisfy applicable
requirements. Moreover,
the length of
the extension could
be less than
we request. If
we are
unable to obtain patent term extension or if
the term of any such extension is less
than we request, our competitors may obtain approval
of competing products earlier than expected following our patent expiration, and our
business, financial condition, results of operations
and prospects could be materially harmed.
If we
are unable
to protect
the confidentiality
of our
proprietary information
and trade
secrets, the
value of
our technology
and
products could be materially adversely affected.
In addition to patent
protection, we also
rely on trade secrets
and confidentiality agreements
to protect other
proprietary information that
is not patentable or that
we elect not to
patent. To maintain the confidentiality of trade
secrets and proprietary information,
we enter into
confidentiality agreements with our employees, consultants, independent contractors, collaborators, contract manufacturers, CROs and
others upon the commencement of their relationships with us. These agreements require that all confidential information developed by
the individual or entity
or made known to
the individual or entity
by us during the course
of the individual’s or entity’s relationship with
us be kept
confidential and not
disclosed to third
parties. Our agreements
with employees as
well as our
personnel policies also
generally
provide that any inventions conceived by the individual in the course of rendering services to us shall be our exclusive property or that
we may obtain full rights to such
inventions at our election. However,
we cannot guarantee that we have entered into
such agreements
with each party that may have or has had access to our trade secrets
or proprietary technology and processes and cannot guarantee that
individuals with whom
we have these
agreements will comply
with their terms.
In the event
of unauthorized use
or disclosure of
our
trade secrets or proprietary information,
these agreements, even if obtained,
may not provide meaningful protection,
particularly for our
trade secrets.
We may not have adequate remedies
in the event of
unauthorized use or disclosure
of our proprietary information
in the case of
a breach
of
any
such
agreements
and
our
trade
secrets
and
other
proprietary
information
could
be
disclosed
to
third
parties,
including
our
competitors. Many of
our partners also
collaborate with our
competitors and other
third parties. The
disclosure of our
trade secrets to
our competitors,
or more
broadly,
would impair
our competitive
position and
may materially
harm our
business, financial
condition,
results of operations and prospects. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary
rights,
and
failure
to
maintain
trade
secret
protection
could
adversely
affect
our
competitive
business
position.
The
enforceability of confidentiality agreements may vary from jurisdiction to
jurisdiction. Courts outside the United States are sometimes
less willing to
protect proprietary information,
technology and know-how.
In addition, others
may independently discover
or develop
substantially
equivalent
or
superior
proprietary
information
and
techniques,
and
the
existence
of
our
own
trade
secrets
affords
no
protection against such independent discovery.
If our trademarks
and trade names
are not adequately
protected, we may
not be able
to build name
recognition in our
markets of
interest and our business, financial condition, results of operations and prospects may be adversely affected.
We rely on our trademarks
for name recognition
by potential partners
and customers
in our markets
of interest. However,
our trademarks
or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other
marks. We may
not be
able to
protect our
rights to
these trademarks
and trade
names or
may be
forced to
stop using
these names
or marks.
During
trademark registration proceedings,
we may receive
rejections that we
may be unable
to overcome. In
addition, in the
USPTO and in
comparable agencies in many foreign jurisdictions,
third parties are given an opportunity
to oppose pending trademark applications and
to seek to cancel
registered trademarks. Opposition
or cancellation proceedings
may be filed against
our trademarks, and
our trademarks
or trademark applications
may not survive
such proceedings. If
we are unable
to establish name
recognition based on
our trademarks
and trade names,
we may not
be able to
compete effectively and
our business, financial condition,
results of operations
and prospects
may be adversely affected.
Intellectual property rights do not necessarily address all potential threats.
The degree of future
protection afforded by
our proprietary and intellectual
property rights is uncertain
because such rights offer
only
limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
•
others may be
able to develop
products that are
similar to,
or better than,
our product candidates
in a way
that is not
covered
by the claims of the patents we license or may own currently or in the future;
•
we,
or
our
licensing
partners
or
current
or
future
collaborators,
might
not
have
been
the
first
to
make
or
file
patent
applications
for
the
inventions
covered
by
issued
patents
or
pending
patent
applications
that
we
license
or
may
own
currently or in the future;
•
we may
not have
the financial
or other
resources necessary
to enforce
a patent
infringement or
other proprietary
rights
violation action;
•
we may choose not to file a patent for certain trade secrets or know-how,
and a third party may subsequently file a patent
covering such intellectual property;
•
our trade
secrets or
proprietary know-how
may be
unlawfully disclosed,
thereby losing
their trade
secret or
proprietary
status;
•
our competitors or
other third parties
might conduct research
and development activities
in countries where
we do not
have
patent rights
and then
use the
information learned
from such
activities to
develop competitive
products for
sale in
our
major commercial markets;
•
it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents;
•
the patents of third parties
or pending or future
applications of third parties, if
issued, may have an adverse
effect on our
business;
•
third parties could design around our patents, or independently develop trade secrets that provide them with an advantage
over us;
•
any patents that
we obtain may
not provide
us with any
competitive advantages
or may ultimately
be found
not to
be owned
by us, or to be invalid or unenforceable; or
•
we may not develop additional proprietary technologies that are patentable.
Should any of these events occur, they could significantly harm our business, financial conditions, results of operations and prospects.
Risks Related to Our Business and Industry
Even if
we, or
any current
or future
collaborators, are
able to
commercialize any
product candidate
that we
or they
develop, the
successful commercialization of our product candidates
will depend in part on the extent to
which governmental authorities, private
health insurers
and other
third-party payors
provide coverage
and adequate
reimbursement levels
and implement
pricing policies
favorable
for
our
product
candidates.
Failure
to
obtain
or
maintain
coverage
and
adequate
reimbursement
for
our
product
candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The healthcare industry
is acutely focused
on cost containment,
both in the
United States and
elsewhere. Government authorities
and
third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement. The insurance coverage and
reimbursement status of newly approved products
is uncertain and failure to obtain or
maintain adequate coverage and reimbursement
for our
product candidates
could limit
our ability
to generate
revenue. Our
business model
is also
focused on
lowering the
cost and
increasing the accessibility of healthcare. Even if we are successful in driving down the cost of healthcare, third- party payors may still
not view our product candidates, if
approved, as cost-effective, and coverage and
reimbursement may not be available to
our patients or
may
not
be
sufficient
to
allow our
products,
if
any,
to be
marketed
on
a
competitive basis.
If
coverage and
reimbursement are
not
available, or reimbursement is
available only to limited
levels, patient subpopulations
of labeled indications, or
otherwise restricted, we,
or any collaborators, may not be able
to successfully commercialize our product candidates.
Even if coverage is provided, the approved
reimbursement amount may not be high enough to allow us, or any collaborators, to establish or maintain pricing sufficient to realize a
sufficient return on our or
their investments. Cost-control initiatives
could also cause us to
decrease any price we
might establish for our
product candidates,
which could
result in
lower than
anticipated product
revenues. Moreover,
eligibility for
reimbursement does
not
imply that any product
will be paid for
in all cases or
at a rate that
covers our costs, including
our costs related to
research, development,
manufacture, sale
and distribution.
Reimbursement rates
may vary,
by way
of example,
according to
the use
of the
product and
the
clinical setting
in which
it is
used. For
products administered
under the
supervision of
a physician,
obtaining coverage
and adequate
reimbursement may be difficult because of the higher
costs often associated with administering such
drugs. If the prices for our product
candidates, if approved, decrease or if governmental and other
third-party payors do not provide adequate coverage or
reimbursement,
our business, financial condition, results of operations and prospects will suffer, perhaps materially.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States,
the Centers
for Medicare
and Medicaid
Services (“CMS”),
the federal
agency responsible
for administering
the Medicare
program,
makes the principal decisions about coverage and reimbursement for new treatments under Medicare. Private payors may follow
CMS
to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for novel
products such as ours. In
addition, certain Affordable
Care Act marketplace
and other private
payor plans are
required to include
coverage for certain
preventative
services,
including
vaccinations
recommended
by
the
U.S.
Centers
for
Disease
Control’s
Advisory
Committee
on
Immunization
Practices (“ACIP”)
without cost
share obligations
(i.e., co-
payments, deductibles
or co-insurance)
for plan
members. For
Medicare
beneficiaries, our product candidates, apart from UB-612,
may be covered for reimbursement under either
the Part B program or Part
D
depending on several
criteria, including the
type of vaccine
and the beneficiary’s
coverage eligibility.
If our product
candidates, once
approved, are
reimbursed only
under the
Part D
program, physicians
may be
less willing
to use
our products
because of
the claims
adjudication costs and time related to
the claims adjudication process and
collection of copayments associated with
the Part D program.
If our product
candidates, once approved,
are reimbursed only
under the Part
B program, certain
potential drawbacks associated
with
the Part B
program, such as
the time and effort
required to seek reimbursement
after purchase, may make
our product candidates less
attractive to clinics or
other potential customers. Outside
of Medicare, private insurance
is likely to raise
similar claims adjudication and
copayment considerations, which may also make our product candidates less attractive to potential customers using private insurance.
Outside the United States, certain
countries set prices and reimbursement for
pharmaceutical products, with limited participation from
the marketing authorization
holders. We cannot be sure that
such prices and reimbursement
will be acceptable
to us or
our collaborators.
If the regulatory
authorities in these
jurisdictions set prices
or reimbursement levels
that are not
commercially attractive for
us or our
collaborators, our
revenues from
sales by
us
or
our collaborators,
and
the potential
profitability of
our product
candidates,
in
those
countries would
be negatively
affected. Additionally,
some countries
require approval
of the
sale price
of a
product before
it can
be
marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. As a result, we
might obtain marketing approval for
a product in a particular
country, but then may experience delays in the
reimbursement approval of
our product or be subject to price regulations that would
delay our commercial launch of the product, possibly for lengthy time
periods,
which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.
Moreover, an
increasing number of
countries are taking
initiatives to attempt
to reduce large
budget deficits by
focusing cost-cutting
efforts on pharmaceuticals for their
state-run healthcare systems. These international price control
efforts have impacted all regions
of
the world, notably in the European Union. In
some countries, in particular in many Member States
of the European Union, we may be
required
to
conduct a
clinical
trial
or
other
studies
that
compare
the
cost-effectiveness
of
our
product candidates
to
other
available
therapies in order to obtain or maintain reimbursement or
pricing approval. In addition, publication of discounts by third-
party payors
or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.
If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business,
financial condition, results of operations or prospects could be materially adversely affected. Cost-control initiatives could cause us, or
any collaborators, to decrease
the price we, or
they, might
establish for products, which
could result in lower
than anticipated product
revenues. Further, our competitors have more experience dealing with and contracting with payors for preferred coverage, which could
potentially
put
us
at
a
competitive
disadvantage.
An
inability
to
promptly
obtain
coverage
and
adequate
payment
rates
from
both
government-funded and
private payors
for any
of our
product candidates
for which
we, or
any future
collaborator, obtain
marketing
approval could
significantly harm our
operating results,
our ability
to raise
capital needed
to commercialize products
and our
overall
financial condition.
Our business
and current
and future
relationships with
third-party payors,
healthcare professionals
and customers
in the
United
States and elsewhere will be subject to applicable healthcare laws and regulations, which could expose us to significant
penalties.
Healthcare
providers,
physicians
and
third-party
payors
in
the
United
States
and
elsewhere
will
play
a
primary
role
in
the
recommendation
and
prescription
of
any
product
candidates
for
which
we
obtain
marketing
approval.
Our
current
and
future
arrangements with healthcare
professionals, third-party payors and
customers expose us to
broadly applicable fraud and
abuse and other
healthcare laws and regulations, including, without limitation, the federal Anti-Kickback
Statute and the federal civil False Claims Act,
that may constrain the
business or financial
arrangements and relationships
through which we conduct
clinical research, sell,
market and
distribute any products for
which we obtain marketing
approval. In addition, we
may be subject to
physician payment transparency
laws
and
patient
privacy
regulation
by
the
federal government
and
by
the
U.S.
states
and
foreign
jurisdictions in
which
we
conduct our
business.
Efforts to
ensure that
our business
arrangements with
third parties
will comply
with applicable
healthcare laws
and regulations
may
involve substantial
costs. It
is possible
that governmental
authorities will
conclude that
our business
practices, including
our relationships
with
physicians
and
other
healthcare
providers,
some
of
whom
may
recommend,
purchase
or
prescribe
our
product
candidate,
if
approved,
may
not
comply
with
current
or
future
statutes,
regulations
or
case
law
involving
applicable
fraud
and
abuse
or
other
healthcare laws and regulations.
If our operations are found to be
in violation of any of these laws or
any other governmental regulations that may apply to
us, we may
be
subject
to
significant
civil,
criminal
and
administrative
penalties,
including,
without
limitation,
damages,
fines,
disgorgement,
individual imprisonment, exclusion from participation in government healthcare programs, such as Medicare and
Medicaid, additional
reporting requirements and
oversight if we
become subject to
a corporate integrity
agreement or similar
agreement to resolve
allegations
of noncompliance with these laws and the curtailment or restructuring of our operations, which could have a material adverse effect on
our business. If any of the physicians or other healthcare providers or entities with whom we expect to
do business is found not to be in
compliance
with
applicable
laws,
they
may
be
subject
to
criminal,
civil
or
administrative
sanctions,
including
exclusions
from
participation in government healthcare programs, which could also materially affect our business.
Cyberattacks or other
failures in our
or our third-party
vendors’, contractors’ or
consultants’ telecommunications or
information
technology systems
could result
in information
theft, compromise,
or other
unauthorized access,
data corruption
and significant
disruption
of
our
business
operations,
and
could
harm
our
reputation
and
subject
us
to
liability,
lawsuits
and
actions
from
governmental authorities.
The success of our research and development
programs depends on data which is stored
and transmitted digitally, the corruption or loss
of which could cause significant setback to
one or all of our programs. We face a number of risks
related to our use, processing, storage
and security of this critical
information, including loss of access,
inappropriate use or disclosure, inappropriate
modification corruption,
unauthorized access or processing.
Because we use third-party
vendors and subcontractors to
manage our sensitive information,
we also
may
not
have
the
ability
to
adequately
monitor,
audit
or
modify
the
security
controls
over
this
critical
information.
Despite
the
implementation of security measures, given the size and complexity of our
internal information technology (“IT”) systems and those of
our
third-party
vendors,
contractors
and
consultants,
such
IT
systems
are
potentially
vulnerable
to
breakdown
or
other
damage
or
interruption
from
service
interruptions,
system
malfunction,
natural
disasters,
terrorism,
war,
and
telecommunication
and
electrical
failures.
Cyber threats are persistent and constantly evolving. Such
threats, which may include ransomware or other malware, phishing
attacks,
denial of services
attacks, man-in-the-middle attacks
and others, have
increased in frequency, scope
and potential impact
in recent years,
which increase the difficulty
of detecting and successfully
defending against them.
We may not be able to
anticipate all types
of security
threats, and, despite
our efforts, we
may not be
able to implement preventive
measures effective against
all such security
threats. The
techniques used by cyber criminals change frequently,
may not be recognized until launched, and
can originate from a wide variety of
sources, including outside groups such
as external service providers,
organized crime affiliates, terrorist organizations or hostile
foreign
governments or
agencies. There
can be
no assurance
that we
or our
third-party service
providers, contractors
or consultants
will be
successful
in
preventing
cyberattacks
or
successfully
mitigating
their
effects.
Our
IT
systems
and
those
of
our
third-party
service
providers,
contractors or
consultants
are
additionally
vulnerable
to
security
breaches
from
inadvertent or
intentional
actions
by
our
employees, third-party
vendors, contractors,
consultants, business
partners and/or
other third
parties. These
threats pose
a risk
to the
security of our
systems and networks,
the confidentiality and
the availability,
security and integrity
of our data,
and these risks
apply
both to us and to
third parties on whose
systems we rely for
the conduct of our
business. If the IT systems
of our third-party vendors and
other contractors
and consultants
become subject
to disruptions
or security
breaches, we
may have
insufficient recourse
against such
third parties and
we may have
to expend significant
resources to mitigate
the impact of
such an event,
and to develop
and implement
protections to prevent future
events of a
similar nature from occurring.
Any cyberattack or destruction
or loss of, unauthorized
access
to, processing of, or
exfiltration of data could have
a material adverse effect
on our business, financial condition,
results of operations
and prospects. For example, if
such an event were to occur
and cause interruptions in our
operations, or those of our third-party
vendors
and other contractors and consultants, it could result in
a material disruption or delay of the development of our
product candidates. In
addition, we may suffer reputational
harm or face litigation
or adverse regulatory action as
a result of cyberattacks
or other data security
breaches, particularly
those involving
personal information
or protected
health information,
and may
incur significant
additional expense
to implement
further data
protection measures.
As cyber
threats continue
to evolve,
we may
be required
to incur
material additional
expenses in order to enhance our protective measures or to remediate any information security vulnerability.
We are subject to
stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data
privacy and security and changes
in such laws, regulations,
policies and contractual obligations
could adversely affect our business,
financial condition, results of operations and prospects.
We
are subject
to data
privacy and
security laws
and regulations
that apply
to the
collection, transmission,
storage, use,
processing,
destruction, retention and security of personal information, which among other things, including additional laws or regulations relating
to
health
information.
The
legislative
and
regulatory
landscape
for
privacy
and
data
protection
continues
to
evolve
in
jurisdictions
worldwide, and these laws may at times be conflicting. It is possible that these
laws may be interpreted and applied in a manner that is
inconsistent with our practices and our efforts to comply with the evolving data protection rules may
be unsuccessful. We
must devote
significant
resources
to
understanding
and
complying
with
this
changing
landscape.
Failure
to
comply
with
federal,
state
and
international laws regarding privacy
and security of personal information
could expose us to penalties
under such laws, orders requiring
that we
change our
practices, claims
for damages
or other
liabilities, regulatory
investigations and
enforcement action,
litigation and
significant costs for remediation,
any of which could adversely
affect our business. Even if
we are not determined
to have violated these
laws,
government
investigations
into
these
issues
typically
require
the
expenditure
of
significant
resources
and
generate
negative
publicity, which have
a material
adverse effect
on our
business, financial
condition, results
of operations
and prospects.
Failure to
comply
with any of these
laws and regulations could
result in enforcement
action against us, including
fines, criminal prosecution
of employees,
claims for
damages by
affected individuals
and damage
to our
reputation and
loss of
goodwill, any
of which
could have
a material
adverse effect on our
business, financial condition,
results of operations
and prospects. Additionally, if we
are unable to
properly protect
the
privacy
and
security
of
personal
information,
including
protected
health
information,
we
could
be
found
to
have
breached
our
contracts with certain third parties.
There are numerous U.S.
federal and state laws
and regulations related to
the privacy and security
of personal information. In
particular,
HIPAA,
as
amended
by
the
Health
Information
Technology
for
Economic
and
Clinical Health
Act
of
(“HITECH”) and
their
respective implementing
regulations, establish
privacy and
security standards
that limit
the use
and disclosure
of individually
identifiable
health
information,
or
protected
health
information,
and
require
the
implementation
of
administrative,
physical
and
technological
safeguards to protect the
privacy of protected health
information and ensure the confidentiality,
integrity and availability of
electronic
protected health
information. Determining
whether protected
health information
has been handled
in compliance
with applicable privacy
standards and
our
contractual obligations
can be
complex and
may be
subject to
changing interpretation.
If we
fail
to
comply with
applicable privacy
laws, including
applicable HIPAA
privacy and
security standards, we
could face
civil and
criminal penalties.
The
HHS has
the discretion
to impose
penalties without
attempting to
first resolve
violations. HHS
enforcement activity
can result
in financial
liability
and
reputational
harm,
and
responses
to
such
enforcement
activity
can
consume
significant
internal
resources.
Even
when
HIPAA
does not
apply,
failing to
take appropriate steps
to keep consumers’
personal information secure
can constitute unfair
acts or
practices in or affecting commerce and be construed as a violation of Section 5(a) of the
Federal Trade Commission Act (the “FTCA”),
15 U.S.C § 45(a). The FTC expects a company’s
data security measures to be reasonable and appropriate in light of the sensitivity and
volume of consumer information
it holds, the size and
complexity of its business, and
the cost of available tools
to improve security and
reduce vulnerabilities. Individually identifiable
health information is
considered sensitive data
that merits stronger
safeguards and the
FTC’s guidance for appropriately securing consumers’ personal information is similar
to what is required by the HIPAA Security Rule.
In addition, state attorneys general are
authorized to bring civil actions seeking either
injunctions or damages in response to violations
that threaten
the privacy
of state
residents. We
cannot be
sure how
these regulations
will be
interpreted, enforced
or applied
to our
operations. In
addition to
the risks
associated with
enforcement activities
and potential
contractual liabilities,
our ongoing
efforts to
comply with evolving
laws and regulations
at the federal
and state level
may be costly
and require ongoing
modifications to our
policies,
procedures and systems.
Internationally,
laws,
regulations
and
standards
in
many
jurisdictions
apply
broadly
to
the
collection,
transmission,
storage,
use,
processing, destruction,
retention and
security of
personal information.
For example,
in the
European Union,
the collection,
transmission,
storage, use, processing,
destruction, retention and
security of personal
data is governed
by the provisions
of the General
Data Protection
Regulation (the “GDPR”) in addition to other applicable laws and regulations. The GDPR came into effect in May 2018, repealing and
replacing the European Union Data Protection Directive, and imposing revised data privacy and
security requirements on companies in
relation to the processing of personal data
of European Union data subjects. The
GDPR, together with national legislation, regulations
and
guidelines
of
the
European
Union
Member
States
governing
the
collection,
transmission,
storage,
use,
processing,
destruction,
retention
and
security
of
personal
data,
impose
strict
obligations
with
respect
to,
and
restrictions
on,
the
collection,
use,
retention,
protection, disclosure, transfer and processing of
personal data. The GDPR also imposes
strict rules on the transfer
of personal data to
countries outside the European
Union that are not
deemed to have protections
for personal information,
including the United States.
The
GDPR authorizes
fines for
certain violations
of up
to 4%
of the
total global
annual turnover
of the
preceding financial
year or
€20 million,
whichever is greater. Such fines are
in addition to any civil litigation claims by data subjects. Separately,
Brexit has led and could also
lead to legislative and regulatory changes and may increase our compliance costs. As of January 1, 2021, and the expiry of
transitional
arrangements agreed to between the United Kingdom and the European Union,
data processing in the United Kingdom is governed by
a United Kingdom version of the
GDPR (combining the GDPR and the Data
Protection Act 2018), exposing us to two
parallel regimes,
each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. On June 28, 2021, the
European Commission
adopted an
adequacy decision
for the
United Kingdom,
allowing for
the relatively
free exchange
of personal
information
between
the
European
Union
and
the
United
Kingdom.
Other
jurisdictions
outside
the
European
Union
are
similarly
introducing or enhancing privacy and data security
laws, rules and regulations, which could increase
our compliance costs and the risks
associated with noncompliance. We cannot guarantee that we are, or will be, in
compliance with all applicable international regulations
as they are enforced now or as they evolve.
We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us.
Most healthcare providers, including research
institutions from which we
obtain patient health information,
are subject to privacy
and
security regulations promulgated under HIPAA,
as amended by the Health Information
Technology for
Economic and Clinical Health
Act. We do not believe
that we are currently classified as a covered entity or business associate under HIPAA
and thus are not directly
subject to its requirements or penalties. However,
any person may be prosecuted under HIPAA’s
criminal provisions either directly or
under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial
criminal penalties if
we knowingly receive
individually identifiable health information
from a HIPAA
-covered healthcare provider or
research
institution that
has not
satisfied HIPAA’s
requirements for
disclosure of
individually identifiable
health
information. Even
when HIPAA
does not
apply,
according to
the FTC
failing to
take appropriate
steps to
keep consumers’
personal information
secure
constitutes unfair
acts or
practices in
or affecting
commerce in
violation of
the FTCA.
The FTC
expects a
company’s
data security
measures
to
be
reasonable
and
appropriate
in
light
of
the
sensitivity
and
volume
of
consumer
information
it
holds,
the
size
and
complexity of its business, and
the cost of available tools
to improve security and reduce
vulnerabilities. Individually identifiable health
information is considered sensitive data that merits stronger safeguards.
In addition, we may maintain
sensitive personally identifiable information,
including health information, that we
receive throughout the
clinical
trial
process,
in
the
course
of
our
research
collaborations.
As
such,
we
may
be
subject
to
state
laws,
including
the
CCPA,
requiring notification of
affected individuals
and state regulators
in the event
of a
breach of personal
information, which is
a broader
class of information
than the
health information
protected by
HIPAA. Our clinical trial
programs outside
the United
States may
implicate
international data protection laws, including the GDPR and legislation of the EU member states implementing it.
Our activities
outside the
United States
impose additional
compliance requirements
and generate
additional risks
of enforcement
for
noncompliance. Failure by our CROs and other
contractors to comply with the strict rules
on the transfer of personal data outside of
the
EU into
the United
States may
result in
the imposition
of criminal
and administrative
sanctions on
such collaborators,
which could
adversely affect
our business.
Furthermore, certain
health privacy
laws, data
breach notification
laws, consumer
protection laws
and
genetic testing laws
may apply directly
to our operations
and/or those of
our collaborators and
may impose restrictions
on our collection,
use and dissemination of individuals’ health information.
Moreover, patients about whom we
or our collaborators obtain health information, as
well as the providers who share this
information
with us, may have
statutory or contractual rights
that limit our ability
to use and disclose
the information. We may be required
to expend
significant capital
and other
resources to
ensure ongoing
compliance with
applicable privacy
and data
security laws.
Claims that
we
have violated
individuals’ privacy rights
or breached
our contractual obligations,
even if
we are
not found
liable, could be
expensive
and time-consuming to defend and could result in adverse publicity that could harm our business.
If
we
or our
contract manufacturers,
CROs or
other
contractors or
consultants fail
to
comply with
applicable federal,
state or
local
regulatory privacy requirements, we could be subject to a range of regulatory actions that could affect our or our contractors’ ability to
develop
and
commercialize
our
product
candidates
and
could
harm
or
prevent
sales
of
any
affected
products
that
we
are
able
to
commercialize, or could substantially increase
the costs and expenses of
developing, commercializing and marketing
our products. Any
threatened
or
actual
government
enforcement
action
could
also
generate
adverse
publicity
and
require
that
we
devote
substantial
resources
that
could
otherwise
be
used
in
other
aspects
of
our
business.
Increasing
use
of
social
media
could
give
rise
to
liability,
breaches of data security or
reputational damage. Any of the
foregoing could have a material
adverse effect on our
business, financial
condition, results of operations and prospects.
We
face substantial
competition, which
may result
in others
discovering, developing
or commercializing
products before
or more
successfully than we do.
The biotechnology and pharmaceutical
industries are characterized by rapidly
advancing technologies, intense competition
and a strong
emphasis on proprietary products. We face and will continue to face competition from third parties that use similar platforms and from
third parties focused on developing and commercializing other peptide and peptide-based product candidates. The
competition is likely
to
come
from
multiple
sources,
including
large
and
specialty
pharmaceutical
and
biotechnology
companies,
academic
research
institutions, government agencies and public and private research institutions.
Many
of
our
potential
competitors,
alone
or
with
their
strategic
partners,
have
substantially
greater
financial,
technical
and
other
resources
than
we
do,
such
as
larger
research
and
development,
clinical,
marketing
and
manufacturing
organizations.
Mergers
and
acquisitions in the biotechnology and pharmaceutical industries may result in even
greater concentration of resources among a smaller
number of competitors.
Our commercial opportunity could
be reduced or eliminated
if competitors develop
and commercialize products
that are safer,
more effective, have
fewer or less
severe side effects,
are more convenient or
are less expensive
than any products
that
we may develop. Our
competitors also may obtain
FDA or other
regulatory approvals for their
products faster or
earlier than we
may
obtain approval
for ours,
which could
result in
our competitors
establishing a
strong market
position before
we are
able to
enter the
market. For example, some of
our competitors have already received
approval from the FDA and other
regulatory authorities for their
COVID-19 vaccines and
boosters to address
variants of SARS-CoV-2.
Additionally,
technologies developed by
our competitors may
render our
product candidates
uneconomical or
obsolete, and
we may
not be
successful in
marketing our
product candidates
against
competitors’ products. In addition, the availability of our competitors’ products and the
lack of complementary products offered by our
sales and distribution team as compared to competitors
with more extensive product lines, could limit
the demand and the prices we are
able to charge for any products that we may develop and commercialize.
Developments by
competitors may
render our
products or
technologies obsolete
or non-competitive
or may
reduce the
size of
our
markets.
Our
industry
has
been
characterized
by
extensive
research
and
development
efforts,
rapid
developments
in
technologies,
intense
competition and a
strong emphasis on
proprietary products.
We expect our product candidates
to face intense
and increasing competition
as new
products enter
the relevant
markets and
advanced technologies
become available.
We
face potential
competition from
many
different
sources, including
pharmaceutical, biotechnology
and specialty
pharmaceutical companies.
Academic research
institutions,
governmental
agencies
and
public
and
private
institutions
are
also
potential
sources
of
competitive
products
and
technologies.
Our
competitors may have
or may develop
superior technologies or
approaches and have
different business models
from us which
do not
focus
on
democratizing
healthcare
and
on
lower
cost,
all
of
which
may
provide
them
with
competitive
advantages. Many
of
these
competitors may also have compounds already approved or in development in the therapeutic categories that we
are targeting with our
product candidates.
The global
vaccine market
is highly
concentrated among
a small
number of
multinational pharmaceutical
companies:
Pfizer, Merck,
GlaxoSmithKline and Sanofi
together control most
of the global
vaccine market. While
we are not
aware of all
of our
competitors’ efforts,
there are
more than
twenty COVID-19
vaccines already
approved for
use in
one or
more countries
around the
world, including
three in
the United
States. We also face
substantial competition
in therapeutic
areas outside
of COVID-19.
For example,
the FDA approved aducanumab in June 2021 as the first FDA-approved immunotherapy for AD. In addition, many of our competitors,
either alone or together with
their collaborative partners, may operate larger
research and development programs or have
substantially
greater financial resources than we do, as well as greater experience in:
•
developing product candidates;
•
undertaking pre-clinical testing and clinical trials;
•
obtaining NDA approval by the FDA;
•
obtaining comparable foreign regulatory approvals of product candidates;
•
formulating and manufacturing products;
•
launching, marketing and selling products; and
•
competing for market share, obtaining reimbursement and securing payor contractors for preferential coverage.
If these
competitors access
the marketplace
with safer, more
effective, or less
expensive therapeutics,
our product
candidates, if
approved
for commercialization, may not
be profitable to
sell or worthwhile
to continue to
develop. Technology
in the pharmaceutical industry
has undergone rapid and significant change,
and we expect that it
will continue to do so.
Any compounds, products or processes
that we
develop may
become obsolete
or uneconomical
before we
recover any
expenses incurred
in connection
with their
development. The
success of
our product
candidates will
depend upon
factors such
as product
efficacy,
safety,
reliability,
availability,
timing, scope
of
regulatory
approval,
acceptance
and
price,
among
other
things.
Other
important
factors
to
our
success
include
speed
in
developing
product
candidates,
completing
clinical
development
and
laboratory
testing,
obtaining
regulatory
approvals
and
manufacturing
and
selling commercial quantities of potential products.
Our product
candidates are
intended to
compete directly
or indirectly
with existing
products and
products currently
in development.
Even if approved
and commercialized, our
product candidates may
fail to achieve
market acceptance with
hospitals, physicians, patients
or
third-party
payors.
Hospitals,
physicians
or
patients
may
conclude
that
our
products
are
less
safe
or
effective
or
otherwise
less
attractive than existing drugs.
If our product candidates
do not receive market
acceptance for any reason, our
revenue potential would
be diminished, which would materially adversely affect our ability to become profitable.
Many of
our competitors
have substantially
greater capital
resources, robust
product candidate
pipelines, established
presence in
the
market and expertise in research and development,
manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals
and
reimbursement and marketing
approved products than
we do. As
a result, our
competitors may achieve
product commercialization or
patent or other
intellectual property protection
earlier than we
can. Smaller or
early-stage companies may
also prove to
be significant
competitors, particularly
through collaborative
arrangements with
large
and established
companies. These
competitors also
compete
with us in recruiting and retaining
qualified clinical, regulatory, scientific, sales, marketing and management
personnel and establishing
clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our
programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are
safer, more effective,
have fewer or less severe side
effects, are more convenient, or are
less expensive than any products that
we may
develop or that would render any products that we may develop obsolete or noncompetitive.
We
are subject to anti-corruption
laws, including the U.S.
Foreign Corrupt Practices Act
(“FCPA”), and
similar laws of non-U.S.
jurisdictions where we conduct business.
If we fail to comply with
these laws, we could be subject
to civil or criminal penalties,
other
remedial measures,
and legal
expenses, which
could adversely
affect our
business, financial
condition, results
of operations
and
prospects.
We are currently subject to anti-corruption laws, including the FCPA.
The FCPA, the U.K. Bribery Act 2010 and other applicable anti-
bribery and
anti-corruption laws generally
prohibit us,
our employees
and intermediaries from
bribing, being
bribed or
making other
prohibited
payments
to
government
officials
or
other
persons
to
obtain
or
retain
business
or
gain
other
business
advantages.
In
furtherance of our goal to democratize
healthcare, we intend to distribute any
product candidates that are approved or
receive an EUA
in various countries around the world, including countries with a heightened corruption risk. This may raise the risk of non-compliance
with anti-corruption laws and other
rules and regulations prohibiting bribery
and other crimes. We also participate in collaborations and
relationships
with
third
parties
whose
actions
could
potentially
subject
us
to
liability
under
the
FCPA
or
other
jurisdictions’
anti-
corruption laws, which
in turn could
result in internal
and external investigations,
associated legal costs
and even civil
fines and criminal
charges, any of which
would divert time
and resources away
from our core
business operations even
if we and
our employees and
agents
do not violate laws and regulations. The FCPA also requires public companies to make and keep books and records that accurately and
fairly reflect
the transactions
of the
corporation and
to devise
and maintain
an adequate
system of
internal accounting
controls. Our
business
is
heavily
regulated
and
therefore
involves
significant
interaction
with
public
officials,
including
officials
of
non-U.S.
governments. Additionally, in many other countries, the
health care providers who prescribe
pharmaceuticals are (directly or indirectly)
employed
by
their
government,
and
the
purchasers
of
pharmaceuticals
are
government
entities;
therefore,
our
dealings
with
these
prescribers and
purchasers are subject
to regulation under,
but not
limited to,
the FCPA.
In recent
years, the SEC
and Department of
Justice have also increased their FCPA enforcement activities with respect to pharmaceutical companies.
We are in the process of establishing
a program to govern
the compliance of any
potential sales or marketing
operations of our products,
should any of them be approved or receive an EUA. To date, we have not had a robust compliance program. We cannot ensure that our
operations to
date have
complied, and
that our future
operations will
comply, with our compliance
program or
laws, rules
and regulations
governing the sales
and marketing of
pharmaceutical products, government
contracting and other
aspects of our
business. We have used,
and plan to use, a network of agents in countries around the world to conduct our sales and marketing operations. These agents will not
be our employees, and while we intend
to have a robust diligence program in
connection with engaging agents, our diligence program
and compliance program may not be sufficient to prevent wrong-doing.
There is
also no
assurance that
we will
be completely
effective in
ensuring our
compliance with
all applicable
anti-corruption laws,
including the FCPA, particularly given the high level of complexity of these laws. We
have adopted a code of conduct applicable to all
of our employees and contractors, but it is not always possible to identify and deter misconduct by these parties and other third parties,
and the precautions we
take to detect and
prevent this activity may
not be effective in controlling
unknown or unmanaged
risks or losses
or in protecting us from governmental
investigations or other actions, claims or lawsuits stemming
from a failure to comply with
such
laws or regulations. If
we are not in
compliance with the FCPA
or other anti-corruption laws,
we may be subject
to criminal and civil
penalties, disgorgement
and other
sanctions and
remedial measures,
and legal
expenses, which
could have
an adverse
impact on
our
business, financial condition, results
of operations and
prospects. Similarly,
any investigation of any
potential violations of
the FCPA
or other
anti-corruption laws
by authorities
in the
United States
or other
jurisdictions where
we conduct
business could
also have
an
adverse impact on our reputation, business, financial condition, results of operations and prospects.
As a result of our geographically diverse operations, we are more susceptible to certain risks.
We
have offices
in two different
countries and additional
operations in an
additional two different
countries. We
have also used,
and
plan to use, a
network of agents
in countries around the
world to conduct
our sales and marketing
operations. If we are
unable to manage
the risks
of our
global operations,
including fluctuations
in foreign
exchange and
inflation rates,
international hostilities
such as
the
Russia-Ukraine conflict,
natural disasters,
security breaches,
our ability
to supply
our product
candidates on
a timely
and large
scale
basis in local markets, lead times for shipping, accounts receivable collection times, import or
export licensing requirements, language
barriers, failure to maintain compliance with our clients’ control requirements and multiple legal and regulatory systems, our results of
operations and
ability to
grow could
be materially
adversely affected.
In particular,
our business
and stock
price may
be affected
by
fluctuations in foreign exchange
rates between currencies in
different jurisdictions in which
operate or in which
we may have sales
in
the future.
Certain
legal
and
political risks
are
also
inherent
in
foreign
operations. Foreign
sales of
our
product
candidates
could be
adversely
affected by the imposition
of governmental controls,
political and economic instability, trade restrictions
and changes in tariffs.
In many
countries, the pricing
of prescription pharmaceuticals
is subject to
governmental control. In
these countries, pricing
negotiations with
governmental authorities
can
take
considerable time
after
the
receipt
of
marketing
approval for
a
drug.
There
is
a
risk
that
foreign
governments may
nationalize private
enterprises in
certain countries
where we
may operate.
In certain
countries or
regions, terrorist
activities and the
response to such
activities may threaten
our operations more
than in the
United States. Social
and cultural norms
in
certain countries may not
support compliance with our
corporate policies, including those
that require compliance with
substantive laws
and regulations. Also,
changes in general
economic and political
conditions in countries
where we may
operate are a
risk to our
financial
performance and future growth. Additionally,
the need to identify
financially and commercially strong partners
for commercialization
outside the United States who will
comply with the high manufacturing and
legal and regulatory compliance standards we require
is a
risk to our financial performance. As we operate our business globally, our success will depend, in part, on our ability to anticipate and
effectively manage these and other related risks. There can be no
assurance that the consequences of these and other factors relating to
our international operations will not have an adverse effect on our business, financial condition, results of operations and prospects.
We
are
exposed
to
potential
product
liability
and
professional
indemnity
risks
that
are
inherent
in
the
research,
development,
manufacturing, marketing and use of pharmaceutical products.
The use of our investigational medicinal products in clinical trials,
the sale of our ELISA test and the sale of
any approved products in
the
future
may
expose
us
to
liability
claims.
These
claims
might
be
made
by
patients
who
use
the
product,
health
care
providers,
pharmaceutical companies or others selling such
products. Any claims against us, regardless
of their merit, could be difficult and costly
to defend
and could
materially adversely
affect the
market for
our product
candidates or
any prospects
for commercialization
of our
product candidates.
In addition, regulations
vary significantly across
jurisdictions regarding the
clinical trial sponsor’s responsibility
to provide free medical
care and compensation
to clinical trial
participants who experience
an injury or
illness during the
trial. For example,
there is no
legal
requirement in the United States for sponsors to provide free medical
treatment or compensation to a participant injured during a study;
as a result, sponsors
usually agree to pay
for the medical care
to diagnose and treat
participant injuries to
the extent related to
the clinical
trial and
typically do
not pay
unless the
injury is
determined to
be related
to participation
in the
trial. In
contrast, India
requires free
medical care
until it is
established that
the injury
is not
related to
the study
and compensation for
any injury that
is determined
to be
related to
the study.
In 2019,
India’s
Ministry of
Health and
Family Welfare
published the
“New Drugs
and Clinical
Trials
Rules,”
which increased a clinical
trial sponsor’s liability for
injuries related to clinical trial
trials. Under the regulation, sponsors
are required
to (i)
provide “free medical
management” to participants
that experience an
injury that, in
the investigator’s
opinion, is related
to the
study or until it
is established that the
injury is not related
to the study and
(ii) “compensate” clinical trial
participants for trial-related
injuries. Clinical
trials conducted
in
jurisdictions with
broad
compensation and
medical care
requirements could
result in
increased
overall research costs and adversely affect our ability to conduct clinical trials.
Although the clinical trial process is
designed to identify and assess
potential side effects, it is always possible
that a product, even after
regulatory approval, may
exhibit unforeseen side
effects, including rare
side effects
more likely to
be seen in
commercial use than
in
clinical studies. If any of our product candidates were to cause adverse side effects during clinical trials or
after approval of the product
candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings
that identify known
potential adverse effects and patients who should not use our product candidates.
To
cover such
liability claims,
we purchase
clinical trial
insurances in
the conduct
of each
of our
clinical trials
(typically conducted
through our
CROs). It
is possible
that our
liabilities could
exceed our
insurance coverage
or that
our insurance
will not
cover all
situations
in which a claim against
us could be made. We also intend to expand
our insurance coverage to include
the sale of commercial products
if we receive marketing approval for any of
our proprietary products. However, we may not be able to maintain
insurance coverage at a
reasonable cost or obtain insurance coverage that will be adequate to
satisfy any liability that may arise. If a successful product liability
claim or series of claims is brought against
us for uninsured liabilities or in excess of
insured liabilities, our assets may not be
sufficient
to cover such claims and our business operations could be impaired. Should any of the events described above occur, this could
have a
material adverse effect on our business, financial condition, results of operations and prospects, including, but not limited to:
•
decreased demand for our future product candidates;
•
adverse publicity and injury to our reputation;
•
withdrawal of clinical trial participants;
•
initiation of investigations by regulators;
•
costs to defend the related litigation;
•
a diversion of management’s time and our resources;
•
compensation in response to a liability claim;
•
product recalls, withdrawals or labeling, marketing or promotional restrictions;
•
loss of revenue;
•
exhaustion of any available insurance and our capital resources; and
•
the inability to commercialize our products or product candidates.
We could be adversely affected if we are
subject to negative publicity. We could also be adversely
affected if any of our
products or any
similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Any adverse publicity associated
with illness or other adverse
effects resulting from patients’ use
or misuse of our products
or any similar products distributed
by other
companies could have a material adverse impact on our business, financial condition, results of operations or prospects.
We
will need
to expand
our organization,
and we
may experience
difficulties
in managing
this growth,
which could
disrupt our
operations.
We expect to
expand our organization, and as a result, we may encounter difficulties
in managing our growth, which could disrupt our
operations. We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in
the areas
of clinical
development and
regulatory affairs,
as well
as to
support our
public company
operations. For
example, we
may
build our own focused sales, distribution and marketing infrastructure to
market our product candidates, if approved, in markets around
the world,
which involves
significant expenses
and risks.
To manage these
growth activities,
we must
continue to
implement and
improve
our managerial, operational and financial systems, expand our facilities and continue to recruit and
train additional qualified personnel.
Our
management
may
need
to
devote
a
significant
amount of
its
attention
to
managing
these
growth
activities. Due
to
our
limited
financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may
not be able to
effectively manage the expansion
of our operations, retain
key employees or identify, recruit and
train additional qualified
personnel.
Our
inability
to
manage
the
expansion
or
relocation
of
our
operations
effectively
may
result
in
weaknesses
in
our
infrastructure,
give
rise
to
operational
mistakes,
loss
of
business
opportunities,
loss
of
employees
and
reduced
productivity
among
remaining employees. Our expected growth could also require significant capital expenditures and may divert financial resources from
other projects, such as the
development of additional product candidates.
If we are unable to
effectively manage our expected
growth,
our expenses may increase more than expected,
our ability to generate revenues could be
reduced and we may not be able to
implement
our business
strategy,
including the
successful development
and commercialization
of our
product candidates.
Any of
the foregoing
could have
a material
adverse effect
on
our business,
financial condition,
results of
operations and
prospects. Future
growth would
impose significant additional responsibilities on our management, including:
•
the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors;
•
managing our internal
development efforts effectively, including the
clinical and regulatory
review process for
our product
candidates, while complying with our contractual obligations to contractors and other third parties; and
•
improving our operational, financial and management controls, reporting systems and procedures. We
currently rely, and
for the
foreseeable future
will continue
to rely,
in substantial
part on
certain related
parties, independent
organizations,
advisors and consultants to
provide certain services, including
substantially all aspects
of regulatory approval, clinical
trial
management and manufacturing. There
can be no
assurance that the
services of independent organizations,
advisors and
consultants will continue to be available to us on a
timely basis when needed, or that we can find qualified replacements.
In addition, if
we are unable
to effectively
manage our outsourced
activities or if
the quality or
accuracy of the
services
provided by consultants is
compromised for any reason,
our clinical trials may
be extended, delayed or
terminated, and we
may not be able to obtain regulatory approval of our
product candidates or otherwise advance our business. There can be
no
assurance
that
we
will
be
able
to
manage
our
existing
consultants
or
find
other
competent
outside
contractors
and
consultants on economically reasonable terms, or
at all. If we are not able
to effectively expand our organization by hiring
new employees and expanding our
groups of consultants and contractors,
or we are not
able to effectively build
out new
facilities to
accommodate this
expansion, we
may not
be able
to successfully
implement the
tasks necessary
to further
develop
and
commercialize
our
product
candidates
and,
accordingly,
may
not
achieve
our
research,
development
and
commercialization goals.
Many of the biotechnology and
pharmaceutical companies that we compete
against for qualified personnel and
consultants have greater
financial and other
resources, different risk
profiles and a
longer history in
the industry than
we do. If
we are unable
to continue to
attract
and retain high-quality
personnel and consultants,
the rate and
success at which
we can discover
and develop product
candidates and
operate our business will be limited.
We only have a limited number of employees to manage and operate our business, which may lead to certain operational issues.
As
of
December
31,
2021,
we
had
full-time
employees.
Our
focus
on
the
development
of
UB-311,
UB-612
and
other
product
candidates requires us to manage and operate our business
in a highly efficient manner.
We have
a limited number of employees upon
which we rely to effectively manage and operate our business and we cannot assure you that operational issues will not arise.
While we intend to identify,
recruit, maintain, motivate and integrate additional
employees, consultants and contractors to support
our
growth, we cannot assure you that
we will be able to hire
and/or retain adequate staffing levels to develop
our product candidates or run
our operations and/or to accomplish all of the objectives that we otherwise would seek to accomplish.
If
we
lose
key
management
or
scientific
personnel,
cannot
recruit
qualified
employees,
directors,
officers
or
other
significant
personnel or experience increases in our compensation costs, our business may materially suffer.
We
are highly dependent on our management and directors.
Due to the specialized knowledge each of our
officers and key employees
possesses with respect to our product candidates
and our operations, the loss of service
of any of our officers or directors could delay
or
prevent the
successful enrollment
and completion
of our
clinical trials.
We
do not
carry key
person life
insurance on
any officers
or
directors. In general, the employment
arrangements that we have
with our executive officers do not
prevent them from terminating their
employment with us at any time. Our agreements with our employees generally provide for at-will employment.
In addition,
our future
success and
growth will depend
in part on
the continued service
of our
directors, employees and
management
personnel
and
our
ability
to
identify,
hire
and
retain
additional
personnel.
If
we
lose
one
or
more
of
our
executive
officers
or
key
employees, our
ability to
implement our
business strategy
successfully could
be seriously
harmed. Furthermore,
replacing executive
officers
and
key
employees
may
be
difficult
or
costly
and
may
take
an
extended
period
of
time
because
of
the
limited
number
of
individuals in our industry with
the breadth of skills and experience
required to develop, gain regulatory
approval of and commercialize
product candidates
successfully.
Competition to
hire from
this limited
pool is
intense, and
we may
be unable
to hire,
train, retain
or
effectively incentivize these additional key personnel
on acceptable terms given the competition among
numerous pharmaceutical and
biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from
universities and research
institutions. In addition,
we rely on consultants
and advisors, including
scientific and clinical
advisors, to assist
us in formulating our research, development and commercialization strategy.
Our consultants and advisors may be engaged by entities
other than us and
may have commitments under consulting
or advisory contracts with other
entities that may limit their
availability to
us. If we are unable
to continue to attract
and retain high quality
personnel, our ability to
develop and commercialize product
candidates
will be limited.
Many of our employees have become or will soon become vested in a substantial amount of our Class A
common stock or a number of
common stock options.
Our employees may
be more
likely to leave
us if
the shares
they own have
significantly appreciated in
value
relative to
the original purchase
prices of the
shares, or if
the exercise prices
of the options
that they hold
are significantly below
the
market price
of Class
A our
common stock,
particularly after
the expiration
of the
lock-up agreements
in connection
with our
initial
public offering. Our
future success also depends
on our ability to
continue to attract and
retain additional executive officers
and other
key employees.
If we engage in future acquisitions, joint ventures or strategic collaborations,
this may increase our capital requirements, dilute our
stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
We may evaluate various
acquisitions and
collaborations, including
licensing or
acquiring complementary
products, intellectual
property
rights, technologies, or businesses. Any potential acquisition, joint venture, or collaboration may entail numerous risks, including:
•
increased operating expenses and cash requirements;
•
the assumption of additional indebtedness or contingent liabilities;
•
assimilation of
operations, intellectual
property and
products of
an acquired
company,
including difficulties
associated
with integrating new personnel;
•
the diversion of
our management’s attention from
our existing product
programs and initiatives
in pursuing such
a strategic
merger or acquisition;
•
retention of
key employees,
the loss
of key
personnel and
uncertainties in
our ability
to maintain
key business
relationships;
•
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their
existing products or investigational medicines and regulatory approvals; and
•
our inability to generate
revenue from acquired technology
or products sufficient to meet
our objectives in undertaking
the
acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we
may utilize our cash, issue dilutive securities,
assume or incur debt obligations, incur large
one-time expenses and acquire intangible assets that could result in significant future amortization expense.
Moreover, we may not be able to locate suitable
acquisition or strategic collaboration opportunities, and this inability could impair our
ability to grow or obtain access to technology or products that may be important to the development of our business.
We
or
the
third
parties
upon
whom
we
depend
may
be
adversely
affected
by
natural
disasters
or
pandemics
and
our
business
continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or pandemics,
other than or in
addition to COVID-19 and
including any potential future
waves of COVID-19, could
severely
disrupt
our
operations
and
have
a
material
adverse
effect
on
our
business,
results
of
operations,
financial
condition
and
prospects. For example, our main laboratory is located
on the Eastern coast of Florida, a
location that is at a higher risk
of exposure to
hurricanes. If a hurricane or natural disaster causes us
to sustain significant damage to our Florida laboratory,
or if we must shut down
our operations there for an extended period of time, our business and financial results would be adversely impacted.
If a natural
disaster, power
outage, pandemic, such as
the COVID-19 pandemic, or
other event occurred
that prevented us from
using
all or
a significant portion
of our
headquarters, that damaged
critical infrastructure, such
as the
manufacturing facilities on
which we
rely,
or that
otherwise disrupted
operations, it
may be
difficult or,
in certain
cases, impossible
for us
to continue
our business
for a
substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate
in the event of a
serious disaster or
similar event. We may incur
substantial expenses as
a result of
the limited nature
of our disaster
recovery and business
continuity plans, which could have a material adverse effect on our business.
Unstable market and economic
conditions may have serious
adverse consequences on our
business, financial condition and
share
price.
The
global
economy,
including
credit and
financial
markets,
has
experienced extreme
volatility and
disruptions,
including
severely
diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment
rates and
uncertainty about
economic stability.
For example,
the COVID-19
pandemic has
resulted in
widespread unemployment, an
economic slowdown and extreme
volatility in the capital
markets. While these effects of
COVID-19 have abated as countries,
including
the United States,
have re-opened and
the rate of
vaccinations have increased,
COVID-19 continues to
cause significant disruptions
both
in the United States and globally. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more
difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. In addition, there is a risk that
one or more of
our CROs,
suppliers, contract
manufacturers or
other third-party
providers may
not survive
an economic
downturn, or
that industry
trends with respect to pricing models, supply chains and delivery mechanisms, among
other things, deviate from our expectations. As a
result, our business, results of operations and price of our Class A common stock may be adversely affected.
Our insurance policies
are expensive and protect
us only from some
business risks, which leaves
us exposed to significant
uninsured
liabilities.
Though
we
have
insurance
coverage for
clinical
trial
product
liability,
we
do
not
carry
insurance
for
all
categories
of
risk
that
our
business may encounter. Some of the policies
we currently maintain include general
liability, auto, renters’, workers’ compensation and
directors’ and officers’ insurance.
Any additional product liability insurance coverage
we acquire in the future may
not be sufficient to reimburse
us for any expenses or
losses we
may suffer. Moreover, insurance
coverage is
becoming increasingly
expensive and
in the
future we
may not
be able
to maintain
insurance coverage
at a
reasonable cost
or in
sufficient amounts
to protect
us against
losses due
to liability.
If we
obtain marketing
approval for
any of
our product
candidates, we
intend to
acquire insurance
coverage to
include the
sale of
commercial products;
however,
we may be unable to obtain product
liability insurance on commercially reasonable terms
or in adequate amounts. A successful product
liability claim
or
series of
claims brought
against us
could cause
our stock
price to
decline and,
if judgments
exceed our
insurance
coverage,
could
adversely
affect
our
results
of
operations
and
business,
including
preventing
or
limiting
the
development
and
commercialization of any product candidates
we develop. We
do not carry specific biological
or hazardous waste insurance
coverage,
and our renters’ and general liability insurance policies
specifically exclude coverage for damages and fines arising
from biological or
hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury,
we could be held liable for damages
or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
We also
expect that operating as a public company will make it more
difficult and more expensive for us to obtain director
and officer
liability insurance, and we may
be required to accept reduced
policy limits and coverage or
incur substantially higher costs
to obtain the
same or
similar coverage.
As a
result, it
may be
more difficult
for us
to attract
and retain
qualified people
to serve
on our
board of
directors, our board
committees or as
executive officers. We
do not know,
however, if
we will be
able to maintain
existing insurance
with adequate levels of coverage. Any significant
uninsured liability may require us to
pay substantial amounts, which would adversely
affect our cash and cash equivalents position and results of operations.
The
ongoing
coronavirus
pandemic
has
caused
interruptions
or
delays
of
our
business
plan.
Delays
caused
by
the
coronavirus
pandemic may have a significant adverse effect on our business.
In December 2019,
a strain of
coronavirus, COVID-19, was
reported to have
surfaced in Wuhan,
China, and on
March 12, 2020, the
World Health Organization
declared COVID-19 to be a pandemic. In an effort
to contain and mitigate the spread of COVID-19, many
countries, including
the United
States, Canada
and China,
have imposed
unprecedented restrictions
on travel,
quarantines and
other
public health safety measures. The extent to
which the pandemic may impact our business
will depend on future developments, which
are
highly uncertain
and
cannot be
predicted,
but
the
development
of
clinical
supply
materials
could
be
delayed
and
enrollment of
patients in our studies may
be delayed or suspended, as
hospitals and clinics in areas
where we are conducting trials
shift resources to
cope with the COVID-19
pandemic and may limit
access or close clinical
facilities due to the
COVID-19 pandemic. Additionally, if our
trial participants are unable to travel to our clinical study sites as a result
of quarantines or other restrictions resulting from the COVID-
pandemic,
we
may
experience higher
drop-out
rates
or
delays
in
our
clinical
studies.
We
have
manufacturers
and
collaboration
partners located in foreign
jurisdictions, and travel restrictions
have limited, and may
continue to limit, our
ability to visit their locations
in person and conduct on-site inspections.
Government-imposed quarantines and restrictions may also require us to temporarily suspend or terminate activity at our clinical sites.
Furthermore, if we determine that our trial participants
may suffer from exposure to COVID-19
as a result of their participation in
our
clinical trials, we may voluntarily
terminate certain clinical sites as a
safety measure until we reasonably believe
that the likelihood of
exposure has subsided.
As a result,
we may encounter
difficulties or delays
in initiating, enrolling,
conducting or completing
our planned
and ongoing clinical trials, and our expected development timelines
for our product candidates may be negatively impacted. We cannot
predict the ultimate
impact of the
COVID-19 pandemic as consequences
of such an
event are highly
uncertain and subject
to change.
We
do not
yet know
the full
extent of
potential delays
or impacts
on our
business, our
clinical studies
or as
a whole;
however,
the
COVID-19 pandemic
may materially
disrupt or
delay our
business operations,
further divert
the attention
and efforts
of the
medical
community
to
coping
with
COVID-19,
disrupt
the
marketplace
in
which
we
operate,
and/or
have
a
material
adverse
effect
on
our
operations.
Moreover, the various precautionary measures taken by many governmental authorities around the world in order to limit the spread of
COVID-19 has had and may continue to
have an adverse effect on
the global markets and global economy generally,
including on the
availability and pricing of employees,
resources, materials, manufacturing and
delivery efforts and other aspects
of the global economy.
There have been business
closures and a substantial
reduction in economic activity
in countries that have
had significant outbreaks of
COVID-19. Significant uncertainty remains as
to the potential impact of the
COVID-19 pandemic on the global economy
as a whole. It
is currently not possible
to predict how long
the pandemic will last
or the time that
it will take for
economic activity to return
to prior
levels.
The COVID-19
pandemic could
materially disrupt
our business
and
operations, interrupt
our sources
of
supply,
hamper our
ability to raise additional funds or sell or securities, continue to slow down the overall economy or curtail consumer spending.
Due to the vaccination rate, the demand for our COVID-19 product candidate may decrease significantly or disappear entirely.
An EUA for
UB-612 was denied
by the TFDA
in August 2021.
In addition to
appealing that decision,
we are exploring
paths to approval
of UB-612 as a
three-dose regimen and as
a heterologous boost
(boosting the immunity of
a subject who has
already received a different
vaccine). Other companies
have also responded
to the pandemic
at a faster pace,
and to date more
than twenty COVID-19
vaccines have
been approved for use in one
or more countries around the world,
including three in the United States.
As our competitors continue to
develop, receive regulatory approval
for and commercialize
their own COVID-19 vaccines
and boosters, vaccination rates
will continue
to increase, which
will result in
a material decrease
in demand for
our COVID-19 product
candidate and a
corresponding decrease in
our potential revenues. Further, the existence and significance of the opportunity
to provide COVID-19 boosters in the future is highly
uncertain, and there can be no assurance that we will commercially benefit from the development of a COVID-19 booster market.
Risks Related to Our Class A Common Stock
An active trading market for our Class A common stock may not continue to be developed or sustained.
Prior to our initial public offering, there was no public market for our Class A
common stock.
Although our Class A common stock is
now listed on The
Nasdaq Global Market, an
active trading market for
our shares of Class
A common stock may
never develop or be
sustained.
If an
active market for
our Class
A common
stock does
not develop
or is
not sustained,
it may
be difficult
for you
to sell
shares of our Class A common
stock at an attractive price or
at all.
An inactive market may also impair our
ability to raise capital by
selling shares of our
common stock, our ability to
motivate our employees through
equity incentive awards, and our
ability to acquire
other companies, products or technologies by using our common stock as consideration for such acquisitions.
The price of
our Class A
common stock
may be volatile
and may be
affected by market
conditions beyond
our control, and
purchasers
of our Class A common stock could incur substantial losses.
Our results
of operations
are likely
to fluctuate in
the future
as a
publicly traded
company.
In addition, securities
markets worldwide
have experienced, and are likely to continue to
experience, significant price and volume fluctuations. This market volatility,
as well as
general economic, market or political
conditions, could subject the market
price of our shares of
Class A common stock to
wide price
fluctuations
regardless
of
our
operating
performance,
which
could
cause
a
decline
in
the
market
price
of
our
common
stock.
Price
volatility may be greater
if the public float
and trading volume of
shares of our Class
A common stock is
low. Some
factors that may
cause the market price of our Class A common stock to fluctuate, in addition to the other risks mentioned in
this Report, include:
•
our operating and financial performance and prospects;
•
our
announcements or
our competitors’
announcements regarding
new products
or
services, enhancements,
significant
contracts, acquisitions or strategic investments;
•
any delay in our development or
regulatory filings for our product candidates and
any adverse development or perceived
adverse development with respect to the applicable regulatory authority’s review of such filings;
•
if any of
our product candidates
receives an
EUA or regulatory
approval, the terms
of such approval
and market acceptance
and demand for such product candidates;
•
the success of any efforts to acquire or in-license additional technologies, products or product candidates;
•
changes in earnings estimates or recommendations by securities analysts who cover our Class A common stock;
•
fluctuations in
our financial
results or,
in the
event we
provide it
from time
to time,
earnings guidance,
or the
financial
results or earnings guidance of companies perceived by investors to be similar to us;
•
changes
in
our
capital
structure,
such
as
future
issuances
of
securities,
sales
of
large
blocks
of
common
stock
by
our
stockholders, including our principal stockholders, or the incurrence of additional debt;
•
additions and departure of key personnel;
•
any disputes relating
to our intellectual
property,
including any intellectual
property infringement lawsuit
or opposition,
interference or cancellation proceeding in which we may become involved;
•
reputational issues, including reputational issues involving our competitors and their products;
•
actions by institutional stockholders;
•
changes in general economic and market conditions, including related to the COVID-19 pandemic;
•
changes in
industry conditions
or perceptions
or changes
in the
market outlook
for the
industry in
which we
compete,
including changes in the structure of healthcare payment systems; and
•
changes in applicable laws, rules or regulations or regulatory actions affecting us or our clients and other dynamics.
These and other factors may cause the market price for shares of our Class A common stock to fluctuate substantially, which may limit
or prevent investors from readily selling their shares of our Class A common stock and may otherwise negatively affect the liquidity of
our Class A common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock sometimes
have instituted securities class action litigation against
the company that issued the stock.
Securities litigation against us, regardless of
the merits or outcome,
could result in substantial
costs and divert the
time and attention of
our management from the
business, which
could significantly harm our business, results of operation, financial condition or reputation.
The dual-class structure of our common stock and
the Voting
Agreement will have the effect of concentrating voting
power, which
will significantly limit
stockholders’ ability to
influence the outcome
of matters submitted
to our stockholders
for approval, including
the election
of our
board of
directors, the
adoption of
amendments to
our Charter
and Bylaws
and the
approval of
any merger,
consolidation, sale of all or substantially all of our assets or other major corporate transaction.
Our Class A common stock has one vote per
share, and our Class B common stock has ten
votes per share. Our principal stockholders
have entered into the
Voting
Agreement. Mei Mei Hu,
as proxyholder under the
Voting
Agreement, controls approximately 58.6%
of
the total voting power
of our outstanding capital
stock. The Voting Agreement provides Mei Mei Hu with
the authority (and irrevocable
proxies) to direct the vote and vote the shares
of capital stock held by the parties to
the voting agreement at her discretion on all
matters
to be voted upon
by stockholders. The voting
power covered by the
Voting
Agreement may increase over
time as the UBI
Warrant
is
exercised and
as our
principal stockholders exercise
or vest
equity awards
that were outstanding
at the time
of the
completion of our
initial public offering.
If all such
equity awards
held by our
principal stockholders
had been exercised
or vested and
exchanged for shares
of common stock and the UBI Warrant
had been exercised in full for shares of Class A common stock as of the date
of the completion
of our initial public
offering, assuming no other
equity awards had
been exercised or
vested, the Voting Agreement would have covered,
in the aggregate
as of the
completion of our
initial public offering,
approximately 67.6% of
the total voting
power of our
outstanding
capital stock.
As a
result, if
our principal
stockholders retain
all or
a large
portion their
common stock,
including the
common stock
issuable upon the
exercise or vesting
of such principal
stockholders’ outstanding equity
awards or upon
the exercise of
the UBI Warrant,
our principal stockholders will be
able to significantly influence (if
not control) any action requiring
the approval of our stockholders,
including the election
of our board
of directors, the
adoption of amendments
to our
amended and restated
certificate of incorporation
(the
“Charter”) and
our
amended
and
restated
bylaws
(the
“Bylaws”)
and
the
approval
of
any
merger,
consolidation,
sale
of
all
or
substantially all of our assets or other major corporate transaction. Assuming our principal stockholders
retain their equity interests and
the Voting Agreement remains in
effect, our principal
stockholders will
effectively control all
such matters submitted
to the stockholders
for the
foreseeable future.
Our principal
stockholders will
also have
the voting
power to
determine the
composition of
our board
of
directors, which in turn will be able to determine matters affecting us, including, among others:
•
any determination with respect to our business direction and policies, including the appointment and removal of officers;
•
the adoption of amendments to our Charter and Bylaws;
•
determinations with respect to mergers, business combinations or disposition of assets;
•
compensation and benefit programs and other human resources policy decisions;
•
the payment of dividends on our common stock; and
•
determinations with respect to tax matters.
Our principal stockholders may have interests that differ from yours and may vote in a way with which you
disagree and which may be
adverse to your interests. This concentrated
control may have the effect
of delaying, preventing or deterring
a change in control of the
Company, could deprive our stockholders of
an opportunity to receive
a premium for their
capital stock as part
of a sale in
the Company
and
might ultimately
affect
the market
price
of
our
Class A
common
stock. In
addition, each
share of
Class
B
common
stock
will
automatically convert into
one share of
Class A common
stock upon
any transfer,
whether or not
for value
and whether voluntary
or
involuntary or by operation of law,
except for certain transfers described in our Charter,
including, without limitation, certain transfers
for tax and estate planning purposes. Such issuances will be dilutive to holders of our Class A common stock.
We are an “emerging growth company”
and a “smaller reporting
company” and will be
able to avail ourselves
of reduced disclosure
requirements applicable to emerging growth companies
and smaller reporting companies, which could
make our Class A common
stock less attractive to investors and adversely affect the market price of our Class A common stock.
We are an “emerging growth company,”
as defined in the JOBS Act. We will remain an emerging growth company until the earliest of
(i) the last day of the fiscal year
in which we have annual gross revenues of
$1.07 billion or more; (ii) the date on which
we have issued
more than $1.0 billion in
non-convertible debt in the
previous three years; (iii)
the date we qualify
as a “large
accelerated filer” under
the Exchange Act,
which would occur
at the
end of
a given
fiscal year
if the market
value of
our common
stock that is
held by
non-
affiliates is $700 million
or more as
of the last
business day of
the second fiscal
quarter of such
year (and we
have been a
public company
for at
least 12
months and
have filed
one annual
report on
Form 10-K);
and (iv)
the last
day of
the fiscal
year ending
after the
fifth
anniversary of our initial public offering.
For so long as we
remain an emerging growth
company, we
are permitted and intend to
rely
on
exemptions
from
certain
disclosure
requirements
that
are
applicable
to
other
public
companies
that
are
not
emerging
growth
companies. These exemptions include:
•
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•
not being
required to
comply with
any requirement
that may
be adopted
by the
Public Company
Accounting Oversight
Board regarding
mandatory audit
firm rotation
or a
supplement to
the auditor’s
report providing
additional information
about the audit and the financial statements;
•
being required
to provide
only two
years of
audited financial
statements in
addition to
any required
unaudited interim
financial statements;
•
permitting
an
extended
transition
period
for
complying
with
new
or
revised
accounting
standards,
which
allows
an
emerging growth
company to
delay the
adoption of
certain accounting
standards until
those standards
would otherwise
apply to private companies;
•
reduced disclosure obligations regarding executive compensation; and
•
exemptions
from
the
requirements
of
holding
a
nonbinding
advisory vote
on
executive
compensation
and
shareholder
approval of any golden parachute payments not previously approved.
We
may choose
to take
advantage of
some, but
not all,
of the
available exemptions.
We
have elected
to use
the extended
transition
period for new or revised accounting standards during the period in which we remain an emerging growth company.
To the extent that
we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease
to qualify as an emerging growth company, we will continue
to be permitted to make certain
reduced disclosures in our periodic reports
and other documents that we file
with the SEC. We cannot predict whether investors will find our
Class A common stock less attractive
as a result of
our reliance on these
exemptions. If some investors find
our Class A common
stock less attractive as
a result, there may
be a less active trading market for our Class A common stock and our stock price may be more volatile.
As long as
our principal stockholders
hold a majority
of the voting
power of our
capital stock, we
may rely on
certain exemptions
from the corporate governance requirements of the Nasdaq available for “controlled companies.”
We
are a
“controlled company”
within the
meaning of
the corporate
governance requirements
of
the Nasdaq
because our
principal
stockholders will continue to hold more than 50% of the voting power of our outstanding shares of capital stock as a result of our dual-
class
common
stock
structure
and
the
Voting
Agreement.
A
controlled
company
may
elect
not
to
comply
with
certain
corporate
governance requirements
of the
Nasdaq. Accordingly,
our board
of directors
will not
be required
to have
a majority
of independent
directors
and
our
Compensation
Committee
and
Nominating
and
Governance
Committee
will
not
be
required
to
meet
the
director
independence
requirements
to
which
we
would
otherwise
be
subject
until
such
time
as
we
cease
to
be
a
“controlled
company.”
Accordingly, you
will not have certain of
the protections afforded to stockholders
of companies that are subject
to all of the
corporate
governance requirements of the Nasdaq.
Your percentage ownership in us may
be diluted by
future issuances of
capital stock, which
could reduce your
influence over matters
on which stockholders vote.
Pursuant to our Charter and Bylaws, our
board of directors has the authority,
without action or vote of our
stockholders, to issue all or
any part of our authorized
but unissued shares of common
stock, including shares issuable upon
the exercise of options, or
shares of our
authorized but
unissued preferred
stock. Issuances of
shares of
common stock
or shares
of voting
preferred stock
would reduce
your
influence over matters on which our
stockholders vote and, in the case
of issuances of shares of
preferred stock, would likely result in
your interest in us being subject to the prior rights of holders of that preferred stock.
Future sales of a substantial number of shares of our Class A common stock may depress the price of our shares.
If our stockholders sell a large
number of shares of our Class
A common stock, or if we
issue a large number of
shares of our Class A
common
stock in
connection with
future acquisitions,
financings or
other
circumstances, the
market price
of
shares of
our
Class A
common stock could decline significantly. Moreover, the perception in
the public market that our stockholders might sell shares of our
Class A common
stock could
depress the market
price of those
shares. In
addition, sales
of a substantial
number of shares
of our common
stock by our principal stockholders could adversely affect the market price of our Class A common stock.
We
do not anticipate
declaring or paying
regular dividends on
our Class A
common stock in
the near term,
and any indebtedness
could limit our ability to pay dividends on our Class A common stock.
We have never declared and do
not anticipate declaring
or paying regular cash
dividends on our Class
A common stock
in the near term.
We currently intend to use our future earnings, if any, to pay any debt obligations, to fund our growth and develop our business and for
general corporate purposes. Therefore, you
are not likely to receive
any cash dividends on your
Class A common stock in
the near term,
and the success of an investment in shares
of our Class A common stock will
depend upon any future appreciation in their value,
which
is not certain to
occur. There is no guarantee
that shares of
our Class A common
stock will appreciate
in value or even
maintain the price
at which they are initially offered. Any
future declaration and payment of cash dividends or other
distributions of capital will be at the
discretion of our board of directors and the payment of any
future cash dividends or other distributions of capital will depend on many
factors, including our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including
requirements of
our subsidiaries) and any
other factors that our
board of directors deems relevant
in making such a determination.
We cannot assure you
that we will
establish a dividend
policy or pay
cash dividends in
the future or
continue to pay
any cash dividend
if we do
commence
paying cash dividends pursuant to a dividend policy or otherwise.
Our Charter designates courts in the State of Delaware as the sole and exclusive forum for certain types
of actions and proceedings
that may be
initiated by our stockholders,
and also provide
that the federal district
courts will be
the exclusive forum
for resolving
any complaint
asserting a
cause of
action arising
under the
Securities Act,
each of
which could
limit our
stockholders’ ability
to
choose the judicial forum for disputes with us or our directors, officers, stockholders or employees.
Our Charter provides that, subject
to limited exceptions, the Court
of Chancery for the State
of Delaware or other specified courts
in the
State of Delaware will be the sole and exclusive forum to the fullest extent of the law for:
•
any derivative action or proceeding brought on our behalf;
•
any action asserting a claim of breach
of a fiduciary duty owed by any
of our directors, officers or other
employees to us
or our stockholders;
•
any action asserting
a claim against
us arising pursuant
to any provision
of the Delaware
General Corporation Law
(the
“DGCL”), our Charter or our Bylaws;
•
any action to interpret, apply, enforce or determine the validity of our Charter or Bylaws; and
•
any other action asserting a claim against us that is governed by the internal affairs doctrine.
Our Charter also provides that the federal district
courts of the United States of America
will be the exclusive forum for the
resolution
of
any complaint
asserting a
cause of
action against
us
or any
of our
directors, officers,
employees or
agents and
arising under
the
Securities Act.
However, Section 22
of the Securities
Act provides
that federal
and state
courts have
concurrent jurisdiction
over lawsuits
brought pursuant to the Securities Act or the rules and regulations thereunder.
To the extent the
exclusive forum provision restricts the
courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a
provision. We
note that
investors cannot
waive compliance
with the
federal securities
laws and
the rules
and regulations
thereunder.
This provision does not apply to claims brought under the Exchange Act.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital
stock shall be deemed to have notice of and
to have consented to
these provisions. These provisions
may limit a stockholder’s ability
to bring a claim in
a judicial forum that it
finds
favorable for
disputes with
us or
our directors,
officers or
other employees,
which may
discourage such
lawsuits against
us and
our
directors, officers and employees. Alternatively, if a court were
to find these provisions of
our Charter inapplicable to, or unenforceable
in respect of, one or more of
the specified types of actions or
proceedings, we may incur additional costs
associated with resolving such
matters in other jurisdictions, which could adversely affect our business or financial condition.
Delaware law and provisions in our Charter and Bylaws might discourage, delay or prevent a change in control of the Company or
changes in our management and, therefore, depress the trading price of our Class A common stock.
Provisions of
our Charter
and Bylaws
and of
state law
may delay,
deter, prevent
or render
more difficult
a takeover
attempt that
our
stockholders might consider in their best interests, including the following provisions:
•
our
dual-class
common
stock
structure
and
the
Voting
Agreement,
which
provide
our
principal
stockholders
with
a
majority of the
voting power of
our capital stock
will enable our
principal stockholders to
influence the outcome
of matters
submitted to our stockholders for
approval even if they own
significantly less than a majority
of the number of shares
of
our outstanding common stock;
•
our Charter does not provide for cumulative voting in the election of directors;
•
vacancies on our board of directors may be filled only by our board of directors and not by stockholders;
•
our
stockholders
may
act
by
written
consent
only
so
long
as
the
Voting
Agreement
is
in
effect
and
our
principal
stockholders hold a majority of the voting power of then-outstanding shares of our capital stock;
•
a special meeting of our
stockholders may only be called
by the chairperson of our
board of directors, our Chief
Executive
Officer, our President, a
majority of
our board of
directors or, so
long as the
Voting Agreement is in effect
and our principal
stockholders hold a majority of the voting power of then-outstanding shares of our capital stock, our stockholders;
•
amendments
to
certain
provisions
of
our
Charter
and
stockholder-proposed
amendments
to
our
Bylaws
require
the
affirmative vote of
the holders of at
least 66 2/3% in
voting power of all
the then outstanding shares
of our capital stock
entitled to vote thereon at any time the Voting
Agreement is not in effect or our principal stockholders do not hold, in the
aggregate, a majority of the voting power of then-outstanding shares of our capital stock;
•
our Charter authorizes our board of
directors, subject to the limitations imposed by
Delaware law or the Nasdaq’s
listing
rules, without any further vote
or action by our stockholders,
to issue preferred stock in one
or more series and to
fix the
designations, powers, preferences, limitations and rights of the shares of each series; and
•
advance notice
procedures apply
for stockholders
to nominate
candidates for
election as
directors or
to bring
matters before
an annual meeting of stockholders.
Such provisions or laws may prevent our stockholders from receiving the benefit from any premium to the market price of our Class A
common stock offered
by a bidder
in a takeover
context. Even in
the absence of
a takeover attempt,
the existence of
these provisions
may adversely affect the prevailing market price of our Class A common stock if they are viewed as discouraging takeover attempts in
the future.
Provisions
in
our
Charter
and
Bylaws,
including
the
dual-class
structure
of
our
common
stock,
might
discourage
or
prevent
institutional investors from purchasing or holding our Class A common stock, and,
therefore, depress the trading price of our Class
A common stock.
Our governance structure and
our Charter may negatively
affect the decision by certain
institutional investors to purchase
or hold shares
of
our
Class A
common
stock.
The holding
of
low-voting stock,
such
as our
Class A
common stock,
may
not
be
permitted by
the
investment policies of certain institutional investors
or may be less attractive to the portfolio
managers of certain institutional investors.
In addition, in July 2017, FTSE
Russell and Standard & Poor’s announced
that they would cease to allow
most newly public companies
utilizing dual- or
multi-class capital structures
to be included
in their indices.
Affected indices
include the Russell
2000 and the
S&P
500, S&P MidCap
400 and S&P
SmallCap 600, which
together make
up the S&P
Composite 1500.
Our dual-class common
stock capital
structure may make us ineligible for inclusion
in any of these and certain other
indices, and as a result, mutual funds,
exchange-traded
funds and
other investment
vehicles that
attempt to
passively track
these indices
would not
invest in
our stock.
These policies
may
depress our valuation compared to those of other similar companies that are included in such indices.
If securities or
industry analysts do
not publish research
or publish inaccurate
or unfavorable research
about us, our
business or
our market, or if
they change their recommendation regarding our
Class A common stock adversely,
the trading price and trading
volume of our Class A common stock could decline.
The trading
market for our
Class A
common stock will
depend in
part on
the research and
reports that securities
or industry
analysts
publish about us, our business, our market
or our competitors. If no or few securities
or industry analysts cover us, the price and
trading
volume of our
Class A
common stock likely
would be negatively
impacted. If one
or more
of the securities
or industry analysts
who
cover us downgrade our Class A common stock or publish
inaccurate or unfavorable research about us, the trading
price of our Class A
common stock
would likely
decline. If
analysts publish
target prices
for our
Class A
common stock
that are
below our
then-current
public price of
our Class A
common stock,
it could cause
the trading price
of our Class
A common stock
to decline significantly. Further,
if one
or more
of these
analysts cease
coverage of
the Company
or fail
to publish
reports on
us regularly,
demand for
our Class
A
common stock could decrease, which might cause our Class A common stock trading price and trading volume to decline.
General Risk Factors
We
incur increased costs as a
result of operating as
a public company,
and our management is
required to devote substantial
time
to new compliance initiatives.
As a public company, and particularly after we are no longer an “emerging
growth company” or “smaller reporting company,” we will
incur significant legal, accounting and other expenses that we
did not incur as a private company.
In addition, the Sarbanes-Oxley Act
and
rules
subsequently
implemented
by
the
SEC
and
the
Nasdaq
impose
various
requirements
on
public
companies,
including
establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our
management and
other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have
increased our legal and financial compliance costs and will make some activities more time- consuming and costly. For example, these
rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance.
Pursuant to
Section 404,
we are
required to
furnish a
report by
our management
on our
internal control
over financial
reporting, including
an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However,
while we remain an
emerging growth company, we will not be
required to include an
attestation report on internal
control over financial
reporting issued by our
independent registered public accounting
firm. To
achieve compliance with Section
404 within the prescribed
period, we
are engaged
in a
process to
document and
evaluate our
internal control
over financial
reporting, which
is both
costly and
challenging. Further,
despite our
efforts, there
is a
risk that
neither we
nor our
independent registered public
accounting firm
will be
able to
conclude within
the prescribed
timeframe that
our internal
control over
financial reporting
is effective
as required
by Section
404.
This
could
result
in
an
adverse
reaction
in
the
financial
markets
due
to
a
loss
of
confidence
in
the
reliability
of
our
financial
statements. In addition, if we are not able to continue to meet these requirements, we may not be able to remain listed on the Nasdaq.
Our internal controls
over financial reporting
are not currently
effective and our independent
registered public accounting
firm may
not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
Upon becoming
a public
company,
we are
now required
to comply
with the
SEC’s
rules implementing
Sections 302
and 404
of the
Sarbanes-Oxley Act, which will require management to certify financial
and other information in our quarterly and annual
reports and
provide an
annual management
report on
the effectiveness
of internal
control over
financial reporting.
Although we
are required
to
disclose changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting
on a quarterly basis,
we will not be
required to make our
first annual assessment of
our internal control over
financial reporting pursuant
to Section 404 until at least
our second annual report required to
be filed with the SEC, and
we are not required to have
our independent
registered public
accounting firm
formally assess
our internal
controls for
as long
as we
remain an
“emerging growth
company” as
defined in the JOBS Act.
When formally
evaluating our
internal controls
over financial
reporting, we
have identified
and may
identify further
material weaknesses
that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of
Section 404
of the
Sarbanes-Oxley Act. In
addition, if
we fail
to achieve
and maintain
the adequacy
of our
internal controls,
as such
standards are modified, supplemented or amended from time to time, we may
not be able to ensure that we can conclude on an ongoing
basis that we
have effective
internal controls over
financial reporting in
accordance with Section
404 of the
Sarbanes-Oxley Act. We
cannot be certain as to the timing of completion of our evaluation, testing and any
remediation actions or the impact of the same on our
operations. If
we are
not able
to implement
the requirements
of Section
404 of
the Sarbanes-Oxley
Act in
a timely
manner or
with
adequate compliance,
our independent
registered public
accounting firm
may issue
an adverse
opinion due
to ineffective
internal controls
over financial
reporting, and
we may
be subject
to sanctions
or investigation
by regulatory
authorities, such
as the
SEC. As
a result,
there could be
a negative reaction
in the financial
markets due to
a loss of
confidence in the
reliability of our
financial statements. In
addition, we may be required
to incur additional costs in
improving our internal control system and
the hiring of additional personnel.
Any such action could have a significant and adverse effect on our business and
reputation, which could negatively affect our results of
operations or cash flows.
Further, we believe that any disclosure controls and procedures or internal controls
and procedures, no matter how well-conceived and
operated,
can
provide
only
reasonable,
not
absolute,
assurance
that
the
objectives
of
the
control
system
are
met.
These
inherent
limitations include the facts that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. Additionally,
controls can be circumvented by
the individual acts of
some persons, by collusion of
two or more people or
by
an unauthorized override of
the controls. Accordingly,
because of the inherent
limitations in our control
system, misstatements due to
error or fraud may occur and not be detected.
We have
identified material weaknesses in our internal control over financial
reporting. If we are unable to remediate our existing
material weaknesses
and otherwise
develop and
maintain an
effective system
of internal
control over
financial reporting,
we may
not be
able to
accurately report
our financial
results or
prevent fraud,
and as
a result,
shareholders could
lose confidence
in our
financial and other public reporting, which would harm our business and the trading price of our Class A common
stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure
controls and
procedures,
are designed
to prevent
fraud. Any
failure
to
implement required
new
or
improved
controls, or
difficulties
encountered
in
their implementation,
could
cause
us
to
fail
to
meet
our
reporting obligations.
A
material weakness
is
a
deficiency or a combination of
deficiencies in internal control over
financial reporting such that there
is a reasonable possibility that
a
material misstatement of our financial statements will not be prevented or detected on a timely basis.
During the
preparation of
our audited
consolidated financial
statements for
the year
ended December
31, 2021,
we identified
certain
errors in
our previously
issued financial
statements that
were determined
not to
be material.
Further, as
disclosed in
Item 9A
of this
Report,
we
identified
material
weaknesses
in
the
design
and
operation
of
our
internal
control
over
financial
reporting
relating
to
maintaining and performing our financial close process, ensuring
that formal processes exist for identifying, analyzing and accounting
for complex, non-routine
transactions and proper
segregation of duties
and responsibilities within
our finance department.
We
are in
the process of
implementing measures designed
to improve internal
control over financial
reporting to remediate
the control deficiencies
that led to these material weaknesses.
We cannot assure you that we will be able to successfully
remediate these material weaknesses or
other material weaknesses that may be discovered in the future. If we are
unable to successfully remediate these issues or future issues
or if
we fail
to design
and operate
effective internal
controls, it
could result
in material
misstatements or
omissions in
our financial
statements and potentially require us to restate
our financial statements, which may result in
the trading value of our Class
A common
stock being materially adversely affected.
If
our
estimates
or
judgments
relating
to
our
critical
accounting
policies
are
based
on
assumptions
that
change
or
prove
to
be
incorrect, our
operating results
could fall
below our
publicly announced
guidance or
the expectations
of securities
analysts and
investors, resulting in a decline in the market price of our Class A common stock.
The
preparation
of
financial
statements
in
conformity
with
U.S.
generally
accepted
accounting
principles
(“GAAP”)
requires
management
to
make
estimates
and
assumptions
that
affect
the
amounts
reported
in
our
consolidated
financial
statements
and
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe
to be reasonable
under the circumstances, the
results of which form
the basis for making
judgments about the carrying
values of assets, liabilities,
equity,
revenue and expenses that are not readily apparent from other sources. If our assumptions
change or if actual circumstances differ from
our
assumptions,
our
operating
results
may
be
adversely
affected
and
could
fall
below
our
publicly
announced
guidance
or
the
expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common
stock.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

---

ITEM 2. PROPERTIES
Item 2. Properties.
Facilities
Our principal executive offices are located
in Dallas, Texas, where we sublease 3,631 square
feet of office space from UBI. UBI’s lease
for the premises is currently
scheduled to terminate in January 2023.
In addition to our principal executive
offices, we have additional
offices in
Florida and Taiwan.
We
do not currently
own any real
property.
We
believe that our
current facilities are
adequate to meet
our immediate needs
and believe that
we should be
able to renew
each of our
leases and subleases
without an adverse
impact on
our
operations.
In
addition,
we
believe
that
if
we
require
additional
office
space
or
manufacturing
facilities,
we
will
be
able
to
obtain
additional facilities on commercially reasonable terms.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
From time to
time we are
a party to
various litigation matters
incidental to the
conduct of our
business. We
are not presently
party to
any legal
proceedings the
resolution of
which we
believe would
have a
material adverse
effect on
our business,
prospects, financial
condition, liquidity, results of operation, cash flows or capital levels.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
The disclosure required by this item is not applicable.
PART
II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Price for the Common Stock
Our Class A
common stock is
listed on the
Nasdaq Global Market
under the symbol
“VAXX
.” As of
March 24, 2022, the
number of
shares of
our Class
A common
stock outstanding
was 111
,966,892 held
by approximately
135 shareholders
of record,
not including
shareholders whose shares are held in securities position listings.
Our Class B common stock is not listed on any exchange nor traded on any public market.
As of March 24, 2022, the number of shares
of our Class B common stock outstanding was 13,874,132 held by approximately 4 shareholders of record.
Dividends
We
have never declared or paid,
and do not anticipate declaring
or paying in the foreseeable
future, any cash dividends on
our capital
stock. Any future determination to declare and pay cash dividends will be at the discretion of our board of directors in accordance with
applicable laws and
will depend on,
among other things,
our financial condition,
results of operations,
cash requirements, contractual
restrictions and
such other
factors as
our board
of directors
deems relevant.
Our ability
to pay
dividends may
also be
limited by
covenants
of any future outstanding indebtedness we or our subsidiaries incur.
Issuer Purchases of Equity Securities
We did not repurchase any shares during the years ended December 31, 2021, 2020, or 2019.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the fourth quarter of 2021.
Use of Proceeds
On November 15, 2021, the Company closed
its IPO, as discussed in Note 1 of
our consolidated financial statements for the
year ended
December 31, 2021. The
aggregate net proceeds to us
from the offering, after
deducting underwriting discounts and commissions
and
other offering expenses
payable by us,
was approximately $71.1
million. The proceeds
from our IPO
have been invested
primarily in
money market accounts.
There has been
no material change
in the expected
use of the
net proceeds from
our IPO as
described in our
prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on November 12, 2021.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved].

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our
consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report. We
intend for this discussion to provide you with information that will assist you in understanding our consolidated financial statements,
the changes in key items in those consolidated financial statements from year to year and the primary factors that accounted for those
changes.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that
involve risks, uncertainties and assumptions. See the section of this Annual Report titled “Special Note Regarding Forward-Looking
Statements” for a discussion of forward-looking statements. As a result of many factors, including those factors set forth in the “Risk
Factors” section of this Annual Report, our actual results could differ materially from management’s
expectations and the results
described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Vaxxinity is engaged in the development and commercialization of
rationally designed prophylactic and
therapeutic vaccines to combat
chronic disorders
and infectious
diseases with
large patient
populations and
unmet medical
needs. While
vaccines have
traditionally
been unable
to effectively
and safely
combat such
disorders, we
believe our
platform could
overcome the
traditional hurdles
facing
vaccines in this area.
Our Vaxxine
Platform relies on a synthetic peptide vaccine technology first developed by UBI and subsequently
refined over the last two decades. We
believe our vaccines have the potential to combat
conditions that have not yet been successfully
treated, or
which have
primarily been
addressed with
monoclonal antibodies
(mAbs) which,
while generally
effective, are
extremely
costly and
cumbersome, and
thus have
limited accessibility.
Our pipeline
primarily consists
of five
programs focused
on chronic
disease,
particularly neurodegenerative
disorders, in
addition to
other neurology
and cardiovascular
indications. Given
the global
COVID-19
pandemic and
our Vaxxine
Platform’s
applicability to
infectious disease,
we are
also opportunistically
advancing product
candidates
that address SARS-CoV-2.
We separated our
business from
UBI through
two separate
transactions: a
spin-out from
UBI in
2014 of
operations focused
on developing
chronic
disease
product
candidates
that
resulted
in
UNS,
and
a
second
spin-out
from
UBI
in
of
operations
focused
on
the
development of a COVID-19 vaccine that
resulted in COVAXX.
On February 2, 2021, Vaxxinity
was incorporated for the purpose of
reorganizing
and combining
UNS and
COVAXX
and did
so on
March 2,
2021 through
the Reorganization.
In connection
with the
Reorganization, (i) all outstanding shares of UNS and COVAXX preferred stock and common stock were contributed to Vaxxinity
and
exchanged for an aggregate
of 57,702,458 shares of
our Class A common
stock, 10,999,149 shares of
our Class B common
stock and
58,175,751
shares of our Series
A preferred stock, (ii) the
outstanding options to purchase
shares of UNS and COVAXX common stock
were terminated
and substituted
with options
to purchase
an aggregate
of 19,712,504
shares of
our Class
A common
stock, (iii)
the
outstanding warrant to purchase shares of
COVAXX
common stock was cancelled and exchanged for
a warrant that is exercisable for
112,373
shares of
our Class
A common
stock, and
(iv) the
outstanding Convertible
Notes and
the Related
Note were
contributed to
Vaxxinity and the former holders of such notes received an aggregate
of
4,047,344
shares of our Series A preferred
stock. As a result of
the Reorganization, COVAXX
and UNS became our wholly-owned
subsidiaries. All shares of our
Series A preferred stock converted
into shares of
our Class A
common stock concurrently
with the closing.
The Reorganization was
determined to be
a common control
transaction, so the
carrying values of
all contributed assets
and assumed liabilities
remained unchanged and
the financial information
for
all
periods in
this
section of
the
financial
statements presented
prior to
the
Reorganization
are presented
on
consolidated basis.
COVA
XX was
incorporated on
March 23,
2020, so
periods prior
to March
23, 2020
in this
section of
the financial
statements only
reflect the historical financial information of UNS. Unless the context requires otherwise, in this section we use the terms “Vaxxinity,”
“we,” “us” and “our” to refer to our operations (including through UNS and COVAXX) both prior to and after the Reorganization.
Since our spin-out transactions from UBI, we have focused on
organizing and staffing our business, business planning,
raising capital,
developing
our
Vaxxine
Platform,
identifying
and
testing
potential
product
candidates
and
conducting
clinical
trials.
We
have
also
developed a SARS CoV-2 antibody ELISA test, which received an EUA from the FDA in January 2021.
Our current pipeline consists
of six programs from early
to late-stage development, including
five programs focused on
chronic disease.
Our neurodegenerative chronic disease program has three primary programs: UB-311, our leading neurology product candidate, which
targets AD; UB-312, which
targets PD and other
synucleinopathies;
and an anti-tau product
candidate which has
the potential to address
multiple neurodegenerative conditions, including AD.
Additionally, we
have two other primary
programs focused on chronic
disease:
UB-313, which targets CGRP
to prevent migraines;
and our anti-PCSK9
program, which targets
hypercholesterolemia to reduce
the risk
of cardiac events.
Through our
Vaxxine Platform, we believe
we may
be able
to address a
wide range
of other
chronic diseases,
including
chronic diseases that are or could potentially be successfully treated by mAbs, which increasingly dominate the treatment
paradigm for
many chronic diseases.
In addition
to our
chronic disease
pipeline, given
our Vaxxine
Platform’s
applicability to
infectious disease
and the
global need
for
additional vaccines
to address
SARS-CoV-2, we are advancing
an infectious
disease product
candidate. We have reported
interim results
of our
UB-612 Phase
1, Phase
2, and
Phase 1
extension clinical
trials. An
EUA application
for UB-612
was denied
by the
TFDA in
August 2021. We are appealing
the TFDA’s decision in partnership with UBIA.
At the same
time, we are
pursuing accelerated pathways
to authorization with regulators in multiple jurisdictions, including high income countries and LMICs, based on a heterologous booster
trial of UB-612 in the first half of 2022.
To date,
our revenue has been
generated from the modest
sales of our ELISA
test and the sale
of an option to negotiate
a license with
UNS (which
option has
expired). As
a result,
our ability
to generate
revenue sufficient
to achieve
profitability will
depend on
the eventual
regulatory approval,
and commercialization
of one
or more
of our
product candidates.
We have not yet
obtained any
regulatory approvals
for our product candidates or conducted sales and marketing activities for our product candidates.
We have principally funded our operations through financing transactions. Through December 31, 2021,
we received gross proceeds of
$306.1 million
in
connection with
various financial
instruments, including
the sale
of preferred
and common
stock, the
issuance of
promissory notes (including
convertible promissory notes
(“Convertible Notes”)), and
the entry into
simple agreements for
future equity
(“SAFEs”).
Costs associated with research and development are the most significant
component of our expenses. These costs can vary greatly from
period to period depending
on the timing of
various trials for our
product candidates. We expect our allocated
research and development
costs and
general and
administrative expenses
to increase
over time
as we
expand the
number of
product candidates
that we
are advancing
and incur
increased costs as
a result of
operating as
a public company.
Further, we
anticipate incurring greater
selling and marketing
expenses if we
commercialize any of
our product candidates
in the future.
Our product candidates
are in clinical
stage or pre-clinical
stage development, and we
have generated limited revenue
to date and
have incurred significant
operating losses since inception.
Net
losses were $137.2 million and
$40.0 million for the years
ended December 31, 2021 and
2020, respectively. As of December 31, 2021,
we had an
accumulated deficit of
$229.5 million. We expec
t our expenses
and capital requirements
will increase over
time in connection
with our planned operations, which include:
•
continuing pre-clinical studies, existing clinical trials, or initiating new clinical trials for product candidates UB-311, UB-312,
UB-313, our COVID-19 product candidate and other product candidates;
•
advancing
the
development
of
our
product
candidate
pipeline
of
other
product
candidates,
including
through
business
development efforts to invest in or in-license other technologies or product candidates;
•
hiring additional clinical, quality control, medical, scientific and other technical personnel to support clinical and research and
development programs;
•
expanding operational, financial
and management systems
and infrastructure, expanding
our facilities and
increasing personnel
to support operations;
•
undertaking actions to meet the requirements and demands of being a public company;
•
maintaining, expanding and protecting our intellectual property portfolio;
•
seeking regulatory approvals for any product candidates that successfully complete clinical trials; and
•
undertaking pre-commercialization activities to establish sales, marketing and distribution capabilities for any product
candidates for which we may receive regulatory approval in regions where we elect to commercialize products on our own or
jointly with third parties.
As of
the date of
this Report, we
expect our existing
cash and
cash equivalents will
be sufficient
to fund
our operating
expenses and
capital expenditure requirements for at least the
next 12 months. We
also believe that cash and cash equivalents will
enable us to fund
our operating expenses
and capital expenditure
requirements into 2023.
Thereafter, our viability will
be dependent on
our ability to raise
additional capital to
finance operations, to
successfully commercialize our
product candidates and/or
to enter into
collaborations with
third parties for the
development of our product candidates.
If we are unable
to do any of
the foregoing, we would be
forced to delay,
limit, reduce or terminate our product candidate development or future commercialization efforts. Our estimates are based on
a variety
of assumptions
that may
prove to
be wrong,
and we
could exhaust
our available
capital resources
sooner than
expected. See
“- Liquidity
and Capital Resources.”
Business Update Regarding COVID-19 Pandemic
In March
2020, the
World
Health Organization
declared the
COVID-19 outbreak
a pandemic.
The onset
of the
pandemic led
to our
institutional
prioritization
of
COVID-19
vaccine
development
efforts,
which
correlated
to
a
decline
in
research
and
development
expenditures for our chronic disease product candidates. To
date, our operations have not been negatively impacted
by the COVID-19
pandemic in a material manner. However, at this time, we cannot predict the specific extent, duration or full impact that the COVID-19
pandemic will have
on our financial
condition and operations,
but the development
of clinical supply
materials could be
delayed and
enrollment of patients in our studies may be delayed or suspended, as hospitals and clinics in areas where we are conducting trials shift
resources
to
cope
with
the
COVID-19
pandemic
and
may
limit
access
or
close
clinical
facilities
due
to
the
COVID-19
pandemic.
Additionally, if our trial participants
are unable to
travel to our
clinical study sites
as a result
of quarantines or
other restrictions resulting
from the COVID-19 pandemic, we may experience
higher drop-out rates or delays in our clinical
studies. The impact of the COVID-19
pandemic on
our financial
performance will
depend on
future developments,
including the
duration and
spread of
the pandemic
and
related
governmental
advisories
and
restrictions.
These
developments
and
the
impact
of
the
COVID-19
pandemic
on
the
financial
markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or
the overall economy are
impacted for an extended period,
our results may be
materially adversely affected. See
“Risk Factors-Risks Related to Our
Business
and
Industry-The
ongoing
coronavirus
pandemic
has
caused
interruptions
or
delays
of
our
business
plan.
Delays
caused
by
the
coronavirus pandemic may have a significant adverse effect on our business.”
Components of Our Consolidated Results of Operations
Revenue
Revenue for the years
ended December 31, 2021
and 2020 was $0.1
million and $0.6 million,
respectively, and consisted of commercial
sales of our ELISA
tests. While we continue to
expect some revenue from sales
of our ELISA tests,
we do not expect
to generate any
meaningful revenue unless and until we obtain regulatory
approval of and commercialize our product candidates, and we
do not know
when, or
if, this
will occur.
If our
development efforts
for our
product candidates
are successful
and result
in commercialization,
we
may generate additional
revenue in the
future from a
combination of product
sales or payments
from collaboration or
license agreements
that we have entered
into or may enter
into with third parties.
See Risk Factors-Risks Related
to the Discovery and
Development of
Product Candidates.
We
have incurred significant
losses since our
inception. We
expect to incur
losses for the
foreseeable future and
may never achieve or maintain profitability.
Cost of Revenue
Cost of revenue
consists of kit
production costs consisting
of materials, labor
and overhead expenses
directly related to
ELISA tests sold
and the costs of expired ELISA tests, which are not available for commercial sale.
If our development efforts
in respect of our current pipeline
of product candidates are successful and
result in regulatory approval, we
expect our cost
of revenue will
increase in relative
proportion to the
level of our
revenue as we
commercialize the applicable product
candidate. We
expect that
cost of
revenue will
increase in
absolute dollars
as and
if our
revenue grows
and will
vary from
period to
period as a percentage of revenue.
Research and Development Expenses
The design, initiation and execution of
candidate discovery and development programs
of our future potential product candidates
is key
to our
success and
involves significant
expenses. Prior
to initiating
these programs,
project teams
incorporating individuals
from the
essential disciplines within
Vaxxinity scope out the activities, timing,
requirements, inclusion and
exclusion criteria and
the primary and
secondary endpoint. Once we have decided
to proceed, our Vaxxine
Platform enables the iteration of drug candidates
in the discovery
phase through rapid,
rational design and
formulation. After we
have identified drug
candidates, the costs
of scaling the
formulation from
research grade
to clinical
grade, then
to commercial
grade, typically
consumes significant
resources. In
addition, to
internal research
and development, we utilize service providers, including related parties, to complete activities we do not
have the internal resources to
handle.
Research and development expenses consist primarily of costs incurred for research activities, including drug discovery efforts and the
development of our product candidates. We expense research and development costs as incurred, which include:
•
expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;
•
expenses incurred under agreements with CROs that are primarily engaged in the oversight and conduct of our clinical trials,
preclinical studies and drug discovery efforts and contract manufacturers that are primarily engaged to provide preclinical
and clinical drug substance and product for our research and development programs;
•
other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical
studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants
that conduct our clinical trials, preclinical studies and other scientific development services;
•
payments made in cash or equity securities under third-party licensing, acquisition and option agreements;
•
employee-related expenses, including salaries and benefits, travel and stock-based compensation expense for employees
engaged in research and development functions;
•
costs related to compliance with regulatory requirements; and
•
facilities-related costs, depreciation and other expenses, which include rent and utilities.
We
recognize external
development
costs based
on
an evaluation
of
the progress
to
completion of
specific
tasks using
information
provided to us
by service providers.
This process involves
reviewing open contracts
and purchase orders,
communicating with personnel
to identify services
that have been
performed on
our behalf and
estimating the
level of service
performed and the
associated cost incurred
for the service when we have not yet been invoiced or otherwise notified of actual costs. Any
nonrefundable advance payments that we
make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.
Such amounts are expensed as the
related goods are delivered or the
related services are performed, or until
it is no longer expected that
the goods will be delivered or the services rendered, at which point the net remainder is expensed.
We are heavily
reliant on related parties for the advancement of our research and development programs, including for manufacturing,
quality
control,
testing,
validation,
supply
services,
research
support,
development
and
clinical
functions.
During
the
years
ended
December 31, 2021
and 2020, related
party expenses were
approximately 29% and
56% of our
operating expenses, respectively.
We
expect this reliance on related parties to diminish significantly in the future.
Where appropriate,
we allocate
our third-party
research and
development expenses
on a
program-by-program basis.
These expenses
primarily
relate
to
outside
consultants,
CROs,
contract
manufacturers
and
research
laboratories
in
connection
with
pre-clinical
development, process development,
manufacturing and clinical
development activities. We
do not
allocate our internal
costs, such as
employee costs, costs
associated with our
discovery efforts, laboratory
supplies and facilities,
including depreciation or
other indirect
costs, to
specific programs
because these
costs often
relate to
platform development,
to multiple
programs simultaneously
or to
discovery
of new
programs, and
any such
allocation would necessarily
involve significant estimates
and judgments
and, accordingly,
would be
imprecise. When we refer
to the research and development
expenses associated with a specific
program, these refer exclusively
to the
allocated
third-party
expenses
associated
with
that
product
candidate.
All
other
research
and
development
costs
are
referred
to
as
unallocated costs.
Product candidates in
later stages of
clinical development generally
have higher development
costs than those
in earlier stages
of clinical
development,
primarily
due
to
the
increased
size
and
duration
of
later-stage
clinical
trials.
Additionally,
greater
research
and
development overhead is
required to support
broader and more
rapid development of
our Vaxxine Platform and new product
candidates.
As a result, we expect that our research and development expenses will increase as we
continue our existing and planned clinical trials
and conduct
increased pre-clinical and
clinical development activities,
including submitting regulatory
filings for product
candidates,
and focus more
generally on the
development of our
chronic disease product candidates.
A significant driver of
such increases would
be the initiation of our
Phase 2b trial for UB-311.
We
currently expect to initiate a
Phase 2b early AD efficacy
trial in the second half
of 2022. If we
decide to advance UB-311 through the
clinic without a strategic
partner, our costs would increase more
significantly than
if we engage a partner to fund the development of UB-311.
At this time,
we cannot reasonably
estimate or know
the nature, timing
and costs of
the efforts that
will be necessary
to complete the
pre-clinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from
any of our product candidates
General and Administrative Expenses
General
and
administrative
expenses
consist
primarily
of
salaries
and
benefits,
travel
and
stock-based
compensation
expense
for
personnel in
executive, business development,
finance, human
resources, legal,
information technology
and administrative functions.
General and administrative expenses also
include facility- related costs as
well as insurance costs and
professional fees for legal, patent,
consulting, investor and public relations, accounting
and audit services and other general operating
expenses not otherwise classified as
research and development expenses. We expense general and administrative costs as incurred.
We also anticipate that our general and administrative expenses will increase in the future as a result of increased costs associated with
being a public company. In each case these increases will likely
include increased costs related to the
hiring of additional personnel and
fees to outside consultants, personnel-related stock-based compensation costs, lawyers and accountants, among other expenses, and, in
the
case
of
public
company-related
expenses,
services
associated
with
maintaining
compliance
with
Nasdaq
listing
and
SEC
requirements, director and officer liability insurance costs and investor and public relations costs.
Other Expense (Income)
Interest Expense
Interest expense consists of (i) interest
expense recognized on the note payable
entered into during June 2020 for
the acquisition of an
airplane (the
“2025 Note”),
(ii) interest
expense recognized
on the
Convertible Notes
and (iii)
interest expense
recognized on
other
promissory
notes,
including
$0.1
million
borrowed
from
our
Chief
Executive
Officer
(the
“Executive
Note”)
and
a
related
party
Convertible Note payable
for $2.0 million
in aggregate proceeds
that was received
in three tranches
(the “2018 Related
Notes”). The
Executive Note was repaid
in full in August
2021 and the 2018
Related Notes were converted
into Series A preferred
stock concurrently
with the Reorganization.
Interest Income
Interest income consists of income earned on our cash and cash equivalents.
Change in Fair Value of Convertible Notes, SAFEs and Series A-1 Warrant
Liability
We
issued a series of Convertible
Notes during the years ended
December 31, 2018 through 2021,
a series of SAFEs during
the years
ended December 31, 2020 and 2021, and warrants to purchase shares of our Series A-1 preferred stock (“Series A-1 Warrants”) during
the year ended December 31, 2020, each of which
were measured and accounted for at fair value. We remeasured the fair value of each
of
the
Convertible
Notes,
SAFEs
and
Series
A-1
Warrants
at
each
reporting
date
and
recognize
changes
in
the
fair
value
in
our
consolidated statements of operations. Inputs to the calculation of fair value generally include market and acquisition comparable(s) as
well as other
variables. In connection
with the Reorganization,
all outstanding Convertible
Notes, SAFEs, and
Series A-1 Warrants were
exchanged for
shares of
Series
A preferred
stock, which
were
subsequently exchanged
into shares
of
Class A
common stock
upon
closing of the IPO in November 2021.
Loss on Foreign Currency Translation, Net
Our foreign subsidiaries, which
are wholly-owned by COVAXX and UNS, use the U.S.
dollar as their functional
currency and maintain
records in the local
currency. Nonmonetary assets and liabilities
are remeasured at historical
rates and monetary assets
and liabilities are
remeasured at exchange
rates in effect at
the end of
the reporting period.
Income statement accounts
are remeasured at
average exchange
rates for the reporting period. The resulting gains or
losses are included in foreign currency (losses) gains in
the consolidated financial
statements.
Provision for Income Taxes
We have not recorded any significant amounts related
to income tax but have
reserved $0.6 million of unrecognized
tax benefits against
NOLs. We have not recorded any income tax benefits for the majority of our net losses we incurred to date.
We
account for income
taxes using the
asset and liability
method, which requires
the recognition of
deferred tax assets
and liabilities
for the expected future tax consequences of events that have been included in the consolidated financial statements or our tax returns.
Deferred tax assets
and liabilities are
determined based on the
difference between the financial
statement carrying amounts
and tax basis
of existing assets and liabilities and for loss and credit carryforwards, which are measured
using the enacted tax rates and laws in effect
in the years in which the differences are expected
to reverse. The realization of our deferred
tax assets is dependent upon the
generation
of future taxable income, the amount
and timing of which are uncertain.
Valuation
allowances are provided, if, based upon
the weight
of available evidence, it is more
likely than not that some
or all of the deferred tax
assets will not be realized.
As of December 31, 2021,
we continue to maintain
a full valuation allowance
against all of our
deferred tax assets based
on evaluation of all
available evidence.
We
file income tax returns
in the U.S. federal
and state jurisdictions and
may become subject to
income tax audit and
adjustments by
related tax authorities. Our tax
return periods (for entities then
in existence) for U.S. federal income
taxes for the tax years
since 2017
remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions. We record reserves
for potential tax
payments to various
tax authorities related
to uncertain
tax positions, if
any.
The nature of
uncertain tax positions
is
subject
to
significant
judgment
by
management
and
subject
to
change,
which
may
be
substantial.
These
reserves
are
based
on
a
determination of whether
and how much
a tax benefit
taken by us
in our tax
filings or positions
is more likely
than not to
be realized
following the resolution of any potential contingencies related to the tax benefit. We develop our assessment of uncertain tax positions,
and the associated cumulative probabilities, using internal
expertise and assistance from third-party experts.
As additional information
becomes
available,
estimates
are
revised
and
refined.
Differences
between
estimates
and
final
settlement
may
occur
resulting
in
additional tax expense. Potential
interest and penalties
associated with such
uncertain tax positions is
recorded as a
component of our
provision for income taxes.
Factors Affecting the Comparability of Our Consolidated Results of Operations
On March 2,
2021, Vaxxinity entered into the Contribution
and Exchange Agreement,
pursuant to which
the outstanding equity
interests
of
UNS
and
COVAXX
were
contributed
to
Vaxxinity
in
return
for
equity
interests
in
Vaxxinity,
resulting
in
UNS
and
COVAXX
becoming wholly owned subsidiaries of Vaxxinity.
Accordingly, all share and per share amounts prior to the Reorganization have been
adjusted to reflect the Reorganization. In
addition, we formed COVAXX, and commenced our COVAXX business, on March 23, 2020.
As a result,
the historical financial information
between March 23, 2020
and March 2,
2021 described in
this Annual Report refers
to
the combined historical financial
information of UNS
and COVAXX
and the historical financial
information prior to March
23, 2020
described in this Annual Report refers only to the historical financial information
of UNS. Our operations for the year ended December
31, 2021 reflects the
operations of UNS and
COVAXX businesses on a consolidated basis for the period
from January 1, 2021
to March
1, 2021
and of
Vaxxinity
and its
subsidiaries for
the remainder
of that
twelve-month period.
Our business
operations for
year ended
December 31, 2020 reflects the operations of our UNS business from
January 1, 2020 to March 22, 2020 and our UNS and
COVAXX
businesses on a consolidated
basis for the remainder
of that twelve-month period.
See Note 1 to
our consolidated financial statements
included elsewhere in this Form 10-K filing.
Consolidated Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our consolidated results of operations for the years ended December 31, 2021 and 2020, together with
the dollar change in those items from year to year (in thousands):
Yea
rs Ended December 31,
Change
$
%
Revenue
$
$
(491)
(88)%
Costs of revenue
1,937
1,885
3624%
Gross (loss) profit
(1,871)
2,376
470%
Operating expenses:
Research and development
71,379
20,570
50,809
247%
General and administrative
51,825
12,217
39,608
324%
Total operating expenses
123,204
32,787
(90,417)
(276)%
Loss from operations
(125,075)
(32,282)
(92,793)
287%
Other (income) expense:
Interest expense
1,182
(342)
(29)%
Interest income
(9)
(1)
(8)
838%
Change in fair value of convertible notes
2,667
5,761
(3,094)
(54)%
Change in fair value of simple agreements for future equity
8,365
7,750
1260%
Change in fair value of warrant liability
422%
Loss on foreign currency translation, net
(54)
(70)%
Other (income) expense, net
12,100
7,675
(4,425)
(58)%
Net loss
$
(137,175)
$
(39,957)
(97,218)
243%
Revenue
Total
revenue
was
$0.1
million
and
$0.6
million
for
the
years
ended
December
31,
and
2020,
respectively.
All
revenue
and
comparable decreases were due to sales of our ELISA tests. We
are not actively pursuing commercialization of our ELISA tests at this
time.
Gross Margin
The gross margin for
the year ended December
31, 2021 was negative
however the sales
volume was de minimis.
During the year ended
December 31,
2021, we
wrote off
,
to cost
of revenue,
$1.9 million
in expired
ELISA tests
that had
no commercial
value, driving
a
significant change in gross profit percentage.
Research and Development Expenses
Research
and
development
expenses
were
$71.4
million
and
$20.6
million
for
the
years
ended
December
31,
and
2020,
respectively.
The
$50.8
million
increase
was
primarily
due
to
an
increase
of
$42.6
million
in
costs
related
to
UB-612,
primarily
consisting of materials
and manufacturing costs
and CRO costs associated
with our ongoing clinical
trial in Taiwan, which program
was
only
in
early
development
in
the
corresponding
period.
The
remaining
$8.2
million
increase
was
driven
by
an
increase
in
unallocated costs of $6.2
million, resulting primarily from
increased salaries and personnel-related
costs in connection with
our UB-612
development efforts, as well as an increase in other allocated costs driven primarily by pre-clinical activities for our UB-313 program.
General and Administrative Expenses
General
and
administrative
expenses
were
$51.8
million
and
$12.2
million
for
the
years
ended
December
31,
and
2020,
respectively. The $39.6 million increase was primarily due to a $28.3 million increase in stock-based compensation expense, including
$23.1 million related to performance-based grants
that vested upon the successful completion
of the Company’s
initial public offering
in November
2021.
The remaining $11.3
million increase was
due to
increased salaries and
personnel-related costs and
professional
services costs
related to
our continued
organizational growth
to support
our ramp-up
in research
and development
efforts, as
well as
increased costs for preparations for being a public company.
Interest Expense
Interest expense
was $0.8
million and
$1.2 million
for the
years ended
December 31,
2021 and
2020, respectively.
The $0.3
million
decrease was due to the exchange of Convertible Notes for Series A preferred stock in connection with the Reorganization.
Interest Income
Interest income on cash was less than $0.1 million for each of the years ended December 31, 2021 and 2020.
Change in Fair Value of Convertible Notes, SAFEs and Series A-1 Warrant
Liability
The decrease in the change in fair value
of the Convertible Notes of $3.1 million for
the year ended December 31, 2021 was primarily
related to the revaluation of the Convertible
Notes upon conversion to equity. The increase in the change in fair
value of SAFEs of $7.8
million for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily related to insight into the
pricing of Vaxxinity’s
next stock issuance at a higher valuation. The increase in the change in fair value of Series A-1
Warrants of $0.2
million for the year ended
December 31, 2021 compared to
the year ended December 31, 2020
was primarily related to an
increase in
value of the Series A-1 preferred
stock. In connection with the
Reorganization, all outstanding Convertible Notes,
SAFEs and Series A-
1 Warrants were exchanged into shares
of Series A preferred
stock, which were
subsequently exchanged into
shares of Class
A common
stock upon the closing of
the IPO in November 2021
as described in Note 8
to our consolidated financial statements
included elsewhere
in this Report.
Loss on Foreign Currency Translation, Net
The net loss
of foreign currency translation
reflected a de minimis
increase in the foreign
exchange rate for the
year ended December
31, 2021 compared to the year ended December 31, 2020.
Liquidity and Capital Resources
Sources of Liquidity
We have generated limited
revenue from sales
of our ELISA
tests and have
not yet commercialized
any of our
product candidates, which
are in
various phases
of pre-clinical
and clinical
development. We have financed
operations primarily
through the
issuance of
convertible
preferred stock, borrowings under promissory
notes (including Convertible Notes) and
the execution of SAFEs. Through
December 31,
2020, we received gross proceeds
of $99.3 million in connection
with the issuance of various
financial instruments, including the sale
of preferred stock,
the issuance of
promissory notes (including
Convertible Notes), and
the execution of
SAFEs. In addition,
we also
generated revenue from the sale
of an option to
negotiate a license with UNS
(which option has expired) and
the sales of ELISA tests
in 2020 and 2021. During
the year ended December 31,
2021, we raised a total
of $198.8 million, which consisted
of $71.1 million in
net proceeds from the issuance of
common stock in connection with the
IPO, $122.8 million in net proceeds
from the issuance of Series
B preferred shares,
$2.0 million in
net proceeds from
the issuance of
convertible debt, and
$2.9 million in
net proceeds from
the issuance
of SAFEs. At December 31, 2021, we had $144.9 million in cash and
cash equivalents, compared to $31.1 million as of December 31,
2020. The increase in cash
and cash equivalents balances
for the periods reported are
primarily due to the factors
described under “Cash
Flows” below.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2021 and 2020 (in thousands):
Years
Ended December 31,
Balance Sheet Data:
Cash and cash equivalents
144,885
31,143
Restricted cash
Total assets
166,673
50,141
Total liabilities
38,054
75,041
Total stockholders' equity (deficit)
128,619
(87,375)
Statement of Cash Flow Data:
Net cash flows used in operating activities
$
(80,990)
$
(33,910)
Net cash flows used in investing activities
(1,318)
(1,477)
Net cash flows provided by financing activities
196,167
66,109
Net increase in cash, cash equivalents and restricted cash
$
113,859
$
30,722
Operating Activities
Net cash
used in
operating activities for
the year
ended December 31,
2021 was
$81.0 million,
primarily due
to a
$137.2 million
net
loss, offset by
a favorable $12.9
million change in
operating assets and
liabilities and total non-cash
items of $43.3
million. The cash
flow impact from changes in net
operating assets and liabilities were primarily
due to $11.4 million
in amounts due to related party as
well as $3.9
million related to
accrued expense, accounts
payable and other
liabilities.
These increases were
offset by
$4.7 million in
prepaid expenses
for UB-612
production. The
primary non-cash
adjustments to
net loss
included an
$11.2
million change
in the
fair
market value of financial instruments as well as $30.4 million of stock-based compensation and $1.1 million in depreciation.
Investing Activities
Net cash used
in investing activities
totaled $1.3 million
for the year
ended December 31,
2021. The cash
used in investing
activities
consisted primarily of the acquisition of equipment.
Financing Activities
Net cash provided by financing
activities totaled $196.2 million
for the year ended December
31, 2021. We raised capital to support our
operations through
the issuance
of Class
A Common
Stock upon
IPO, with
net proceeds
of $71.1
million, the
issuance prior
to the
Reorganization of SAFEs
and Convertible
Notes, with
net proceeds
of $2.9
million and
$2.0 million, respectively,
as well
as the issuance
of Series
B convertible preferred
stock, with net
proceeds of $122.8
million. We
also repaid $2.0
million in relation
to a
Convertible
Note, $0.1 million in relation
to a note payable with
related party, $0.3 million in repayment for
Paycheck Protection Program, and
$0.4
million in relation to a note payable entered into for the acquisition of an Airplane.
Funding Requirements
We
have generated approximately
$3.7 million in
revenue since inception
and have incurred
net losses in
each reporting period
since
inception. We
do not expect to generate
any meaningful revenue unless and until
we obtain regulatory approval of and
commercialize
our product
candidates. We
do not know
when, or if,
this will occur.
If we do
not receive regulatory
approval for any
of our
product
candidates, or
if we
receive approval
but our
commercialization results
fall short
of our
expectations, we
will continue
to incur
significant
losses for the foreseeable future, and we
expect the losses to increase as we
continue the development of, and seek regulatory
approvals
for, our product candidates and begin to commercialize any approved products.
As of the date of this Annual Report, we
expect our existing cash and cash equivalents
will be sufficient to fund our operating expenses
over the next 12 months. As of December 31, 2021, other than our 2025 Note, we have no material debt obligations.
We have based
our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of
our available capital resources sooner than we expect. Our future capital requirements will depend on many factors,
which include:
•
the number of discovery and pre-clinical programs that we pursue and the speed with which they are advanced;
•
the number, size, and nature of clinical trials that we conduct;
•
the length of time it takes for regulators to review and approve any product candidates that successfully complete clinical
trials;
•
the timing and manner in which we manufacture our pre-clinical and clinical drug material, the terms on which we can have
such manufacturing completed, and the extent to which we undertake commercialization of any drug products, if approved;
•
the extent to which we establish sales, marketing, medical affairs and distribution infrastructure to commercialize any product
candidates;
•
the timing and extent to which we expand our operational, financial and management systems and infrastructure, and
facilities;
•
the timing and extent to which we increase our personnel to support operations, including necessary increases in headcount to
conduct and expand our clinical trials, commercialize any approved products and support our operations as a public
company; and
•
the number of patent applications we must file and claims we must defend in order to maintain, expand and protect our
intellectual property portfolio, and the costs of preparing, filing and prosecuting patent applications, maintaining
and
protecting our intellectual property rights.
Until such time, if ever, as we can generate positive cash flows from operations, we expect to finance our cash needs through public or
private equity offerings, strategic collaborations
and debt financing. To the extent that
we raise additional capital
through the sale of our
Class A common stock, convertible securities
or other equity securities, shareholders’ ownership interest
will be diluted and the
terms
of these securities could include
liquidation or other preferences and
anti-dilution protections. In addition, debt financing,
if available,
may result
in fixed
payment obligations
and may
involve agreements
that include
restrictive covenants
that limit
our ability
to take
specific actions, such as incurring
additional debt, making capital
expenditures, creating liens, redeeming shares
or declaring dividends.
If we raise additional funds through strategic collaborations or
marketing, distribution or licensing arrangements with third parties,
we
may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that
may
not
be favorable
to
us.
If
we are
unable to
raise
additional funds
when needed,
we
may
be
required to
delay,
limit, reduce
or
terminate our product candidate development or
future commercialization efforts or grant rights
to third parties to develop and
market
product candidates that we would otherwise prefer to develop and market ourselves.
Contract Research and Manufacturing Organizations
We
recorded accrued expenses
of $4.5 million
and $0.3 million
in our balance
sheet for expenditures
incurred by CROs
and contract
manufacturers as of December 31, 2021 and 2020, respectively.
Tax-Related Obligations
We
have reserved
$0.6 million
of unrecognized
tax benefits
against NOLs.
Additionally,
as of
December 31, 2021,
we accrued
$0.2
million in interest and penalties related to prior year tax filings.
Off-Balance Sheet Arrangements
We did not have during the periods
presented, and do not
currently have, any off-balance
sheet arrangements, as defined
in the rules and
regulations of the SEC.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect
the amounts reported
in our consolidated
financial statements and
accompanying notes. Management
bases its estimates
on historical
experience, market and other conditions,
and various other assumptions it
believes to be reasonable. Although these
estimates are based
on management’s best knowledge of current events and actions
that may impact us in the
future, the estimation process is, by its
nature,
uncertain given that estimates depend
on events over which we
may not have control. In
addition, if our assumptions change,
we may
need to
revise our
estimates, or
take other
corrective actions,
either of
which may
also have
a material
effect on our
consolidated financial
statements. Significant estimates contained within these consolidated financial statements include, but
are not limited to, the estimated
fair
value
of
our
common
stock,
convertible
notes
payable
and
SAFEs,
stock-based
compensation,
warrant
liabilities,
income
tax
valuation allowance
and the
accruals of
research and
development expenses.
We
base our
estimates on
historical experience,
known
trends and other
market-specific or other
relevant factors that
we believe to
be reasonable under
the circumstances. On
an ongoing basis,
management evaluates its estimates, as there are changes in facts and circumstances. If market and other conditions change
from those
that we anticipate, our consolidated financial statements may be materially affected.
While our
significant accounting policies
are described
in more detail
in the
notes to our
consolidated financial statements
appearing
elsewhere in this
Annual Report,
we believe that
the following
critical accounting
policies and estimates
have a higher
degree of inherent
uncertainty and require our most significant judgments.
Accrued Research and Development Expenses
As part of the process
of preparing our consolidated financial
statements, we are required to
estimate accrued research and
development
expenses. As
we
advance our
programs, we
anticipate more
complex clinical
studies resulting
in greater
research and
development
expenses, which will place even greater emphasis on
the accrual. This process involves reviewing open contracts
and purchase orders,
communicating with our
applicable personnel to
identify services that
have been performed
on our behalf
and estimating the
level of
service performed and the
associated cost incurred for
the service when we
have not yet been
invoiced or otherwise notified
of actual
costs. The majority of
our service providers invoice
in arrears for services
performed, on a pre-determined
schedule or when contractual
milestones are met; however, some require advance payments. We make estimates of accrued expenses as of each balance sheet date in
the consolidated financial statements based on facts and circumstances known to us at that
time. We periodically
confirm the accuracy
of the estimates
with the service
providers and make
adjustments if necessary. Examples
of estimated accrued
research and development
expenses include fees paid to:
•
vendors, including research laboratories, in connection with pre-clinical development activities;
•
CROs and investigative sites in connection with pre-clinical studies and clinical trials; and
•
contract manufacturers in connection with drug substance and drug product formulation of pre-clinical studies and clinical
trial materials.
We
base our
expenses related to
pre-clinical studies and
clinical trials on
our estimates of
the services received
and efforts
expended
pursuant to quotes and contracts with multiple research institutions and CROs that supply, conduct and manage pre-clinical studies and
clinical trials on our behalf. The financial terms of
these agreements are subject to negotiation, vary from contract to
contract and may
result
in uneven
payment
flows. There
may
be
instances in
which
payments
made to
our
vendors will
exceed
the
level of
services
provided and result in
a prepayment of the
expense. Payments under some
of these contracts depend
on factors such as
the successful
enrollment of patients and the completion of
clinical trial milestones. In accruing service fees,
we estimate the time period over which
services will be performed and
the level of effort
to be expended in each period.
If the actual timing of
the performance of services or
the level
of effort
varies from
the estimate,
it adjusts
the accrual
or the
prepaid expense
accordingly.
Although we
do not
expect our
estimates to be
materially different from
amounts actually incurred,
our understanding of
the status and
timing of services
performed
relative to the actual status and timing of services performed may vary and may result in reporting amounts that
are too high or too low
in any particular period. To date, our estimated accruals have not differed materially from actual costs incurred.
Stock-Based Compensation
We measure all stock-based awards granted to
employees, directors and non-employees
based on their fair
value on the date
of the grant
and recognize the corresponding compensation
expense of those awards over
the requisite service period,
which is generally the vesting
period of the respective award. Forfeitures are accounted for as they occur.
We grant stock
options and restricted stock awards that are
subject to service vesting conditions.
We
classify stock-based
compensation expense
in our
consolidated statements
of operations
in the
same manner
in which
the award
recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
We estimate the fair value of
each stock option
grant using the Black-Scholes
option-pricing model, which
requires the use
of subjective
assumptions
that
could
materially
impact
the
estimation
of
fair
value
and
related
compensation
expense
to
be
recognized.
These
assumptions include (i) the
expected volatility of our
stock price, (ii) the
periods of time over
which recipients are expected
to hold their
options prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which are
based
on
quoted
U.S.Treasury
rates
for
securities
with
maturities
approximating
the
options’
expected
lives.
Developing
these
assumptions requires the use of judgment. Both prior to and after the IPO, we lacked company-specific historical and implied volatility
information.
Therefore,
we
estimate
our
expected
stock
volatility
based
on
the
historical
volatility
of
a
publicly
traded
set
of
peer
companies. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that
qualify
as “plain-vanilla” options. The expected term of options granted to non-employees is equal to the contractual term of the option award.
The expected dividend
yield is zero
as we have
never paid dividends
and do not
currently anticipate paying
any in the
foreseeable future.
Determination of the Fair Value
of Common Stock
Before there was a public market for our common stock, the estimated fair value of common stock was determined by its most recently
available third-party
valuations of
common stock.
These third-
party valuations
were performed
in accordance
with the
guidance outlined
in the
American Institute
of Certified
Public Accountants’
Accounting and
Valuation
Guide, Valuation
of Privately-Held-Company
Equity Securities Issued as Compensation. Our common stock valuations were prepared using an option pricing method (“OPM”).
The
OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the
value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common
stock
has
value
only
if
the
funds
available
for
distribution
to
stockholders
exceeded
the
value
of
the
preferred
stock
liquidation
preferences at the time
of the liquidity event,
such as a strategic
sale or a merger.
A discount for lack
of marketability of the
common
stock is then applied to arrive at an indication of value for the common stock.
In addition to considering the results of these third-party valuations, our board of directors considered various
objective and subjective
factors to determine the fair value of our common stock as of each grant date, including:
•
the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to
our common stock at the time of each grant;
•
the progress of our research and development programs, including the status and results of pre-clinical studies and clinical
trials for our product candidates;
•
our stage of development and commercialization and our business strategy;
•
external market conditions affecting the biopharmaceutical industry and trends within the biopharmaceutical industry;
•
our financial position, including cash on hand, and our historical and forecasted performance and results of operations;
•
the lack of an active public market for our common stock and our preferred stock;
•
the likelihood of achieving a liquidity event, such as an initial public offering or our sale in light of prevailing market
conditions; and
•
the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry.
The assumptions
underlying these
valuations represented management’s
best estimate,
which involved
inherent uncertainties
and the
application of management’s judgment. As a result,
if we had used significantly
different assumptions or estimates, the fair
value of our
common stock and our stock-based compensation expense could have been materially different.
Once a public trading market for
our common stock has been established
for a sufficient period of
time, it will no longer be
necessary
to estimate the
fair value of
our common stock
in connection with
its accounting for
granted stock options
and other such
awards we
may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.
Awards Granted
The following table sets forth information on stock options awarded to employees since January 1, 2019:
Grant Date
Number of
shares subject
to award
Per share
exercise price
of options
Per share fair value
of common stock on
grant date
Per share estimated
fair value of award
on grant date
December 30, 2019
1,139,717
$0.57
$0.64
$0.40
August 22, 2020
1,984,553
$1.21
$1.65
$0.75
August 24, 2020
521,406
$1.21
$1.65
$0.75
September 2, 2020
160,161
$0.57
$1.43
$1.18
January 26, 2021
9,043,916
$4.12
$4.12
$2.26
February 11, 2021
1,404,291
$4.01
$4.01
$2.53
June 16, 2021
690,266
$4.81
$4.81
$3.59
July 16, 2021
282,776
$4.81
$4.81
$3.63
July 28, 2021
562,605
$10.07
$10.07
$7.47
November 11, 2021
1,499,085
$13.00
$13.00
$9.77
Simple Agreement for Future Equity
During the years
ended December 31, 2021
and 2020, we entered
into SAFEs. The SAFEs
were not mandatorily redeemable,
nor did
they
require
us
to
repurchase
a
fixed
number
of
shares.
We
determined
that
the
SAFEs
contained
a
liquidity
event
provision
that
embodied an obligation indexed to the fair value of the equity shares and could require us to settle the SAFE obligation by transferring
assets or cash. Our SAFEs represented a recurring measurement that is
classified within Level 3, disclosed and defined in Note 3 to
our
consolidated financial
statements included
elsewhere in
this Report,
of the
fair value
hierarchy wherein
fair value
is estimated
using
significant unobservable inputs, including
an estimate of the
number of months
to a liquidity
event, volatility rates and
the estimation
of the most likely conversion feature for converting the SAFE.
The fair value of the SAFEs on the date of issuance was determined to equal the proceeds we received. The
value of the SAFEs on the
date of conversion into
Series A preferred stock
was determined to be
equal to the fair
value of the
Series A preferred stock
issued in
connection with the Reorganization.
Convertible Notes
Beginning in 2018, we
issued Convertible Notes
that bore simple interest
at annual rates ranging
from 4.8% to 6%.
All unpaid principal,
together with the
accrued interest thereon,
for the
Convertible Notes were
payable upon the
event of default
or upon maturity,
which
ranged from one to three
years. The Convertible Notes contained
a number of provisions addressing
automatic and optional conversion,
events
of
default
and
prepayment
provisions.
We
determined
that
a
portion
of
the
Convertible
Notes
contained
a
liquidity
event
provision, requiring them to be
measured and accounted for at
fair value at each reporting
date. We
determined the Convertible Notes
requiring a measurement to fair value represented a recurring measurement that was classified within Level 3, disclosed and defined in
Note 3 to our consolidated financial statements included elsewhere in this Annual Report, of the fair value hierarchy wherein fair value
is estimated using significant unobservable inputs.
Taiwan Centers for Disease Control Grant
UBIA, which is responsible
for applying for and
managing grants on
our behalf, was awarded
a grant by the
Taiwan Centers for Disease
Control (“TCDC”)
for COVID-19
vaccine development.
The grant
provides that
costs incurred to
complete the
two phases of
the clinical
trial will be reimbursed based on the
achievement of certain milestones as defined in the
agreement. We
are entitled to reimbursement
under the TCDC grant.
At each reporting
date, we assess
the status of
all of the
activities involved in completing
the clinical study
in
relation to
the milestones.
We
account for
the amounts
that have
been received
from the
TCDC to
reimburse costs
incurred on
the
clinical study and
not expected
to be
refunded back to
the TCDC as
contra research and
development expenses in
the accompanying
consolidated statement of operations.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We
are exposed to
market risk in
the ordinary course
of our business.
These risks primarily
relate to foreign
currency and changes
in
interest rates.
Foreign Currency Exchange Risk
We
have
limited
exposure
to
foreign
currency
exchange risk
as
most
of
our
operating
activities are
primarily
denominated
in
U.S.
dollars. We believe actual
foreign exchange
gains and
losses did
not have
a significant
impact on
our results
of operations
for any periods
presented herein. The results of the
analysis based on our financial position
as of December 31, 2021, indicated that
a hypothetical 10%
increase or decrease in applicable foreign currency exchange rates would not have a material effect on our financial results.
Interest Rate Risk
We
are exposed to market risk
related to changes in
interest rates. As of December 31,
2020 and 2021, our
cash equivalents consisted
of
interest-bearing
checking
accounts
and
money
market
accounts.
We
issued
Convertible
Notes,
which
Convertible
Notes
were
exchanged for Series A preferred stock
in connection with the Reorganization. The Convertible
Notes bore simple interest at the annual
rates ranging from 4.8% to
6%, with redemption terms payable
at the earlier of one
year, or upon
the event of default. In
addition, the
Convertible Notes contained provisions addressing automatic and optional conversion. Given the redemption of the Convertible
Notes,
and the
short-term nature and
fixed interest rate,
we believe there
is no
material exposure to
interest rate risk.
Additionally,
the 2025
Note we entered into for the year ended December 31, 2020 bears
an annual interest rate of 3.4% and matures in June 2025.
Given the
fixed interest rate
of the 2025
Note, we believe
there is no
material exposure to
interest rate risk.
The results of
the analysis based on
our financial position
as of December 31, 2021,
indicated that
a hypothetical 100
basis point increase
or decrease in
risk-free rates would
not have a material effect on our financial results.
Our measurement of interest rate
risk involves assumptions that are
inherently uncertain and, as a
result, cannot precisely estimate the
impact of changes
in interest rates on
net interest revenues. Actual
results may differ
from simulated results due
to balance growth or
decline and
the timing,
magnitude, and
frequency of
interest rate
changes, as
well as
changes in
market conditions
and management
strategies, including changes in asset and liability mix.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
VAXXINITY,
INC.
Audited Consolidated Financial Statements as of and for the years ended December 31, 2021 and 2020
Report of Independent Registered Public Accounting Firm
(PCAOB ID:
)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Vaxxinity,
Inc. Dallas, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Vaxxinity,
Inc. and Subsidiaries (collectively the “Company”) as of
December 31, 2021
and 2020,
and the
related consolidated
statements of
operations, convertible
preferred stock
and stockholders’
equity
(deficit),
and
cash flows
for each
of
the years
in
the two-year
period ended
December 31, 2021,
and the
related notes
(collectively
referred to as the “consolidated financial statements”).
In our
opinion, the
consolidated financial
statements present
fairly,
in all
material respects,
the consolidated
financial position
of the
Company as of December 31, 2021 and 2020, and the
results of their operations and cash flows for each
of the two years in the period
ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
The Company’s
management is responsible for
these consolidated financial statements. Our
responsibility is to express
an opinion on
the
Company’s
consolidated
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company Accounting Oversight Board
(United States) (the “PCAOB”)
and are required to
be independent with respect
to the Company
in accordance with the U.S. federal securities
laws and the applicable rules and
regulations of the Securities and Exchange
Commission
and the PCAOB.
We
conducted our audits in accordance with
the standards of the PCAOB.
Those standards require that we plan
and perform the audit
to obtain
reasonable assurance about
whether the
consolidated financial statements
are free
of material
misstatement, whether due
to
error or
fraud. The
Company is
not required
to have,
nor were
we engaged
to perform,
an audit
of its
internal control
over financial
reporting. As part
of our
audits we are
required to obtain
an understanding of
internal control over
financial reporting but
not for
the
purpose
of
expressing an
opinion
on
the
effectiveness
of
the
Company’s
internal
control
over
financial
reporting.
Accordingly,
we
express no such opinion.
Our audits included
performing procedures to
assess the risks
of material misstatement
of the consolidated
financial statements, whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining, on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
consolidated
financial
statements.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s
auditor since 2018.
/s/
Armanino LLP
San Ramon, California
March 24, 2022
VAXXINITY,
INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
Assets
Current assets:
Cash and cash equivalents
$
144,885
$
31,143
Accounts receivable
-
Amounts due from related parties
Prepaid expenses and other current assets
8,851
4,144
Total current assets
154,129
35,674
Deferred offering costs
-
2,254
Property and equipment, net
12,173
12,158
Long-term prepaid fixed assets
-
Restricted cash
Total assets
$
166,673
$
50,141
Liabilities, convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
$
3,192
$
1,017
Amounts due to related parties
19,407
8,004
Accrued expenses and other current liabilities
4,519
2,744
Notes payable
Notes payable with related parties
-
2,294
Convertible notes payable
-
10,356
Convertible notes with related parties, net of discount
-
14,324
Total current liabilities
27,494
39,358
Other liabilities
Simple agreement for future equity
-
24,335
Notes payable, net of current portion
10,323
10,699
Warrant liability
-
Other long-term liabilities
Total liabilities
38,054
75,041
Commitments and contingencies (Note 16)
Preferred stock: $
0.0001
par value,
50,000,000
and
57,298,376
shares authorized at December 31, 2021 and 2020,
respectively
-
-
Convertible preferred stock:
Series seed stock, 0 and
7,831,528
shares designated, issued and outstanding at December 31, 2021 and 2020;
liquidation preference $0 and $
10,452
at December 31, 2021 and 2020, respectively
-
10,383
Series seed-1 stock,
and
23,021,458
shares designated, and
and
22,876,457
shares issued and outstanding at
December 31, 2021 and 2020, respectively; liquidation preference $0 and $
20,964
at December 31, 2021 and 2020,
respectively
-
20,903
Series seed-2 stock, 0 and
14,615,399
shares designated, issued and outstanding at December 31, 2021 and 2020,
respectively; liquidation preference $0 and $
11,360
at December 31, 2021 and 2020, respectively
-
11,315
Series A-1 stock, 0 and
5,522,300
shares designated, and 0 and
1,871,511
shares issued and outstanding at December
31, 2021 and 2020, respectively; liquidation preference $0 and $
5,210
at December 31, 2021 and 2020, respectively
-
4,640
Series A-2 stock, 0 and
6,307,690
shares designated, issued and outstanding at December 31, 2021 and 2020,
respectively; liquidation preference $0 and $
14,660
at December 31, 2021 and 2020, respectively
-
15,234
Series A stock, 0 shares designated, issued and outstanding at December 31, 2021 and 2020; liquidation
preference $0
at December 31, 2021 and 2020
-
-
Series B stock, 0 shares designated, issued and outstanding at December 31, 2021 and 2020; liquidation
preference $0
at December 31, 2021 and 2020
-
-
Total convertible preferred stock
-
62,475
Stockholders’ equity (deficit):
Class A common stock, $
0.0001
par value;
1,000,000,000
and
129,916,912
shares authorized,
111,518,094
and
60,360,523
shares issued and outstanding at December 31, 2021 and 2020, respectively
Class B common stock, $
0.0001
par value;
100,000,000
and
10,999,149
shares authorized,
13,874,132
and
10,999,149
shares issued and outstanding at December 31, 2021 and 2020, respectively
-
-
Class A treasury stock, par value of $
0.0001
; 0
and
shares at December 31, 2021 and 2020, respectively
-
(23)
Additional paid-in capital
357,822
4,682
Accumulated deficit
(229,481)
(92,306)
Total stockholders’ equity (deficit)
128,619
(87,375)
Total liabilities, convertible preferred stock, and
stockholders’ equity (deficit)
$
166,673
$
50,141
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
(in thousands, except share and per share amounts)
Years
Ended December 31,
Revenue
$
$
Cost of revenue
1,937
Gross (loss) profit
(1,871)
Operating expenses:
Research and development
71,379
20,570
General and administrative
51,825
12,217
Total operating expenses
123,204
32,787
Loss from operations
(125,075)
(32,282)
Other (income) expense:
Interest expense
1,182
Interest income
(9)
(1)
Change in fair value of convertible notes
2,667
5,761
Change in fair value of simple agreement for future equity
8,365
Change in fair value of warrant liability
Loss on foreign currency translation, net
Other (income) expense
12,100
7,675
Loss before income taxes
(137,175)
(39,957)
Provision for income taxes
-
-
Net loss
$
(137,175)
$
(39,957)
Net loss per share, basic and diluted
$
(1.79)
$
(0.61)
Weighted average common shares outstanding, basic and diluted
76,586,842
65,638,946
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
INC.
CONSOLIDATED STATEMENTS
OF CONVERTIBLE PREFERRED STOCK
(in thousands, except share amounts)
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Series A
Series B
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at December 31, 2019
7,831,528
$
10,383
8,017,771
$
16,436
-
$
-
-
$
-
-
$
-
-
$
-
-
$
-
$
26,819
Issuance of Series Seed-1 preferred stock, net of issuance costs
of $18
-
-
14,858,686
4,467
-
-
-
-
-
-
-
-
-
-
4,467
Issuance of Series Seed-2 preferred stock, net of issuance costs
of $45
-
-
-
-
14,152,237
10,955
-
-
-
-
-
-
-
-
10,955
Conversion of Simple Agreement for Future Equity to Series
Seed-2 preferred stock
-
-
-
-
463,162
-
-
-
-
-
-
-
-
Issuance of Series A-1 preferred stock, net of issuance costs of
$585
-
-
-
-
-
-
1,799,649
4,426
-
-
-
-
-
-
4,426
Exercise of warrants for Series A-1 preferred stock
-
-
-
-
-
-
71,862
-
-
-
-
-
-
Conversion of Simple Agreement for Future Equity to Series
A-2 preferred stock, net of issuance costs of $41
-
-
-
-
-
-
-
-
6,307,690
15,234
-
-
-
-
15,234
Balance at December 31, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,871,511
$
4,640
6,307,690
$
15,234
-
$
-
-
$
-
$
62,475
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series
A-1 and Series A-2 for Series A
(7,831,528)
(10,383)
(22,876,457)
(20,903)
(14,615,399)
(11,315)
(1,871,511)
(4,640)
(6,307,690)
(15,234)
53,502,585
62,475
-
-
-
Conversion of convertible notes to Series A preferred stock,
net of debt issuance costs
-
-
-
-
-
-
-
-
-
-
3,624,114
27,545
-
-
27,545
Conversion of notes payable with related parties to Series A
convertible preferred
-
-
-
-
-
-
-
-
-
-
423,230
2,205
-
-
2,205
Conversion of Simple Agreement for Future Equity to Series A
convertible preferred
-
-
-
-
-
-
-
-
-
-
4,539,060
35,600
-
-
35,600
Conversion of warrant liability
to Series A convertible
preferred
-
-
-
-
-
-
-
-
-
-
134,106
-
-
Issuance of Series B convertible preferred stock, net of
issuance costs of $133
-
-
-
-
-
-
-
-
-
-
-
-
15,365,574
122,791
122,791
Conversion of Series A and Series B to Class A common stock
concurrently with initial public offering
-
-
-
-
-
-
-
-
-
-
(62,223,095)
(128,439)
(15,365,574)
(122,791)
(251,230)
Balance at December 31, 2021
-
$
-
-
$
-
-
$
-
-
$
-
-
$
-
-
$
-
-
$
-
$
-
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
Stockholders’ Deficit
Common Stock
Common Stock-Class A
Common Stock-Class B
Treasury Stock
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Additional Paid-
in Capital
Accumulated
Deficit
Stockholders’
Equity (Deficit)
Balance at December 31, 2019
37,953,692
$
-
$
-
-
$
-
(3,169,093)
$
(23)
$
3,590
$
(52,349)
$
(48,512)
Issuance of common stock upon exercise of stock options
283,290
-
-
-
-
-
-
-
Vesting of restricted stock
121,282
-
-
-
-
-
-
-
-
Issuance of common stock
33,001,408
-
-
-
-
-
-
-
-
-
-
Stock-based compensation expense
-
-
-
-
-
-
-
-
1,014
-
1,014
Reclassification of common stock to Class A common stock
(60,360,523)
(272)
60,360,523
-
-
-
-
-
-
-
Reclassification of common stock to Class B common stock
(10,999,149)
-
-
-
10,999,149
-
-
-
-
-
-
Net loss
-
-
-
-
-
-
-
-
-
(39,957)
(39,957)
Balance at December 31, 2020
-
$
-
60,360,523
$
10,999,149
$
-
(3,169,093)
$
(23)
$
4,682
$
(92,306)
$
(87,375)
Issuance of common stock upon exercise of stock options
-
-
186,202
-
-
-
-
-
-
Vesting of restricted stock
-
-
15,405
-
-
-
-
-
-
-
-
Reclassification of Class A common stock to Class B common stock
-
-
(2,874,983)
-
2,874,983
-
-
-
-
-
-
Issuance of common stock upon stock grant
-
-
485,836
-
-
-
-
-
-
Retirement of treasury stock upon reorganization
-
-
(3,169,093)
-
-
-
3,169,093
(23)
-
-
Proceeds from initial public offering, net of offering expenses of $13,913
-
-
6,537,711
-
-
-
-
71,076
-
71,077
Exercise of warrants concurrently with initial public offering
-
-
112,373
-
-
-
-
-
-
Conversion of Series A and Series B to Class A common stock concurrently with initial public
offering
-
-
49,864,120
-
-
-
-
251,225
-
251,230
Stock-based compensation expense
-
-
-
-
-
-
-
-
30,412
-
30,412
Net loss
-
-
-
-
-
-
-
-
-
(137,175)
(137,175)
Balance at December 31, 2021
-
$
-
111,518,094
$
13,874,132
$
-
-
$
-
$
357,822
$
(229,481)
$
128,619
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
Years Ended December
31,
Cash flows from operating activities:
Net loss
$
(137,175)
$
(39,957)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
1,102
Amortization of debt issuance costs
Stock-based compensation expense
30,412
1,014
Non-cash consulting expense
-
Non-cash interest expense
-
Change in fair value of convertible notes
2,667
5,761
Change in fair value of warrant liability
Change in fair value of simple agreement for future equity
8,365
Changes in operating assets and liabilities:
Accounts receivable
(26)
Amounts due from related parties
(31)
(1,743)
Prepaid expenses and other current assets
(4,704)
(3,488)
Deferred offering costs
2,254
(2,254)
Accounts payable
2,174
(267)
Amounts due to related parties
11,402
4,608
Accrued expenses and other current liabilities
1,775
Other long-term liabilities
(12)
Net cash used in operating activities
(80,990)
(33,910)
Cash flows from investing activities:
Purchase of property and equipment
(1,318)
(1,477)
Net cash used in investing activities
(1,318)
(1,477)
Cash flows from financing activities:
Proceeds from initial public offering, net of offering expenses of $13,913
71,077
-
Proceeds from issuance of convertible notes payable
2,000
12,040
Repayment of convertible notes payable
(2,000)
(5,500)
Repayment of notes payable
(414)
(202)
Repayment of note payable with related party
(100)
-
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs
122,791
-
Proceeds from issuance of simple agreement for future equity
2,900
39,355
Proceeds from issuance of Series Seed-1 convertible preferred stock, net of issuance costs
-
4,467
Proceeds from issuance of Series Seed-2 convertible preferred stock, net of issuance costs
-
10,955
Proceeds from issuance of Series A-1 convertible preferred stock, net of issuance costs
-
4,999
Payment for Series A-2 convertible preferred stock issuance costs
-
(41)
Debt issuance costs for related party convertible notes
-
(300)
Repayment of Paycheck Protection Program
(257)
-
Proceeds from Paycheck Protection Program
-
Proceeds from exercise of stock options
Net cash provided by financing activities
196,167
66,109
Increase in cash, cash equivalents, and restricted cash
113,859
30,722
Cash, cash equivalents, and restricted cash at beginning of period
31,198
Cash, cash equivalents, and restricted cash at end of period
$
145,057
$
31,198
Supplemental Disclosure
Cash paid for interest
$
$
Noncash Financing Activities
Conversion of Series A and Series B to Class A common stock concurrently with initial public offering
$
251,230
$
-
Exchange of Series Seed, Series Seed-1, Series Seed-2, Series A-1 and Series A-2 for Series A
$
62,475
$
-
Conversion of simple agreement for future equity into Series A preferred stock
$
35,600
$
-
Conversion of convertible notes payable into Series A preferred stock
$
27,545
$
-
Conversion of notes payable with related parties into Series A preferred stock
$
2,205
$
-
Conversion of warrant liability into Series A preferred stock
$
$
-
Cashless exercise of warrant into Class A common stock concurrently with initial public offering
$
-
Retirement of treasury stock upon reorganization
$
$
-
Conversion of simple agreement for future equity into Series A-2 preferred stock
$
-
$
15,275
Acquisition of airplane through issuance of note payable
$
-
$
11,500
Fair value of warrants issued in connection with preferred stock issuance
$
-
$
Conversion of simple agreement for future equity into Series Seed-2 preferred stock
$
-
$
Warrant liability reclassified to Series A-1
preferred stock upon warrant exercise
$
-
$
Fair value of restricted stock vesting during the period
$
-
$
The accompanying notes are an integral part of the consolidated financial statements.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
Vaxxinity,
Inc.,
a
Delaware corporation
(“Vaxxinity
,”
and
together
with
its
subsidiaries,
the
“Company”), was
formed
through
the
combination of two
separate businesses that
originated from United
Biomedical, Inc. (“UBI”)
in two separate
transactions: a spin-out
from UBI
in 2014
of operations
focused on
developing chronic
disease product
candidates that
resulted in
United Neuroscience
(“UNS”),
and a second spin-out from UBI in
2020 of operations focused on the development
of a COVID-19 vaccine that resulted in
C19 Corp.
(“COVAXX”).
On February 2, 2021, Vaxxinity
was incorporated for the purpose of reorganizing
and combining UNS and COVAXX
and on March 2, 2021, did so by acquiring all of the outstanding equity interests of UNS and COVAXX
pursuant to a contribution and
exchange
agreement
(the
“Contribution
and
Exchange
Agreement”)
whereby
the
existing
equity
holders
of
UNS
and
COVAXX
contributed their equity interests in each of UNS and COVAXX in exchange for equity in Vaxxinity
(the “Reorganization”).
The Company is a
biotechnology company currently focused
on developing product candidates
for human use in
the fields of neurology
and coronaviruses utilizing
its “Vaxxine Platform”-a peptide vaccine
technology first developed
by UBI and
subsequently refined
over
the
last
two
decades.
The
Company
is
engaged
in
the
development
and
commercialization
of
rationally
designed
prophylactic
and
therapeutic vaccines to combat chronic disorders
and infectious diseases with large patient populations
and unmet medical need. UBI is
a significant shareholder of the Company and, therefore, considered a related party.
The Company is
subject to risks
and uncertainties common
to early-stage companies
in the biotechnology
industry including, but
not
limited
to,
uncertainty
of
product
development
and
commercialization,
lack
of
marketing
and
sales
history,
development
by
its
competitors of
new technological
innovations, dependence
on key
personnel, market
acceptance of
products, product
liability, protection
of proprietary technology,
ability to raise additional financing, and compliance
with government regulations. If the Company does
not
successfully commercialize any
of its product
candidates, it will
be unable to
generate recurring product
revenue or achieve
profitability.
The
Company’s
product
candidates
are
in
development
and
will
require
significant
additional
research
and
development
efforts,
including extensive pre-clinical
and clinical testing and
regulatory approval prior to
commercialization. These efforts require
significant
amounts of additional capital,
adequate personnel and infrastructure
and extensive compliance-reporting capabilities.
There can be
no
assurance that
the Company’s
research and
development will
be successfully
completed, that
adequate protection for
the Company’s
intellectual property
will be
obtained, that
any products
developed will
obtain necessary
government regulatory
approval or
that any
approved products will
be commercially viable.
Even if the
Company’s product development efforts are
successful, it is
uncertain when,
if ever, the Company will generate significant revenue
from product sales. The Company
operates in an environment of rapid
change in
technology and is dependent upon the services of its employees and consultants.
Contribution and Exchange Agreement
On March
2, 2021,
in accordance
with the
Contribution and
Exchange Agreement,
(i) all
outstanding shares
of UNS
and COVAXX
preferred stock
and common
stock were
contributed to
Vaxxinity and exchanged for
like shares
of stock
in Vaxxinity, (ii) the outstanding
options to purchase
shares of UNS
and COVAXX
common stock were
terminated and substituted
with options to
purchase shares of
common stock in Vaxxinity,
(iii) the outstanding warrant to purchase shares
of COVAXX common stock was cancelled and exchanged
for a warrant to acquire common stock in
Vaxxinity and (iv) each outstanding Reorganization Convertible Note (as defined below) was
contributed to Vaxxinity and the holders of such notes received Series A preferred stock in Vaxxinity.
In particular:
•
Each UNS common share and convertible preferred share was exchanged for 0.2191 shares of Vaxxinity common stock or
Series A preferred stock, as applicable;
•
Each share of COVAXX
common and convertible preferred stock was exchanged for
3.4233
shares of Vaxxinity common
stock or Series A preferred stock, as applicable (and prior to the closing of the Reorganization, all the holders of outstanding
COVAXX
SAFEs agreed to convert such SAFEs into shares of Series A-3 preferred stock of COVAXX, which shares were
then exchanged for shares of Vaxxinity’s
Series A preferred stock);
•
The Reorganization Convertible Notes were exchanged for an aggregate of
4,047,344
shares of Vaxxinity’s
Series A
preferred stock; and
•
Each outstanding option of both UNS and COVAXX to purchase common shares of UNS or COVAXX
was terminated and
substituted with an option to purchase shares of Class A common stock of Vaxxinity.
Each outstanding UNS option was
exchanged based on a conversion ratio of
0.2191
. Each outstanding COVAXX
option was exchanged based on a conversion
ratio of
3.4233
.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All parties
to the
Contribution and
Exchange Agreement
intend that
the contribution
of outstanding
equity interests
to Vaxxinity
in
exchange for
Vaxxinity’s
common stock
and preferred
stock will
be treated
as an
integrated transaction
for U.S.
federal income
tax
purposes that is governed by Section 351(a) of the Internal Revenue Code of 1986, as amended.
The Reorganization was
determined to be
a common control
transaction, so the
carrying values of
all contributed assets
and assumed
liabilities
remained
unchanged
and
the
financial
information
for
all
periods
in
the
financial
statements
presented
prior
to
the
Reorganization are presented on a consolidated basis.
Reverse Stock Split
On October 29, 2021,
the Company effectuated
a reverse stock split
of 1-for-
1.556
(the “Stock Split”) of
the Company’s
Class A and
Class B common stock
pursuant to an amendment
to the Company’s
Amended and Restated Certificate
of Incorporation approved by
the Company’s
board of directors
and stockholders. As a
result of the
Stock Split, the
Company also adjusted
the share and
per share
amounts
associated
with
its
options
and
warrants
to
purchase
shares
of
its
common
stock.
These
consolidated
financial
statements
including the notes have been retroactively adjusted
to reflect the Stock Split for all
periods presented. Any fractional shares that
would
have resulted from the Stock Split have been rounded down to the nearest whole share.
Initial Public Offering
On November 15, 2021, the Company closed its IPO of
6,000,000
shares of Class A common stock at a public offering price of $
13.00
per share. On November 18, 2021
the Company held a subsequent closing
for the issuance of an
additional
537,711
shares of Class A
common stock
pursuant to
a 30-day
option granted
to the
underwriters to
purchase up
to an
additional
900,000
shares of
Class A
common
stock at
the IPO
price, less
underwriting discounts
and commissions.
The aggregate
net proceeds
to the
Company from
the offering,
after deducting
underwriting discounts
and commissions
and other
offering expenses payable
by the Company, was
approximately $
71.1
million. Upon the closing of the IPO, all previously outstanding shares of the
Company’s redeemable convertible preferred stock were
automatically converted at the same ratio used for the Stock Split (1-for-
1.556
) into shares of its Class A common stock.
Liquidity
As of December 31, 2021, the Company
had $144.9 million of cash and cash
equivalents. To date, the Company has primarily financed
its operations
through the
sale of
convertible preferred
stock and
common stock
and borrowings
under promissory
notes (including
Convertible Notes), a portion
of which has been
raised from related party
entities. The Company has
experienced significant negative
cash flows from operations since
inception, and incurred a net
loss of $137.2 million for
the year ended December 31, 2021.
Net cash
used in
operating activities
for the
year ended
December 31,
2021 was
$81.0 million.
In addition,
as of
December 31, 2021,
the Company
has an accumulated deficit of $229.5 million. The Company expects to incur substantial operating losses and negative cash flows from
operations for
the foreseeable
future. As
of the
date these
financial statements
were available
to be
issued, the
Company expects
its
existing cash and
cash equivalents to
be sufficient to
fund its operating
expenses and capital
expenditure requirements for
at least the
next 12 months.
The Company will need to obtain additional funding beyond the period that is 12 months from the date these financial statements were
available to be issued
whether through collaboration
agreements, private or
public equity or debt
offerings or a combination
thereof, and
such
additional funding
may not
be
available on
terms the
Company finds
acceptable or
at
all. If
the
Company is
unable
to obtain
sufficient capital
to continue
to advance
its programs,
the Company
would be
forced to
delay,
limit, reduce
or terminate
its product
development
or
future
commercialization
efforts
or
grant
rights
to
third
parties
to
develop
and
market
product
candidates
that
the
Company would otherwise prefer to develop and market itself.
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization
of
assets and
satisfaction of
liabilities in
the
ordinary
course of
business.
The
consolidated financial
statements
do
not
include
any
adjustments relating to the
recoverability and classification
of recorded asset amounts
or the amounts and
classification of liabilities
that
might result from the outcome of the uncertainties described above.
Impact of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a
COVID-19 pandemic. The COVID-19 pandemic is
evolving,
and to date, has
led to the implementation
of various responses,
including government-imposed quarantines,
travel restrictions and
other
public health safety measures.
The Company is closely monitoring the impact of
the COVID-19 pandemic on all aspects of its business,
including how it will impact
its operations and
the operations of
its customers, suppliers,
vendors and business
partners. The Company
does not yet
know the
full
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or
the global economy
and it cannot presently predict the scope and severity of any potential business shutdowns or disruptions. The extent to which
COVID-19
impacts its
business, results
of operation
and financial
condition will
depend on
future developments,
which
are highly
uncertain and cannot be predicted with confidence, such as
the duration of the outbreak, new information that may
emerge concerning
the severity of COVID-19 or
the effectiveness of actions to contain
COVID-19 or treat its impact,
among others. If the Company
or any
of the third parties with whom the Company engages, however,
were to experience shutdowns or other business disruptions, its ability
to conduct its business
in the manner and
on the timelines presently planned
could be materially and negatively
affected, which could
have a material adverse impact on its business, results of operation and financial condition.
The Company has not incurred impairment losses
in the carrying values of its assets
as a result of the COVID-19 pandemic
and it is not
aware of any specific related event or circumstance that would require it to revise its estimates reflected in these consolidated financial
statements.
2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements have
been prepared using generally accepted
accounting principles in the United
States of America (GAAP)
and pursuant to the
rules and regulations of
the United States Securities
and Exchange Commission (“SEC”)
for financial reporting. The consolidated
financial statements for the periods
presented include the accounts of
UNS and COVAXX that
were parties to the Contribution and Exchange Agreement. All share and per share amounts, as
originally recorded by each entity, have
been converted
to a
number of
shares and
per share
amounts using
the conversion
ratios determined
under the
Contribution and
Exchange
Agreement and the Stock Split ratio.
Foreign currency translation
The
Company’s
consolidated
financial
statements
are
prepared
in
U.S.
dollars.
Its
foreign
subsidiaries
use
the
U.S.
dollar
as
their
functional currency
and maintain
their records
in the
local currency.
Nonmonetary assets
and liabilities
are re-measured
at historical
rates and monetary assets and liabilities are
re-measured at exchange rates in effect at the end
of the reporting period. Income statement
accounts are
re-measured at
average exchange
rates for
the reporting
period. The
resulting gains
or losses
are included
in foreign
currency
(losses) gains in the consolidated statements of operations.
Segment information
Operating segments are
defined as components
of an
entity for which
separate financial information
is available and
that is
regularly
reviewed by
the Chief
Operating Decision
Maker (“CODM”)
in deciding
how to
allocate resources
to an
individual segment
and in
assessing performance. The Company’s
CODM is its Chief Executive Officer
(“CEO”). The Company has determined that
it operates
as a single operating segment and has one reportable segment.
Use of estimates
The preparation of consolidated
financial statements in accordance
with GAAP requires the Company’s management to
make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of expenses during
the reporting period. Significant estimates contained
within these consolidated financial statements include, but are not limited to, the estimated fair value of the Company’s common
stock
and convertible notes payable, simple agreements for future equity, warrant liabilities, stock-based compensation, income tax valuation
allowance and the
accruals of research
and development expenses.
The Company bases
its estimates on
historical experience, known
trends and other market-specific
or other relevant factors that
it believes to be reasonable
under the circumstances. On
an ongoing basis,
management evaluates
its estimates,
as there
are changes
in facts
and circumstances.
Actual results
may differ
materially from
those
estimates or assumptions.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to
be
cash equivalents,
including balances
held
in
the Company’s
money market
accounts. The
Company
maintains its
cash
and
cash
equivalents with financial institutions, in
which balances from time to
time may exceed the U.S.
federally insured limits. The
objectives
of the Company’s cash management policy
are to safeguard and preserve funds to maintain liquidity sufficient
to meet the Company’s
cash flow requirements, and to attain a market rate of return.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted cash
As
of
December
31,
and
a
deposit
of
$0.2
million
and
$0.1
million,
respectively,
was
restricted
from
withdrawal.
The
restriction
relates
to
securing
credit
card
obligations.
This
balance
is
included
in
restricted
cash
on
the
accompanying consolidated
balance sheets.
The Company’s consolidated statement
of cash flows
for the year
ended December 31,
2021 and 2020
included restricted cash
with cash
and
cash
equivalents
when
reconciling
the
beginning-of-period
and
end-of-period
total
amounts
shown
on
such
statements.
A
reconciliation of cash, cash
equivalents and restricted cash
reported within the consolidated
balance sheets that sum
to the total of
the
same amounts shown in the consolidated statements of cash flows is as follows (in thousands):
December 31,
Cash and cash equivalents
$
144,885
$
31,143
Restricted cash
Total cash, cash equivalents and restricted cash
$
145,057
$
31,198
Concentration of credit risk
Financial instruments
that potentially
expose the
Company to
concentrations of
credit risk
consist primarily
of cash
and cash
equivalents.
Cash equivalents are
occasionally invested in
certificates of deposit.
The Company maintains
each of its
cash balances with
high-quality
and accredited financial
institutions and
accordingly,
such funds
are not
exposed to unusual
credit risk
beyond the
normal credit
risk
associated with
commercial banking
relationships. The
Company maintains
a portion
of its
cash and
cash equivalent
balances in
the
form of a money market account with a financial institution that management believes to be creditworthy.
The Company is dependent on contract manufacturers, several of whom are considered to be related parties, for manufacturing, quality
control,
testing,
validation
and
supply
services,
including
production,
including
production
and
shipment
of
its
enzyme-linked
immunosorbent assay (“ELISA”) tests, and for research
and development and clinical activities. The Company’s future revenue as
well
as research and
development programs could
be adversely affected
by a significant
supply interruption by
one or more
of its contract
manufacturers.
Accounts receivable
The
Company’s
trade
accounts
receivable
consist
of
amounts
due
from
distributors.
The
Company
reserves
against
trade
accounts
receivable for estimated
losses that may
arise from a
customer’s inability to
pay,
and any amounts
determined to be
uncollectible are
written off
against the
reserve when
it is
probable that
the receivable
will not
be collected.
As of
December 31,
2021 and
2020, the
Company has not recorded any allowance for bad debts against the trade accounts receivable.
Property and equipment
Property and equipment are
stated at cost,
less accumulated depreciation. Depreciation
is computed on
the straight-line basis over
the
estimated useful life of the assets.
The estimated useful life of property and equipment is as follows:
Estimated
Useful
Life
Airplane
15 years
Facilities
15 years
Furniture and fixtures
5 years
Vehicles
5 years
Laboratory and computer equipment
3 years
Software
3 years
Upon retirement or sale, the cost of assets
disposed of and the related accumulated depreciation
are removed from the accounts and any
resulting gain or
loss is included
in gain or
loss from operations.
Expenditures for repairs
and maintenance are
charged to expense
as
incurred.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment of long-lived assets
Long-lived
assets,
comprised
of
property
and
equipment,
are
tested
for
recoverability
whenever
events
or
changes
in
business
circumstances indicate
that
the
carrying
amount
of
the
assets
may
not
be
fully
recoverable.
Factors
that
the
Company
considers
in
deciding
when
to
perform
an
impairment
review
include
significant
underperformance
of
the
business
in
relation
to
expectations,
significant negative industry or
economic trends and significant
changes or planned changes
in the use of
the assets. If an
impairment
review
is
performed
to
evaluate
a
long-lived
asset
for
recoverability,
the
Company
compares
forecasts
of
undiscounted
cash
flows
expected to
result from
the use
and eventual
disposition of
the long-lived
asset to
its carrying
value. An
impairment loss
would be
recognized when estimated undiscounted future cash flows expected to result from the use of an asset
are less than its carrying amount.
The impairment loss would be
based on the excess of
the carrying value of the
impaired asset over its fair value,
determined based on
discounted cash flows. To date, the Company has not recorded any impairment losses or disposals on long-lived assets.
Deferred offering costs
The Company capitalizes certain
legal, audit, accounting and
other third-party fees that
are directly associated
with an in-process capital
financing effort
as deferred offering
costs until such
financing is consummated.
After consummation of
the financing, these
costs are
recorded
as
a reduction
of
additional paid-in
capital generated
as
a result
of
the financing.
Should
the financing
be abandoned,
the
deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations.
Fair value measurements
Certain assets and liabilities
are carried at fair value
under GAAP. Fair value is defined as the exchange
price that would be received
for
an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for
the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation
techniques used to measure fair value must maximize
the
use of observable inputs and minimize the
use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following
three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1-Quoted prices in active markets that are identical assets or liabilities.
Level 2-Observable inputs (other than Level 1
quoted prices), such as quoted prices
in active markets for similar assets
or liabilities,
quoted prices
in markets
that are
not active
for identical
or similar
assets or
liabilities, or
other inputs
that are
observable or
can be
corroborated by observable market data.
Level 3-Unobservable inputs that are supported by
little or no market activity that
are significant to determining the fair
value of the
assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
Prior to the conversion in accordance
with the Contribution and Exchange Agreement,
the majority of the Company’s convertible notes
and all of the simple agreement
for future equity (“SAFE”) and
warrant liabilities were carried at
fair value and were classified
as Level
3 liabilities.
Convertible notes payable
The Company issued
convertible notes payable
at various times
from 2014 to
2021. The Company
accounts for the
convertible notes
payable at fair value in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). The notes payable with related
parties are
accounted for
as straight
debt under
ASC 470,
Debt (“ASC
470”). The
Company has
elected to
separate interest
expense
from the
full change
in fair
value of
the convertible
notes. Debt
issuance costs
incurred by
the Company
are amortized
to interest expense
over the term of the convertible notes using the effective interest method in the accompanying consolidated statements of operations.
On March 2, 2021, each convertible note that was outstanding was exchanged for shares of Series A preferred stock (see
Note 8).
Debt issuance costs
The Company records
debt issuance costs
as a reduction
to the
carrying value of
the debt. The
debt discounts are
amortized over the
term of the debt using
the effective interest method and recognized
as interest expense in the accompanying
consolidated statement of
operations.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Simple Agreement for Future Equity-SAFE
The Company accounts for SAFEs at
fair value in accordance with ASC
480. The SAFEs are subject to
revaluation at the end of each
reporting period, with changes in fair value recognized in the accompanying consolidated statements of operations.
On March 2, 2021,
each SAFE that
was outstanding was converted
into shares of the
Company’s Series A preferred stock
(see Note 11).
Classification of convertible preferred stock
The Company
records all
convertible preferred
stock at
its original
issuance price,
less direct
and incremental
issuance costs,
as stipulated
by its terms. The Company’s convertible preferred stock is classified
outside of stockholders’ deficit because the
holders of such shares
have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.
All shares
of the
Company’s
Series A
and Series
B preferred
stock converted
into shares
of the
Company’s
Class A
common stock
concurrently with the closing of the initial public offering (see Note 10).
Revenue recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts With Customers (“ASC 606”). Under
ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or
services, in an amount that reflects the
consideration that
the entity
expects to be
entitled to
in exchange
for those
goods or services.
The Company applies
ASC 606 to
contracts
with customers only when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or
services it transfers to the customer.
The Company assesses the
goods or services promised
within each contract and
determines those that are
performance obligations by
evaluating
whether
each
promised
good
or
service
is
distinct.
This
assessment
involves
subjective
determinations
and
requires
management to make judgments about the individual promised goods or services, the intended benefit of
the contract and whether each
good or
service is
separately identifiable
from the
other aspects
of the
contractual relationship.
If a
promised good
or service
is not
distinct, an entity is required to combine that good or service with other promised goods or services
until it identifies a bundle of goods
or services that is distinct.
If the consideration promised in a contract includes a variable amount, the Company
estimates the amount of consideration to which it
will be
entitled in
exchange for
transferring the
promised goods
or services
to a
customer.
The Company
determines the
amount of
variable consideration by using the most likely amount method and applies the constraint on variable consideration, which requires the
amount included in the
transaction price to be
constrained to the amount
for which it is
probable that a significant
reversal of cumulative
revenue recognized
will not
occur.
At the
end of
each subsequent
reporting period,
the Company
re-evaluates the
estimated variable
consideration included in the transaction price
and any related constraint, and if necessary, adjusts its estimate
of the overall transaction
price.
The Company recognizes as revenue the
amount of the transaction price that
is allocated to the respective performance
obligation when
(or as) each performance obligation is satisfied, either at a
point in time or over time, and, if over
time, recognition is based on the use
of an output or input method. In the Company’s sole revenue contract, the performance obligation was satisfied at the point in time the
data and related samples were made available for the customer’s review.
For its sales of ELISA tests, the Company recognizes revenue once control is transferred upon delivery to the customer.
Taiwan Centers for Disease Control grant
United
Biomedical,
Inc.,
Asia
(“UBI-Asia”),
a
related
party
through
common
ownership
which
is
responsible
for
applying
for
and
managing
grants
on
the
Company’s
behalf,
was
awarded
a
grant
by
the
Taiwan
Centers
for
Disease
Control
(“Taiwan
CDC”)
for
COVID-19 vaccine development.
UBI-Asia contracted with
the Company to
conduct a two-phase
study of a
COVID-19 vaccine clinical
trial in Taiwan.
The grant provides that
costs incurred to complete
the two phases of
the clinical trial will
be reimbursed based on
the
achievement
of
certain
milestones
as
defined
in
the
agreement.
At
each
reporting
date,
the
Company
assesses
the
status
of
all
the
activities involved in completing the clinical trials in relation to the milestones. The Company accounts for the amounts that have been
received from the
Taiwan
CDC to reimburse
costs incurred on
the clinical trials
and not
expected to be
refunded back
to the Taiwan
CDC as contra research and development expenses in the accompanying consolidated statements of operations.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Research and development
Research
and
development
expenses
include
employee
related
costs,
consulting,
contract
research,
depreciation,
rent,
stock-based
compensation and other corporate costs attributable to research and development activities and are expensed as incurred.
The Company has entered into various research, development and manufacturing contracts, some of which are with related parties (see
Note 18). These
agreements are generally
cancelable by either
party,
and related payments
are recorded as
research and development
expenses as incurred.
The Company records
accruals for estimated
ongoing research costs.
When evaluating the
adequacy of the
accrued
liabilities, the Company
analyzes progress of
the studies or
trials, including the
phase or
completion of events,
invoices received and
contracted costs. The Company’s historical accrual estimates have not been materially different from the actual costs.
Patent costs
Patent-related costs
incurred in
connection with
filing and
prosecuting patent
applications are
expensed as
incurred due
to the
uncertainty
relating to the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.
Stock-based compensation
The Company measures all stock-based awards granted to employees, directors and non-employees based on the fair
value on the date
of grant and recognizes compensation
expense of those awards over
the requisite service period, which
is generally the vesting period
of the respective award. Forfeitures are accounted for as they occur.
The Company classifies
stock-based compensation expense
in its
consolidated statements of
operations in the
same manner in
which
the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Prior to
the Company's IPO
in November 2021,
there was no
public market for
the Company’s
common stock and
the estimated fair
value of its common stock was determined by its most recently available third-party valuations of common stock. There are significant
judgments
and
estimates
inherent
in
the
determination
of
the
fair
value
of
the
Company’s
common
stock.
These
estimates
and
assumptions include
a number
of objective
and subjective
factors, including
external market
conditions, the
prices at
which the
Company
sold shares of preferred
securities, the superior rights
and preferences of securities senior
to the common securities at
the time of, and
the likelihood
of, achieving
a liquidity
event, such
as an
initial public
offering (“IPO”)
or sale.
Significant changes
to the
key assumptions
used in the valuations could result in different fair values of common stock at each valuation date.
The fair value of each restricted stock award is estimated on
the date of grant based on the fair value
of the Company’s common stock
on that same
date. The fair
value of each
option grant is
estimated on the
date of grant
using the Black-Scholes
option pricing model
(“Black-Scholes”), which
requires inputs
based
on
certain subjective
assumptions, including
the
expected stock
price volatility,
the
expected term
of the award,
the risk-free
interest rate
and expected
dividends. The
Company, both prior
to and
after the
IPO in
November
2021, lacks sufficient company-specific
historical and implied volatility
information for its stock,
and therefore estimates its expected
stock volatility based on
the historical volatility of a
publicly traded set of
peer companies and expects
to continue to do
so until such
time as it has adequate
historical data regarding the
volatility of its own
traded stock price. The
expected term of the
Company’s options
has been determined utilizing the “simplified” method for awards that qualify as
“plain-vanilla” options. The expected term of options
granted to non-employees is equal to the
contractual term of the option award. The risk-free
interest rate is determined by reference to
the U.S. Treasury yield curve in effect at
the time of grant of
the award for time periods
approximately equal to the expected
term of the
award. Expected dividend
yield is
based on the
fact that
the Company has
never paid
cash dividends on
common stock and
does not
expect to pay any cash dividends in the foreseeable future.
Performance-based options
The Company accounts for performance-based options according to the ASC 718, Compensation - Stock Compensation ("ASC 718"),
which are subject to different accounting depending on whether they meet the definition of performance conditions, market conditions,
or other conditions. The
conditions present in the
Company's grants contain
both performance and market
conditions. The effect of each
condition
is
reflected
in
the
grant-date
fair
value
and
the
performance-based
options
are
measured
considering
the
probability
of
satisfying the performance and market conditions.
The Company has used a Monte
Carlo Simulation Model to calculate the
fair value
of the
performance condition
(the completion
of the
IPO) and
market condition
(the 25%
higher value
after the
IPO condition).
The
performance condition was determined
to not be
probable at the
time of the
grant date, and
the recognition of
compensation cost was
deferred until
the IPO
was consummated
in November
2021. The
recognition of
expense for
the portion
of the
grant-date fair
value
assigned to the market condition will be recognized as expense according to the derived service period in the
valuation model.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income taxes
The Company accounts for
income taxes according to
the ASC 740, Income
Taxes
(“ASC 740”) using the
asset and liability method,
which requires the
recognition of deferred
tax assets and
liabilities for the
expected future tax
consequences of events
that have been
recognized
in
the
consolidated
financial
statements
or
in
the
Company’s
tax
returns.
Deferred
taxes
are
determined
based
on
the
difference between the
financial statement and tax
basis of assets
and liabilities using
enacted tax rates in
effect in the
years in which
the differences are expected to reverse.
Changes in deferred tax assets
and liabilities are recorded in the
provision for income taxes. The
Company assesses
the likelihood
that its
deferred tax
assets will
be realized
and, to
the extent
it believes,
based upon
the weight
of
available evidence, that
it is more likely
than not that all
or a portion of
the deferred tax
assets will not
be realized, a valuation
allowance
is established through a charge to income tax
expense. In evaluating its ability to recover
its deferred tax assets, the Company considers
all available positive and negative evidence, including
projected future taxable income, prudent and feasible
tax planning strategies and
recent financial operations.
The
Company accounts
for uncertainty
in income
taxes
recognized
in
the
consolidated financial
statements by
applying a
two-step
process to determine
the amount of
tax benefit to
be recognized. First,
the tax position
must be evaluated
to determine the
likelihood
that it
will be
sustained upon
external examination
by the
taxing authorities.
If the
tax position
is deemed
more-likely-than-not to
be
sustained, the tax position is then
assessed to determine the amount of
benefit to recognize in the consolidated
financial statements. The
amount of the
benefit that may
be recognized is
the largest amount
that has a
greater than 50%
likelihood of being
realized upon ultimate
settlement. To
the extent the
Company determines that
such tax positions will
not be sustained,
the provision for
income taxes would
include the
effects of
any resulting
income tax
reserves, or
unrecognized tax
benefits, that
are considered
appropriate as
well as
the
related net interest and penalties.
Net loss per share
The Company
follows the
two-class method
when computing
net loss
per share
as the
Company has
issued shares
that meet
the definition
of participating
securities. The
two-class method
determines net
loss per
share for
each class
of common
and participating
securities
according to dividends declared or accumulated, and participation rights
in undistributed earnings. The two-class method requires loss
available to
common stockholders
for the
period to
be allocated
between common
and participating
securities based
upon their
respective
rights to receive dividends as if all income for the period had been distributed.
Basic net
loss per
share is
computed by
dividing the
net loss by
the weighted average
number of
common shares outstanding
for the
period. Diluted net loss is computed by
adjusting net loss to reallocate undistributed earnings based
on the potential impact of dilutive
securities. Diluted net
loss per share
is computed by
dividing the diluted
net loss by
the weighted average
number of common
shares
outstanding for
the period,
including potential
dilutive common
stock. For
purpose of
this calculation,
outstanding options,
unvested
restricted stock and convertible preferred stock are considered potential dilutive common stock and are excluded from the computation
of net loss per share as their effect is anti-dilutive.
The Company’s
convertible preferred
stock contractually
entitles the
holders of
such shares
to participate
in dividends
but does
not
contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company
reports a
net loss,
such losses
are not
allocated to
such participating
securities. In
periods in
which the
Company reports
a net
loss,
diluted net loss per share is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are
not assumed to be outstanding if their effect is anti-dilutive.
Emerging growth company status
The Company is an “emerging growth company” (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”) and is
permitted to and plans to
take advantage of certain exemptions from
various reporting requirements that are
applicable to other public
companies that are not EGCs. The Company
may take advantage of these exemptions until
it is no longer an EGC under Section 107
of
the JOBS
Act, which
provides that
an EGC
can take
advantage of
the extended
transition period
afforded
by the
JOBS Act
for the
implementation of new or revised accounting standards. The Company has
elected to avail itself of the extended transition period
and,
therefore, as long as the Company remains
an EGC, it will not be
subject to new or revised accounting standards at
the same time that
they become applicable to other public companies that are not EGCs.
Reclassifications
We reclassified certain accrued payroll and related liabilities for employee bonuses from
other long-term liabilities to accrued expenses
and other current liabilities
within the Consolidated Balance
Sheet. Prior year amounts
have been reclassified to
conform to current year
presentation. These changes have no impact on our previously reported consolidated net loss, financial position or net increase in cash,
cash equivalents, and restricted cash.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently issued accounting pronouncements
In February
2016, the
FASB
issued ASU
2016-02, “Leases
(Topic
842), and
associated ASUs
related to
Topic
842, which
requires
organizations that lease assets to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those
leases. The new
guidance requires that
a lessee recognize
assets and liabilities
for leases, and
recognition, presentation and
measurement
in
the
financial
statements
will
depend
on
its
classification
as
a
finance
or
operating
lease.
In
addition,
the
new
guidance
requires
disclosures to
help investors
and other
financial statement
users better
understand the
amount, timing
and uncertainty
of cash
flows
arising from leases.
The
Company has
elected to
apply the
transition requirements
as of
January 1,
2022. This
approach allows
for a
cumulative effect
adjustment in the period of
adoption, and prior periods continue to
be reported in accordance with historic
accounting under ASC 840
“Leases.” Additionally, as
an accounting policy election, the Company has chosen
to not apply the standard to any existing
short-term
leases (term of
12 months or
less) as
this is optional
under U.S. GAAP.
This adoption of
the new standard
on January 1,
2022 is not
expected to have
a material impact
to the consolidated
balance sheets, consolidated
statements of operations
and consolidated statements
of cash flow.
3. Fair Value Measurements
The Company's money
market accounts are shown
at fair value based
on unadjusted quoted
market prices in active
markets for identical
assets.
The value for the Convertible Notes, SAFE and
warrant liability balances as of December 31, 2020 are
based on significant inputs not
observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In accordance with the Contribution
and Exchange
Agreement, on
March 2,
2021 the
Convertible Notes,
SAFEs and
warrants were
all converted
into Series
A preferred
stock.
The following
table presents
information about
the Company’s
financial instruments
measured at
fair value
on a
recurring basis
and
indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
December 31, 2021
Level 1
Level 2
Level 3
Total
Assets:
Money market account
$
139,794
$
-
$
-
$
139,794
Total assets
$
139,794
$
-
$
-
$
139,794
December 31, 2020
Level 1
Level 2
Level 3
Total
Assets:
Money market account
$
-
$
-
$
-
$
-
Total assets
$
-
$
-
$
-
$
-
Liabilities:
Convertible notes payable
$
-
$
-
$
10,356
$
10,356
Convertible notes with related parties
-
-
14,324
14,324
SAFEs
-
-
24,335
24,335
Warrant liability
-
-
Total liabilities
$
-
$
-
$
49,415
$
49,415
During the years ended December 31, 2021 and 2020, there were
no
transfers between Level 1, Level 2 and Level 3.
Convertible Notes
During the years ended December 31, 2021 and
2020, the Company issued Convertible Notes. In accordance with
ASC 480, a portion
of the Convertible Notes were required to
be measured and accounted for at fair value
at each reporting date. The Company determined
the Convertible Notes requiring a
measurement to fair value represent a
recurring measurement that is classified within
Level 3 of the
fair value hierarchy wherein fair value is estimated using significant unobservable inputs.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Notes requiring a measurement to fair value are as follows (in thousands):
Convertible
Notes
Balance at December 31, 2019
$
12,121
Issuance of convertible notes
12,040
Repayments
(5,500)
Change in fair value
5,761
Issuance costs
(300)
Amortization of issuance costs
Accrued interest
Balance at December 31, 2020
24,680
Issuance of convertible notes
2,000
Repayments
(2,000)
Change in fair value
2,667
Amortization of issuance costs
Accrued interest
Interest paid
(187)
Conversion to Series A preferred stock
(27,545)
The
fair
value
of
the
Convertible
Notes
was
estimated
using
a
straight
debt
and
conversion
feature
valuation
model
consisting
of
probability assumptions on multiple conversion scenarios, discount rates and interest rates.
In accordance with the Contribution and Exchange Agreement, on March 2, 2021, the Convertible Notes were
converted into Series A
preferred stock.
Simple Agreement for Future Equity-SAFE
During the years ended December 31, 2021 and 2020, the Company executed SAFE arrangements. The fair value of the SAFEs on the
date of issuance
was determined to
equal the proceeds
received by the
Company.
The value of
the SAFEs on
the dates of
conversion
into preferred stock
was determined to
be equal to
the fair value
of the preferred
stock issued, or
$
35.6
million during the
year ended
December 31, 2021 and $
15.6
million during the year ended December 31, 2020.
The following table sets forth a summary of the activities of the SAFE arrangements, which represents a recurring measurement that is
classified within Level 3
of the fair value hierarchy
wherein fair value is estimated
using significant unobservable inputs
(in thousands):
SAFE
Liability
Balance at December 31, 2019
$
-
Issuance of SAFEs
39,355
Change in fair value
Conversion to Series Seed-2 convertible preferred stock
(360)
Conversion to Series A-2 convertible preferred stock
(15,275)
Balance at December 31, 2020
24,335
Change in fair value
8,365
Issuance of SAFEs
2,900
Conversion to Series A preferred stock
(35,600)
In accordance with
the Contribution and
Exchange Agreement, on March
2, 2021, the
SAFEs were converted
into Series A
preferred
stock.
Warrants to Purchase Series A-1 Convertible Preferred Stock & Common Stock
In connection with the
2020 Series A-1 convertible
preferred stock (“Series A-1
preferred”) financing transactions, the
Company issued
fully vested
warrants to
purchase
205,970
shares of
Series A-1
preferred. The
warrants were
issued to
advisors as
consideration for
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assistance with the
sale and issuance
of the Series
A-1 preferred. The
warrants were determined
to represent issuance
costs and were
recorded as a reduction in the proceeds received from the sale.
The warrants were issued to advisors of the company and represented non-variable contingently redeemable instruments.
As such, the
warrants were accounted for as liabilities and adjusted to fair value at each reporting period.
The warrants are exercisable on the date of issuance and have an exercise price of $
0.003
per share and a contractual term of ten years.
In December 2020, warrants were exercised for
71,862
shares of Series A-1 at $
0.003
per share, resulting in cash proceeds of less than
$
1,000
.
As
of
December
31,
2020,
warrants
to
purchase
134,106
shares
of
Series
A-1
preferred
were
outstanding.
The
Company
continued to re-measure the fair value
of the liability associated with the
warrant to purchase shares of Series
A-1 preferred at the end
of
each
reporting
period
until
the
Reorganization,
when
the
warrant
converted
into
Series
A
preferred
stock
and
subsequently,
in
connection with the IPO, converted into Class A common stock.
The
following table
sets
forth a
summary of
the activity
of
the warrant
liability which
represented a
recurring measurement
that
is
classified within Level 3
of the fair value hierarchy
wherein fair value is estimated
using significant unobservable inputs
(in thousands):
Warrant
Liability
Balance at December 31, 2019
$
-
Issuance of Series A-1 preferred warrants
Exercise of warrants
(214)
Change in fair value
Balance at December 31, 2020
Change in fair value
Conversion to warrants for shares of Series A preferred stock
(614)
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
December 31,
Deposits
$
4,379
$
Prepaid materials and supplies
4,131
3,302
Other
$
8,851
$
4,144
The Company’s
prepaid material and supplies
related to ELISA test
production, of which $
1.0
million was paid to
a related party and
$
2.5
million related to materials to be utilized during its Phase 2 clinical trial for COVID-19 vaccine development.
5. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
December 31,
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
1,831
Software
-
Vehicles
-
Facilities, furniture and fixtures
Total property and equipment
14,154
13,036
Less: accumulated depreciation
(1,981)
(878)
Property and equipment, net
$
12,173
$
12,158
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation expense for the years ended December 31, 2021 and 2020 was $1.1 million and $0.7 million, respectively.
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
Accrued bonuses
$
2,294
$
2,187
Accrued external research and development
1,501
Accrued professional fees and other
Accrued interest
$
4,519
$
2,744
7. Other Long-Term Liabilities
Other long-term liabilities consisted of the following (in thousands):
December 31,
Accrued tax provision
Accrued rent
$
$
As of
December 31,
2021 and
2020, approximately
$
0.2
million of
the accrued
tax provision
relates to
penalties and
interest the
Company
may be subject to paying for late filing fees related to a foreign subsidiary. The Company expects these amounts to be forgiven but has
accrued for them until the statute of limitations expires and it is appropriate to write them off.
8. Convertible Notes Payable
Beginning in April 2018, the
Company issued several Convertible Notes,
some of which were issued
to related parties. The Convertible
Notes bear simple interest at annual rates
ranging from
4.8
% to
%. All unpaid principal, together with
the accrued interest thereon, are
payable upon an event
of default or upon
maturity, which
ranges from one to
three years. The Convertible
Notes contain a number
of
provisions addressing automatic and optional conversion, events of default, and prepayment provisions.
The Company
accounts for
the
Convertible Notes
at
fair value,
in accordance
with ASC
480, with
any changes
in fair
value being
recognized through the consolidated statements of operations.
In
accordance
with
the
Contribution
and
Exchange
Agreement,
on
March
2,
each
Reorganization
Convertible
Note
that
was
outstanding was exchanged
for shares of
Series A preferred
stock, as set
forth in the
applicable Convertible Note
agreements and the
Contribution and Exchange Agreement.
During
the
years
ended
December
31,
and
2020,
the
Company
recognized
interest
expense
of
$
0.2
million
and
$
0.7
million,
respectively, related to the Convertible Notes. In addition, in the years ended December 31, 2021 and 2020, the Company recognized a
change
in
fair
value
of
$
2.7
million
and
$
5.7
million
in
the
accompanying
consolidated
statements
of
operations
related
to
the
Convertible Notes, respectively.
The following table shows the activity of the Convertible Notes (in thousands):
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Notes
Principal Amount Payable
Change in Fair Value
Accrued Interest
Issuance
Conversion to
Standard
Related
Party
Standard
Related
Party
Standard
Related
Party
Costs
Series A
Balance
December 31, 2019
$
11,170
$
$
$
$
$
$
-
$
-
$
12,121
Additions
2,040
10,000
1,884
3,822
(300)
-
18,185
Settlements
(5,500)
-
-
(264)
-
-
-
(5,709)
Amortization
-
-
-
-
-
-
-
December 31, 2020
7,710
10,510
1,972
3,848
(217)
-
24,680
Additions
-
2,000
1,855
-
-
4,835
Settlements
(2,000)
-
-
-
(187)
-
-
-
(2,187)
Amortization
-
-
-
-
-
-
-
Conversion of Convertible
Notes to Series A preferred
stock
(5,710)
(12,510)
(2,784)
(5,703)
(545)
(293)
-
(27,545)
(27,545)
December 31, 2021
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
(27,545)
$
-
9. Notes Payable
Notes Payable with Related Parties
In December 2018, the Company entered into
related party convertible notes payable (the “2018
Related Notes” and together with the
Convertible Notes, the
“Reorganization Convertible Notes”)
for $
2.0
million in aggregate
proceeds, received
in three tranches.
The 2018
Related
Notes
bore
simple
interest
at
an
annual
rate
of
%
and
contain
a
number
of
provisions
addressing
events
of
default
and
prepayment. In accordance with the Contribution and Exchange Agreement, on March 2, 2021,
the 2018 Related Notes were converted
into Series A preferred stock.
During the years ended December
31, 2021 and 2020, the
Company recognized interest expense of
less than $
0.1
million on the 2018
Related Notes.
2019 Executive Note
In November 2019, the Company borrowed
$
0.1
million from its Chief Executive Officer (the “2019
Executive Note”). No formal loan
agreement was executed. However,
the Company has
elected to accrue interest
at an annual
rate of
%, consistent with
the terms and
conditions of the Convertible Notes and 2018 Related Notes, which was the closest benchmark the Company could evaluate. The 2019
Executive Note was repaid in August 2021.
The activity of the 2018 Related Notes and 2019 Executive Note is as follows (in thousands):
2018 Related Notes and 2019 Executive Note
Related Party
Principal
Accrued
Interest
Balance
December 31, 2019
$
2,100
$
$
2,188
Additions
-
December 31, 2020
2,100
2,294
Accrued interest
-
Repayment
(100)
-
(100)
Interest paid
-
(8)
(8)
Conversion
(2,000)
(205)
(2,205)
December 31, 2021
$
-
$
-
$
-
Note Payable-Airplane
In connection with the acquisition
of an airplane, the Company entered
into a note payable agreement (the
“2025 Note”) in June 2020
for $
11.5
million, with an annual interest rate of
3.4
% and a maturity date of June 9, 2025. Principal and interest payments are payable
monthly in the
amount of $
0.07
million with a
final payment of
$
9.4
million at maturity. The
2025 Note is
guaranteed by the
co-founders
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the Company. In addition, the Company incurred debt issuance costs of $
0.3
million, which are being amortized over the term of the
loan. There are no financial covenants associated with the 2025 Note.
The carrying value of the 2025 Note is as follows (in thousands):
Principal
$
10,883
$
11,298
Unamortized debt issuance cost
(184)
(237)
Carrying amount
10,699
11,061
Less: current portion
(376)
(362)
Note payable, net of current portion and debt issuance cost
$
10,323
$
10,699
As of December 31, 2021, the remaining principal payments for the 2025 Note, are as follows (in thousands):
Amount
$
9,552
$
10,883
Interest expense
associated with
the 2025
Note was
$
0.4
million and
$
0.2
million for
the years
ended December 31,
2021 and
2020,
respectively. As of December 31, 2021, accrued interest of less than $
0.1
million was included in accrued expenses and other liabilities
in the accompanying consolidated balance sheets.
Note Payable-Paycheck Protection Program
The Company
applied for
and received
a loan,
which is
in the
form of
a note
dated May
5, 2020,
from HSBC
Bank USA,
National
Association (“HSBC”) in the
aggregate amount of approximately
$
0.3
million (the “PPP Loan”),
pursuant to the Paycheck
Protection
Program (“PPP”). The
PPP,
established as part
of the
Coronavirus Aid, Relief
and Economic Security
Act (“CARES Act”),
provides
for loans to qualifying businesses for
amounts up to 2.5 times of
the average monthly payroll expenses
of the qualifying business. As of
December 31, 2021, there were no events of default under the PPP Loan.
The Company paid off the PPP Loan in full, including all accrued but unpaid interest to the repayment date, in August 2021.
10. Convertible Preferred Stock
In connection with the Reorganization, each
UNS convertible preferred share was exchanged for
0.2191
shares of Vaxxinity
preferred
stock and each
share of COVAXX
convertible preferred stock was
exchanged for
3.4233
shares of Vaxxinity
preferred stock. During
the first
and second quarters
of 2021,
the Company raised
gross proceeds of
$
122.8
million in connection
with its
Series B preferred
stock financing. The Company issued
a total of
15,365,574
shares at a price of
$
8.00
per share. All shares
of the Company’s
Series B
preferred stock
converted into
shares of
the Company’s Class
A common
stock concurrently
with the
closing of
the initial
public offering.
As of December 31,
2021, Vaxxinity’s
Amended and Restated
Certificate of Incorporation
authorized
50,000,000
shares of preferred
stock with a par value of $
0.0001
per share.
The table below
details the Company's
Class A common
stock which was
issued upon conversion
of Series A
and Series B
preferred
stock concurrently with the
closing of the IPO
in November 2021. The
common stock issued upon
conversion reflects the application
of the stock split described in Note 1.
As of December 31, 2021
Issuance Dates
Shares Issued and
Outstanding Prior to IPO
Common Stock Issued
Upon IPO Conversion
Series A preferred stock
March 2021
62,223,095
39,989,083
Series B preferred stock
March 2021
5,441,863
3,497,338
Series B preferred stock
June 2021
9,923,711
6,377,699
77,588,669
49,864,120
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11.
Simple Agreement for Future Equity-SAFE
During the years
ended December 31, 2021
and 2020, the
Company executed SAFE
arrangements. The SAFEs were
not mandatorily
redeemable,
nor
did
they
require
the
Company
to
repurchase
a
fixed
number
of
shares.
The
Company
determined
that
the
SAFEs
contained a liquidity
event provision that
embodied an obligation
indexed to the
fair value of
the Company’s
equity shares and
could
require the Company to settle the SAFE obligation by transferring assets or cash. For this reason, the Company recorded the SAFEs as
a liability
under ASC
480 and
re-measured the
fair value
at the
end of
each reporting
period, with
changes in
fair value
reported in
earnings.
In
March
2020,
the
Company
issued
a
SAFE
(“SAFE
1”)
for
$
0.4
million,
which
converted
into
463,162
shares
of
Series
Seed-2
convertible preferred stock at
$
0.7773
per share in April 2020. In June, July,
and August 2020, the Company issued a series of SAFEs
(“SAFE 2”) for $
14.7
million, which converted into
6,307,690
shares of Series A-2 convertible
preferred stock (“Series A-2 preferred”)
at
$
2.3241
per share in August 2020.
The Company determined the fair value
of SAFE 2 investment on the
date of conversion and recognized the
difference between the fair
value on the date of conversion and the initial fair value of SAFE 2 investment in the consolidated statements of operations.
In December 2020, the Company
issued a series of SAFEs
(collectively, “SAFE
3”) for $
24.3
million. In January 2021, the
Company
issued additional SAFEs for $
2.9
million which had the same terms as SAFE 3. Key provisions of SAFE 3 are as follows:
Equity Financing
-Upon initial closing of a
qualified financing of at least
$
50.0
million, SAFE 3 will automatically
convert into the
greater of (1) the number of
shares of SAFE 3 preferred stock
equal to the purchase amount
divided by the SAFE 3 price,
defined as the
price per share equal
to the post-money valuation
divided by all
shares outstanding, all convertible
securities, all issued,
outstanding and
promised options, and
the unissued option
pool, or (2)
the number of
shares of SAFE
3 preferred stock
equal to the
purchase amount
divided by the discount
price, defined as the price
per share of the
standard preferred stock sold in
a qualified financing multiplied by
eighty percent (80%).
Liquidity Event
-If there is a liquidity
event, as defined, before the
termination of SAFE 3, SAFE 3
will automatically be entitled to
receive a
portion of
proceeds, subject
to the
liquidation priority
set forth
in the
agreement, due
and payable
immediately prior
to, or
concurrent with, the consummation of such
liquidity event, equal to the greater
of (i) the purchase amount or (ii)
the amount payable on
the number of shares of common stock equal to the purchase amount divided by the liquidity price, as outlined in the agreements.
Dissolution Event
-If there is a dissolution event, as described in the agreements, before the
termination of SAFE 3, the investor will
automatically be
entitled, subject
to the
liquidation priority
set forth
in the
agreement, to
receive a
portion of
proceeds equal
to the
purchase amount, due and payable to the investor immediately prior to the consummation of the dissolution event.
Termination
-SAFE 3 will automatically terminate immediately following the
earliest to occur of: (i) the issuance
of capital stock to
the investor pursuant
to the automatic
conversion provisions of
SAFE 3 or
(ii) the payment,
or setting aside
for payment, of
amounts
due the investor.
In connection with
the Contribution and
Exchange Agreement, the
holders of SAFEs agreed
to convert such
SAFEs
into shares of Series A-3 preferred stock of COVAXX,
which shares were then exchanged for shares of Vaxxinity’s
preferred stock.
The
SAFEs
were
converted
into
shares
of
the
Company’s
Series
A
preferred
stock
pursuant
to
the
Contribution
and
Exchange
Agreement. Prior to the Reorganization,
all the holders of outstanding COVAXX
SAFEs agreed to convert such SAFEs
into shares of
Series A-3 preferred stock of COVAXX,
which shares were then exchanged for shares of the Company’s Series A preferred stock.
12. Common Stock
As explained
in Note
1, in
accordance with
the Contribution
and Exchange
Agreement, on
March 2,
2021, all
outstanding shares
of
common
stock
of
UNS
and
COVAXX
were
contributed
to
Vaxxinity
and
exchanged
for
an
aggregate
of
60,360,523
shares
of
Vaxxinity’s
Class A common
stock and
10,999,149
shares of Vaxxinity’s
Class B common
stock. Each UNS
share of common
stock
was exchanged for
0.2191
shares of Vaxxinity
common stock and
each share of COVAXX
common stock was exchanged
for
3.4233
shares of Vaxxinity
common stock.
In June 2021, the Company converted
2,874,983
shares of Class A common stock held by the Company’s Chief Executive Officer and
Executive Chairman on a one-to-one basis for shares of Class B common stock.
As of December 31, 2021,
Vaxxinity’s
Amended and Restated Certificate
of Incorporation authorized
1,100,000,000
shares of common
stock
with
a
par
value
of
$
0.0001
per
share,
of
which
1,000,000,000
shares
have
been
designated
as
Class
A
common
stock
and
100,000,000
shares have been designated as Class B common stock.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Holders of Class
A common stock
and Class B
common stock have
identical rights,
except with respect
to voting and
conversion. Except
as otherwise expressly provided
in Vaxxinity’s
Amended and Restated Certificate
of Incorporation or Bylaws,
or required by applicable
law,
holders of
Class A
common stock
will be
entitled to
one vote
per share
on all
matters submitted
to a
vote of
stockholders and
holders of our Class B common stock will be entitled to ten votes per share on all matters submitted to a vote of stockholders.
Holders of
Class A
common stock
and Class
B common
stock vote
together as
a single
class on
all matters
submitted to
a vote
of
stockholders, except (i) amendments to Vaxxinity’s
Amended and Restated
Certificate of Incorporation to increase or decrease the par value of a class of capital stock, in which case the applicable class would be
required to vote separately to approve the proposed amendment and (ii) amendments to Vaxxinity’s
Amended and Restated Certificate
of Incorporation
that alter
or change
the powers,
preferences or
special rights
of a
class of
capital stock
in a
manner that
affects its
holders adversely, in which case the applicable class would be required to vote separately to approve the proposed amendment.
Holders of common stock are
entitled to receive, ratably,
dividends as may be declared
by Vaxxinity’s
board of directors out of
funds
legally available therefor if the board of directors, in its discretion, determines to issue dividends.
The voting,
dividend, and
liquidation rights
of the
holders of
common stock
are subject
to and
qualified by
the rights,
powers, and
preferences of the holders of Vaxxinity’s
preferred stock.
The Company has reserved shares of common stock for issuance for the following purposes:
December 31,
Series Seed preferred
-
7,831,528
Series Seed-1 preferred
-
22,876,457
Series Seed-2 preferred
-
14,615,399
Series A-1 preferred
-
1,871,511
Series A-2 preferred
-
6,307,690
Options issued and outstanding
21,387,909
9,276,399
Options available for future grants
7,209,538
1,897,049
Warrants issued and outstanding
1,928,020
86,186
30,525,467
64,762,219
13. Equity Incentive Plan
Stock Options
In March 2021, the
Company replaced the 2017
and 2020 Stock Option
and Grant Plans with
the newly-adopted 2021 Stock
Option and
Grant
Plan
(the “Existing
Plan”), which
provided for
the Company
to grant
qualified
incentive options,
nonqualified options,
restricted
stock
awards,
unrestricted
stock
awards,
and
restricted
stock
units
to
employees
and
non-employees
to
purchase
the
Company’s
Class A
common stock.
The Existing
2021 Plan
authorized the
issuance of
up to
21,593,830
shares of
Class A
common
stock pursuant to awards.
In
August
2021,
the
Company
canceled
existing
options
to
purchase,
in
aggregate,
6,362,455
shares
of
Class
A
common
stock
in
exchange for an equal number of options to purchase shares of Class B common stock. The Company accounted for this exchange as a
stock option modification.
In November 2021,
the Company replaced
the Existing 2021
Plan with the
2021 Omnibus Incentive
Compensation Plan (the
“New 2021
Plan”), which
provides for
the Company
to grant
nonqualified stock
options,
incentive (qualified)
stock options,
stock
appreciation
rights,
restricted
share
awards,
restricted
stock
units,
performance
awards,
cash
incentive
awards
and
other
equity-based
awards
(including fully
vested shares).
The New
2021 Plan
replaced the
Existing 2021
Plan and
no further
grants will
be made
under the
Existing
2021 Plan. The following is a summary of certain terms and conditions of the New 2021 Plan.
The maximum number of
shares of common stock
that can be issued under
the New 2021 Plan
is
8,700,000
shares of Class A
shares.
As
of
December
31,
2021,
7,209,538
shares
were
available
for
future
grant.
Shares
that
are
forfeited,
canceled,
reacquired
by
the
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company prior to vesting, satisfied without the issuance
of stock, withheld to cover the exercise
price or tax withholdings, or otherwise
terminated, other than by exercise, shall be added back to the Shares available for issuance under the New 2021 Plan.
The exercise
price for
grants made
pursuant to
the terms
of the
New 2021
Plan is
determined in
the applicable grant
by the
board of
directors. Any incentive options granted to persons possessing less than 10% of the total combined voting power of all classes of stock
may not have an exercise price
of less than 100% of the fair
market value of the common stock
on the grant date. Any incentive options
granted to persons possessing more than 10% of the total combined voting power of all classes of stock may not have an exercise price
of less than 110% of the fair market value of the common stock on the grant date.
The option term for incentive awards may not be greater than ten years from the date of the grant. Incentive options granted to persons
possessing more than 10% of
the total combined voting power
of all classes of stock
may not have an option
term of greater than five
years from the date of the grant. The vesting period for equity-based awards is determined at the discretion of the board of directors.
As of December
31, 2021 there
were options for
15,025,454
shares of Class
A stock outstanding
and options for
6,362,455
shares of
Class B stock outstanding,
of which
8,652,630
Class A and
4,786,936
Class B shares were
exercisable, respectively.
As of December
31, 2021, the maximum number of stock options awards available for future issuance under the Company’s plans is
7,209,538
.
Stock Option Activity
The following table summarizes stock option activity for the years ended December 31, 2021 and 2020:
Number of Stock
Options
Outstanding
Weighted Price
Per Share
Weighted
Contractual
Term (years)
Aggregate
Intrinsic Value
(in thousands)
Balance at December 31, 2019
7,610,289
$
0.33
8.6
$
2,357
Granted
2,672,152
1.17
Exercised
(283,290)
0.29
Forfeited
(722,752)
0.29
Balance at December 31, 2020
9,276,399
$
0.60
7.6
$
8,415
Granted
13,482,915
8.20
Exercised
(186,204)
0.91
Forfeited
(1,185,201)
2.98
Balance at December 31, 2021
21,387,909
$
5.25
7.4
$
49,684
Options vested and exercisable at December 31, 2021
13,439,566
$
4.40
6.8
$
37,969
The aggregate intrinsic value of options
is calculated as the difference between
the exercise price of the
options and the fair value of
the
common stock for those options that had exercise prices lower than the fair value of the common stock.
The intrinsic value of options exercised during each of the years ended December 31, 2021 and 2020 were less than $
0.1
million.
The weighted-average grant-date fair
value per share of options
granted during the years ended
December 31, 2021 and 2020
was $
4.21
and $
0.50
, respectively.
The
total
fair
value
of
options
vested
during
the
years
ended
December
31,
and
was
$
24.5
million
and
$
0.8
million,
respectively.
Valuation
of Stock Options Granted that Contain Service Conditions Only
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair
value of
each option
award granted
with service-based
vesting is
estimated on
the date
of the
grant using
the Black-Scholes
option valuation model
based on the
assumptions noted in
the table below
for those options
granted in the
years ended December
31,
2021 and 2020:
December 31,
Risk-free interest rate
0.59% - 1.35%
0.34% - 0.38%
Expected term (in years)
5.00 - 6.30
5.60 - 6.08
Expected volatility
71.60% - 93.40%
70.90% - 86.84%
Expected dividend yield
0.00%
0.00%
In August 2021, the
Company canceled 378,786
existing Class A common
stock options with service-based
conditions held by Mei
Mei
Hu in exchange
for an equal number
of options to purchase
shares of Class B
common stock. The Company
accounted for this
exchange
as a stock option modification.
There was no incremental stock-based
compensation expense as a result
of this modification as the fair-
value-based measures
of the
modified award
immediately after
the modification
were less
than the
fair-value-based measures
of the
original award immediately before the modification.
Stock Options Granted to Employees that Contain Performance and Market Conditions
Included in
the stock
options granted
during the
year ended
December 31,
2021 were
stock options
to purchase
6,799,625
shares of
Class A
common stock that
contain performance- and
market-based vesting conditions
granted to
the Mei Mei
Hu, Louis Reese,
and
Peter Diamandis.
In August 2021, the stock option awards for the Mei Mei Hu and Louis Reese totaling
5,983,670
shares were cancelled in exchange for
an equal number of options to purchase shares
of Class B common stock. The Company accounted for
this exchange as a stock option
modification. The fair value of the
awards granted to Mei Mei Hu
and Louis Reese at the modification date
was $
23.8
million, valued
using the Monte-Carlo simulation model. The assumptions used in the Monte-Carlo simulation model were as follows:
Time to expiration (in years)
4.5
Volatility
75%
Risk-free interest rate
58%
Cost of equity
25%
Fair value of underlying common stock (as of valuation date)
$
10.07
The stock option awards for Peter Diamandis totaling
815,955
shares had a grant date fair value of $
0.3
million. The assumptions used
in the Monte-Carlo simulation model were as follows:
Time to expiration (in years)
Volatility
90%
Risk-free interest rate
0.09%
Cost of equity
25%
Fair value of underlying common stock (as of valuation date)
$
4.12
The compensation
expense for
these awards
is recognized
when the
vesting condition
is met
for the
performance-based criteria,
and
over the derived service period for the market-based criteria.
The
condition
for
the
performance-based
criteria
in
the
stock
options
was
based
on
the
Company's
completion
of
its
IPO,
and
the
condition for the market-based criteria in the stock options was based on the future price of the Company's common stock trading at or
above a
specified threshold.
During the
year ended
December 31,
2021, stock
options for
an aggregate
of
5,439,700
of the
total
6,799,625
shares containing performance-
and market-based vesting
conditions were vested
following the satisfaction
of the performance-based
condition achieved through the Company’s
completion of its IPO. As
of December 31, 2021, the market-based
vesting conditions had
not been achieved.
Restricted Stock
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s restricted stock activity for the year ended December 31, 2021:
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Unvested at December 31, 2020
15,405
$
0.50
Vested
(15,405)
(0.50)
Unvested at December 31, 2021
-
$
-
The aggregate fair value of restricted stock that vested was less than $
0.1
million for the years ended December 31, 2021 and 2020.
Stock-based compensation expense
recognized on vested
restricted stock was
immaterial for the
years ended December
31, 2021 and
2020.
Stock-Based Compensation Expense
The
Company
recorded
stock-based
compensation
expense
in
the
following
expense
categories
in
the
accompanying
consolidated
statements of operations (in thousands):
Years
Ended December 31,
Research and development
$
1,343
$
General and administrative
29,069
Total stock-based compensation expense
$
30,412
$
1,014
As of December 31, 2021, total
unrecognized compensation cost related to the
unvested stock-based awards was $
26.8
million, which
is expected to be recognized over a weighted average period of
3.3
years.
14. Income Taxes
The sources of
losses from continuing
operations, before income
taxes, classified between
domestic entities and those
entities domiciled
outside of the U.S., are as follows (in thousands):
Years
Ended December 31,
Losses before taxes
Domestic entities
$
(128,538)
$
(31,053)
Entities outside the U.S.
(8,636)
(8,904)
(137,175)
$
(39,957)
Tax Expense (Benefit)
The components of the provision for income taxes are as follows for the years ended December 31, 2021 and 2020 (in thousands):
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended December 31,
Current:
Federal
$
-
$
-
State and local
-
-
Foreign
-
-
Total current tax expense
-
-
Deferred tax (benefit):
Federal
-
-
State and local
-
-
Foreign
-
-
Total deferred tax (benefit)
-
-
Tax Rate Reconciliation
The Company’s effective tax rate for the years ended December 31, 2021 and 2020 was
0.00
% and
0.00
%, respectively.
A reconciliation
of the
provision for
income taxes
at the
statutory rate
to the
amount reflected
in the
consolidated statements
of operations
is as follows (in thousands):
Years
Ended December 31,
Income taxes at statutory rate
21.00
%
21.00
%
State income taxes, net of federal benefit
0.50
%
0.29
%
Stock compensation
(3.65)
%
0.00
%
Foreign rate differential
(0.74)
%
(4.06)
%
Uncertain tax positions
0.00
%
0.00
%
Other
(1.90)
%
(0.36)
%
Change in valuation allowance
(15.21)
%
(16.87)
%
Provision for income taxes
0.00
%
0.00
%
Deferred Tax Assets (Liabilities)
The Company computes income taxes using
the liability method. This method requires
recognition of deferred tax assets and
liabilities,
measured by enacted rates, attributable
to temporary differences between the
financial statements and the income
tax basis of assets and
liabilities. In
assessing the
realizability of
deferred tax
assets, the
Company considers
whether it
is more
likely than
not that
certain
deferred tax
assets will be
realized. The
ultimate realization of
deferred tax
assets is dependent
upon the
generation of future
taxable
income
in those
specific jurisdictions
prior to
the dates
on
which such
net operating
losses expire.
The Company
maintained a
full
valuation allowance against its net deferred tax assets for December 31, 2021
and 2020 because the Company has determined that it is
more likely than not that these assets will not be fully realized based on a current evaluation of expected future
taxable income and the
Company is in a cumulative loss
position. The valuation allowance increased by
$
6.7
million during the year ended
December 31, 2020
and $
20.9
million during the year ended December 31, 2021, primarily as a result of net
operating losses generated during the periods.
The Company reevaluates the positive and negative evidence at each reporting period.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31,
Deferred tax assets:
Net operating loss carryforwards
$
32,405
$
12,373
Compensation accruals
1,735
Other
Total deferred tax assets
34,167
13,377
Less: valuation allowance
(34,106)
(13,247)
Net deferred tax assets
$
$
Deferred tax liabilities:
Depreciation
$
(61)
$
(130)
Net deferred tax liabilities
(61)
(130)
Net deferred income taxes
$
-
$
-
Net Operating Losses
The Company had total net
operating loss carryforwards for U.S.
federal income tax purposes of
$
134.6
million, and $
44.5
million as
of December 31, 2021 and 2020, respectively, that have no expiration date. The Company has foreign net operating loss carryforwards
of $
24.0
million and $
20.2
million, respectively, that have no expiration date.
Utilization
of
the
NOL
carryforwards
and
credits
may
be
subject
to
a
substantial
annual
limitation
due
to
the
ownership
change
limitations provided by
the Internal Revenue
Code Sections 382
and 383 (the
“Code”), as amended,
and similar state
provisions. The
Company has not
completed a study
to assess whether
an ownership
change has occurred
or whether there
have been multiple
ownership
changes since
the Company’s
formation due
to the
complexity and
cost associated
with such
a study,
and the
fact that
there may
be
additional ownership changes
in the future. If
the Company experienced
an ownership change at
any time since its
formation, utilization
of the
NOL or
tax credit
carryforwards to
offset future
taxable income
and taxes,
respectively,
would be
subject to
annual limitation
under the Code. The annual limitation may result in the expiration of the
NOL and credits before utilization. If impaired, the NOL and
credit carryforwards would be removed from
the deferred tax asset schedule with
a corresponding reduction in the valuation
allowance.
On March 27, 2020, the President of the United States signed into law the CARES Act, which, along with earlier issued IRS guidance,
contains numerous provisions that may benefit the Company,
including the deferral of certain taxes. There is no material impact to the
Company. The CARES Act did not have a material impact on the Company’s tax provision for the year ended December 31, 2021.
The Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, has expanded, extended, and clarified selected
CARES Act provisions, specifically on Paycheck Protection Program loan
and Employee Retention Tax
Credit, 100% deductibility of
business meals as well as
other tax extenders. The Consolidated Appropriations Act
did not have a material
impact on the Company’s
tax provision for the year ended December 31, 2021.
The Company
is subject
to tax
in the
United States
and many
state and
local jurisdictions. The
Company,
with certain
exceptions, is
subject to income tax examinations by U.S. federal, state and local for tax years 2017 and future periods. The company is not currently
under audit for any US federal or state or foreign income tax audits.
Uncertain Tax Positions
A summary of the Company’s unrecognized tax benefits activity and related information is presented as follows (in thousands):
Years
Ended December 31,
Uncertain tax position liability at the beginning of the year
$
$
Increases (decreases) related to tax positions taken during current period
-
Uncertain tax position liability at the end of the year
$
$
The unrecognized tax benefits
for U.S. jurisdiction of
$
0.6
million, if recognized, would
not have an impact
on the Company’s effective
tax
rate
assuming
the
Company
continues
to
maintain
a
full
valuation
allowance
position
against
its
U.S.
deferred
tax
assets.
The
remaining unrecognized tax benefits
of less than $
0.1
million, if recognized, will
have an impact on
the effective tax rate. The
Company
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recognizes accrued interest
and penalties related
to unrecognized tax
benefits in income
tax expense. We accrued $
0.2
million in interest
and penalties related to prior year’s tax filings, as of December 31, 2021.
The Company
is subject
to U.S.
federal income
tax as
well as
income
tax of
various foreign
jurisdictions. Generally,
the statute
of
limitations for examination
of the Company’s
U.S. federal and
foreign income tax
filings are open
for the years
ended December 31,
2017 and future periods.
15. Net Loss Per Share
The Company’s unvested restricted common shares have been excluded from the computation of basic net loss per share.
The
Company’s
potentially
dilutive
securities,
which
include
options,
unvested
restricted
stock,
convertible
notes
payable
and
convertible preferred stock, have been excluded from the computation of diluted net loss per share as the effect
would be to reduce the
net loss per share. Therefore, the weighted
average number of common shares outstanding used
to calculate both basic and diluted net
loss per share is the same. The Company
excluded the following potential common shares, presented based on amounts outstanding
at
each period end, from the
computation of diluted net loss per
share as of December 31, 2021
and 2020 because including them
would
have had an anti-dilutive effect:
December 31,
Series Seed preferred
-
7,831,528
Series Seed-1 preferred
-
22,876,457
Series Seed-2 preferred
-
14,615,399
Series A-1 preferred
-
1,871,511
Series A-2 preferred
-
6,307,690
Unvested restricted stock
-
23,970
Options and RSUs issued and outstanding
21,387,909
14,434,095
Warrants issued and outstanding stock
1,928,020
134,106
23,315,929
68,094,756
16. Commitments and Contingencies
Contractual Obligations
The Company
enters into
agreements with
contract research
organizations (“CROs”)
to conduct
clinical trials
and preclinical
studies
and contract manufacturing organizations (“CMOs”) to produce vaccines and other potential product candidates. Contracts with CROs
and CMOs are generally cancellable, with notice, at the Company’s option.
As of December 31, 2021, the Company had remaining prepayments to CROs of $
1.6
million and remaining prepayments to CMOs of
$
2.5
million for activities associated with the conduct of its
clinical trials and for the production of the Company’s
anticipated vaccine
product candidate.
Michael J. Fox Foundation Grant
On November 3, 2021, the
Company was awarded a grant from
the Michael J. Fox Foundation
for Parkinson’s Research
(“MJFF”) in
the amount of $
0.8
million to be used in a
project for the exploration of markers
for target engagement in individuals immunized
with
UB-312, an
active
a
-Synuclein immunotherapy.
The Company
will oversee
sample management,
sample preparation
(IgG fractions)
and
distribution,
as
well
as
characterize
the
binding
properties
of
the
antibodies
against
pathological
forms
of
aSyn.
As
funding
is
expected to
be utilized
over a
two-year period,
as cash
is received,
the amount
expected to
the utilized
within twelve
months is
recognized
to short-term
restricted cash/deposits, with
a corresponding
short-term accrued liability,
which is
released as
the related expenses
are
offset. The Company recognizes payments from MJFF as a reduction of research
and development expenses, in the same period as the
expenses that
the grant
is intended
to reimburse
are incurred.
The remaining
balance of
cash received
is recognized
to long-term
restricted
cash/deposits,
with
a
corresponding
long-term
accrued
liability.
As
of
December
31,
2021,
the
balance
of
short-term
restricted
cash/deposits and the
corresponding short-term accrued
liability was $
and the balance
of long-term restricted
cash/deposits and the
corresponding
long-term
accrued
liability
was
$
.
For
the
year
ended
December
31,
2021,
the
Company recognized
less
than
$
0.1
million as a reduction of research and development expenses for amounts reimbursed through the grant.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lease Agreements
The Company has multiple operating lease agreements for office and laboratory space that extend through August 2022. The Company
records total expense on a straight-line basis over the term of the lease agreement. One of the Company’s
leases requires the Company
to provide a security deposit in the amount of less than $
0.1
million. The Company is also required to pay certain operating costs under
its leases.
Rent expense
for each
of the
years ended
December 31,
2021 and
2020 amounted
to less
than $
0.1
million, and
$
0.1
million, respectively.
In August 2021,
the Company entered
into a lease
for
5,012
square feet of
lab space with
Space Florida in
Exploration Park, Florida
commencing August
12, 2021. The
lease has
an initial one-year
term with an
annual lease
obligation of $
0.2
million, after Lessee
credits.
License Agreements
In October 2014, the Company
entered into a contribution
agreement with UBI, whereby
UBI contributed and assigned
to the Company
assets and
granted a non-exclusive
license to
certain technologies
deemed necessary
or reasonably
useful in
the utilization
of the licensed
intellectual property.
In consideration,
the Company
issued
32,505,306
shares of
common stock
to UBI.
The agreement
allowed for
exploitation of all
diagnostic, prophylactic, and therapeutic
uses and indications in
humans in the
field of neurology. The agreement
was
amended in
August 2019
to provide
the Company
with exclusivity
(except as
to UBI)
in the
field of
neurology and
the flexibility
to
pursue indications outside the initial field limitations.
In connection with the amendment,
the Company agreed to execute
an exclusive, worldwide license agreement for
any product that is
developed by the Company outside the original
field. The terms and conditions are
to be negotiated in good faith
and mutually agreed
upon. The Company
anticipates that if
it is required
to enter into
an exclusive license
agreement, it will
be able to
negotiate financial
terms for the license at prevailing
market rates within the pharmaceutical industry.
Accordingly, the
Company may be required to pay
UBI upfront fees, revenue royalties, development milestones, commercial milestones, sublicense fees, and other related
fees.
Vaxxinity’s
COVAXX
subsidiary was formed
in March 2020
through a transfer
of technology from
UBI, UBI IP
Holdings, and UBI
US Holdings, LLC, all
related parties of the
Company, whereby
the Company,
pursuant to an April
2020 license agreement, obtained
exclusive rights
to intellectual
property and
technology related
to the
discovery of
vaccines, diagnostic
assays, and
antigens for
use
against all coronaviruses
including, without
limitation, SARS,
MERS, and
COVID-19 in all
strains in humans.
The license
is worldwide,
perpetual, exclusive and fully paid-up.
There are no future royalty
or milestone payment obligations
associated with the agreement.
The
Company has the right to grant sublicenses.
The
Company
considered
ASC
805,
“Business
Combinations”
and
ASC
730,
“Research
and
Development”
in
determining
how
to
account for the issuance of common
stock. The license agreement is considered
to be a common control transfer;
however, the related
party did not have any basis in the assets licensed, so there was no accounting impact for the Company.
In August 2021, Vaxxinity
entered into a license
agreement (the “Platform License
Agreement”) with UBI and
certain of its affiliates
that
expanded
intellectual
property
rights
previously
licensed
under
previously
issued
license
agreements
with
UBI.
As
part
of
the
agreement, Vaxxinity
obtained a worldwide, sublicensable (subject to certain conditions), perpetual, fully paid-up, royalty-free
license
to
research,
develop,
make,
have
made,
utilize,
import,
export,
market,
distribute,
offer
for
sale,
sell,
have
sold,
commercialize
or
otherwise exploit peptide-based vaccines in the field
of all human prophylactic and therapeutic uses,
except for such vaccines related to
human immunodeficiency virus (HIV), herpes
simplex virus (HSE) and
Immunoglobulin E (IgE). The patents
and patent applications
licensed under the Platform License
Agreement include claims directed to
a CpG delivery system, artificial
T helper cell epitopes and
certain designer
peptides and
proteins utilized in
UB-612. As
described above,
in consideration for
the Platform
License Agreement,
the Company issued to UBI a warrant to purchase Class A common stock (the “UBI Warrant”).
The Company considered ASC 805, “Business Combinations” (“ASC 805”) and ASC 730, “Research and Development” (“ASC 730”)
in determining how
to account for
the issuance of
the Class A common
stock warrants. The
Class A common
stock warrants were
issued
to a related party in exchange for a license agreement. The majority of the voting interests in the related party and that of the Company
were held by
a group of
immediate family members,
at the time
of the transaction,
and as such
the transaction constitutes
a common
control transaction,
which requires
the license
to be
accounted for
at the
carrying value
in the
books of
the transferor.
As the
related
party did not have any basis in the assets licensed, there was no accounting impact for the Company.
In connection with
preparing its financial
statements for the
fiscal year ended
December 31, 2021,
the Company identified
an immaterial
error relating to the recording of the UBI Warrant
on its financial statements as of and for
the nine months ended September 30, 2021.
The UBI
Warrant
was recorded
on
the balance
sheet as
additional paid
in
capital and
recognized
as an
‘intangible asset
-
licensed
intellectual property’
in the
amount of
$
13.3
million, and
$
0.1
million was
amortized in
the nine
months ended
September 30, 2021.
However, as noted above, the UBI Warrant
was issued to a related party whose basis in the rights and licenses received pursuant to the
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Platform License Agreement was zero. As a result, the
transaction should not have resulted in any accounting impact to
the Company.
The Company has concluded that the error is not material to any previously issued financial statements.
Indemnification Agreements
In the ordinary
course of business,
the Company may
provide indemnification of
varying scope and
terms to employees,
consultants,
vendors, lessors,
business partners and
other parties
with respect
to certain
matters including, but
not limited
to, losses
arising out
of
breach of such
agreements or from
intellectual property infringement
claims made by
third parties. In
addition, the Company
has entered
into indemnification agreements
with members of
its board of
directors and executive
officers that
will require
the Company,
among
other things, to indemnify them against certain liabilities that may arise by reason of their status or
service as directors or officers. The
maximum potential amount of future payments
the Company could be required to
make under these indemnification agreements is,
in
many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is
not aware of any indemnification arrangements that could have
a material effect on its financial position,
results of operations, or cash
flows, and it has not accrued any liabilities related to such obligations as of December 31, 2021.
Legal Proceedings
From
time
to
time,
the
Company
may
become
involved
in
legal
proceedings
arising
in
the
ordinary
course
of
business.
As
of
December 31, 2021, the Company was not a party to any material legal matters or claims.
17. Benefit Plans
In
March
2018,
the
Company
established
a
defined
contribution
savings
plan
under
Section
401(k)
of
the
Code.
This
plan
covers
substantially all
U.S. employees
who meet
minimum age
and service
requirements and
allows participants
to defer
a portion
of their
annual compensation on a pre-tax basis. The Company does not make matching contributions to the Plan.
The Company offers its Ireland-based employees a
Personal Retirement Savings Account (“PRSA”) that allows participants to
defer a
portion of their
annual compensation. The
Company provides contributions
equal to
% of each
participant’s annual salary. During both
of the years ended December 31, 2021 and 2020, the Company contributed less than $
0.1
million to PRSA accounts.
18. Related Party Transactions
The Company has
a Related Party
policy which defines
related parties, and
assigns oversight responsibility
for related party transactions
to
the
Company's Audit
Committee.
The
Committee reviews
in
advance related
party
transactions, and
considers multiple
factors,
including the
proposed aggregate
value of the
transaction, or, in
the case
of indebtedness,
the amount
of principal that
would be
involved,
the benefits
to the
Company of
the proposed transaction,
the availability of
other sources of
comparable products or
services, and
an
assessment of whether
the proposed transaction is
on terms that
are comparable to
the terms available to
or from, as
the case may be,
unrelated third parties.
Under the policy,
related party transactions
are approved only
if the Committee
determines in good
faith that
the transaction is not inconsistent with the interests of the Company and its shareholders.
The Company has related
party arrangements with
UBI and a number
of its affiliated companies
listed namely, United Biomedical, Inc.,
Asia (“UBI-Asia”), UBI Pharma, Inc. (“UBI-P”), United BioPharma, Inc (“UBP”) and UBI IP Holding (“UBI-IP”).
As of
December 31, 2021
UBI owned
% of
the Company’s
stock on
an as
converted basis.
The majority
of the
voting interests
in
both UBI and the Company were held by a group of immediate family members, and as such the entities are under common control.
These related parties are governed by various Master Services Agreements (“MSA”) detailed below.
UBI MSA - UBI provides research,
development and clinical functions to
the Company. There is also a purchase arrangement
with
UBI for the production and shipment of the Company’s diagnostic test kits.
UBIA MSA - UBI-Asia for manufacturing, quality control, testing, validation, and supply services.
UBP MSA - United BioPharma, Inc provide the Company with manufacturing, testing and validation.
COVID MSA (“COVID MSA”)
- COVID MSA
provides that UBI acts
as COVAXX’s
agent with respect
to matters relating
the
Company’s COVID-19 program and provides research, development, manufacturing and back office administrative services to the
Company.
VAXXINITY,
INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COVID-19
Relief
MSA
-
A
four-company
MSA
with
UBI,
UBI-Asia
and
UBP.
The
Company
is
an
exclusive
licensee
of
technologies related to diagnostics, vaccines, and therapies for COVID-19. The MSA established the terms under which UBI-Asia
provides research, development, testing and manufacturing services to
the Company and UBP provides contract development
and
manufacturing services to the Company.
Total amounts due to
related parties were
$
19.4
million and $
8.0
million as of
December 31, 2021
and 2020, respectively. Total amounts
due from related
parties were
$
0.4
million and
$
0.4
million as
of December
31, 2021 and
December 31,
2020, respectively.
Total service
fees incurred were $
35.4
million and $
18.2
million for the years ended December 31, 2021 and 2020, respectively.
Taiwan Centers for Disease Control Grant (“Taiwan
CDC”)
UBI-Asia, which is responsible
for applying for and managing
grants on our behalf under
the COVID-19 program, was awarded
a grant
by the Taiwan
CDC for COVID-19 vaccine
development. The Company contracted with
UBI-Asia to conduct a
two-phase study of a
COVID-19 vaccine clinical trial
in Taiwan.
The grant provides that
costs incurred to complete
the two phases of
the clinical trial will
be reimbursed based on the achievement of certain milestones as provided in the agreement.
The Company provides administrative services to UBI-IP.
Under the arrangement, the Company issues vendor payments and provides
technical services mostly for legal services on behalf UBI-IP.
The Company bills UBI-IP for services based on the
costs incurred with
no markup.
Total
related party operating
activity,
including the activity
described above, for
the years ended
December 31, 2021
and 2020 are
as
follows (in thousands):
December 31,
Consolidated balance sheet
Assets
Prepaid expenses and other current assets
$
3,517
$
2,867
Property and equipment, net
Accrued expenses
-
Amounts due from related parties
Liabilities
Amounts due to related parties
19,407
8,004
Years
Ended December 31,
Consolidated statement of operations
Revenue
$
-
$
Cost of revenue
-
Operating expenses
Research and development
Services provided by related parties
41,430
17,987
Taiwan CDC grant reimbursement from related party
(7,199)
(2,948)
General and administrative
Services provided by related parties
1,173
3,147
19. Subsequent Events
The Company has evaluated subsequent events
through March 24, 2022 and has concluded
that no events or transactions have
occurred
that require disclosure in the accompanying consolidated financial statements.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our management, with the participation
of our principal executive officer
and principal accounting officer,
evaluated, as of the end
of
the period covered
by this Annual
Report on Form
10-K, the effectiveness
of our disclosure
controls and procedures
(as defined in
Rules
13a-15(e) and
15d-15(e) under
the Exchange
Act). In
designing and
evaluating our
disclosure controls
and procedures,
management
recognizes
that
any
controls
and
procedures,
no
matter
how
well
designed
and
operated,
can
provide
only
reasonable
assurance
of
achieving the desired control objectives. In addition,
the design of disclosure controls and procedures
must reflect the fact that there are
resource constraints, and that management is required to apply judgment in evaluating the benefits of possible
controls and procedures
relative to
their costs.
Based on
management’s
evaluation and
as a
result of
the material
weaknesses described
below,
our principal
executive officer and principal
accounting officer concluded that,
as of December
31, 2021, our
disclosure controls and
procedures were
not effective at the reasonable assurance level.
Report on Internal Control Over Financial Reporting
This Report does not include
a report of management’s
assessment regarding internal control over financial
reporting or an attestation
report of
our independent
registered public
accounting firm
due to
a transition
period established
by the
rules of
the SEC
for newly
public companies.
Material Weaknesses in Internal Control over Financial Reporting
A material
weakness is
a deficiency,
or combination
of deficiencies,
in internal
control over
financial reporting,
such that
there is
a
reasonable
possibility
that
a
material
misstatement
of
a
company’s
annual
and
interim
financial
statements
will
not
be
detected
or
prevented on a timely basis.
Management identified
material weaknesses
in the
design and
operation of
our internal
controls over
financial reporting
during the
preparation of our audited consolidated financial statements for the year ended December 31, 2021. These material weaknesses related
to:
•
performing our financial close
process, including account reconciliation
and analysis on a
timely basis, accruing for
related-party
transactions, recording stock-based
compensation expense and aggregating
and mapping amounts from
trial balances to
financial
statements;
•
ensuring
that
formal
processes
exist
for
identifying,
analyzing
and
accounting
for
key
contracts
and
complex,
non-routine
transactions; and
•
proper segregation of duties
and responsibilities within our
finance department, including authorization and
review of accounting
entries.
Remediation Measures
We
are
investing resources
to remediate
the material
weaknesses identified
in
the preparation
of
our audited
consolidated financial
statements for the year ended December 31, 2021 described above through a combination of hiring additional qualified accounting and
financial
reporting
personnel
and
further
evolving
and
refining
our
accounting
processes
and
policies.
These
remediation
activities
involve the following:
•
having hired, and continuing
to hire, additional accounting
personnel with the appropriate
level of skill and
experience for public
company financial reporting;
•
designing and implementing a formal financial close process that includes multiple levels of reviews of accounting entries; and
•
supplementing our
resources for
evaluating and
accounting for
complex transactions
and stock
options through
the use
of third-
party advisors.
While we
are working
to remediate
the
identified material
weaknesses as
timely and
efficiently
as possible,
at
this time
we cannot
provide an estimate
of costs expected
to be incurred
in connection with
our remediation efforts,
we cannot provide
an estimate of
the
time it will take
to complete remediation,
nor can we provide
assurance that our efforts
will successfully prevent
any errors or omissions
that may result because of these material weaknesses.
Changes in Internal Control over Financial Reporting
Other
than
the
measures
described
in
“Remediation Measures”
above,
there
were
no
changes
in
our
internal
control
over
financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2021 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

---

ITEM 11. EXECUTIVE COMPENSATION

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this Report:
(1)
Financial Statements. The
following consolidated
financial statements
and the
notes thereto,
and the
Reports of
Independent
Registered Public Accounting Firm are incorporated by reference as provided in Item 8 and Item 9A of this Report:
Audited Consolidated Financial Statements as of and for the years ended December 31, 2021 and 2020
Report of Independent Registered Public Accounting Firm
(PCAOB ID: 32)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Convertible Preferred Stock
Consolidated Statements of Stockholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules.
[IF ANY]
(b) Exhibits:
The following
exhibits required
by Item 601
of Regulation
S-K are
filed herewith
or have
been filed
previously with
the SEC
as indicated
below:
Exhibit
No.
Index to Exhibits
3.1
Amended and Restated Certificate of Incorporation of Vaxxinity,
Inc. to be in effect upon the completion of this
offering (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K (File No. 001-41058) filed on
November 17, 2021).
3.2
Amended and Restated Bylaws of Vaxxinity,
Inc. to be in effect upon the completion of this offering (incorporated by
reference to Exhibit 3.2 of our Current Report on Form 8-K (File No. 001-41058) filed on November 17, 2021).
4.1
Warrant to Purchase Shares of Class A Common Stock of Vaxxinity, Inc. (incorporated by reference to Exhibit 4.1 of
our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).
4.2
Description of Registered Securities*
10.1
Form of Indemnification Agreement between Vaxxinity, Inc. and each of its directors and executive officers
(incorporated by reference to Exhibit 10.1 of our Registration Statement on Form S-1 (File No. 333-260163) filed on
October 8, 2021).
10.2
Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K (File No.
001-41058) filed on November 17, 2021).
10.3
Voting Agreement, dated as of October 1, 2021, among Mei Mei Hu, Louis Reese, Blackfoot Healthcare Ventures LLC
and United Biomedical, Inc. (incorporated by reference to Exhibit 10.3 of our Registration Statement on Form S-1 (File
No. 333-260163) filed on October 8, 2021).§
10.4
Platform License Agreement, dated as of August 5, 2021, among Vaxxinity, Inc., United Biomedical, Inc., UBI IP
Holdings and UBI US Holdings, LLC (incorporated by reference to Exhibit 10.4 of our Registration Statement on Form
S-1 (File No. 333-260163) filed on October 8, 2021).§
10.5
United Neuroscience 2017 Share Option and Grant Plan (incorporated by reference to Exhibit 10.5 of our Registration
Statement on Form S-1 (File No. 333-260163) filed on October 8, 2021).+
10.6
C19 Corp. 2020 Stock Option and Grant Plan (incorporated by reference to Exhibit 10.6 of our Registration Statement
on Form S-1 (File No. 333-260163) filed on October 8, 2021).+
10.7
Vaxxinity, Inc. 2021 Stock Option and Grant Plan (incorporated by reference to Exhibit 10.7 of our Registration
Statement on Form S-1 (File No. 333-260163) filed on October 8, 2021).+
10.8
Letter agreement by and between United Neuroscience, LLC and Dr. Farshad Guirakhoo, dated May 4, 2020
(incorporated by reference to Exhibit 10.8 of our Registration Statement on Form S-1 (File No. 333-260163) filed on
October 8, 2021).+
10.9
Vaxxinity, Inc. 2021 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.9 of our
Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
10.10
Vaxxinity, Inc. 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.10 of our Registration
Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
10.11
Form of Incentive Stock Option Grant Notice under the 2021 Stock Option and Grant Plan (incorporated by reference to
Exhibit 10.11 of our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
10.12
Form of Non-Qualified Stock Option Grant Notice under the 2021 Stock Option and Grant Plan (incorporated by
reference to Exhibit 10.12 of our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5,
2021).+
10.13
Form of Restricted Stock Award Notice under the 2021 Stock Option and Grant Plan (incorporated by reference to
Exhibit 10.13 of our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
10.14
Form of Notice of Stock Option Award 2021 Omnibus Incentive Compensation Plan (incorporated by reference to
Exhibit 10.14 of our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
10.15
Form of Notice of Restricted Stock Unit Award 2021 Omnibus Incentive Compensation Plan (incorporated by reference
to Exhibit 10.15 of our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).+
21.1
Subsidiaries of Vaxxinity, Inc.*
23.1
Consent of Armanino LLP*
24.1
Power of attorney (included on signature page)
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002*‡+
101.INS
Inline XBRL Instance Document*
101.SCH
Inline XBRL Taxonomy Extension Schema Document*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document*
Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document).*
__________________________
*
Filed herewith.
†
Indicates management contract or compensatory plan, contract or arrangement.
§
Portions of the
exhibit, marked by
brackets, have
been omitted
because the
omitted information
(i) is not
material and
(ii) would
likely cause competitive harm if publicly disclosed.
‡ The certifications attached as Exhibits 32.1 that accompany this Form 10-K are deemed furnished and not filed with the
Securities and Exchange Commission and are not to be incorporated by reference into any filing of Vaxxinity, Inc. under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this
Form 10-K, irrespective of any general incorporation language contained in such filing.
(c) Schedules:
None