UNITED STATES
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WASHINGTON, D.C. 20549
FORM
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its 2022 annual meeting of shareholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year end of December 31, 2021. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
Intellia Therapeutics, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2021
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Forward-looking Information
This Annual Report on Form 10-K contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
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All of our express or implied forward-looking statements are as of the date of this Annual Report on Form 10-K only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Annual Report on Form 10-K that modify or impact any of the forward-looking statements contained in this Annual Report on Form 10-K will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.
Summary of the Material Risks Associated with Our Business
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PART I
Item 1. Business
Overview
We are a leading clinical-stage genome editing company, focused on developing novel, potentially curative therapeutics using CRISPR/Cas9 technology. CRISPR/Cas9, an acronym for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). To realize the transformative potential of CRISPR/Cas9-based technologies, we are building a full-spectrum genome editing company, by leveraging our modular platform, to advance in vivo and ex vivo therapies for diseases with high unmet need. For our in vivo programs to address genetic diseases, we use intravenously administered CRISPR as the therapy, in which our proprietary delivery technology enables highly precise editing of disease-causing genes directly within specific target tissues. For our ex vivo programs to address immuno-oncology and autoimmune diseases, we use CRISPR to create the therapy by engineering cells outside of the body. Our deep scientific, technical and clinical development experience, along with our robust intellectual property (“IP”) portfolio, enables us to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine.
Treating—and potentially curing—a broad range of severe diseases will require multiple gene editing approaches. With proprietary CRISPR/Cas9-based technology at the core of our platform, we continue to add new capabilities to expand our current solutions for addressing a multitude of life-threatening diseases. These additions include our proprietary base editor, as well as novel CRISPR enzymes, which provide us with the capabilities to achieve multiple editing strategies.
We continue to advance our platform’s modular solutions and research efforts on genome editing technologies as well as delivery and cell engineering capabilities to generate additional development candidates.
Our mission is to transform the lives of people with severe diseases by developing curative genome editing treatments. We believe we can deliver on our mission and provide long-term benefits for all of our stakeholders by focusing on four key elements:
Our lead in vivo candidate, NTLA-2001 for the treatment of transthyretin (“ATTR”) amyloidosis, as well as NTLA-2002 for the treatment of hereditary angioedema (“HAE”) are the first CRISPR/Cas9-based therapy candidates to be administered systemically, via intravenous infusion, for precision editing of a gene in a target tissue in humans. In parallel, we are developing ex vivo applications to address immuno-oncology and autoimmune diseases, where CRISPR/Cas9 is the tool that creates the engineered cell therapy. Our most advanced ex vivo programs include a wholly owned T cell receptor (“TCR”)-T cell candidate, NTLA-5001 for the treatment of acute myeloid leukemia (“AML”), and a program with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) to engineer hematopoietic stem cells (“HSCs”) for the treatment of sickle cell disease.
CRISPR/Cas9 Technology
The Nobel Prize-winning CRISPR/Cas9 system developed by one of our scientific co-founders, Dr. Jennifer Doudna, and her collaborators, offers a revolutionary approach for therapeutic development due to its broad ability to precisely edit the genome. This system can be used to make three general types of edits: knockouts, repairs and insertions. Each of these editing strategies takes advantage of the Cas9 endonuclease, an enzyme which can be programmed to edit double-stranded DNA at specific locations using a ribonucleic acid (“RNA”) molecule, called a guide RNA (“gRNA”). The desired edits result from naturally-occurring biological mechanisms that effect particular types of genetic alterations. CRISPR/Cas9 genome editing has the potential to make permanent, precisely targeted changes in a patient’s chromosomes and repair the underlying genetic mutation, whereas more traditional gene therapy typically
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involves introducing a non-permanent copy of a gene into a patient’s cells. These attributes of CRISPR/Cas9 provide a significant therapeutic edge over other gene therapy and costly earlier-generation genome editing technologies.
Strategy
Our goal is to build a full spectrum, fully integrated, product-driven biotechnology company, focused on developing and commercializing curative CRISPR/Cas9-based therapeutics. Our approach to advancing the broad potential of genome editing includes:
Focusing on Indications that Enable Us to Fully Develop the Potential of the CRISPR/Cas9 System. To maximize our opportunity to rapidly develop clinically successful products, we have applied a risk-mitigated approach to selecting indications with significant unmet medical needs based on four primary criteria:
We believe these selection criteria position us to build a diversified pipeline, in which we are not reliant on any single delivery technology or editing approach for success. This approach has the potential to increase the probabilities of success in our initial indications, and generate insights that will accelerate the development of additional therapeutic products. Specifically, we believe we can apply the learnings from our current programs to inform our selection of additional indications and targets of interest.
Aggressively Pursuing In Vivo Liver Indications to Develop Therapeutics Rapidly with Our Proprietary Delivery System. For our in vivo indications, we select well-validated targets in diseases with significant unmet medical needs where there are predictive biomarkers, or measurable indicators of a biological condition or state, with strong disease correlation and where the CRISPR/Cas9 technology and our proprietary delivery tools can be applied towards developing novel therapeutics. Our current in vivo pipeline targets diseases of the liver, including ATTR amyloidosis and HAE as a gene knockout approach to remove unwanted protein, all of which we believe we can address using our proprietary lipid nanoparticle (“LNP”) delivery system. In addition, we are exploring the use of our insertion platform to restore native protein including the treatment of alpha-1 antitrypsin deficiency (“AATD”), hemophilia A, hemophilia B, and additional disease indications.
Actively Developing and Expanding Ex Vivo Therapeutic Programs. We are independently researching and developing proprietary engineered cell therapies to treat various cancers and autoimmune diseases. Our initial focus is on TCR-engineered T cells for immuno-oncology applications, which could be used to treat various types of blood cancers and solid tumors. Our current ex vivo pipeline includes engineered cell therapies to treat cancers, such as AML.
Continuing to Leverage Strategic Partnerships to Accelerate Clinical Development. We view strategic partnerships as important drivers for accelerating the achievement of our goal of rapidly developing curative therapies. The potential application of CRISPR/Cas9 and derivative technologies is extremely broad, and we plan to continue to identify partners who can contribute meaningful resources and technical expertise to our programs and allow us to more rapidly bring scientific innovation to a broader patient population. Our ongoing partnership on in vivo programs for genetic diseases with Regeneron Pharmaceuticals, Inc. (“Regeneron”), a leader in genetics-driven drug discovery and development, and our collaborations with AvenCell Therapeutics, Inc. (“AvenCell”), a newly formed corporation with a world-leading clinical-stage universal chimeric antigen receptor T (“CAR-T”) platform; SparingVision SAS (“SparingVision”), a genomic medicine company developing vision saving treatments for ocular diseases; Kyverna Therapeutics, Inc. (“Kyverna”), a cell therapy company engineering a new class of therapies for autoimmune and inflammatory diseases; and ONK Therapeutics, Ltd. (“ONK”), a cell therapy company engineering a new class of natural killer (“NK”) cell therapies to treat cancer, exemplify this strategy.
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Growing Our Leadership Position in the Field of Genome Editing. We are committed to broadening our capabilities to remain at the cutting edge of genome editing research. We will continue to invest internally in developing our platform capabilities, including innovative genome editing, delivery and cell engineering technologies to advance our therapeutic programs. We will also continue to explore accessing external technologies or opportunities to enhance our leadership position in developing innovative therapeutics.
Our Pipeline
The following table summarizes the status of our most advanced programs:
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In Vivo Programs
Our selection criteria include identifying diseases that originate in the liver; have well-defined mutations that can be addressed by a knockout or insertion approach; have readily measurable therapeutic endpoints with observable clinical responses; and for which effective treatments are absent, limited or unduly burdensome. Our initial in vivo indications target genetic liver diseases, including our ATTR amyloidosis, HAE and AATD development programs. Our current efforts on in vivo delivery focus on the use of LNPs for delivery of the CRISPR/Cas9 complex to the liver.
Transthyretin (“ATTR”) Amyloidosis Program
Background
ATTR amyloidosis is a progressive and fatal disorder resulting from deposition of insoluble amyloid fibrils into multiple organs and tissues leading to systemic failure. Blood-borne transthyretin (“TTR”) protein is produced by hepatocytes and normally circulates as a soluble homotetramer that facilitates transport of vitamin A, via retinol binding protein, as well as the thyroid hormone, thyroxine. Mutations in the TTR gene lead to the production of TTR proteins that are destabilized in their tetramer form. These tetramers more readily dissociate into the monomeric form, and thence to an aggregative form that results in amyloid deposits in tissues. These deposits cause damage in those tissues, resulting in a disorder known as hereditary ATTR amyloidosis (“ATTRv”). Over 120 different genetic mutations are currently known to cause ATTRv.
Deposits of TTR amyloid in the heart, nerves and/or other tissues can lead to diverse disease manifestations, including two main hereditary forms – ATTRv with polyneuropathy (“ATTRv-PN”), and ATTRv with cardiomyopathy (“ATTRv-CM”). Typical onset of disease symptoms is during adulthood and can be fatal within two to 15 years. Estimates suggest that approximately 50,000 patients suffer from ATTRv worldwide.
In addition to the hereditary forms described above, ATTR amyloidosis can also develop spontaneously in the absence of any TTR gene mutation. This wild-type ATTR (“ATTRwt”) is increasingly being recognized as a significant and often undiagnosed cause of heart failure in the elderly and is the subject of active investigation. Recent estimates suggest that, globally, between 200,000 and 500,000 people may suffer from ATTRwt with cardiomyopathy (“ATTRwt-CM”).
Limitations of Current Treatment Options
Currently, there are two therapies for the treatment of ATTRv-PN approved in the United States (“U.S.”), and three approved in most major markets outside of the U.S. While these therapies have shown the potential to slow or halt the progression of neuropathic symptoms, and in some patients lead to an improvement in symptoms, their approved prescribing instructions require them to be administered chronically for the life of the patient in order to sustain benefit. Additionally, patient response to these therapies varies. While some patients may experience symptomatic improvement after being treated with these therapies, the disease continues to progress in many of the treated patients, which highlights the continued need for efficacious and potentially curative therapies. At present, there is only one therapy approved for ATTR-CM (including both ATTRv-CM and ATTRwt-CM) which has shown the ability to improve patient outcomes, though most patients still appear to have the progressive disease. As with the treatments for ATTRv-PN, chronic, lifetime dosing is required to sustain the therapeutic effects.
Our Approach
NTLA-2001 is designed as an in vivo liver gene knockout approach for the treatment of ATTR amyloidosis. We believe that by disabling the TTR gene in the liver with CRISPR/Cas9 technology, we have the potential to cure ATTR amyloidosis. We expect this approach to greatly reduce the production of circulating TTR protein levels, which should slow or stop the accumulation of undesired TTR protein in the nerves and the heart, thereby halting and potentially reversing disease progression. Using this approach, we aim to address both forms of the disease - ATTRv and ATTRwt. Current treatments and ongoing clinical trials in ATTRv-PN have shown a significant correlation between TTR protein reduction and clinical benefit. Additionally, these studies suggest that loss of TTR gene expression from the liver would be well-tolerated in adult humans. We believe our approach may improve patient outcomes by potentially eliminating defective TTR protein in a single dose, as opposed to life-long therapy. We have assessed delivery of gRNAs directed at the TTR gene together with Cas9 messenger RNA (“mRNA”) via LNPs and have
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achieved high levels of liver cell editing in vitro and in vivo, as well as reduction of serum TTR protein in multiple animal models.
In non-human primate (“NHP”) studies, we have demonstrated our ability to reduce circulating TTR protein to estimated therapeutically relevant levels after a single systemic administration of LNPs containing our CRISPR/Cas9 complex. In December 2019, we completed a year-long durability study of our lead LNP formulation, maintaining an average reduction of more than 95% of serum TTR protein after a single dose in NHPs. The data from our various NHP studies has shown that following editing, our proprietary modular LNP delivery system is rapidly cleared from circulation, such that exposure to components is transient and all CRISPR/Cas9 complex is undetectable in blood within 14 days of administration.
About the NTLA-2001 Clinical Program
Our global Phase 1 study is an open-label, multi-center, two-part study of NTLA-2001 in adults with ATTRv-PN or ATTR-CM. The trial’s primary objectives are to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of NTLA-2001. Patients receive a single dose of NTLA-2001 via intravenous administration. The study will enroll up to 38 ATTRv-PN participants (ages 18-80 years) and up to 36 ATTR-CM participants (ages 18-90 years) and consists of a single-ascending dose phase in Part 1 and, following the identification of a recommended dose, an expansion phase in Part 2. The ongoing first-in-human study is currently being conducted in the United Kingdom (“U.K.”), New Zealand and Sweden. NTLA-2001 has received orphan drug designation for the treatment of ATTR amyloidosis by both the European Commission (“EC”) and the U.S. Food and Drug Administration (“FDA”).
On June 26, 2021, at the Peripheral Nerve Society (“PNS”) Annual Meeting and in the New England Journal of Medicine, we publicly disclosed positive interim data from our ongoing Phase 1 study of NTLA-2001. The interim data cover the first six ATTRv-PN patients across two single-ascending dose cohorts of the Phase 1 study. Single doses of either 0.1 mg/kg or 0.3 mg/kg of NTLA-2001 were administered systemically. Reductions in serum TTR levels were measured from baseline to day 28. Treatment with NTLA-2001 led to dose-dependent reductions in serum TTR, with mean reductions of 52% among the three patients in the 0.1 mg/kg dose group, and 87% among the three patients in the 0.3 mg/kg dose group, including one patient with a 96% reduction. At both dose levels, NTLA-2001 was generally well-tolerated by the six ATTRv-PN patients included in the interim analysis, with no serious adverse events or abnormal coagulation or liver findings by day 28.
NTLA-2001 is completing the dose-escalation portion of the study, to determine the recommended dose for evaluation in Part 2 of the study, a single-dose expansion cohort. For the third cohort in the dose-escalation portion, we will be evaluating NTLA-2001 at the 1 mg/kg dose level. During the third quarter, to more fully elucidate the dose-response relationship, we began dosing subjects in Cohort 4, evaluating NTLA-2001 in patients with ATTRv-PN at the 0.7 mg/kg dose level. We plan to present interim data from all four cohorts in the single-ascending dose phase in Part 1 at a company-sponsored event and to initiate Part 2, a single-cohort expansion, in the first quarter of 2022. Data to be presented will include safety and serum TTR knockdown for Cohorts 3 and 4 as well as an early look at durability across all cohorts.
We also accelerated the development of NTLA-2001 for the treatment of patients with ATTR-CM. In November 2021, we announced that the U.K. Medicines and Healthcare products Regulatory Agency (“MHRA”) had approved a protocol amendment for our ongoing Phase 1 study of NTLA-2001 to include patients with either ATTRv-CM or ATTRwt-CM. The study of NTLA-2001 in patients with cardiomyopathy will be enrolled in new dose-escalation and expansion cohorts. In December 2021, the first patient in the cardiomyopathy arm of the Phase 1 study was treated with NTLA-2001. We expect to complete enrollment of the Phase 1 study for both ATTRv-PN and ATTR-CM subjects in 2022.
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NTLA-2001 is part of a co-development and co-promotion (“Co/Co”) agreement directed to our first collaboration target with Regeneron, ATTR (the “ATTR Co/Co”), for which we are the clinical and commercial lead party and Regeneron is the participating party. Regeneron shares in approximately 25% of worldwide development costs and commercial profits for the ATTR program. For more information regarding our collaboration with Regeneron, see the section below entitled “Collaborations - Regeneron Pharmaceuticals, Inc.”
Hereditary Angioedema (“HAE”) Program
Background
HAE is a rare genetic disorder characterized by recurrent, painful and unpredictable episodes of severe swelling. The most common areas of the body to develop swelling are the limbs, face, intestinal tract and airway. Minor trauma or stress may trigger an attack but swelling often occurs without a known trigger. Episodes involving the intestinal tract cause severe abdominal pain, nausea and vomiting. Swelling in the airway can restrict breathing and lead to life-threatening obstruction of the airway. The disease is caused by increased levels of bradykinin, a protein which leads to swelling. Most patients with HAE have a deficiency of C1 esterase inhibitor (“C1-INH”) protein, which normally prevents the unregulated release and buildup of bradykinin. HAE is estimated to affect 1 in 50,000 people, with an estimated 11,000 to 21,500 diagnosed HAE patients in the U.S. and Europe.
Limitations of Current Treatment Options
Currently, there are multiple therapies approved to treat HAE, including acute and prophylactic approaches. Acute treatments are used to treat patients who are experiencing an attack. Prophylactic treatments are used to reduce the number of attacks that a patient may experience. Prophylactic treatments have proven to be effective in reducing the number of attacks for most patients, though some patients still experience breakthrough attacks and such treatment options require regular injections that can be associated with significant treatment burden and impact on quality of life.
Our Approach
Using our modular LNP delivery system, we aim to knock out the kallikrein B1 (“KLKB1”) gene with a single dose to permanently reduce the plasma kallikrein activity and thereby ameliorate the frequency and intensity of HAE attacks. We expect our approach should eliminate the current, significant treatment burden for people living with HAE and minimize the risk of breakthrough attacks with extensive and continuous reduction in plasma kallikrein activity. We believe KLKB1 knockout to be safe, as humans with prekallikrein deficiency appear to have no known health effects. In addition, inhibition of kallikrein activity has proven to be clinically effective as a prophylactic treatment for HAE.
On May 7, 2020, we announced NTLA-2002 as our wholly owned development candidate for the treatment of HAE. We have completed an NHP durability study of our lead LNP formulation in support of NTLA-2002, which resulted in a 24 month-long therapeutically relevant reduction of serum kallikrein protein levels and activity following a single dose.
About the NTLA-2002 Clinical Program
The multi-national Phase 1/2 study will evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of NTLA-2002 in adults with Type I or Type II HAE. This includes the measurement of kallikrein protein levels and activity as determined by HAE attack rate measures. The Phase 1 portion of the study is an open-label, single-ascending dose design used to identify up to two dose levels of NTLA-2002 that will be further evaluated in the randomized, placebo-controlled Phase 2 portion of the study. This Phase 1/2 study is intended to identify the dose of NTLA-2002 for use in future studies. In December 2021, we announced that the first patient was dosed with NTLA-2002. The first-in-human study is expected to evaluate the safety, tolerability and activity of NTLA-2001 in adults with Type I or Type II HAE. We expect to present interim data from the Phase 1/2 study in the second half of 2022. These data are expected to characterize the emerging safety and activity profile of NTLA-2002, and to potentially demonstrate preliminary proof-of-concept.
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Alpha-1 Antitrypsin Deficiency (“AATD”) Program
Background
AATD is a genetic disorder that results in increased risk for lung and/or liver disease. Alpha-1 antitrypsin (“A1AT”), which is encoded by the SERPINA1 gene, is a serine protease inhibitor that is primarily produced in the liver and has a wide range of biological functions, one of which is to inhibit neutrophil elastase. Patients with AATD have genetic variants of A1AT which cause the enzyme to accumulate in the liver, reducing the amount of functioning A1AT in the bloodstream. This has two prominent potential downstream clinical manifestations. The first is an increased risk for progressive liver disease, resulting from an accumulation of mutant A1AT enzyme in the liver. The second, and more common, effect is enhanced risk for emphysema resulting from reduced inhibition of neutrophil elastase in the lungs. Both clinical manifestations are progressive and potentially fatal.
It is estimated that there are approximately 250,000 individuals globally and 60,000 in the U.S. with the ZZ genotype, the genotype most associated with AATD and the downstream clinical manifestations. There are another 1.25 million individuals globally estimated to have the SZ genotype, who are also at enhanced risk of developing AATD. While augmentation therapy is available for the treatment of AATD, the effect on pulmonary exacerbations and on the progression of emphysema in AATD has not been conclusively demonstrated in randomized, controlled clinical trials. Also, at present, there are no therapies that have been approved for the treatment of liver disease resulting from AATD.
Limitations of Current Treatment Options
There are multiple therapies approved by the FDA to treat patients with emphysema caused by hereditary AAT deficiency. All marketed therapies are alpha-1 proteinase inhibitors (alpha-1 antitrypsin) given through intravenous infusion, with the goal of augmenting naturally-occurring low levels of A1AT. To maintain benefit, current therapies are usually given weekly for the duration of a patient’s lifetime. Currently marketed therapies may slow the progression of disease and lung dysfunction, but there remains high unmet need for more effective, and less burdensome, therapies that can further slow, halt, or even reverse disease progression.
Our Approaches
NTLA-3001
In October 2021, we announced the nomination of NTLA-3001, our development candidate for the treatment of AATD-associated lung disease. NTLA-3001 is our first wholly owned CRISPR/Cas9-mediated in vivo gene insertion development candidate. It is designed with the aim to precisely insert a functional SERPINA1 gene, which encodes the A1AT protein in the liver, with the potential to permanently restore expression of functional A1AT protein levels after a single dose. This approach aims to address AATD-associated lung disease and eliminate the need for sub-optimal weekly IV infusions of A1AT augmentation therapy or transplant in severe cases.
In October 2021, we presented data showing that insertion of a healthy form of the SERPINA1 gene led to normal human A1AT levels in NHPs which were durable through 52 weeks in an ongoing study. We are conducting Investigational New Drug (“IND”)-enabling activities for NTLA-3001 with plans to file an IND application or IND-equivalent application in 2023.
NTLA-2003
In February 2022 we announced NTLA-2003, a wholly owned in vivo knockout development candidate for the treatment of AATD-associated liver disease. It is designed to inactivate the SERPINA1 gene responsible for the production of abnormal A1AT protein in the liver. This approach aims to halt the progression of liver disease and eliminate the need for liver transplant in severe cases.
We have presented data showing that knockout of the SERPINA1 gene led to reduction of the abnormal A1AT, the endogenous disease-associated protein, in NHPs. We are advancing towards IND-enabling activities for this program.
In Vivo Research Programs
We continue to work on various liver-focused programs, such as hemophilia A and hemophilia B, which we are co-developing with Regeneron, primary hyperoxaluria type 1, as well as other liver targets, which are worked on both
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independently and in partnership with Regeneron, which leverage our capabilities to knockout, insert and make consecutive edits to the genome.
In the third quarter of 2021, we and Regeneron, the lead party for this program, nominated a Factor 9 (“F9”) gene insertion development candidate for our Hemophilia B (“Hem B”) program, leveraging our jointly developed targeted transgene insertion capabilities to insert F9. F9 is a gene that encodes for Factor IX (“FIX”), a blood-clotting protein that is missing or defective in Hem B patients. In preclinical studies, we and Regeneron demonstrated the first CRISPR/Cas9-mediated targeted transgene insertion in the liver of NHPs, which resulted in circulating FIX levels at or above those found in normal human plasma. At the 2019 American Society of Gene and Cell Therapy Annual Meeting, we presented data demonstrating the first CRISPR/Cas9-mediated, targeted transgene insertion in the liver of NHPs, using F9 as a model gene. Following a single dose to NHPs of the hybrid LNP-adeno-associated virus (“AAV”) delivery system containing an F9 DNA template, we demonstrated that the circulating human FIX protein levels achieved in NHPs were at or above normal levels. Additionally, the NHP data expands on the durability of clinically relevant human FIX protein levels achieved in mice for over 12 months.
In September 2020, we presented data that showed the persistence of in vivo CRISPR/Cas9 edits in regenerated liver tissue, both knockout and insertion, and corresponding durability of effect following a partial hepatectomy (“PHx”) and liver regrowth in a murine model. Unlike traditional gene therapy, for which a significant loss (over 80%) in transgene expression was observed in the insertion PHx model, our targeted gene insertion approach yielded durable edits, with no significant loss in expression.
We are further investigating delivery strategies that target tissues outside of the liver. For example, at the Keystone eSymposium: Precision Engineering of the Genome, Epigenome and Transcriptome in March 2021, we presented preclinical data establishing proof-of-concept for non-viral genome editing of bone marrow and HSCs in mice. This represented our first demonstration of systemic in vivo genome editing in bone marrow using our proprietary non-viral delivery platform. We believe these results extend our modular in vivo capabilities to treat inherited blood disorders such as sickle cell disease. In addition, we announced a collaboration with SparingVision to develop novel genomic medicines utilizing CRISPR/Cas9 technology for the treatment of ocular diseases.
Following the nomination of NTLA-2003, we plan to advance at least one new in vivo development candidate by the end of 2022.
Ex Vivo Programs
We are independently researching and developing proprietary engineered cell therapies to treat various oncological and other disease indications, for example TCR-engineered T cells and CAR-T cells for immuno-oncology applications and engineered regulatory T cells for autoimmune disorders. Our diverse product strategy includes multiple elements. In particular:
In addition, we strategically partner with others who possess complementary capabilities or technologies to bring forth innovative engineered cell therapies outside of our core areas of focus. This includes collaborations with AvenCell and Kyverna, who will be leveraging our ex vivo genome editing platform to develop novel cell therapies for a variety of therapeutic indications, as well as ONK to advance CRISPR-edited NK cell therapies. Further, our partner Novartis is developing therapies directed to selected targets using CAR-T cells for oncology indications, as well as HSC and ocular stem cell (“OSC”)-based therapies.
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Acute Myeloid Leukemia (“AML”)
Background
AML includes a heterogeneous group of blood cancers arising from the malignant expansion of hematopoietic cells of the myeloid lineage. AML is associated with weakness, fatigue and bleeding resulting from the depletion of healthy myeloid cells, and is typically rapidly progressive and fatal without immediate treatment. AML is an aggressive and hard-to-treat cancer, resulting in less than 30% of patients living more than five years after diagnosis. AML is the most common acute leukemia in adults and is associated with the largest number of annual deaths from leukemia in the U.S. It is estimated that there were over 11,000 deaths due to AML, as well as nearly 20,000 new AML cases in the U.S. in 2020. While AML can occur at any age, the prevalence of the disease increases with age, resulting in a median age at diagnosis of 68 years.
Limitations of Current Treatment Options
Induction chemotherapy, most commonly with cytarabine and anthracycline, represents the standard first-line treatment option for patients who can tolerate an intensive treatment regimen. Patients who achieve remission with induction typically receive additional chemotherapy or an HSC transplant as consolidation therapy. While this treatment approach has the potential to lead to sustained remission or even cure patients, the intensity of these treatments is associated with significant morbidity and mortality. Patients who are older, who represent a significant proportion of the patient population, are often unable to be treated with an intensive regimen and are commonly treated with BCL-2 inhibitors, lower intensity chemotherapy or hypomethylating agents. While these therapies offer the potential to prolong survival and address some of the clinical symptomatology associated with AML, they are not generally considered to be potentially curative treatments. Even among patients who are considered fit enough to receive an intensive regimen, a significant proportion of patients are refractory (i.e., do not achieve a complete remission). Further, relapse is common even among those patients who achieve a remission.
Over the past several years, new treatments have emerged for AML with different mechanisms of action. While these treatments have led to improvements in response rates and in some cases increased overall survival, the outcomes demonstrated thus far have been incremental in nature and long-term outcomes in AML continue to be extremely poor.
Our Approach
NTLA-5001 is our engineered T cell therapy development candidate for the treatment of AML, utilizing our TCR-directed approach to target the WT1 intracellular antigen and restricted to the HLA-A*02:01 allele. As WT1 is overexpressed in >90% of AML blasts, we are developing NTLA-5001 as a broadly applicable treatment for AML, regardless of mutational subtypes of a patient’s leukemia. This approach employs CRISPR/Cas9 complexes to knock out and replace the patient’s endogenous TCR with a natural, high avidity therapeutic TCR. The resulting cells are engineered to be capable of specific and potent killing of AML blasts without bone marrow cell toxicity. In December 2020, we presented data on NTLA-5001 highlighting the high anti-tumor activity observed in proof-of-concept mouse models of acute leukemias and the faster expansion and superior function of T cells manufactured by our proprietary approach, compared to T cells engineered with a standard genome editing process.
About the NTLA-5001 Clinical Program
In September 2021, we announced that the FDA had accepted the IND application for NTLA-5001. This first-in-human Phase 1/2a study will evaluate the safety, tolerability, cell kinetics and anti-tumor activity of a single dose of NTLA-5001 in adults who have detectable AML after having received standard first-line therapies. The study will contain a dose escalation and expansion phase, with up to 54 participants. The dose-escalation phase of the study will include two independent arms of up to three cohorts: Arm 1 will consist of adults with AML with lower disease burden, defined as those with less than 5% blasts in bone marrow, while Arm 2 will consist of adults with AML with higher disease burden, defined as those greater than or equal to 5% blasts in bone marrow. Once a dose is identified in each arm, two expansion cohorts will be opened for further assessment of safety and activity in patients with persistent or recurrent AML who have previously received first-line therapies.
In the fourth quarter of 2021, we initiated screening of patients in the Phase 1/2a study of NTLA-5001 for patients with AML. We have begun enrolling patients and we expect to dose our first patient in the coming weeks. Later this
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year, we plan to provide guidance around timing of the first expected data readout, with the goal of demonstrating clinical proof-of-concept for its TCR-based platform.
Hodgkin’s Lymphoma
Background
Hodgkin’s Lymphoma is a lymphoma that arises typically from B lymphocytes and spreads through the lymphatic system, a component of the immune system. Hodgkin’s Lymphoma usually affects younger individuals, with a median age of diagnosis less than 40-years-old. In the U.S. alone, almost 9,000 individuals are diagnosed annually with Hodgkin’s Lymphoma.
Limitations of Current Treatment Options
Current treatments are associated with significant toxicity and require treatment cycles over the course of several months. Additionally, individuals that relapse after initial therapy and are not eligible for transplants typically have poorer prognoses, with little opportunity for a curative therapy.
Other CD30+ Lymphomas
Background
CD30+ lymphomas (other than Hodgkin’s Lymphoma) include various peripheral T-cell lymphomas (“PTCL”), cutaneous T-cell lymphomas (“CTCL”), and other T- and NK-cell lymphomas. These are a heterogeneous group of lymphomas that are typically diagnosed in patients over 60 years of age, and have 5-year overall survivals that typically range from 20 – 50%, but may be as high as 70 – 90% for select subtypes. It is estimated in the U.S. that there are over 3,000 individuals diagnosed with a CD30+ lymphoma every year.
Limitations of Current Treatment Options
Current treatment options mainly consist of chemotherapy regimens, which generally have poor outcomes. Additionally, given the heterogeneity of CD30+ lymphomas, clinically-validated treatment options across CD30+ lymphomas are limited.
Our Approach
NTLA-6001 is our wholly owned allogeneic CAR-T development candidate targeting CD30 for the treatment of CD30-expressing hematologic cancers including relapsed or refractory classical Hodgkin’s Lymphoma (“cHL”). NTLA-6001 is developed using our proprietary allogeneic cell engineering platform, which leverages a novel combination of sequential gene edits. Preclinical data presented on its differentiated allogeneic engineering platform showed allogeneic T cells were shielded from immune rejection, both host T and NK cell attack. We are advancing NTLA-6001 towards IND-enabling activities and plan to present preclinical data in support of NTLA-6001 at an upcoming scientific conference this year.
Ex Vivo Research Programs
We are developing engineered cell therapies to treat a range of hematological and solid tumors. We are pursuing modalities, such as TCR, with broad potential in multiple indications. We continue to advance efforts to move from autologous to allogeneic therapies and from liquid to solid tumors. Our researchers are developing and improving cell-engineering manufacturing and delivery processes that, we believe, may allow us to deliver T cell therapies with high levels of editing, robust levels of cell expansion, desirable memory phenotypes, improved function and no translocations above background levels.
Our proprietary T cell engineering process using LNPs to engineer cell therapies enables multiple, sequential gene edits. We have shared preclinical data demonstrating that our LNP-based engineering technology is a significant improvement over electroporation, the standard engineering process used, to introduce proteins and nucleic acids into cells. The resulting T cells engineered with LNPs had improved cell properties and performance both in vitro and in vivo as compared to electroporation. The data support the ability of our platform to be used for a variety of targeting
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modalities, including CAR and TCRs, and to support both autologous and allogeneic T cell candidates. The LNP-based approach is already being used for NTLA-5001.
In March 2021, we presented our first preclinical data set on our novel, proprietary cytosine deaminase base editor technology. We demonstrated the technology’s potential for enhanced cell engineering, with multiple simultaneous gene knockouts achieving >90% T cell editing efficiency and no detectable increase in translocation above background levels.
Novartis-Led Sickle Cell Disease and Other Research Programs
In December 2019, the research term under our collaboration agreement with Novartis entered into in 2014 (the “2014 Novartis Agreement”) ended, although the 2014 Novartis Agreement remains in effect. Under the 2014 Novartis Agreement, Novartis has selected particular CAR-T cell, HSC and OSC targets for continued development. Novartis has initiated clinical studies for OTQ923 and HIX763, two therapeutic candidates, based on CRISPR/Cas9 editing of HSCs that resulted from our research collaboration with Novartis. Novartis is currently recruiting patients for its Phase 1/2 study of these investigational candidates for treatment of sickle cell diseases. Novartis is developing several other product candidates arising from the 2014 Novartis Agreement. For more information regarding our collaboration with Novartis, see the section below entitled “Collaborations - Novartis Institutes for BioMedical Research, Inc.”
Our Genome-Editing Platform
Our robust genome-editing platform forms the foundation of our full-spectrum therapeutic product pipeline based on CRISPR/Cas9 and derivative technologies. Our modular platform is based on our proprietary components that can serve both in vivo and ex vivo programs, as well as our delivery technologies that can be used in either program type. In addition to the components described below, we have developed robust, high volume (high throughput) capabilities centering around enabling strategic target identification and validation that we believe will provide us with a competitive advantage in creating successful therapeutic products.
We are committed to staying at the forefront of the genome editing revolution and will continue to advance our technology platform through a mix of both internal research and development and external opportunities in order to potentially serve more patients across a broad set of diseases. With proprietary CRISPR/Cas9-based technology at the core of our platform, we continue to add new capabilities to expand our current solutions for therapeutic application. These additions include our proprietary base editor, as well as novel CRISPR-derivative enzymes, which provide us with the capabilities to achieve multiple editing strategies. Consistent with our ambitions to build the broadest genome editing toolbox, in February 2022, we announced the acquisition of Rewrite Therapeutics, Inc. (“Rewrite”), a private biotechnology company focused on advancing novel DNA writing technologies. Rewrite has developed promising new tools for genome editing, including DNA writing via CRISPR/Cas9-guided polymerases. These new tools may enable targeted corrections, insertions, deletions, and the full range of single-nucleotide changes, which could provide new ways to edit disease-causing genes and broaden the therapeutic potential for genomic medicines.
Informatics
We have built a high throughput, scalable data processing and analysis, or informatics, infrastructure to support various aspects of our platform, including gRNA selection and evaluation of on- and off-target editing in cells. Depending on the desired editing strategy, we use proprietary bioinformatics methods to design candidate guides and select those that we believe are both highly specific and have high cutting efficiency. As we grow our experimental data set, we continue to incorporate gRNA performance into our algorithms to improve their predictive power.
Guide RNA qualification
As part of the process to identify gRNAs for potential development candidates, we screen numerous gRNAs for their ability to generate the required edit at the genomic site of interest, called on-target activity, as well as any potential propensity to generate unwanted events at other sites in the genome, also known as off-target activity. To evaluate on-target activity, we use high throughput sequencing methods to analyze the genomes of edited cells, allowing us to assess overall editing efficiency and to examine the nature of the editing events, such as specific insertions or deletions.
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For gRNAs selected through our primary on-target screens, we perform a variety of analyses to look for possible off-target editing events, including bioinformatic evaluations and experimental methods. Part of our approach involves identifying candidates with no or few off-target sites based on experimental measurements of genome-wide DNA breaks, as well as targeted sequencing of such candidate sites to evaluate actual off-target editing events in relevant cell types. We continue to optimize our gRNA qualification capability over time by increasing our throughput, improving our off-target activity detection accuracy and increasing our bioinformatics predictive accuracy.
Guide RNA format
CRISPR/Cas9 systems can function with gRNAs having a variety of modifications, such as changes to the gRNA sequence or chemical modifications of nucleotides. As part of our development of CRISPR/Cas9 therapeutics, we have engineered modified gRNAs to, for example, improve editing efficiency, specificity and stability inside cells, as well as to reduce the likelihood of an immune response. We believe our work in this area will allow us to develop the most appropriate gRNAs for therapeutic applications.
Nuclease
Our current preferred Cas9 protein is derived from a species of bacteria called S. pyogenes (“Spy”), which is the Cas9 used in the vast majority of published CRISPR/Cas9 literature to date. We are exploring other naturally occurring Cas9 proteins and nucleases from other bacteria, which may differ from Spy Cas9 in aspects such as specificity, size or mechanism of DNA recognition, binding and cutting. We are pursuing these alternative Cas9 forms and other nucleases through ongoing internal work, collaborations with our existing partners and scientific founders, and in-licensing opportunities. We also are investigating targeted modifications of Cas9 that can modulate DNA activity by mechanisms other than cleavage. We believe that different therapeutic applications may be best addressed using different forms of Cas9 or other nucleases, depending on the target cell or tissue of interest, the delivery method and the desired type of edit.
Cas9 Edit Type
Knockout
The CRISPR/Cas9 system, by itself, primarily functions to cut DNA, while the resulting desired therapeutic editing events are performed by the cell, subsequent to the cut, as the cell seeks to rejoin the cut ends. One type of edit is caused by a DNA repair mechanism that is prone to losing or adding short lengths of DNA around the cut site. The resulting changes in the DNA impair the function of any encoded protein, causing a knockout edit. Using a combination of our informatics, gRNA qualification and format, and nuclease platform capabilities, we have developed an efficient process to identify gRNAs that create this kind of edit at high frequency while possessing high specificity for the on-target site and no substantial off-target effects.
Based on both NHP and rodent disease models, we have demonstrated the ability to knockout multiple targets in the liver, including TTR, KLKB1, SERPINA1, hydroxyacid oxidase 1 (“HAO1”) and lactate dehydrogenase A (“LDHA”). We believe these data demonstrate the modular nature of our proprietary LNP delivery system.
Gene Insertion
While knockout edits can be made using solely a Cas9 protein and gRNA, other kinds of editing, involving repair and insertion, additionally require a template DNA that contains a desired genomic sequence that may be inserted or used to correct a patient’s original sequence. For ex vivo applications, in addition to delivering a Cas9-gRNA complex to cleave the cellular DNA sequence at the desired location, the desired DNA template may be delivered by physical means such as LNP in combination with a Cas9-gRNA complex, or by other means such as viral vectors or chemical means. For in vivo applications, we have developed combination approaches for delivering the editing machinery by LNP, and the repair and insertion templates by AAV vectors. We are currently working closely with Regeneron to advance insertion programs for the treatment of hemophilia A and hemophilia B and are also independently evaluating the hybrid LNP-AAV delivery system for targeted insertion across several other transgenes of interest in an in vivo setting.
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Consecutive Editing
Consecutive editing is any combination of knockout and insertion strategies. At the 2021 European Society of Gene and Cell Therapy Annual Meeting, we reported the first demonstration of a consecutive in vivo gene insertion and knockout in an NHP model of AATD. The consecutive edits led to durable production of normal human A1AT protein levels and reduction of endogenous disease-associated protein in the ongoing NHP study.
In Vivo Delivery
We are focusing our initial in vivo applications in the liver, where we deliver the CRISPR/Cas9 therapy intravenously to patients using our proprietary LNP platform.
Our proprietary LNPs encapsulate the therapeutic cargo, providing it with stability, selective delivery, improved pharmacologic properties and controlled circulation time. Our therapeutic cargo is designed to degrade relatively quickly, resulting in transient expression of Cas9. We see multiple advantages of using LNPs as an in vivo delivery vehicle, particularly as optimized by us for delivery of the CRISPR/Cas9 system or its components. First, LNPs have been clinically validated as an effective delivery vehicle of therapeutic nucleic acids to the liver after intravenous administration. For example, Onpattro is an LNP-based, approved drug for delivery of small interfering RNA (“siRNA”). Clinical data also supports the use of LNP for delivery of mRNA for protein expression. LNPs have shown to have favorable tolerability in humans, with toxicities being dose-dependent, monitorable and reversible. Additionally, LNPs are chemically well-defined and have a completely synthetic route of manufacture, which permits greater scalability, product quality and controls. LNPs are tunable, do not exhibit cargo size limitations and can co-formulate different nucleic acid components, such as mRNA and gRNAs. There is no pre-existing immunity to the LNP or limiting de novo immunity after dosing, allowing for repeat dosing as required by the therapeutic approach. We are currently advancing our programs using our proprietary LNP delivery system, which uses a set of biodegradable, well-tolerated lipids, based on lipids originally developed by Novartis and in-licensed by us for use with all genome editing technologies, including CRISPR/Cas9 products. To date, we have successfully demonstrated well-tolerated in vivo editing in various animal models, including in mouse, rat and NHP livers, with a single dose of systemically delivered LNPs. In addition, we have moved into early-stage human clinical trials using LNPs as the delivery mechanism. Based on interim data reported from the first-in-human study of NTLA-2001, we have also successfully demonstrated LNP delivery of CRISPR/Cas9 is well-tolerated in humans.
We plan to continue to further improve on our LNP system to optimize delivery of a variety of CRISPR/Cas9 therapeutic components, including templates for repair and insertion edits. In parallel, we are exploring additional delivery vehicles, including synthetic particles and viral vectors. We also are developing delivery strategies that we believe will allow us to target other tissues.
Ex Vivo Delivery
Cellular therapies are based on the administration of engineered human cells that are modified to provide or restore necessary functions in the cells of patients, or to target and eliminate cells with harmful attributes, such as cancer cells. The cells to be modified ex vivo can come from the individual patient (autologous source) or from another individual (allogeneic source). The CRISPR/Cas9 system can be used to modify cells outside the body using clinically proven delivery methods, such as electroporation. We are exploring these standard methods in parallel with our own newly-developed proprietary ex vivo delivery methods, which may provide advantages such as increased delivery efficiency and cell viability.
Ex Vivo Allogeneic Platform
In October 2021, we shared the first preclinical data highlighting our proprietary allogeneic cell engineering platform, demonstrating its potential to prevent immune rejection of allogeneic T cells for application in TCR-T and CAR-T cell therapy. Our proprietary approach leverages a novel combination of sequential gene edits and does not rely on long-term, aggressive immune suppression of patients, or the selective knock out of class I proteins, approaches currently employed by others to address the challenge of host rejection of the adoptive cell therapy.
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Collaborations and Other Arrangements
To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, we have formed, and intend to seek other opportunities to form, strategic alliances with collaborators who can augment our leadership in CRISPR/Cas9 therapeutic development.
Regeneron Pharmaceuticals, Inc. (“Regeneron”)
In April 2016, we entered into a license and collaboration agreement with Regeneron (the “2016 Regeneron Agreement”). The 2016 Regeneron Agreement has two principal components: (i) a product development component under which the parties will research, develop and commercialize CRISPR/Cas-based therapeutic products primarily focused on genome editing in the liver; and (ii) a technology collaboration component, pursuant to which the parties will engage in research and development activities aimed at discovering and developing novel technologies and improvements to CRISPR/Cas technology to enhance our genome editing platform. We may also access the Regeneron Genetics Center and proprietary mouse models to be provided by Regeneron for a limited number of our liver programs. At the inception of the 2016 Regeneron Agreement, Regeneron selected the first of its 10 targets, ATTR, which is subject to a co-development and co-promotion agreement between us and Regeneron (the “ATTR Co/Co”).
On May 30, 2020, we entered into (i) amendment no. 1 (the “2020 Regeneron Amendment”) to the 2016 Regeneron Agreement, (ii) co-development and co-funding agreements for the treatment of hemophilia A and hemophilia B (the “Hemophilia Co/Co”) agreements and (iii) a stock purchase agreement. The collaboration expansion builds upon the jointly developed targeted transgene insertion capabilities designed to durably restore missing therapeutic protein, and to overcome the limitations of traditional gene therapy. The collaboration was extended until April 2024, at which point Regeneron has an option to renew for an additional two years. The 2020 Regeneron Amendment also grants Regeneron exclusive rights to develop products for five additional in vivo CRISPR/Cas-based therapeutic liver targets and non-exclusive rights to independently develop and commercialize up to 10 ex vivo gene edited products made using certain defined cell types. Refer to Note 9 to our consolidated financial statements of this Annual Report on Form 10-K for a detailed description of the terms related to the 2016 Regeneron Agreement and the 2020 Regeneron Amendment.
AvenCell Therapeutics, Inc. (“AvenCell”)
On July 30, 2021, we finalized a transaction in which we, Cellex Cell Professionals GmbH (“Cellex”) and funds managed by Blackstone Life Sciences Advisors L.L.C. (“BXLS”) established a new universal CAR-T cell therapy company, AvenCell, and entered into two agreements with AvenCell: (i) a license and collaboration agreement (the “LCA”), under which we will collaborate to develop allogeneic universal CAR-T cell therapies and granted AvenCell a license to develop and commercialize genome edited universal CAR-T cell therapies (limited to its use with their switchable, universal CAR-T cell UniCAR and RevCAR platforms); and (ii) a co-development and co-funding agreement (the “AvenCell Co/Co”) under which we will co-develop and co-commercialize allogeneic universal CAR-T cell products for an immuno-oncology indication.
In addition to the license, we will collaborate with AvenCell on at least seven universal CAR-T cell products that combine our allogeneic T cell technology with AvenCell's switchable, universal CAR-T cell technology, referred to as the (“Allo Collaboration”). Additionally, AvenCell will pay us to provide supply and manufacturing services for them, including supplying good manufacturing practice (“GMP”) CRISPR reagents to support the research and development of all CRISPR Products (as defined in the LCA) under the Allo Collaboration until the completion of the first Pivotal Trial (as defined in the LCA) of the first such CRISPR Product. We will also have one additional option to enter into a second co-development and co-funding agreement from selected allogeneic universal CAR-T cell therapy products that the parties intend to develop under the Allo Collaboration for a payment of $30.0 million to AvenCell.
In exchange for the license, we received a 33.33% equity interest in AvenCell at the time of the initial closing. Refer to Notes 9 and 10 to our consolidated financial statements of this Annual Report on Form 10-K for additional information related to the terms of the agreements between us and AvenCell.
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SparingVision SAS (“SparingVision”)
In October 2021, we and SparingVision, a genomic medicine company developing vision saving treatments for ocular diseases, entered into a license and collaboration agreement (the “LCA”), to develop novel genomic medicines utilizing CRISPR/Cas9 technology for the treatment of ocular diseases. We will grant SparingVision exclusive rights to our proprietary in vivo CRISPR/Cas9-based genome editing technology for up to three ocular targets addressing diseases with significant unmet medical need. In addition, the parties will research and develop novel self-inactivating AAV vectors and LNP-based approaches to address delivery of CRISPR/Cas9 genome editing reagents to the retina. SparingVision will lead and fund the preclinical and clinical development for the genome editing product candidates pursued under the collaboration.
In exchange for the license, we received an 11% equity ownership in SparingVision as of the closing date as well as three warrants attached to each share received for the right to purchase additional shares at designated prices that are subject to certain vesting conditions. We will also be eligible to receive certain research, development and commercial milestone payments (up to approximately $200 million per product) as well as royalties on potential future sales of products arising from the collaboration. We will have an option to obtain exclusive U.S. commercialization rights for product candidates arising from two of three collaboration targets. For product candidates we choose to option, we will pay an opt-in fee between $10.0 million and $20.0 million depending on the stage of development of the target, reimburse certain costs, share in 50% of development costs and pay royalties to SparingVision on U.S. sales. Refer to Notes 9 and 10 to our consolidated financial statements of this Annual Report on Form 10-K for additional information related to the terms of the agreement between us and SparingVision.
Kyverna Therapeutics, Inc. (“Kyverna”)
In December 2021, we entered into a licensing and collaboration agreement with Kyverna, a cell therapy company engineering a new class of therapies for autoimmune and inflammatory diseases, for the development of an allogeneic CD19 CAR-T cell therapy for the treatment of a variety of B cell-mediated autoimmune diseases. We granted Kyverna rights to our proprietary ex vivo CRISPR/Cas9-based allogeneic platform for the development of KYV-201, an allogeneic CD19 CAR-T cell investigational candidate for the treatment of select autoimmune diseases. This is a novel approach aimed at targeting CD19 for inflammatory diseases as compared to traditional oncology indications. Kyverna will lead and fund preclinical and clinical development for KYV-201 and we will be eligible to receive certain development and commercial milestone payments, as well as low-to-mid-single-digit royalties on potential future sales. We may also exercise an option to lead U.S. commercialization for KYV-201 under a co-development and co-commercialization agreement. If we choose to co-develop and co-commercialize KYV-201, we will pay an opt-in fee of $5.0 million and share in 50% of development costs and future net profit and/or loss arising from commercializing KYV-201 in the U.S. Kyverna retains all rights outside of the U.S., and we will receive low-to-mid-single-digit royalties on net sales generated outside of the U.S.
In exchange for the license, we received an equity ownership of preferred stock in Kyverna. We separately made an additional investment in Kyverna, purchasing incremental shares of Kyverna's preferred stock in exchange for $3.0 million in cash, bringing our investment to approximately 7% ownership in Kyverna at the time of closing. Refer to Notes 9 and 10 to our consolidated financial statements of this Annual Report on Form 10-K for additional information related to the terms of the agreement between us and Kyverna.
ONK Therapeutics, Ltd (“ONK”)
In February 2022, we announced a license, collaboration and option agreement with ONK for the development of engineered NK cell therapies for the treatment of cancer. The agreement grants ONK a non-exclusive license to our proprietary ex vivo CRISPR/Cas9-based genome editing platform and its LNP-based delivery technologies for development of up to five allogeneic NK cell therapies. ONK will be responsible for preclinical and clinical development for the engineered NK cell therapies enabled by the agreement. We will be eligible to receive up to $184 million per product in development and commercial milestone payments, as well as up to mid-single digit royalties on potential future sales. In addition, the agreement grants us options to co-develop and co-commercialize up to two products worldwide with rights to lead commercialization in the U.S.
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IRCCS Ospedale San Raffaele (“OSR”), Milan
In June 2017, we entered into a collaboration and license option agreement with Ospedale San Raffaele, Milan (the “OSR Agreement”). The research collaboration between the parties involves research related to novel WT1 TCRs, and modification of the same with CRISPR/Cas9 to treat cancers, particularly AML and solid tumors. We have the exclusive right to use the IP developed under the collaboration to develop therapeutic products. Discoveries from this collaboration are included in our first ex vivo product candidate directed to AML, which we refer to as NTLA-5001. The OSR Agreement also granted us an option to obtain an exclusive license to certain patent families of OSR and IP developed in the collaboration to research, develop and commercialize engineered WT1 TCR T cells comprising the WT1 TCRs identified by OSR in the collaboration. In December 2019, we exercised this option.
Under the OSR Agreement, we will owe OSR a royalty below 1% on net sales of licensed products sold by us and a share in the low- to mid-single digit percentage of sublicense revenue that we receive if we sublicense our rights under the OSR Agreement to a third party. In June 2021, the research collaboration agreement was amended to add certain research activities and extend the research term through November 2022. The OSR Agreement will continue until the date when no royalty or other payment obligations are due, unless earlier terminated in accordance with the terms of the agreement.
Rewrite Therapeutics Inc. (“Rewrite”)
In February 2022, we entered into an agreement to acquire Rewrite, a private biotechnology company focused on advancing novel DNA writing technologies. Rewrite has developed potentially promising novel tools for genome editing, including DNA writing via CRISPR/Cas9-guided polymerases. These tools may allow for targeted corrections, insertions, deletions, and the full range of single-nucleotide changes, which could provide new ways to edit disease-causing genes and broaden the therapeutic potential for genomic medicines. Rewrite also has developed an approach that could improve the efficiency of genome editing in non-dividing cell types, a key challenge for some existing editing platforms. We believe Rewrite’s technology could likely be delivered using our LNP technology and AAV vectors.
Under this agreement, we paid Rewrite’s former stockholders and optionholders (the “Rewrite Holders”) upfront consideration in an aggregate amount of approximately $45.0 million payable in cash, excluding customary purchase price adjustments. In addition, the Rewrite Holders will be eligible to receive up to an additional $155.0 million in milestone payments upon the achievement of certain pre-specified research and regulatory approval milestones, payable through a mixture of $130.0 million in cash and $25.0 million in shares of common stock.
Novartis Institutes for BioMedical Research, Inc. (“Novartis”)
In December 2014, we entered into a license and collaboration agreement with Novartis (the “2014 Novartis Agreement”), primarily focused on the research of new ex vivo CRISPR/Cas9-edited therapies using CAR-T cells and HSCs. The agreement was amended in December 2018 to also include research on OSCs. In December 2019, per the terms of the 2014 Novartis Agreement, the research term ended, although the 2014 Novartis Agreement remains in effect, for which we will be eligible to receive milestone and royalty payments in the future. In June 2021, we entered into Amendment No. 3 (the “Amendment”) to the 2014 Novartis Agreement. The Amendment amends Novartis’ rights with respect to all of the CAR-T Therapeutic Targets (as defined in the 2014 Novartis Agreement) that Novartis selected under the 2014 Novartis Agreement, including (a) making Novartis’ license non-exclusive for such CAR-T Therapeutic Targets, (b) removing Novartis’ diligence and related reporting obligations for such CAR-T Therapeutic Targets, and (c) refining the scope of Novartis’ sublicense rights for such CAR-T Therapeutic Targets. We made a one-time payment to Novartis of $10.0 million within 30 days after the effective date of the Amendment, which was recorded as research and development expense in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2021. Since December 31, 2020, there have been no other material changes to the key terms of the 2014 Novartis Agreement and the Novartis Amendment. For further information on the terms and
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conditions of these agreements, refer to Note 9 to our consolidated financial statements of this Annual Report on Form 10-K.
Potential Future Collaborations
We view strategic partnerships as important drivers for helping accelerate our goal of rapidly treating patients. The potential application of CRISPR/Cas9 is extremely broad, and we plan to continue to identify partners who can contribute meaningful resources and insights to our programs and allow us to more rapidly bring scientific innovation to a broader patient population.
Intellectual Property
We believe we are well positioned in terms of our IP because we:
Our licensed patent portfolio encompasses foundational filings on the use of CRISPR/Cas9 systems for genome editing, improvement modifications of these CRISPR systems, LNP technologies, TCRs for specific targets, and cell expansion technology relevant to stem cell-based therapies. We access these patent estates from licensors, including Caribou, Novartis and OSR. We also actively apply for, maintain, and plan to defend and enforce, as needed, our internally developed and externally licensed patent rights. Furthermore, we continue to search for and evaluate opportunities to in-license IP relevant to our targeted therapeutic programs and platforms and to develop and acquire new IP in collaboration with third parties.
In addition to our in-licensed IP, our IP portfolio includes over 40 patent families filed since 2015 covering solely or jointly owned technologies that we have developed independently or through our collaborations with Novartis, Regeneron and OSR. The patent families claim inventions relating to CRISPR/Cas9 improvements, methods for delivering CRISPR/Cas9 complexes, methods of treating diseases using CRISPR/Cas9 genome editing, and methods for analyzing editing events, among others. Patents resulting from our internal portfolio, if issued, would expire no earlier than 2036.
We actively apply for, maintain, and plan to defend and enforce, as needed, our internally developed and externally licensed patent rights. Furthermore, we continue to search for and evaluate opportunities to in-license IP relevant to our targeted therapeutic programs and platforms and to develop and acquire new IP in collaboration with third parties.
Caribou Biosciences In-Licensed Intellectual Property (“Caribou”)
In July 2014, we entered into a license agreement with Caribou (the “Caribou License”), as subsequently amended and supplemented, for an exclusive, worldwide license for human therapeutic, prophylactic, and palliative uses, except for anti-fungal and anti-microbial uses, defined in the license agreement as our field of use, of any CRISPR/Cas9-related patents and applications owned, controlled or licensed by Caribou as well as companion diagnostics to our product or product candidates. The license agreement also included exclusive rights in our field of use to any CRISPR/Cas9-related IP developed by Caribou after July 16, 2014 and through a cut-off date of January 30, 2018. The agreement further includes a non-exclusive research license to conduct research and development on product candidates and products.
The licensed Caribou patent portfolio includes several U.S. and foreign patents and patent applications owned or licensed by Caribou. Through January 30, 2018, Caribou had filed over 50 patent applications in the U.S. and internationally, which relate to the CRISPR/Cas platform, including modified and improved CRISPR/Cas9 systems or components, and methods of use that are part of our license. In addition, the licensed Caribou patent portfolio
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includes an exclusive sublicense in our field of use to the Regents of the University of California (“UC”) and University of Vienna’s (“Vienna”) rights in U.S. and foreign patent and patent applications covering the CRISPR/Cas9 technology, which they co-own with Dr. Emmanuelle Charpentier (collectively, the “UC/Vienna/Charpentier IP”). In July 2015, we exercised our option to include in the licensed Caribou patent portfolio the U.S. and foreign patent and patent applications owned or controlled by Pioneer Hi-Bred International (“Pioneer”) and its affiliates. We have the right to grant sublicenses to the licensed Caribou patent portfolio to third parties in our field of use. Caribou retains the right to practice the licensed IP in all other fields, including for its own specific therapeutic product candidates outside our field of use. The UC/Vienna/Charpentier IP and Pioneer IP, and our rights to the same, are further described below.
We have agreed to pay 30.0% of Caribou’s patent prosecution, filing and maintenance costs for the IP included in the license agreement, which has amounted to a total of $7.8 million incurred through December 31, 2021. Any patents that grant or have granted from these applications will expire in or after 2034, assuming payment of necessary maintenance fees. We also granted Caribou an exclusive, royalty-free, worldwide license, with the right to sublicense, to any CRISPR/Cas9 patents, patent applications and know-how in Caribou’s retained fields of use owned or developed by us between July 16, 2014 and January 30, 2018. Caribou, which is obligated to pay a portion of our patent filing, prosecution and maintenance costs for any such licensed IP, also has an option to sublicense any CRISPR/Cas9 IP in-licensed by us for uses and activities in its retained field of use.
The Caribou License terminates on the expiration of the last-to-expire patent right that is licensed to either party. We must use commercially reasonable and diligent efforts to research, develop, manufacture and commercialize at least one product covered by the licensed IP. Either party may terminate the agreement in the event of the other party’s uncured material breach, bankruptcy or insolvency-related events, or breach of its obligations with respect to the included in-licenses.
On October 17, 2018, we initiated an arbitration proceeding against Caribou asserting that Caribou violated the terms and conditions of the Caribou License, as well as other contractual and legal obligations to us, by using and seeking to license to third parties two patent families relating to specific structural or chemical modifications of gRNAs, that were invented or controlled by Caribou, in our exclusive human therapeutic field, before January 30, 2018. Caribou has asserted that the two families of IP are outside the scope of our license. In the arbitration, we seek a declaration that the disputed IP is included within the scope of our exclusive license, an award of compensatory, consequential and punitive damages based on Caribou’s conduct, and an injunction prohibiting Caribou from licensing or using this IP in our exclusive human therapeutics field, among other claims.
On September 26, 2019, we announced that the arbitration panel issued an interim award concluding that both the structural and chemical gRNA modification technologies were exclusively licensed to us by Caribou pursuant to the Caribou License. Nevertheless, the arbitration panel, solely with respect to the clinically modified gRNAs, stated that it will declare that Caribou has an equitable “leaseback”, which it described as exclusive, perpetual and worldwide (the “Caribou Award”). The Caribou Award does not include the structural guide modifications IP also at issue in the arbitration, any other IP exclusively licensed or sublicensed by Caribou to us under the Caribou License (including but not limited to the UC/Vienna/Charpentier IP), or any other of our IP. On February 6, 2020, the panel clarified that the Caribou Award is limited to a particular on-going Caribou program, which seeks to develop a CAR-T cell product directed at CD19.
On June 16, 2021, we executed a Leaseback Agreement (“Leaseback”) with Caribou, which settled the ongoing arbitration. Under the Leaseback negotiated by the parties, in exchange for an upfront payment, potential future regulatory and sales milestones, and single-digit royalties payable by Caribou, we have agreed to leaseback or sublicense certain CRISPR/Cas9 IP, including our chemical gRNA modification technology and foundational CRISPR/Cas9 IP, to Caribou so that it can develop and commercialize CB-010. Caribou also will be responsible for any payments required in respect of our in-licensed IP. We recorded $1.0 million within “Collaboration Revenue” in the second quarter of 2021 on the condensed consolidated statements of operations and comprehensive loss for an upfront payment related to the Leaseback and received the payment in the third quarter of 2021. After the execution of the Leaseback Agreement, the arbitration concluded.
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The Regents of the University of California and the University of Vienna Intellectual Property
The UC/Vienna/Charpentier IP covers methods of use and compositions relating to engineered CRISPR/Cas9 systems for, among other things, cleaving or editing DNA and altering gene product expression in various organisms, including humans. The earliest claimed priority date for the patents in the UC/Vienna/Charpentier IP is May 25, 2012. As of December 31, 2021, this family includes over 40 issued patents in the U.S. and over 40 granted patents outside the U.S., including for example the U.K., Australia, China, Japan, Israel, Mexico and the approximately 40 countries that are members of the European Patent Convention. Applications continue to be prosecuted in the United States Patent and Trademark Office (“USPTO”) and other patent agencies across the world. Patents issued from this family will expire in or after 2033, if successfully maintained.
In April 2013, Caribou entered into an exclusive, worldwide license in all fields, with the right to sublicense, for this patent family with UC/Vienna solely under UC/Vienna ownership rights. Caribou’s license remains in effect for the life of the last-to-expire patent or last-to-be-abandoned patent application licensed, whichever is later. Through our license agreement with Caribou, we have an exclusive sublicense to UC/Vienna’s interest in this foundational CRISPR/Cas9 patent family for use in human therapeutics, except for anti-fungal and anti-microbial uses as defined in the license agreement as our field of use. For therapeutic products covered by this license and their companion diagnostics, we will owe mid-single-digit royalties on net sales. In addition, we may be subject to milestone payments of $0.1 million upon the first filing of an IND application, a total of $0.5 million for Phase II and Phase III clinical trials, $0.5 million to $1.0 million for each of the first three approved new drug applications or biologics license applications in the U.S., and $0.2 million for each of the first three approved indications in Europe. Caribou has the right to terminate its agreement with UC/Vienna at any time or the agreement may be terminated by UC/Vienna due to an uncured material breach. We cannot guarantee that Caribou will maintain the UC/Vienna license for its full term. Should the license between Caribou and UC/Vienna be terminated for any reason, any compliant Caribou sublicenses as of the termination date will remain in effect and will be assigned to UC/Vienna in place of Caribou. Specifically, if we are in compliance with our obligations under our sublicense and Caribou and UC/Vienna terminate their agreement, UC/Vienna would replace Caribou as our licensor.
On April 13, 2015, UC/Vienna/Charpentier jointly filed a request with the USPTO asking that an interference be declared between a UC/Vienna/Charpentier patent application and certain patents issued to the Broad Institute, Massachusetts Institute of Technology, and the President and Fellows of Harvard College (collectively, the “Broad Institute patent family” or the “Broad”), which claim aspects of CRISPR/Cas9 systems and methods to edit genes in eukaryotic cells, including human cells. An interference is an adversarial proceeding conducted by the USPTO’s Patent Trial and Appeal Board (the “PTAB”) to determine the initial inventor of a particular invention claimed in U.S. patents and patent applications owned by different parties. On January 11, 2016, the PTAB declared an interference involving one UC/Vienna/Charpentier application, 12 Broad issued patents and a Broad patent application. In the order declaring the interference, the PTAB designated UC/Vienna/Charpentier the “Senior Party” and the Broad the “Junior Party”. In March 2016, the PTAB re-declared the interference to add an additional U.S. patent application owned by the Broad. On February 15, 2017, the PTAB dismissed the proceeding finding that the parties’ respective patent claims involved in the interference were distinct such that they did not meet the legal requirement to proceed with the interference. Specifically, the PTAB concluded that the Broad’s claims were directed to the use of CRISPR/Cas9 only in eukaryotic cells and, thus were patently distinct from UC/Vienna/Charpentier’s claims, which were directed to the use of CRISPR/Cas9 in all settings. As a result of this proceeding’s dismissal, the PTAB did not make a decision regarding which party actually first invented the use of CRISPR/Cas9 systems and methods to edit genes in eukaryotic cells. After considering UC/Vienna/Charpentier’s appeal, on September 10, 2018, the U.S. Court of Appeals for the Federal Circuit affirmed the PTAB’s decision to terminate the interference proceeding. The time for UC/Vienna/Charpentier to ask for a rehearing by the Federal Circuit or permission from the U.S. Supreme Court to appeal has expired. Accordingly, the Federal Circuit returned the UC/Vienna/Charpentier patent application at issue in the terminated interference to the USPTO. On April 23, 2019, the USPTO issued to UC/Vienna/Charpentier the patent, which covers generally the use of the CRISPR/Cas9 technology using a single RNA guide in any setting, including cellular settings.
On June 25, 2019, the PTAB declared another interference between the UC/Vienna/Charpentier and the Broad, which specifically involves their respective eukaryotic patent families, to determine which research group first invented the use of the CRISPR/Cas9 technology in eukaryotic cells and, therefore, is entitled to the patents covering the invention. On August 26, 2019, the PTAB redeclared the interference to include additional UC/Vienna/Charpentier patent applications covering the invention that had also been found allowable by the USPTO. As of December 31, 2020, the
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interference involves 14 allowable patent applications from the UC/Vienna/Charpentier eukaryotic patent family and 13 patents and one patent application from the Broad Institute patent family. The PTAB held a hearing in this interference on February 4, 2022.
On December 14, 2020, the PTAB declared an additional interference between the same 14 allowable patent applications in the UC/Vienna/Charpentier portfolio, and one patent application owned by ToolGen, Inc. (“ToolGen”), that also purports to cover the use of CRISPR/Cas9 for gene editing in eukaryotic cells.
If either the Broad or ToolGen were to succeed in their respective interference, the prevailing party or parties could seek to assert its issued patents against us based on our CRISPR/Cas9-based activities, including product commercialization. Defense of these claims, regardless of their merit, would involve substantial litigation expense, would be a substantial diversion of management and other employee resources from our business and may impact our reputation. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may not be feasible or require substantial time and monetary expenditure. In that event, we could be unable to further develop and commercialize our product candidates, which could harm our business significantly.
Pioneer Hi-Bred International (DuPont Company) Intellectual Property
Pioneer Hi-Bred International and its affiliates, including the DuPont Company, have licensed to Caribou on a worldwide basis, various patent families relating to CRISPR/Cas systems, components and methods of use generally and CRISPR/Cas9 specifically in certain fields, which include Intellia’s field of use under our license agreement with Caribou. In July 2015, we exercised our option under the license agreement with Caribou to sublicense these Pioneer patent families in our field of use. The license from Pioneer to Caribou will expire upon the expiration, abandonment or invalidation of the last patent or patent application licensed from Pioneer to Caribou.
The licensed Pioneer portfolio includes a family of applications filed by Vilnius University that discloses the components of a CRISPR/Cas9 system required for gene editing in non-bacterial organisms. The USPTO has issued patents to Vilnius University with claims covering the in vitro assembly and use of a recombinant CRISPR/Cas9 complex to modify DNA. Patents obtained from this patent family will expire in or after 2033, assuming payment of necessary maintenance fees. We cannot ensure that these additional applications in this family will lead to issued claims that cover our products or activities.
Invention Management Agreement
On December 15, 2016, we entered into a Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement (the “Invention Management Agreement”), with UC, Vienna, Dr. Charpentier, Caribou, CRISPR Therapeutics AG, ERS Genomics Ltd. and TRACR Hematology Ltd. Under the Invention Management Agreement, Dr. Charpentier retroactively consented to UC/Vienna’s CRISPR/Cas9 license to Caribou as well as Caribou’s sublicensing to Intellia certain of its rights to the UC/Vienna/Charpentier CRISPR/Cas9 IP, subject to the restrictions of our license from Caribou. Under the agreement, the parties commit to maintain and coordinate the prosecution, defense and enforcement of the CRISPR/Cas9 foundational patent portfolio worldwide, and each of the co-owners of the IP grants cross-consents to all existing and future licenses and sublicenses based on the rights of another co-owner. The Invention Management Agreement also includes retroactive approval by certain parties of certain prior assignments of interests in patent rights to other parties, and provides for, among other things, (i) good faith cooperation among the parties regarding patent maintenance, defense and prosecution, (ii) cost-sharing arrangements, and (iii) notice of and coordination in the event of third-party infringement of the subject patents. Unless earlier terminated by the parties, the Invention Management Agreement will continue in effect until the later of the last expiration date of the UC/Vienna/Charpentier patents underlying the CRISPR/Cas9 technology, or the date on which the last underlying patent application is abandoned.
Novartis In-Licensed Intellectual Property
The 2014 Novartis Agreement grants us worldwide, non-exclusive, royalty-free rights to a portfolio of 14 Novartis patent families containing granted patents and pending applications in the U.S. and internationally relating to LNP compositions, methods of use and modified nucleic acids. The license under the 2014 Novartis Agreement permits us
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to use the Novartis LNPs to develop therapeutic, prophylactic, and palliative CRISPR-based in vivo products. Under a December 2018 amendment to the 2014 Novartis Agreement, we obtained rights to use these LNPs both in vivo and ex vivo for any genome editing product. The licensed patent will expire by or after December 2030. The term of the license continues until the expiration of the last-to-expire patent right that is licensed to either party. If we attempt to challenge any of the patents in the licensed families, Novartis may terminate the license on a patent-by-patent basis. We cannot guarantee that our products or delivery methods will be covered by issued claims in these families.
In addition, under the 2014 Novartis Agreement, Novartis has also granted us rights to use its proprietary small molecule for HSC expansion. Our rights to this technology are subject to a single-digit royalty based on whether we develop and commercialize the relevant product solely or in collaboration with another third party.
Under the 2014 Novartis Agreement, any platform IP developed as part of the collaboration is owned solely by us, while all other IP developed within the collaboration, including product-based IP, is jointly owned by us and Novartis. We cannot guarantee that IP filed based on collaboration data will result in issued claims covering our products or delivery methods. Under our agreement with Novartis, as amended, we have also granted Novartis a sublicense to the IP we license under our agreement with Caribou for the Novartis-selected HSC, CAR-T and OSC products, with such sublicense being exclusive as long as Novartis uses commercially reasonable efforts to develop and commercialize those products.
Manufacturing
We have entered into certain manufacturing and supply arrangements with third-party suppliers to support production of our product candidates and their components. We plan to continue to rely on these qualified third-party organizations and our own capabilities to produce or process bulk compounds, formulated compounds, viral vectors or engineered cells for IND-supporting activities and to supply materials for clinical trials. We expect that clinical and commercial quantities of any in vivo product or engineered cells that we may seek to develop will be manufactured in GMP compliant facilities and by processes that comply with FDA and other regulatory agency requirements. At the appropriate time in the product development process, we will determine whether to establish manufacturing facilities or continue to rely on third parties to manufacture commercial quantities of any products that we may successfully develop. In certain instances, we may consider building our own commercial infrastructure.
Competition
The biotechnology and pharmaceutical industries are extremely competitive in the race to develop new products. While we believe we have significant competitive advantages with our industry-leading expertise in genome editing, clinical development expertise and dominant IP position, we currently face and will continue to face competition for our development programs from companies that use genome editing or gene therapy development platforms and from companies focused on more traditional therapeutic modalities such as small molecules and antibodies. 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 these competitors may have access to greater capital and resources than us. For any products that we may ultimately commercialize, not only will we compete with any existing therapies and those therapies currently in development, but we will also have to compete with new therapies that may become available in the future.
Competitors in our efforts to provide genetic therapies to patients can be grouped into at least three sets based on their product discovery platforms:
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Our platform and product foci are on the development of therapies using CRISPR/Cas9 gene-editing technology. Genome editing companies focused on CRISPR based technologies include: Beam Therapeutics Inc., Caribou Biosciences, Inc., CRISPR Therapeutics AG, Editas Medicine, Inc., Verve Therapeutics Inc. and ToolGen, Inc.
There are also companies developing therapies using additional gene-editing technologies, which include Allogene Therapeutics, Inc., bluebird bio, Inc., Cellectis S.A., Precision Biosciences, Inc., Sangamo Therapeutics, Inc., Homology Medicines, Inc., Poseida Therapeutics, Inc. and Prime Medicine, Inc.
We are also aware of companies developing therapies in various areas related to our specific research and development programs. In ex vivo, these companies include Allogene Therapeutics, Inc., Precision BioSciences, Inc., CRISPR Therapeutics AG, Cellectis S.A. and Editas Medicine, Inc. In in vivo, these companies include Editas Medicine, Inc., CRISPR Therapeutics AG, Locus Biosciences, Inc., Excision Biotherapeutics, Inc. and Precision Biosciences, Inc.
Specific to our NTLA-2001 program, we are aware of other companies that are currently commercializing or developing products used to treat ATTR amyloidosis, including Pfizer, Inc., Alnylam Pharmaceuticals, Inc., Ionis Pharmaceuticals, Inc., BridgeBio Pharma Inc. and Novo Nordisk A/S.
Specific to our NTLA-2002 program, we are aware of other companies that are currently commercializing or developing products used to treat HAE including Takeda Pharmaceutical Company Limited, BioCryst Pharmaceuticals Inc., Pharming Group N.V., and CSL Limited.
Our competitors will also include companies that are or will be developing other genome editing methods as well as small molecules, biologics, in vivo gene therapies, engineered cell therapies (both autologous and allogeneic) and nucleic acid-based therapies for the same indications that we are targeting with our CRISPR/Cas9-based therapeutics.
Government Regulation and Product Approval
As a biopharmaceutical company, we are subject to extensive legal and regulatory requirements. For example, we need approval from regulatory agencies for our clinical studies, development, manufacturing, distribution, exportation and importation, commercialization, marketing and reimbursement relating to our products and product candidates. Relevant regulatory authorities include, but are not limited to, the FDA, the European Medicines Agency (“EMA”), the Commission of the European Union, EU member state agencies, such as Germany’s Federal Institute for Drugs and Medicinal Devices (“BfArM”), and other countries’ similar agencies, such as the MHRA, as well as agencies responsible for market access and pricing, such as the U.K. National Institute of Health and Care Excellence (“NICE”).
We expect our future in vivo and ex vivo product candidates to be regulated as biologics. Biological products are subject to regulation under the Food, Drug and Cosmetic (“FD&C”) Act and the Public Health Service Act (“PHS Act”), and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving drug and biological products. As is the case for all investigational products, before clinical testing of biological products in the U.S. may begin, we must submit an IND application to the FDA, which reviews the clinical protocol and other information, and the IND application must become effective before clinical trials may begin. Prior to initiating clinical trials in foreign countries, clinical trial applications (“CTAs”) or other equivalent applications, similar to IND applications, must be approved.
Biologic products must be approved by the FDA before they may be legally marketed in the U.S. and by the appropriate foreign regulatory agencies before they may be legally marketed in foreign countries. 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 and we may not be able to obtain the required regulatory approvals.
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Within the FDA, the Center for Biologics Evaluation and Research (“CBER”) regulates biological products, including gene and cell therapies. CBER’s Office of Tissues and Advanced Therapies (“OTAT”) is responsible for oversight of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee (“CTGTAC”) advises CBER on its reviews. Human gene therapy products are defined as all products that mediate their effects by transcription or translation of transferred genetic material or by specifically altering host (human) genetic sequences. Some examples of gene therapy products include nucleic acids, genetically modified microorganisms (e.g., viruses, bacteria, fungi), engineered site-specific nucleases used for human genome editing, and ex vivo genetically modified human cells. FDA has published guidance documents related to, among other things, gene therapy products in general and their preclinical assessment, potency or other quality testing, and chemistry, manufacturing and control information in gene therapy IND applications, and long-term adverse event monitoring of clinical trial subjects; all of which are intended to facilitate industry’s development of these products. More recently and as part of the implementation of the 21st Century Cures Act, FDA has issued a number of guidances pertaining to regenerative medicine advanced therapies, which include cell therapy, therapeutic tissue engineering products, human cell and tissue products and combination products using any such therapies or products. Additionally, gene therapies, including genetically modified cells, that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine therapy. A number of guidances have been revised to reflect the growing knowledge and incorporation of newer technology, including certain considerations for genome editing. A small, but growing number of gene therapy products have been approved by regulatory agencies. In 2012, the EMA authorized the marketing of the first gene therapy product approved by regulatory authorities anywhere in the Western world. And in the U.S., in 2017, the FDA approved the first two cell-based, gene therapy products as well as a gene therapy product. Additional gene therapies have been approved in the U.S. since then.
U.S. Gene and Cell Therapy Products Development Process
The FDA approves biologics, including gene and cellular therapy products, through the Biologics License Application (“BLA”) process before they may be legally marketed in the U.S. This process generally involves the following:
Before testing any drug or biological product candidate, including gene and cellular therapy product candidates, in humans, the product candidate is evaluated through preclinical testing. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to
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assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with applicable federal regulations and requirements, including GLP.
The clinical trial sponsor must submit the results of the preclinical 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. Some preclinical testing may continue even after the IND application is submitted. The IND application automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold within that 30-day time period. In such a case, the clinical trial sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to, among other reasons, safety concerns or non-compliance with regulatory requirements. If the FDA imposes a clinical hold, trials may not proceed without FDA authorization and then only under authorized terms. Accordingly, we cannot be sure that submission of an IND application will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that result in the suspension or termination of such trials.
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 study sponsor’s 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, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and its amendments must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board (“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 study 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 must monitor the clinical trial until completed.
In addition to the submission of an IND to the FDA before initiation of a clinical trial in the U.S., certain human clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of institutional biosafety committees, (“IBCs”), as set forth in the National Institutes for Health (“NIH”) Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules (“NIH Guidelines”). Under the NIH Guidelines, recombinant and synthetic nucleic acids are defined as: (i) molecules that are constructed by joining nucleic acid molecules and that can replicate in a living cell (i.e., recombinant nucleic acids); (ii) nucleic acid molecules that are chemically or by other means synthesized or amplified, including those that are chemically or otherwise modified but can base pair with naturally occurring nucleic acid molecules (i.e., synthetic nucleic acids); or (iii) molecules that result from the replication of those described in (i) or (ii). Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.
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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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 evidence about the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA typically advises that sponsors observe subjects for potential gene therapy-related delayed adverse events for up to a 15-year period, including a minimum of five years of annual examinations followed by ten years of annual queries, either in person or by questionnaire.
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 status of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other trials, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.
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 product candidate has been associated with unexpected serious harm to patients.
There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products, including biologics such as gene and cellular therapy products, are required to register and disclose certain clinical trial information to NIH. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made publicly available as part of the registration at www.clinicaltrials.gov. Sponsors also are obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved, up to a maximum of two years.
Human therapeutic products based on genome editing technology are a relatively new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there can be no assurance as to the length of the study period, the number of patients the FDA will require to be enrolled in the trials in order to establish the safety, purity and potency for human gene editing therapeutics, or that the data generated in these trials will be acceptable to the FDA to support marketing approval.
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Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional information about the physical characteristics of the product candidate, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP, and in certain cases, cGTP, requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final product to support a BLA. 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
FDA approval of a BLA must be obtained before commercial marketing of the product. The BLA must include results of product development, laboratory and animal trials, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act (“PREA”), a BLA or supplement to a BLA, for a product candidate with certain novel characteristics must contain data to assess the safety and effectiveness of the product candidate 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 Food and Drug Administration Safety and Innovation Act of 2012 (“FDASIA”) requires that a sponsor who is planning to submit a marketing application for a biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan (“PSP”) within sixty days after an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA, unless exempt due to orphan drug designation. The initial PSP must include, among other things, an outline of the pediatric study or studies that the sponsor plans to conduct, including, to the extent practicable, study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information, along with any other information specified in FDA regulations. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, or other clinical development programs. 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 biological product for an indication for which orphan drug designation has been granted. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act (“PDUFA”), as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.
Within 60 days following submission of the application, the FDA reviews the BLA to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission, including for failure to pay required fees, and may request additional information. In this event, the application must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the application to determine, among other things, whether the proposed product is safe and effective (or, in the case of biological products, safe, pure and potent), and whether the product is being manufactured in accordance with cGMP, and in certain cases, cGTP, requirements to ensure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel products or products that 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 FDA review and approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy (“REMS”) is necessary to assure the safe use of the biological product candidate. If the FDA concludes a
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REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the application without a REMS, if required.
Before approving a 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 and, if applicable, cGTP requirements are adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP, cGTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the specific deficiencies in the application identified by the FDA. Addressing the deficiencies identified may require significant development work, such as product reformulation or additional clinical trials. 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 resubmit the application, addressing all of the deficiencies identified in the letter, challenge the determination set forth in the letter by requesting a hearing or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases, dosages or patient subgroups 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, precautions or adverse events be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase IV clinical trials, designed to further assess a product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
One of the performance goals agreed to by the FDA under the PDUFA VI (Fiscal Years 2018-2022) is to review 90% of BLAs in 10 months from the 60-day filing date, and 90% of priority BLAs in six months from the 60-day filing date, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and its review goals are subject to change with PDUFA reauthorization. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission, also known as a Major Amendment, within the last three months before the PDUFA goal date.
Orphan Drug Designation
The FDA may grant orphan drug designation to biological products, including cellular and gene therapy products, intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the U.S., or, if it affects more than 200,000 individuals in the U.S., when there is no reasonable expectation that the cost of developing and marketing the product for this type of disease or condition will be recovered from sales in the U.S. Orphan drug designation must be requested before submission of BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same orphan indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer with orphan exclusivity is unable to assure sufficient quantities of the approved orphan designated product. Competitors, however, may receive approval of different products for the
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indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity, which may permit off-label use for the orphan indication. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or biological product as defined by the FDA for the same orphan indication or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.
Expedited Development and Review Programs
In the U.S. and the EU, as well as in other countries, there are a number of programs to expedite development, review and approval of products for serious or life-threatening disease or condition that address an unmet medical need in the relevant regulatory jurisdiction. In the U.S., these FDA programs include Fast Track Designation, priority review, accelerated approval and Breakthrough Therapy designation. Similar programs in the EU include accelerated assessment, conditional approval and PRIME, which stands for priority medicines.
The FDA’s Fast Track program intends to expedite or facilitate the process for reviewing new drug and biological products that meet certain criteria. Specifically, new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new biologic, including gene and cellular therapy products, may request that the FDA designate the product as a Fast Track product at any time during the product’s clinical development, but ideally not later than the pre-BLA meeting. The FDA may consider for review sections of the marketing application for a Fast Track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application.
In the U.S., any product is eligible for priority review if it treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness of the treatment, prevention, or diagnosis of that condition. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a product subject to accelerated approval perform adequate and well-controlled, post-marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.
FDA's Breakthrough Therapy designation program is intended to expedite the development and review of products that treat serious or life-threatening diseases or conditions. A breakthrough therapy is defined as a drug or biological product 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 drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the features of Fast Track designation, as well as more intensive FDA interaction and guidance. The Breakthrough Therapy designation is a distinct status from both accelerated approval and priority review, but these can also be granted to the same product candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy. All requests for Breakthrough Therapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request.
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Orphan designation, Fast Track designation, priority review, accelerated approval and Breakthrough Therapy designation do not change the standards for approval but may expedite the development or approval process. Where applicable, we plan to request Fast Track and Breakthrough Therapy designation for our product candidates. Even if we receive one or both of these designations for our product candidates, the FDA may later decide that our product candidates no longer meet the conditions for qualification. In addition, these designations may not provide us with a material commercial advantage.
Regenerative medicine advanced therapies (“RMAT”) designation
As part of the 21st Century Cures Act, the FD&C Act was amended to facilitate an efficient development program for, and expedite review of regenerative advanced therapies, which include cell and gene therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products. Gene therapies, including genetically modified cells, that lead to a durable modification of cells or tissues may meet the definition of a regenerative medicine therapy. This program is intended to facilitate efficient development and expedite review of regenerative medicine therapies, which are intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition and qualify for RMAT designation. A drug sponsor may request that FDA designate a drug as a RMAT concurrently with or at any time after submission of an IND. FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is preliminary clinical evidence indicating that the drug has the potential to address unmet medical needs for a serious or life-threatening disease or condition. A BLA for a regenerative medicine therapy that has received RMAT designation may be eligible for priority review or accelerated approval through use of surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites. Benefits of RMAT designation also include early interactions with FDA and, for those granted accelerated approval, post-approval requirements may be fulfilled through the submission of clinical evidence from clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval. Like the FDA’s other expedited development programs, RMAT designation does not change the standards for approval but may expedite the development or approval process.
Post-Approval Requirements
Maintaining substantial compliance with applicable federal, state, and local statutes and regulations and, as applicable, their counterparts in other jurisdictions, requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products, including gene and cellular therapy products, continues after approval, particularly with respect to cGMP requirements. We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of certain components of products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including quality control, quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological products include reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products, including gene and cellular therapy products.
We also would have to comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet and social media platforms. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the labeling or marketing of a product, imposition of a REMS or post-market study requirement or withdrawal of the product from the market as well as possible civil or criminal sanctions. 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
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applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products, including gene and cellular therapy products, in the U.S. are required to register their establishments with the FDA and certain other federal and state agencies, and are subject to periodic unannounced inspections by the FDA and certain other federal and state agencies for compliance with cGMP, and in certain cases, cGTP, requirements 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 BLA, including withdrawal of the product from the market, as well as potential civil and criminal liability. In addition, changes to the manufacturing process or facility 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.
Biosimilars and Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act” or “ACA”), signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product in the U.S. Starting in 2015, the FDA commenced licensing biosimilars under the BPCIA, and there are currently numerous biosimilars approved in the U.S. and Europe. The FDA has issued a number of draft and final guidance documents outlining an approach to review and approval of biosimilars and interchangeable biological products.
The BPCIA also contains various provisions regarding exclusivity for reference and interchangeable products and procedures for sharing and litigating patents covering the reference product. The BPCIA, however, is complex and only beginning to be interpreted and implemented by the FDA. In addition, proposed legislation has sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and meaning of the BPCIA is subject to significant uncertainty.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, all affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
Other Healthcare and Privacy Laws
In addition to FDA restrictions on marketing of biological products, other U.S. federal and state healthcare regulatory laws restrict business practices in the pharmaceutical industry, which include, but are not limited to, state and federal anti-kickback, false claims, data privacy and security, and physician payment transparency laws. The laws that may affect our ability to operate include:
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Because of the breadth of these laws and the limited statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
In the event we decide to conduct clinical trials or enroll subjects in our future clinical trials, we may be subject to additional privacy restrictions. As of May 25, 2018, the General Data Protection Regulation (“GDPR”) regulates the collection, use, storage, disclosure, transfer or other processing of personal data, including personal health data, in the EU. The GDPR covers any business, regardless of its location, that provides goods or services to residents in the EU and, thus, could incorporate our activities in EU Member States. The GDPR imposes strict requirements on controllers and processors of personal data, including special protections for “sensitive information,” which includes health and genetic information of individuals residing in the EU, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, ensuring certain accountability measures are in place and taking certain measures when engaging third-party processors. GDPR grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, the GDPR imposes strict rules on the transfer of personal data out of the EU to regions that have not been deemed to offer “adequate” privacy protections, such as the U.S. currently. Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States, which may deviate slightly from the GDPR, may result in warning letters, mandatory audits and financial penalties, including fines of up to 4% of annual global revenues, or
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€20,000,000, whichever is greater. As a result of the implementation of the GDPR, we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules, including as implemented by individual countries. In addition, further to the U.K.’s exit from the EU on January 31, 2020, the GDPR ceased to apply in the U.K. at the end of the transition period on December 31, 2020. However, as of January 1, 2021, the U.K.’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to certain U.K. specific amendments) into U.K. law, referred to as the U.K. GDPR. The U.K. GDPR and the U.K. Data Protection Act 2018 set out the U.K.’s data protection regime, which is independent from but aligned to the EU’s data protection regime. Non-compliance with the U.K. GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher. Although the U.K. is regarded as a third country under the EU’s GDPR, the EC has now issued a decision recognizing the U.K. as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the U.K. remain unrestricted. Like the EU GDPR, the U.K. GDPR restricts personal data transfers outside the U.K. to countries not regarded by the U.K. as providing adequate protection. The U.K. government has confirmed that personal data transfers from the U.K. to the European Economic Area (“EEA”), which consists of the EU Member States, plus Norway, Liechtenstein and Iceland remain free flowing.
In the U.S., there has been a flurry of legislative activity at the state level. California recently enacted the California Consumer Privacy Act (“CCPA”), which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA will require covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with additional causes of action. The CCPA went into effect on January 1, 2020, and the California Attorney General could commence enforcement actions for violations beginning July 1, 2020. The California Attorney General’s CCPA regulations went into effect on August 14, 2020, and their application may further impact our business activities. The uncertainty surrounding the application of CCPA and its regulations exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information. Further, a new California privacy law, the California Privacy Rights Act (“CPRA”), was passed by California voters on November 3, 2020. The CPRA will create additional obligations with respect to processing and storing personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022). Additionally, some observers have noted that the CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business. Already, in the U.S., we have witnessed significant developments at the state level. For example, on March 2, 2021, Virginia enacted the Consumer Data Protection Act (the “CDPA”) and, on July 8, 2021, Colorado’s governor signed the Colorado Privacy Act (“CPA”) into law. The CDPA and the CPA will both become effective January 1, 2023. While the CDPA and CPA incorporate many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of regulated businesses.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, individual imprisonment, and additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with this law, any of which could adversely affect our ability to operate our business and our financial results.
To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.
Regulation in the European Union
Clinical Trial Approval
In April 2014, the EU adopted the new Clinical Trials Regulation, (EU) No 536/2014, which replaced the current Clinical Trials Directive 2001/20/EC on 31 January 2022. The Clinical Trials Regulation is directly applicable in all
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EU Member States meaning no national implementing legislation in each EU Member State is required. It overhauls the current system of approvals for clinical trials in the EU. The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the EU. The main characteristics of the regulation include: a streamlined application procedure via a single-entry point, the “EU portal” through the Clinical Trials Information System, (“CTIS”); a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts (Part I contains scientific and medicinal product documentation and Part II contains the national and patient-level documentation). Part I is assessed by a coordinated review by the competent authorities of all EU Member States in which an application for authorization of a clinical trial has been submitted (Member States concerned) of a draft report prepared by a Reference Member State. Part II is assessed separately by each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.
Marketing Authorization
In the EU, medicinal products, including advanced therapy medicinal products (“ATMP”s), are subject to extensive pre- and post-market regulation by regulatory authorities at both the EU and national levels. ATMPs comprise gene therapy products, somatic cell therapy products and tissue engineered products. We anticipate that our gene therapy development products would be regulated as ATMPs in the EU.
To obtain regulatory approval of a medicinal product in the EU, we must submit a marketing authorization application (“MAA”).
The centralized procedure provides for the grant of a single marketing authorization by the EC that is valid throughout the EU, and in the additional member states of the EEA (Iceland, Norway and Liechtenstein). Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, ATMPs, and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of cancer, HIV or AIDS, diabetes, neurodegenerative disorders, auto-immune and other immune dysfunctions and viral diseases. For those products for which the use of the centralized procedure is not mandatory, applicants may elect to use the centralized procedure where either the product contains a new active substance indicated for the treatment of other diseases, or where the applicant can show that the product constitutes a significant therapeutic, scientific or technical innovation or for which a centralized process is in the interest of patients at an EU level.
Specifically, the grant of marketing authorization in the EU for ATMPs is governed by Regulation (EC) No. 1394/2007 on ATMPs, read in combination with Directive 2001/83/EC of the European Parliament and of the Council, commonly known as the Community code on medicinal products. Regulation (EC) No. 1394/2007 lays down specific rules concerning the authorization, supervision, and pharmacovigilance of gene therapy medicinal products, somatic cell therapy medicinal products, and tissue engineered products. Manufacturers of ATMPs must demonstrate the quality, safety, and efficacy of their products to the Committee for Advanced Therapies (“CAT”), at the EMA, which conducts a scientific assessment of the MAA and provides an opinion regarding the MAA for an ATMP. The EC grants or refuses marketing authorization in light of the opinion delivered by EMA.
The Committee for Medicinal Products for Human Use (“CHMP”), established at the EMA, is responsible for issuing a final opinion on whether an ATMP meets the required quality, safety and efficacy requirements, and whether a product has a positive benefit/risk profile. Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA by the EMA is 210 days from receipt of a valid MAA, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days. Where the CHMP gives a positive opinion, it provides the opinion, together with supporting documentation, to the EC, who make the final decision to grant a marketing authorization, which is issued within 67 days of receipt of the EMA’s recommendation. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time frame of 210 days for assessment will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP may revert to the standard time limit for the
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centralized procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment.
Data and Market Exclusivity
The EU also provides opportunities for market exclusivity. For example, in the EU, upon receiving marketing authorization, innovative medicinal products generally receive eight years of data exclusivity and an additional two years of market exclusivity. Data exclusivity prevents applicants for authorization of generics or biosimilars of these innovative products from referencing the innovator’s pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU, during a period of eight years from the date on which the reference product was first authorized in the EU. During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity period. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be an innovative medicinal product, and products may therefore not qualify for data exclusivity. Even if a product is considered to be an innovative medicinal product so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, pre-clinical tests and clinical trials.
Orphan Designation and Exclusivity
Products with an orphan designation in the EU will, upon the grant of a marketing authorization for an orphan product, receive ten years of market exclusivity, during which time no “similar medicinal product” for the same indication may be placed on the market. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. An orphan product can also obtain an additional two years of market exclusivity in the EU where an agreed Pediatric Investigation Plan (“PIP”) for pediatric studies has been complied with. No extension to any supplementary protection certificate (“SPC”) can be granted on the basis of pediatric studies for orphan indications.
The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the U.S. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it is intended for the diagnosis, prevention or treatment of (1) a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made; or (b) it is unlikely that the product, without the benefits derived from orphan status, would generate sufficient return in the EU to justify the necessary investment in its development; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the MAA if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The ten-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar medicinal product for the same therapeutic indication at any time if:
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Pediatric development
In the EU, companies developing a new medicinal product must agree upon a PIP with the EMA, and must conduct pediatric clinical trials in accordance with that PIP, unless a waiver applies, (e.g., because the relevant disease or condition occurs only in adults). This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The MAA for the product must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies, or a deferral has been granted, in which case the pediatric clinical trials must be completed at a later date. Products that are granted a marketing authorization on the basis of the pediatric clinical trials conducted in accordance with the PIP are eligible for a six month extension of the protection under a SPC provided an application for such extension is made at the same time as filing the SPC application for the product, or at any point up to two years before the SPC expires, even where the trial results are negative, or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity. This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP are developed and submitted.
Post-approval controls
The holder of a marketing authorization must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance, who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports (“PSUR”s).
All new MAAs must include a risk management plan (“RMP”), describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the marketing authorization. Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. RMPs and PSURs are routinely available to third parties requesting access, subject to limited redactions.
The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical ingredients into the EU.
All advertising and promotional activities for the product must be consistent with the approved Summary of Product Characteristics and therefore all off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the EU. Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each EU member state and can differ from one country to another.
The aforementioned EU rules are generally applicable in the EEA, which consists of the EU Member States, plus Norway, Liechtenstein and Iceland.
For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, 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 must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
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Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the U.K. voted in favor of leaving the EU, commonly referred to as Brexit, and the U.K. formally left the EU on January 31, 2020. There was a transition period during which EU pharmaceutical laws continued to apply to the U.K., which expired on December 31, 2020. However, the EU and the U.K. have concluded a trade and cooperation agreement (“TCA”), which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021. The TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not foresee wholesale mutual recognition of U.K. and EU pharmaceutical regulations. At present, Great Britain has implemented EU legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the EU regulatory framework will continue to apply in Northern Ireland). The regulatory regime in Great Britain therefore currently aligns with EU regulations, however it is possible that these regimes will diverge in the future now that Great Britain’s regulatory system is independent from the EU and the TCA does not provide for mutual recognition of U.K. and EU pharmaceutical legislation.
Other Government Regulation
In addition to the healthcare laws and regulations in the U.S. and EU discussed above, we may be subject to a variety of regulations in these and other jurisdictions governing, among other things, animal research, clinical studies, manufacture, marketing approval, and any commercial sales and distribution of biological products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. In addition, in 2020 we were subject to evolving local and state regulations relating to the coronavirus disease-19 (“COVID-19”) pandemic. These regulations may continue to change, and we may be required to change our operations and business conduct in response to these changes.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any biological product for which we obtain regulatory approval. In the U.S. and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of any products for which we receive regulatory approval for commercial sale will therefore depend, in part, on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, health maintenance organizations, private health insurers and other organizations.
In the U.S., no uniform policy of coverage and reimbursement for biological products, including gene and cellular therapy products, exists among third-party payors. As a result, obtaining coverage and reimbursement approval for such a product from a government or other 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 regarding the products’ clinical benefits and risks on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our gene-modifying products. Patients are unlikely to use, and health care providers may not prescribe, our product candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the product’s cost to the patient. Because our product candidates may have a higher cost of goods than conventional therapies, and may require long-term follow up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability may be greater. Moreover, increasing efforts by governmental and third-party payors in the U.S. and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for biological products and, as a result, they may not cover or provide adequate payment for our product candidates. In addition, we expect to experience pricing pressures in connection with the sale of any of our product candidates upon their approval due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost containment initiatives and additional legislative changes. For these reasons, there is significant uncertainty related to coverage and
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reimbursement of our future products. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.
Third‑party and government payors consistently seek to reduce reimbursements for medical products and services. Additionally, the containment of healthcare costs is a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost‑containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost‑containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third‑party reimbursement for our products or a decision by a third‑party payor to not cover our products could reduce physician usage of the products and have a material adverse effect on our sales, results of operations and financial condition.
Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non‑governmental payors.
The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012 by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures are made to Congress.
It is likely that our product candidates, once approved, will have to be administered by a health care provider. Under currently applicable U.S. law, certain products not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare Part B. As a condition of receiving Medicare Part B reimbursement, the manufacturer of the therapy is required to participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program, both of which require the manufacturer to provide rebated pricing under certain conditions. For example, the Medicaid Drug Rebate Program requires pharmaceutical manufacturers to have a national rebate agreement with the federal government as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to program eligible entities, which generally are federally funded clinics and hospitals that serve large numbers of low-income and uninsured patients.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the U.S. and generally prices tend to be significantly lower.
Healthcare Reform
In the U.S. and some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare.
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For example, in March 2010, the ACA was enacted in the U.S. The ACA includes measures that have significantly changed, and are expected to continue to significantly change, the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA of greatest importance to the pharmaceutical industry are that the ACA:
Congress also could consider additional legislation to repeal, replace, or further modify elements of the ACA. Thus, the full impact of the ACA, or any law replacing elements of it, and the political uncertainty regarding any repeal and replacement on the ACA, on our business remains unclear.
Additionally, there have been a number of proposed regulatory actions and legislative recommendations aimed at lowering prescription drug prices. In May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option to use step therapy, a type of prior authorization, for Part B drugs. This final rule codified CMS’s policy change that was effective January 1, 2019.
We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory developments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates and may affect our overall financial condition and ability to develop product candidates.
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Human Capital
We believe the success of Intellia’s mission largely depends on our ability to attract and retain highly skilled employees. We believe programs that foster company engagement, diversity, equity and inclusion, growth and development while providing competitive compensation and benefits will attract a diverse population of employees who will bring innovative ideas and creative solutions that will enable the achievement of our goals.
Company Communications and Engagement. Many of our employees actively participate in our Cultural Ambassador program, fostering a grassroots approach to engagement with support and guidance from our executive leadership team. Our Cultural Ambassador programs focus on the following: diversity, equity and inclusion, continuous learning, wellness and sustainability, social events, community outreach, and Intellia values and engagement.
Diversity, Equity and Inclusion. As we continue to grow as an organization, we remain dedicated to championing a culture that celebrates diversity and fosters a collaboration inside the organization. We are committed to continue our efforts to increase diversity throughout Intellia, particularly in leadership roles. Our team of Senior and Executive Vice Presidents is 50% female and 30% are ethnically diverse. Overall, as of February 17, 2022, our employee population consists of 56% women and 44% men.
Compensation and Benefits, Health and Wellness. We offer competitive benefits, including competitive salaries, excellent health insurance, and a 401(k) match. We are committed to pay equity, regardless of gender, race/ethnicity, or sexual orientation and conduct comprehensive pay equity analyses on a semi-annual basis. Since the onset of the COVID-19 pandemic, we have taken additional steps to support our employees in managing their work and personal responsibilities, with a focus on employee wellbeing.
Growth and Development. Investing in our employees’ career growth is an important priority at Intellia. We aim to provide a wide range of on-the-job development opportunities, as well as in-person, virtual, and off-site training seminars. Of particular importance is fostering of leaders with our “Manager Bootcamp” series, which aims to refine the leadership and managerial skills of our managers.
Conduct and Ethics. We believe it is imperative that the board of directors and senior management strongly support a no-tolerance stance for workplace harassment, biases and unethical behavior. All employees, including senior management, are required to abide by, review and confirm compliance to the company’s Code of Business Conduct and Ethics Policy and other internal policies that outline our high expectations.
Employees
As of February 17, 2022, we had 485 full-time employees, 367 of whom were primarily engaged in research and development activities and 111 of whom have an M.D. or Ph.D. degree.
Our Corporate Information
We were incorporated under the laws of the state of Delaware in May 2014 under the name AZRN, Inc. Our principal executive offices are located at 40 Erie Street, Suite 130, Cambridge, Massachusetts 02139. Our telephone number is (857) 285-6200, and our website is located at www.intelliatx.com. References to our website are inactive textual references only and the content of our website should not be deemed incorporated by reference into this Annual Report on Form 10-K.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge on our website located at www.intelliatx.com as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (the “SEC”).
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.
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A copy of our Corporate Governance Guidelines, Code of Conduct and Business Ethics and the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are posted on our website, www.intelliatx.com, under “Investor Relations”.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. In evaluating us and our business, careful consideration should be given to the following risk factors, in addition to the other information set forth in this Annual Report on Form 10-K for the year ended December 31, 2021 and in other documents that we file with the SEC. If any of the following risks and uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks described below are not intended to be exhaustive and are not the only risks facing us. New risk factors can emerge from time to time, and we cannot predict the impact that any factor or combination of factors may have on our business, prospects, financial condition and results of operations.
Risks Related to Our Business
Risks Related to Preclinical and Clinical Development
CRISPR/Cas9 genome editing technology is not yet clinically validated for human therapeutic use. The approaches we are taking to discover and develop novel therapeutics using CRISPR/Cas9 systems are unproven and may never lead to marketable products. If we are unable to develop viable product candidates, achieve regulatory approval for any such product candidate or market and sell any product candidates, we may never achieve profitability.
We are focused on developing curative medicines utilizing CRISPR/Cas9 genome editing technology, including in vivo therapies and ex vivo engineered cell therapies. Although there have been significant advances in recent years in the fields of gene therapy and genome editing, in vivo CRISPR-based genome editing technologies are relatively new and their therapeutic utility is largely unproven. Our approach to developing therapies centers on using CRISPR/Cas9 technology to alter, introduce or remove genetic information in vivo to treat various disorders, or to engineer human cells ex vivo to create therapeutic cells that can be introduced into the human body to address the underlying disease.
Successful development of products by us will require solving a number of issues, including developing or obtaining technologies to safely deliver a therapeutic agent into target cells within the human body or engineer human cells while outside of the body such that the modified cells can have a therapeutic effect when delivered to the patient, optimizing the efficacy and specificity of such products, and ensuring and demonstrating the therapeutic selectivity, efficacy, potency, purity and safety of such products. There can be no assurance we will be successful in solving any or all of these issues. Indeed, no genome editing in vivo therapy or genome-edited engineered cell therapy has been approved in the United States (“U.S.”), European Union (“EU”) countries or other key jurisdictions. With regards to CRISPR/Cas9-based therapies specifically, we are beginning to clinically test our in vivo and ex vivo product candidates. Further, we are unaware of any clinical trials validating safety and efficacy having been completed by any third parties. Accordingly, the potential to successfully obtain approval for any of our CRISPR/Cas9 product candidates remains unproven.
Our future success also is highly dependent on the successful development of CRISPR-based genome editing technologies, cellular delivery methods and therapeutic applications for the indications on which we have focused our on-going research and development efforts. We may decide to alter or abandon these programs as new data become available and we gain experience in developing CRISPR/Cas9-based therapeutics. We cannot be sure that our CRISPR/Cas9 efforts and technologies will yield satisfactory products that are safe and effective, sufficiently pure or potent, manufacturable, scalable or profitable in our selected indications or any other indication we pursue. We cannot guarantee that progress or success in developing any particular CRISPR/Cas9-based therapeutic product will translate to other CRISPR/Cas9-based products.
Public perception and related media coverage of potential therapy-related efficacy or safety issues, including adoption of new therapeutics or novel approaches to treatment, as well as ethical concerns related specifically to genome editing and CRISPR/Cas9, may adversely influence the willingness of subjects to participate in clinical trials, or if any therapeutic is approved, of physicians and patients to accept these novel and personalized treatments. Physicians, healthcare providers and third party payors often are slow to adopt new products, technologies and treatment practices, particularly those that may also require additional upfront costs and training. Physicians may not be willing to undergo training to adopt these novel and potentially personalized therapies, may decide the particular therapy is too complex
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or potentially risky to adopt without appropriate training, and may choose not to administer the therapy. Further, due to health conditions, genetic profile or other reasons, certain patients may not be candidates for the therapies. In addition, responses by federal and state agencies, congressional committees and foreign governments to negative public perception, ethical concerns or financial considerations may result in new legislation, regulations, or medical standards that could limit our ability to develop or commercialize any product candidates, obtain or maintain regulatory approval or otherwise achieve profitability. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be. Based on these and other factors, healthcare providers and payors may decide that the benefits of these new therapies do not or will not outweigh their costs.
Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates.
All of our lead programs are still in the discovery, preclinical or early clinical stage. Our current and future product candidates will require preclinical and clinical activities and studies, regulatory review and approval in each jurisdiction in which we intend to market the products, substantial investment, establishing manufacturing capabilities, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. Before obtaining marketing approval from regulatory authorities for the sale of a product candidate, we must conduct extensive clinical trials to demonstrate the safety, purity, potency and efficacy of the product in humans. It is impossible to predict when or if any of our programs will prove effective and safe in humans or will receive regulatory approval. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. We may be unable to establish clinical endpoints that regulatory authorities consider clinically meaningful, and a clinical trial can fail at any stage. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain approval of their products.
Successful completion of clinical trials is a prerequisite to submitting a Biologics License Application (“BLA”) to the FDA, and similar applications to comparable foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. We do not know whether any of our clinical trials will begin or be completed on schedule, if at all.
Because these are new therapeutic approaches, discovering, developing, manufacturing and commercializing our product candidates subject us to a number of challenges or delays in completing our preclinical studies and initiating or completing clinical trials. We also may experience numerous unforeseen events during, or as a result of, any current or future clinical trials that we conduct, which could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
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In addition, disruptions caused by the evolving COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our ongoing and planned clinical trials. We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted or the relevant ethics committee, the Data Safety Monitoring Board (“DSMB”) for such trial, or the FDA or other relevant regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities, resulting in the imposition of a clinical hold, manufacturing or quality control issues, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.
Additionally, because our in vivo technology potentially involves genome editing across multiple cell and tissue types, we are subject to many of the challenges and risks that other genome editing therapeutics and gene therapies face, including:
Further, because our ex vivo product candidates involve editing human cells and then delivering modified cells to patients, we are subject to many of the challenges and risks that engineered cell therapies face. For example, clinical trials using engineered cell-based gene therapies may require unique products to be created for each patient and such individualistic manufacturing may be both inefficient and cost-prohibitive.
To date, human clinical trials utilizing either in vivo or ex vivo CRISPR/Cas9-based therapeutics, including our clinical trials for NTLA-2001 for transthyretin (“ATTR”) amyloidosis, NTLA-2002 for hereditary angioedema (“HAE”) and NTLA-5001 for acute myeloid leukemia (“AML”), are still at an early stage. In November 2021, we received MHRA approval for an amendment to our approved protocol for NTLA-2001 which enabled us to include patients with ATTR amyloidosis with cardiomyopathy. There is no certainty that the FDA or other similar agencies will continue to apply to all our CRISPR/Cas9 product candidates the same regulatory pathway and requirements it is applying to other in vivo therapies or ex vivo engineered therapeutics. In addition, if any product candidates encounter safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and business could be significantly harmed. Further, competitors that are developing in vivo or ex vivo products with similar technology may experience problems with their product candidates or programs that could in turn cause us to identify problems with our product candidates and programs that would potentially harm our business.
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We received IND authorization from the FDA for NTLA-5001 in September 2021 and CTA authorization from the MHRA in November 2021, and we initiated patient screening in a Phase 1/2a study. In addition, we received authorization in October 2021 from the U.K.'s MHRA and New Zealand's MEDSAFE to initiate a Phase 1/2 study evaluating NTLA-2002 for the treatment of adults with HAE, and the first patient was dosed in such clinical trial. We may experience manufacturing delays or other issues that prevent us from executing the first-in-human clinical trials for NTLA-5001 or NTLA-2002 on the timelines we expect. Moreover, we cannot guarantee that the FDA, MHRA, MEDSAFE, or other regulatory authorities will not change their requirements in the future or approve amendments to our INDs or equivalent regulatory filings, including for NTLA-2001, NTLA-2002, or NTLA-5001.
Negative public opinion and increased regulatory scrutiny of CRISPR/Cas9 use, genome editing or gene therapy generally may damage public perception of the safety of any product candidates that we develop and adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates.
Gene therapy in general, and genome editing in particular, remain novel technologies, with only a limited number of gene therapy products approved to date in the U.S. and EU. Public perception may be influenced by claims that gene therapy or genome editing, including the use of CRISPR/Cas9, is unsafe or unethical, or carries an undue risk of side effects, such as improper modification of a gene sequence in a patient’s chromosome that could lead to cancer, and gene therapy or genome editing may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians who specialize in the treatment of diseases targeted by our product candidates prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available. In addition, responses by the U.S., state or foreign governments to negative public perception or ethical concerns may result in new legislation or regulations that could limit our ability to develop or commercialize any product candidates, obtain or maintain regulatory approval or otherwise achieve profitability. More restrictive statutory regimes, government regulations or negative public opinion could have an adverse effect on our business, financial condition and results of operations and prospects, and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, certain gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death. Serious adverse events, such as these, in our clinical trials, or other clinical trials involving gene therapy or genome editing products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidate. In addition, the use of the technology by third parties in areas that are not being pursued by us, such as for targeting and editing of embryonic cells, could adversely impact public and governmental perceptions regarding the ethics and risks of the CRISPR/Cas9 technology and lead to social or legal changes that could limit our ability to apply the technology to develop human therapies addressing disease. For example, reports of the use of CRISPR/Cas9 in China and Russia to edit embryos in utero have generated and may continue to create negative public perception about the use of the technology in humans. Negative public and governmental perception of the technology, or additional governmental regulation of our technologies, could also adversely affect our stock price or our ability to enter into revenue generating collaborations or obtain additional funding from the public markets.
Risks Related to Competition
We face significant competition in an environment of rapid technological change. The possibility that our competitors may achieve regulatory approval before we do or develop therapies that are more advanced or effective than ours may harm our business and financial condition or our ability to successfully market or commercialize our product candidates.
The biotechnology and pharmaceutical industries are extremely competitive in the race to develop new products. While we believe we have significant competitive advantages with our industry-leading expertise in genome editing, clinical development expertise and dominant IP position, we currently face and will continue to face competition for our development programs from companies that use genome editing or gene therapy development platforms and from companies focused on more traditional therapeutic modalities such as small molecules and antibodies. 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 these competitors may have access to greater capital and resources than us. For any products that we may ultimately
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commercialize, not only will we compete with any existing therapies and those therapies currently in development, but we will also have to compete with new therapies that may become available in the future.
Competitors in our efforts to provide genetic therapies to patients can be grouped into at least three sets based on their product discovery platforms:
Our platform and product foci are on the development of therapies using CRISPR/Cas9 gene-editing technology. Genome editing companies focused on CRISPR based technologies include: Beam Therapeutics Inc., Caribou Biosciences, Inc., CRISPR Therapeutics AG, Editas Medicine, Inc., Verve Therapeutics Inc. and ToolGen, Inc.
There are also companies developing therapies using additional gene-editing technologies, which include Allogene Therapeutics, Inc., bluebird bio, Inc., Cellectis S.A., Precision Biosciences, Inc., Sangamo Therapeutics, Inc., Homology Medicines, Inc., Poseida Therapeutics, Inc. and Prime Medicine, Inc.
We are also aware of companies developing therapies in various areas related to our specific research and development programs. In ex vivo, these companies include Allogene Therapeutics, Inc., Precision BioSciences, Inc., CRISPR Therapeutics AG, Cellectis S.A. and Editas Medicine, Inc. In in vivo, these companies include Editas Medicine, Inc., CRISPR Therapeutics AG, Locus Biosciences, Inc., Excision Biotherapeutics, Inc. and Precision Biosciences, Inc.
Specific to our NTLA-2001 program, we are aware of other companies that are currently commercializing or developing products used to treat TTR amyloidosis, including Pfizer, Inc., Alnylam Pharmaceuticals, Inc., Ionis Pharmaceuticals, Inc., BridgeBio Pharma Inc. and Novo Nordisk A/S.
Specific to our NTLA-2002 program, we are aware of other companies that are currently commercializing or developing products used to treat hereditary angioedema including Takeda Pharmaceutical Company Limited, BioCryst Pharmaceuticals Inc., Pharming Group N.V., and CSL Limited.
Our competitors will also include companies that are or will be developing other genome editing methods as well as small molecules, biologics, in vivo gene therapies, engineered cell therapies (both autologous and allogeneic) and nucleic acid-based therapies for the same indications that we are targeting with our CRISPR/Cas9-based therapeutics.
Any advances in gene therapy, engineered cell therapies or genome editing technology made by a competitor may be used to develop therapies that could compete against any of our product candidates.
Many of these competitors have substantially greater research and development capabilities and financial, scientific, technical, intellectual property, manufacturing, marketing, distribution and other resources than we do, and we may not be able to successfully compete with them.
Even if we are successful in selecting and developing any product candidates, in order to compete successfully we may need to be first-to-market or demonstrate that our CRISPR/Cas9-based products are superior to therapies based on the same or different treatment methods. If we are not first-to-market or are unable to demonstrate such superiority, any products for which we are able to obtain approval may not be commercially successful. Furthermore, in certain jurisdictions, if a competitor has orphan drug status for a product and if our product candidate is determined to be contained within the scope of a competitor’s orphan drug exclusivity, then approval of our product for that indication or disease could potentially be blocked, for example, for up to seven years in the U.S. and 10 years in the EU.
We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
Risks Related to the Industry
Results, including data from our preclinical and clinical studies, are not necessarily predictive of our other ongoing and future preclinical and clinical studies, and they do not guarantee or indicate the likelihood of approval of any
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potential product candidate by the FDA or any other regulatory agency. If we cannot replicate positive results from any of our preclinical or clinical activities and studies, we may be unable to successfully develop, obtain regulatory approval for and commercialize any potential product candidate.
From time to time, we may disclose interim data from our clinical trials, such as the interim results of our ongoing Phase 1 study of NTLA-2001. Interim data from clinical trials that have not been completed 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. We also 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, 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. As a result, interim data should be viewed with caution until we make the final data and analysis available.
In addition, there is a high failure rate, as well as potential substantial and unanticipated delays, for product candidates progressing through preclinical and clinical studies. Even if we are able to successfully complete our ongoing and future preclinical and clinical activities and studies for any potential product candidate, we may not be able to replicate, or may have to engage in significant efforts and resource and time investments to replicate, any positive results from these or any other studies in any of our future preclinical and clinical trials, and they do not guarantee approval of any potential product candidate by the FDA or any other necessary regulatory authorities in a timely manner or at all. For more information regarding these risks, see also the above risk factor section entitled “Risks Related to Preclinical and Clinical Development”.
Inconclusive results, lack of efficacy, adverse events or additional safety concerns in clinical trials that we or others conduct may impede the regulatory approval process or overall market acceptance of our product candidates.
Therapeutic applications of genome editing technologies, and CRISPR/Cas9 in particular, for both in vivo products and ex vivo products, are unproven and must undergo rigorous clinical trials and regulatory review before receiving marketing authorization. If the results of our clinical studies or those of any other third parties, including with respect to genome editing technology or engineered cell therapies, are inconclusive, fail to show efficacy or if such clinical trials give rise to safety concerns or adverse events, we may:
Additionally, our product candidates could potentially cause other adverse events that have not yet been predicted and the potentially permanent nature of genome editing effects, including CRISPR/Cas9’s effects, on genes or novel cell therapies in the organs of the human body may make these adverse events irreversible. The inclusion of critically ill patients in our clinical studies or those of our competitors may result in deaths or other adverse medical events, including those due to other therapies or medications that such patients may be using. Any of these events could
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prevent us from achieving or maintaining regulatory approval or market acceptance of our product candidates and impair our ability to achieve profitability.
Research and development of biopharmaceutical products is inherently risky. We may not be successful in our efforts to use and enhance our genome editing technology to create a pipeline of product candidates, establish the necessary manufacturing capabilities, obtain regulatory approval and develop commercially successful products, or we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on potential product candidates or diseases that may be more profitable or for which there is a greater likelihood of success. If we fail to develop product candidates, our commercial opportunity, if any, will be limited.
We are at an early stage of development and our technology and approach has not yet led, and may never lead, to the approval or commercialization of any of our product candidates, including NTLA-2001 for ATTR amyloidosis, NTLA-2002 for HAE or NTLA-5001 for AML, or for other product candidates being deemed appropriate for clinical development and ultimately approval, including NTLA-3001 for alpha-1 antitrypsin deficiency (“AATD”), by a regulatory agency. Even if we are successful in building our pipeline of product candidates, completing clinical development, establishing the necessary manufacturing processes and capabilities, obtaining regulatory approvals and commercializing product candidates will require substantial additional funding and are subject to the risks of failure inherent in therapeutic product development. Investment in biopharmaceutical product development involves significant risk that any potential product candidate will fail to demonstrate acceptable safety and efficacy profiles, gain regulatory approval, or become commercially viable.
We cannot provide any assurance that we will be able to successfully advance any of our product candidates, including NTLA-2001, NTLA-2002, NTLA-5001 or NTLA-3001, through the entire research and development process. Any of our other programs may show promise, yet fail to yield product candidates for clinical development or commercialization for many reasons. For more information regarding these risks, see the above risk factor section entitled “Risks Related to Clinical Development.”
Even if we obtain regulatory approval of any product candidates, such candidates may not gain market acceptance among physicians, patients, hospitals, third-party payors and others in the medical community.
The use of the CRISPR/Cas9 system to create genome editing-based therapies is a recent development and may not become broadly accepted by patients, healthcare providers, third-party payors and other stakeholders. A variety of factors will influence whether our product candidates are accepted in the market, including, for example:
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Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete. In addition, adverse publicity due to the ethical and social controversies surrounding the therapeutic in vivo use of CRISPR/Cas9, gene edited modified cells, or other therapeutics mediums, such as viral vectors that we may use in our clinical trials may limit market acceptance of our product candidates. If our product candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals, third-party payors or others in the medical community, we will not be able to generate significant revenue. Our efforts to educate the healthcare providers, patients and third-party payors about our products may require significant resources and may never be successful.
Risks Related to Healthcare
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell any product candidates or therapies profitably.
The success of our product candidates, if approved, depends on the availability of adequate coverage and reimbursement from third-party payors, including government agencies, private health insurers and health maintenance organizations. There is significant uncertainty related to the insurance coverage and reimbursement of any newly approved product, but in particular novel gene editing and engineered cell products. All the therapeutic indications approved by the relevant authorities may not be covered or reimbursed. In addition, we cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, our product candidates because they are novel treatments for diseases using a new technology and delivery approaches.
In the U.S. and some other jurisdictions, patients generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the U.S., and commercial payors are critical to new product acceptance.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. In the U.S., the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (“CMS”), an agency within the U.S. Department of Health and Human Services. CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare, and private payors often follow CMS’ coverage decisions. Other jurisdictions have agencies, such as the National Institute for Health and Care Excellence (“NICE”) in the U.K., that evaluate the use and cost-effectiveness of therapies, which impact the utilization and price of the medicine in such jurisdiction.
In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result, 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 supporting scientific, clinical and cost-effectiveness data for the use of our products to each potential payor, with no assurance that coverage and adequate reimbursement will be obtained from all or any of them. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might be insufficient or may require co-payments that patients find unacceptably high, which may prevent us from achieving or sustaining profitability. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of our gene-modifying products.
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In addition, each country in which we seek approval to market our product candidates has unique laws and market practices regulating coverage and reimbursement for human therapeutics. Market acceptance and sales of our products in each country will depend on our ability to meet each of these jurisdiction’s requirements for coverage and reimbursement. Further, changes to the country’s existing requirements may also affect our ability to commercialize our products in the future, or achieve profitability from their sale.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, physician payment transparency laws, health information privacy and security laws and anti-corruption laws. If we are unable to comply, or have not fully complied, with such laws or their relevant foreign counterparts, we could face substantial penalties.
The sale, distribution and marketing of human therapeutics and the relationship with healthcare providers are strictly regulated by laws in the U.S. and most other jurisdictions in which we intend to seek approval for our product candidates. In addition, the collection and use of personally identifiable information, including health-related information, is regulated by federal, state and foreign privacy, data security and data protection laws. Failure to comply with these laws could impair our ability to properly sell our product candidates in particular jurisdictions and subject us to liability from private and governmental entities. In addition, addressing these diverse and sometimes contradictory requirements in myriad jurisdictions may necessitate that we expend significant resources on compliance efforts. Any failure to comply with these requirements may leave us exposed to possible enforcement actions and potential liability.
The laws that may affect our ability to operate include:
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The scope and enforcement of each of these laws is not always certain and is subject to legislative, judicial or prosecutorial changes. Further, because of the breadth of these laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Indeed, U.S. federal and state enforcement bodies have increasingly scrutinized healthcare companies and providers interactions, which has led to a number of investigations, prosecutions, convictions and settlements in the industry. Ensuring business arrangements comply with applicable laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from its business.
The increasingly global nature of our business operations, including clinical development efforts, subjects us to domestic and foreign anti-bribery and anti-corruption laws and regulations, such as the FCPA and the U.K. Bribery Act. These activities create the risk of unauthorized payments or offers of payments that are prohibited under the FCPA, the U.K. Bribery Act or similar laws. It is our policy to implement safeguards to discourage these practices by our employees and agents. However, these safeguards may ultimately prove ineffective, and our employees, consultants, and agents may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
Further, the U.S. federal and state government, as well as other jurisdictions, have myriad laws regulating the collection, storage, distribution and use of data of employees, patients, agents, and others. These different laws governing the privacy and security of health and other personal information often differ from each other in significant ways and may not have the same effective requirements, thus complicating efforts to comply with their respective provisions. For example:
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The costs associated with ensuring compliance with these laws, including in particular European Data Protection Law, may be onerous and adversely affect our business, financial condition, results of operations and prospects. Further, due to Brexit, we may have additional costs and operational challenges in complying with the U.K. GDPR and any other developments regulation the transfer between the U.K. and EU. We may also need to rely on multiple third parties to meet these legal requirements, which could result in additional liability for us if they do not comply.
Efforts to ensure that we comply with all applicable healthcare and data privacy laws and regulations, as well as other domestic and foreign legal requirements, will involve substantial costs. It is possible that governmental and enforcement authorities in the U.S. or outside the U.S. will conclude that our business practices do not comply with current or future legal requirements. If any noncompliance actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, individual imprisonment, exclusion from participation in federal healthcare programs (such as Medicare and Medicaid), contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our results of operations. Any action for violation of these laws, even if successfully defended, could result in significant legal expenses and divert management’s attention from the operation of the business. Prohibitions or restrictions on sales (including importation or exportation) or withdrawal of future marketed products could materially affect business in an adverse way.
Healthcare cost control initiatives, including healthcare legislative and regulatory reform measures, may have a material adverse effect on our business and results of operations.
The U.S. and many other jurisdictions have enacted or proposed legal changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates, affect our ability to profitably sell our product candidates once approved, and restrict or regulate post-approval activities. Changes in the legal requirements, or their
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interpretation, could impact our business by compelling, for example, modification to: our manufacturing arrangements; product labeling; pricing and reimbursement arrangements; private or governmental insurance coverage; the sale practices for, or availability of, our products; or record-keeping activities. If any such changes were to be imposed, they could adversely affect the operation of our business.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In the U.S. and certain other jurisdictions, there have been, and are expected to continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In the U.S., however, significant uncertainty exists regarding the provision and financing of healthcare because the newly elected administration and federal legislators have publicly declared their intention to review and potentially significantly modify the current legal and regulatory framework for the healthcare system.
Current legislation at the U.S. federal and state levels seeks to reduce healthcare costs and improve the quality of healthcare. For example, the U.S. Affordable Care Act, enacted in March 2010, subjected biologic products to potential competition by lower-cost biosimilars; introduced a new methodology to calculate manufacturers’ rebates under the Medicaid Drug Rebate Program for certain drugs, including infused or injected drugs; increased manufacturers’ minimum Medicaid rebates under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to pharmaceutical prescriptions of individuals enrolled in Medicaid managed care organizations; imposed new annual fees and taxes for certain branded prescription drugs and biologic agents; created the Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts as of January 1, 2019, off negotiated prices on certain brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and provided incentives to programs that increase the federal government’s comparative effectiveness research. At this time, the full effect that the Affordable Care Act would have on our business remains unclear.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA and we expect there will be additional challenges and amendments to the ACA in the future. The Tax Cuts and Jobs Act of 2017 (“Tax Act”) includes a provision that decreased the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, commonly referred to as the “individual mandate,” to $0, effective January 1, 2019. On December 14, 2018, a federal district court in Texas ruled the individual mandate is a critical and inseverable feature of the ACA and, therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals (“Fifth Circuit”) held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. Following an appeal by certain defendants, on June 17, 2021, the U.S. Supreme Court dismissed the plaintiffs’ challenge to the ACA for lack of standing without specifically ruling on the constitutionality of the ACA, and reversed the Fifth Circuit’s judgment and remanded the case with instructions to dismiss. It is unclear how other healthcare reform measures of the Biden administrations or other efforts, if any, to challenge, repeal or replace the ACA, will impact our business.
Other legislative changes relevant to the healthcare system have been adopted in the U.S. since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and subsequent legislation, the Medicare sequester reductions under the Budget Contract Act of 2011 have been suspended from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers, cancer centers and other treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
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Additionally, on July 9, 2021, President Biden issued an executive order directing the FDA to, among other things, work with states and tribes to safely import prescription drugs from Canada and to continue to clarify and improve the approval framework for generic drugs and biosimilars, including the standards for interchangeability of biological products, facilitate the development and approval of biosimilar and interchangeable products, clarify existing requirements and procedures related to the review and submission of BLAs, and identify and address any efforts to impede generic drug and biosimilar competition. It is unclear whether the FDA will make changes or additions to current requirements and procedures relating to BLAs and, if so, how such changes or additions could impact our business.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. As indicated previously, significant uncertainty exists regarding the future scope and effect of current healthcare legislation and regulations because of recent changes in U.S. executive and legislative branches, and elected officials’ public declarations of their intention to significantly modify or repeal the current legislative framework. We cannot predict the initiatives that may be adopted in the future, any of which could limit or modify the amounts that foreign, federal and state governments as well as private payors, including patients, will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Risks Related to Manufacturing and Supply
In vivo genome editing products and ex vivo engineered cell therapies based on CRISPR/Cas9 genome editing technology are novel and may be complex and difficult to manufacture. We could experience manufacturing problems that result in delays in the development, approval or commercialization of our product candidates or otherwise harm our business.
The manufacturing process used to produce CRISPR/Cas9-based in vivo and engineered cell therapy product candidates may be complex, as they are novel and have not been validated for late phase clinical and commercial production and may require components that are difficult to obtain or manufacture at the necessary quantities and in accordance with regulatory requirements. Several factors could cause production interruptions, including equipment malfunctions; facility unavailability or contamination; raw material cost, shortages or contamination; natural disasters, such as the COVID-19 pandemic; disruption in utility services; human error; insufficient personnel; inability to meet legal or regulatory requirements; or disruptions in the operations of our suppliers.
Because our product candidates likely will be regulated as biologics, their processing steps will be more complex than those of most small molecule drugs. Moreover, unlike small molecules, the physical and chemical properties of a complex product such as ours generally cannot be fully characterized. As a result, assays of the finished product or relevant components may not be sufficient to ensure that the product will perform in the intended manner. For this reason, we will employ multiple steps to control the manufacturing process to ensure that the process results in product candidates that meet their specifications, but complications at any one step could adversely impact our manufacturing of products. Further, we may encounter problems achieving adequate quantities and quality of clinical grade materials that meet the FDA or other relevant regulatory agency’s applicable standards or our specifications with consistent and acceptable production yields and costs. Manufacturing process irregularities, even minor deviations from the normal process, could result in product defects or manufacturing issues that cause lot failures, product recalls, product liability claims and litigation, insufficient inventory or production interruption. In addition, product manufacturing and supply could be delayed if the FDA and other regulatory authorities require us to submit lot samples, testing results and protocols, or if they require that we not distribute a lot until they authorize the product’s release.
Further, certain of our product candidates may require components that are unavailable or difficult to acquire or manufacture at the necessary scale and in compliance with regulatory requirements to support our clinical trials or, if approved, commercial efforts. In addition, we rely on third-party contract manufacturing organizations (“CMOs”) to manufacture these components and the final product candidates. We may not have full control of these CMOs and they may prioritize other customers or be unable to provide us with enough manufacturing capacity to meet our objectives. Even if we decide to manufacture the product candidates or their components ourselves, we may face extremely high costs and long timelines to build and maintain manufacturing facilities. Further, we may rely on CMOs outside the U.S. for certain components of our product candidates, and may be subject to importation regulations that may affect our ability to manufacture or increase the cost of our product candidates.
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We also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing personnel needed to operate or supervise the necessary manufacturing processes, which could result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements.
Any of these manufacturing and supply issues or delays could restrict our ability to meet clinical or market demand for our products, and be costly to us and otherwise harm our business, financial condition, results of operations and prospects. Further, any problems in manufacturing processes or facilities could make us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs.
Risks Related to Data and Privacy
Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our operations and development efforts.
We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business, we collect, store, and transmit large amounts of confidential information (including but not limited to intellectual property such as trade secrets, proprietary business information, and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information. Our third-party collaborators, vendors and service providers (including our CMOs and CROs) also have access to large amounts of confidential information relating to our operations, including our research and development efforts. The size and complexity of our information technology systems, and those of third-party vendors, service providers and collaborators, and the large amounts of confidential information stored on those systems, make such systems potentially vulnerable to service interruptions or systems failures, or to security breaches from inadvertent or intentional actions by our employees, third-party vendors, service providers, collaborators, and/or business partners, or from cyber-attacks by malicious third parties.
In addition to such risks, the adoption of new technologies may also increase our exposure to cybersecurity breaches and failures. Further, having a significant portion of our workforce working from home for extended periods of time due to the COVID-19 pandemic puts us at greater risk of cybersecurity attacks. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect. Cyber-attacks could include the deployment of harmful malware, denial-of-service attacks, social engineering, “phishing” scams, ransomware, network security breaches, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information. Certain of our service providers have been subject to such attacks and our company or our service providers may be impacted by such attacks in the future. Significant disruptions of these information technology systems or security breaches could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including but not limited to trade secrets or other intellectual property, proprietary business information, and personal information), and could result in financial, legal, business, and reputational harm to us and would adversely affect our operations, including our discovery and research and development programs. For example, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our employees or current or future clinical trial participants, could harm our reputation, require us to comply with federal and/or state breach notification laws and foreign law equivalents (such as the GDPR or the U.K.’s Data Protection Act), and otherwise subject us to liability, including financial penalties and fines, under laws and regulations that protect the privacy and security of personal information. Also, the loss of preclinical or clinical trial data from completed or future preclinical or clinical trials, respectively, could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type summarized and described above. While we have implemented security measures to protect our information technology systems and infrastructure, there is no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.
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Interruptions in the availability of server systems or communications with internet or cloud-based services, or failure to maintain the security, confidentiality, accessibility or integrity of data stored on such systems, could harm our business.
We rely upon a variety of internet service providers, third-party web hosting facilities and cloud computing platform providers and Software as a Service vendors to support our business. Failure to maintain the security, confidentiality, accessibility or integrity of data stored on such systems could result in interruptions in our operations, damage our reputation in the market, increase our service costs, cause us to incur substantial costs, subject us to liability for damages and/or fines, and divert our resources from other tasks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects. If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to our data or our information technology systems, we may incur significant legal and financial exposure and liabilities.
We also do not have control over the operations of the facilities of our cloud service providers, software as a service vendors or our third-party web hosting providers, and they also may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct. In addition, any changes in these providers’ service levels may adversely affect our ability to meet our requirements and operate our business.
Social media platforms present new risks and challenges to our business.
As social media continues to expand, it also presents us with new risks and challenges. Social media is increasingly being used to communicate information about us, our programs and the diseases our therapeutics are being developed to treat. Social media practices in the pharmaceutical and biotechnology industries are evolving, which creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media platforms to comment on the effectiveness of, or adverse experiences with, a product or a product candidate, which could result in reporting obligations or other consequences. Further, the accidental or intentional disclosure of non-public information by our workforce or others through media channels could lead to information loss. In addition, there is a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us, our products, or our product candidates on any social media platform. The immediacy of social media precludes us from having real-time control over postings made regarding us via social media, whether matters of fact or opinion. Our reputation could be damaged by negative publicity or if adverse information concerning us is posted on social media platforms or similar mediums, which we may not be able to reverse. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face restrictive regulatory actions or incur other harm to our business including quick and irreversible damage to our reputation, brand image and goodwill.
Risks Related to the COVID-19 Pandemic
Business interruptions resulting from the COVID-19 outbreak or similar public health crises could delay or cause a disruption of the development of our product candidates and adversely impact our business.
Public health crises, such as pandemics or similar outbreaks, could adversely impact our business. The current COVID-19 pandemic has continuously evolved, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers, in Massachusetts, across the U.S. and in other countries. The U.S. government, as well as certain foreign governments, have imposed restrictions on travel to or from the U.S. and other jurisdictions, which may delay or prevent us from conducting our business in a timely and efficient manner. The extent to which COVID-19 impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, the identification of new variants of the virus, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions to contain COVID-19 or address its impact in the short and long term, among others.
Additionally, completion of our clinical trials for NTLA-2001 for ATTR amyloidosis, NTLA-2002 for HAE and NTLA-5001 for AML as well as timely completion of preclinical activities and initiation of planned clinical trials for other product candidates, such as NTLA-3001 for AATD, is dependent upon the availability of, for example,
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preclinical and clinical trial sites, researchers and investigators, regulatory agency personnel, and materials, which may be adversely affected by global health matters, such as pandemics. We plan to conduct preclinical activities and clinical trials for our investigational drug product candidates in geographies that are currently being affected by COVID-19.
Further, in response to the pandemic and in accordance with direction from state and local government authorities, we have restricted and may continue to restrict access to our facilities mostly to personnel and third parties who must perform critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that personnel work remotely, as appropriate. In the event that governmental authorities were to further modify current restrictions, our employees conducting research and development or manufacturing activities may not be able to access our laboratory or manufacturing space, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.
Some factors from the COVID-19 pandemic that could delay or otherwise adversely affect the completion of our preclinical activities and our ongoing and planned clinical trials for our investigational drug product candidates, as well as our business generally, include:
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These and other factors arising from COVID-19 could worsen in countries that are already afflicted with coronavirus or could continue to spread to additional countries, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.
In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, preclinical studies and ongoing and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and other actions to contain the outbreak or address its impact, such as social distancing and quarantines or lock-downs in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and other countries to contain and address the disease.
Risks Related to Commercialization
If, in the future, we are unable to establish sales, marketing and distribution capabilities or enter into agreements with third parties to sell, market and distribute products based on our technologies, we may not be successful in commercializing our products if and when any product candidates or therapies are approved and we may not be able to generate any revenue.
We do not currently have a sales, marketing or distribution infrastructure and, as a company, have no experience in the sale, marketing or distribution of therapeutic products. To achieve commercial success for any approved product candidate for which we retain sales and marketing responsibilities, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.
Factors that may inhibit our efforts to commercialize our product candidates include:
If we enter into arrangements with third parties to perform sales, marketing and distribution services, we would likely have lower product revenue or profitability than if we ourselves were to market and sell our product candidates. In addition, we may be unable to enter into sales and marketing arrangements with third parties, or into arrangements with terms that are favorable to us. We likely will have little control over such third parties and any of them may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or through third parties, we may not be successful in commercializing our product candidates, and our business, results of operations, financial condition and prospects will be materially adversely affected.
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Risks Related to Our Financial Position and Need for Additional Capital
Risks Related to Past Financial Condition
We have never generated any revenue from product sales and our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of areas.
We have no products approved for commercial sale, have not generated any revenue from product sales, and do not anticipate generating any revenue from product sales until we have received regulatory approval for the commercial sale of one of our product candidates. Our ability to generate revenue, and achieve and retain profitability, depends significantly on our success in many areas, including:
Even if one or more product candidates that we discover and develop are approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and the timing of such costs may be out of our control. If we are not able to generate revenue from the sale of any approved products, we may never become profitable.
Our limited operating history may make difficult the evaluation of our business’s success to date and assessment of our future viability.
We are an early clinical-stage company. We were founded and commenced operations in mid-2014. All of our product candidates are still in the preclinical development or early clinical stage. We have not yet demonstrated our ability to successfully complete any clinical trials, including large-scale, pivotal clinical trials, obtain marketing approvals, manufacture clinical and commercial scale therapeutics, or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Our ability to generate product revenue or profits, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates, which may never occur. We may never be able to develop or commercialize a marketable product.
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Each of our programs may require additional discovery research and then preclinical and clinical development, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. In addition, our product candidates must be approved for marketing by the FDA, or certain other foreign regulatory agencies, before we may commercialize any product.
Our limited operating history, particularly in light of the rapidly evolving genome editing field, may make it difficult to evaluate our current business and predict our future performance. Our relatively short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by very early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer.
We have incurred net losses in each period since our inception, anticipate that we will continue to incur net losses in the future and may never achieve profitability.
We are not profitable and have incurred losses in each period since our inception. Our net loss was $81.2 million for the three months ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $703.0 million. We expect these losses to increase as we continue to incur significant research and development and other expenses related to our ongoing operations, seek regulatory approvals for our future product candidates, scale-up manufacturing capabilities, maintain, expand and protect our intellectual property portfolio and hire additional personnel to support the development of our product candidates and to enhance our operational, financial and information management systems. Although we believe that our cash, cash equivalents, and marketable securities will enable us to fund our operating and capital expenditure requirements at least through the next twenty four months, we cannot predict the impact of the COVID-19 pandemic on future results of operations and financial condition due to a variety of factors, including the health of our employees, the ability of suppliers to continue to operate and deliver, the ability of Intellia to maintain operations, continued access to transportation resources, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic. We expect to finance our operations through a combination of collaboration revenue, equity or debt financings or other sources, which may include collaborations with third parties. Given the impact of COVID-19 on the U.S. and global financial markets, we may be unable to access further equity or debt financing when needed.
A critical aspect of our strategy is to invest significantly in our technology to improve the efficacy and safety of potential product candidates that we discover. Even if we succeed in discovering, developing and ultimately commercializing one or more of these product candidates, we will continue to incur losses for the foreseeable future relating to our substantial research and development expenditures to develop our technologies. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business, such as the COVID-19 pandemic. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.
Risks Related to Future Financial Condition
We may need to raise substantial additional funding to fund our operations. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of any product candidates.
Our operations have required substantial amounts of cash since inception, and we expect to spend substantial amounts of our financial resources on our discovery programs going forward and future development efforts. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development, manufacture (or have manufactured) product candidates and components, and then conduct extensive clinical trials to demonstrate the safety and efficacy of any of our future product candidates in humans. Because preclinical and clinical testing is expensive and can take many years to complete, we may require additional funding to complete these undertakings. Further, if we are able to identify product candidates that are eventually approved, we will require significant additional amounts in order to launch and commercialize our product candidates. For the foreseeable future, we expect to continue to rely on additional financing to achieve our business objectives. Our future capital requirements will depend on and could increase significantly as a result of many factors, including the scope,
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progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our current or future product candidates, including additional expenses attributable to adjusting our development plans (including any supply related matters).
We will require additional capital for the further development and commercialization of any product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate or due to other unanticipated factors. Disruptions in the financial markets in general and, more recently, due to the COVID-19 pandemic have made equity and debt financing more difficult to obtain, and may have a material adverse effect on our ability to meet our fundraising needs.
We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital and 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, manufacture or commercialization of our product candidates or other research and development initiatives. Our collaboration and license agreements may also be terminated if we are unable to meet the payment or other obligations under the agreements. We could be required to seek collaborators for product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.
Raising additional capital may cause dilution to our stockholders and restrict our operations.
We will need additional capital in the future to continue our planned operations. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. In addition, the impact on the economic and financial markets of the COVID-19 pandemic has depressed the valuation of public companies, which could require selling equity at lower prices to ensure appropriate capitalization. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Unfavorable national or global economic conditions or political developments could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the national or global economy and financial markets. For example, governmental statements, actions or policies, political unrest and global financial crises can cause extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, political unrest or additional global financial crises, including those resulting from the current COVID-19 pandemic, could result in a variety of risks to our business, including weakened demand for our products, if approved, or our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate, further political developments and financial market conditions could adversely impact our business.
Inadequate funding for, or change of priorities or disruptions at, the FDA and other government agencies in or outside the U.S. could hinder their ability to hire, retain, or deploy key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA and other similar regulatory agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and authorization to accept the payment of user fees, reallocation of resources to address unique or new healthcare issues (such as the COVID-19 pandemic), and statutory, regulatory, and policy changes. For example, the FDA’s average
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review times at the agency have fluctuated in recent years as a result of these factors in the U.S. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other similar agencies may also slow the time necessary for new product applications to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities.
If a prolonged government shutdown occurs (or if the COVID-19 pandemic continues to disrupt or prevent regular inspections, reviews, or other regulatory activities conducted by regulatory agencies) in the U.S. or other jurisdictions where we plan to conduct our clinical trials, manufacturing, or other operations, it could significantly impact the ability of the relevant agency, such as the FDA, to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Risks Related to Our Reliance on Third Parties
Risks Related to Our Reliance on Collaboration Partners
Our technological advancements and any potential for revenue may be derived in part from our collaborations, including, for example, with Regeneron and AvenCell, and if the collaboration or co-development agreements related to a material collaboration were to be terminated or materially altered in an adverse manner, our business, financial condition, results of operations and prospects would be harmed.
We rely on strategic collaborations to advance our technology and co-develop products that we plan to co-commercialize. If our collaboration partner in a material collaboration fails to develop, obtain regulatory approval for or ultimately commercialize any product candidate from the development programs governed by the respective collaboration agreements, including, e.g., a co-development or co-commercialization agreement, or breaches or terminates our collaboration with it, our business, financial condition, results of operations and prospects could be harmed. In addition, any material alteration, in an adverse manner, of any material collaboration agreement, or dispute or litigation proceedings we may have related to a material collaboration in the future could delay development programs, create uncertainty as to ownership of or access to intellectual property rights, distract management from other business activities and generate substantial expense.
As described within the “Collaborations and Other Arrangements” section of this Form 10-K, we have entered into co-development and co-promotion (“Co/Co”) arrangements with Regeneron and AvenCell Therapeutics, Inc. (“AvenCell”). Either Regeneron or AvenCell may change its strategic focus or pursue alternative technologies in a manner that results in reduced, delayed or no revenue to us under these arrangements. For example, Regeneron has a variety of marketed products and product candidates either by itself or with other companies, including some of our competitors. In addition, the corporate objectives of our collaborators, such as Regeneron or AvenCell, may not be consistent with our best interests. Regeneron or AvenCell may change its position regarding its participation and funding of our joint activities, which may impact our ability to successfully pursue those programs.
Our existing and future collaborations will be important to our business. If we are unable to maintain any of these collaborations, or if these collaborations are not successful, our business could be adversely affected.
We have limited capabilities for product discovery and development and do not yet have any capability for sales, marketing or distribution. Accordingly, we have entered, and plan to enter, into collaborations with other companies, including our therapeutic-focused collaboration agreements with Novartis and Regeneron, that we believe can provide such capabilities. These current and future therapeutic-focused collaborations could provide us with important technologies and/or funding for our programs and technology. Our existing and future therapeutic collaborations may have a number of risks, including that collaborators:
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If our therapeutic collaborations do not result in the successful discovery, development and commercialization of products or if a collaborator terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. All of the risks relating to product discovery, development, regulatory approval and commercialization summarized and described in this report also apply to the activities of our therapeutic collaborators.
Additionally, if one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected.
As part of our business strategy, we may pursue acquisitions or licenses of assets or acquisitions of businesses, or disposition of assets or technologies. For example, in February 2022, we announced the acquisition of Rewrite in order to add additional capabilities to our growing platform. We also may pursue strategic alliances and joint ventures that leverage our core technology and industry experience. If we decide to collaborate with other companies to discover, develop and commercialize therapeutic products, we face significant competition in seeking appropriate collaborators because, for example, third-parties have comparable rights to the CRISPR/Cas9 system or similar genome editing technologies. In addition, we have limited experience with acquiring, disposing of or licensing assets or forming strategic alliances and joint ventures. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the
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proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail, delay or abandon discovery efforts or development programs, and the development, manufacture or commercialization of a product candidate, or increase our expenditures and undertake these activities at our own expense. If we elect to fund and undertake discovery, development, manufacturing or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary discovery, development, manufacturing and commercialization activities, we may not be able to further develop our product candidates, manufacture the product candidates, bring them to market or continue to develop our technology and our business may be materially and adversely affected. Furthermore, we may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, license, strategic alliance or joint venture.
Risks Related to AvenCell
We launched a new company, AvenCell, alongside Cellex Cell Professionals GmbH and Blackstone Life Sciences Advisors L.L.C. We are exposed to risks associated with the launch of the new company and may not realize the advantages we expect from it.
In July 2021, we launched AvenCell alongside Cellex Cell Professionals GmbH (“Cellex”) and Blackstone Life Sciences Advisors L.L.C. (“BXLS”) (the “AvenCell Launch”). AvenCell acquired GEMoaB GmbH (“GEMoaB”), a wholly-owned subsidiary of Cellex. AvenCell combines GEMoaB’s clinical-stage universal CAR-T program and platforms with our allogeneic universal cell engineering platform. In connection with the AvenCell Launch, we entered into a license and collaboration agreement with AvenCell (the “AvenCell License”), under which we will collaborate to develop allogeneic universal CAR-T cell therapies, as well as a co-development and co-funding agreement (the “AvenCell Co/Co Agreement”) to develop allogeneic universal CAR-T cell products targeted to a particular undisclosed immuno-oncology therapeutic target. AvenCell may not be successful in the timeframe we expect, or at all. In addition, if AvenCell fails to develop, obtain regulatory approval for or ultimately commercialize any product candidate from its development programs, including those governed by the respective AvenCell License or AvenCell Co/Co Agreement, or breaches or terminates such agreements, our business, financial condition, results of operations and prospects could be harmed.
Additionally, we, BXLS, and Cellex (and certain related entities) each have equal ownership of AvenCell and therefore share control over portions of the operations of AvenCell. Because of our minority ownership in AvenCell, we have a lesser degree of control over its business operations, thereby potentially increasing the financial, legal, operational and compliance risks Intellia may face in the future. In addition, we may be dependent on controlling shareholders or management of AvenCell who may have business interests, strategies or goals that are inconsistent with ours. These risks include the possibility that AvenCell, BXLS or Cellex has economic or business interests or goals that are or become inconsistent with our economic or business interests or goals; is in a position to take action contrary to our instructions, requests, policies or objectives; subjects us to unexpected liabilities or risks; takes actions that reduce our return on investment; acts in a manner that compromises our key licensed rights, or important IP or other rights that we own or license; or takes actions that harm our reputation or restrict our ability to run our business. Furthermore, as a result of our ownership in AvenCell, we may be required to include AvenCell’s financial information in our consolidated financial results. We have not previously included a minority-owned subsidiary in our financial statements and therefore are subject to increased risk in accurately representing and incorporating AvenCell’s financial statements into our own, which could result in delayed filings with the SEC and the finding of a material or significant weakness, among others. This could result in harmful consequences to our business, including an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.
Risks Related to Our Reliance on Other Third Parties
We currently rely, and expect to continue to rely in part on, third parties to manufacture our clinical product supplies, and we intend to rely on third parties for at least a portion of the manufacturing process of our product candidates, if approved. Our business could be harmed if the third parties fail to provide us with sufficient quantities of product inputs or fail to do so at acceptable quality levels or prices or fail to meet legal and regulatory requirements.
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We do not currently own any facility that may be used as our clinical-scale manufacturing and processing facility and must rely on outside vendors, such as CMOs, to manufacture supplies and process our product candidates. We have only recently begun to manufacture and process product candidate components on a clinical scale and may not be able to successfully complete or continue to do so. We will make changes to optimize the manufacturing process, and cannot be sure that even minor changes in the process will result in therapies that are safe, potent, pure or effective.
The facilities used by our CMOs to manufacture our product candidates must be inspected and approved by, as applicable, the FDA or other foreign regulatory agencies after we apply for approval or marketing authorization. We will be dependent on our CMO partners to properly manufacture adequate supply of our product candidates and components in a timely manner and in accordance with our specification. We also will depend on these entities for compliance with relevant legal and regulatory requirements for manufacture of our product candidates, including current good manufacturing practice (“cGMP”), and in certain cases, current good tissue practice (“cGTP”), requirements. If they cannot successfully manufacture material that conforms to our specifications and the strict relevant regulatory requirements, our CMOs will not be able to secure or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel, particularly as we increase the scale of our manufactured material. If the FDA or relevant foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates.
If any CMO with whom we contract fails to perform its obligations, we may be forced to enter into an agreement with a different CMO, which we may not be able to do on reasonable terms, if at all. In such scenario, our clinical trials supply could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to manufacture our product candidates may be unique to the original CMO and we may have difficulty transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change CMOs for any reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a comparability study, that any new manufacturing process will produce our product candidate according to the specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely manner. In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials.
Events such as the ongoing COVID-19 pandemic could adversely impact the ability of our vendors, including CMOs, to manufacture supplies, process and deliver our product candidates, or to otherwise meet our requirements or those of the applicable regulatory agencies. For example, since the beginning of the COVID-19 pandemic, three vaccines for COVID-19 have been granted Emergency Use Authorization by the FDA, and one of those later received marketing approval. Additional vaccines may be authorized or approved in the future. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing capacity for the products needed for our clinical trials, which could lead to delays in these trials. Additionally, these events could also impact the regulatory agencies’ ability to inspect and approve our vendors, including CMOs, within our currently expected timeframe.
We currently rely, and expect to continue to rely on, third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with legal and regulatory requirements, we may not be able to obtain regulatory approval of or commercialize any potential product candidates.
We currently depend, and expect to continue to depend, upon third parties, including independent investigators, to conduct our clinical trials under agreements with universities, medical institutions, CROs, strategic partners and others. We expect to have to negotiate budgets and contracts with CROs, trial sites and other service and goods providers, which may result in delays to our development timelines and increased costs.
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We currently rely, and expect to continue to rely heavily on third parties over the course of our preclinical studies and clinical trials and, as a result, will have limited control over the clinical investigators and other service providers, and limited visibility into their day-to-day activities, including with respect to their compliance with the approved clinical protocol and other legal, regulatory and scientific standards. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our legal responsibilities. We and these third parties are required to comply with good clinical practice (“GCP”), which are regulations and guidelines enforced by the FDA, EMA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical investigators and trial sites. If we or any of these third parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the relevant regulatory authorities may require us to suspend or terminate these trials or perform additional preclinical studies or clinical trials before approving our marketing applications. We cannot be certain that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP, and in certain cases, cGTP, requirements and may require a large number of test patients.
Our or these third parties’ failure to comply with these requirements or to recruit a sufficient number of patients may require us to delay, suspend, repeat or terminate clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of these third parties violates applicable federal, state or local, as well as foreign, laws and regulations, such as the fraud and abuse or false claims laws and regulations or privacy and security laws. In jurisdictions such as the U.K. and EU, penalties for violations of privacy laws and other regulations can be financially significant. Further, if any of our CROs, clinical investigators or others involved in our clinical trials fail to comply with such laws and regulations, we could be held responsible for its actions or omissions and be negatively impacted. In the event of non-compliance with European Data Protection Law, we could be subject to substantial fines and other penalties, including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses.
Any third parties conducting our current or future clinical trials will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether they devote sufficient time and resources to our ongoing preclinical, clinical, and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf. If these third parties fail to meet their contractual obligations, legal requirements or expected deadlines, need to be replaced, or generate inaccurate or substandard clinical data by failing to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product candidates. In addition, the COVID-19 pandemic or similar events, and responsive governmental actions, could divert healthcare resources, including necessary materials and clinical trial personnel, away from our clinical trial sites to focus on pandemic concerns. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.
A resurgence of the COVID-19 pandemic (or a similar event) and measures taken in response by U.S. or other governments may have a significant impact on our CROs, clinical sites and other service and goods providers, which may affect our ability to initiate and complete preclinical studies and clinical trials.
If any of our relationships with these third-party CROs, clinical sites or other third parties terminate, we may not be able to enter into arrangements with alternative CROs, clinical sites or other third parties or to do so on commercially reasonable terms. Switching or adding additional CROs, clinical sites or other providers involves additional cost and requires management time and focus. In addition, the transition to a new CRO may result in delays, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with these parties, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
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Risks Related to Employee Matters and Managing Our Growth
Risks Related to Hiring and Retention
We expect to expand our research, development, manufacturing, clinical and regulatory capabilities, and, as a result, we may encounter difficulties in hiring capable personnel and otherwise managing our growth, which could disrupt our operations.
We expect growth in the number of our employees and the scope of our operations, including the areas of technology research, product development and manufacturing, clinical, regulatory and quality affairs and, if any product candidates receive marketing approval, sales, marketing and distribution. To manage our anticipated growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities, and recruit and train additional qualified personnel. Due to our limited financial resources, the significant competition for employees in our market and industry, and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to recruit and train additional qualified personnel or otherwise effectively manage the expansion of our operations, which may lead to significant costs and divert our management and business resources. Any inability to manage growth could delay or disrupt the execution of our business and operational plans.
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on the research and development, clinical, legal, financial and business development expertise of John M. Leonard, M.D., our President and Chief Executive Officer, Glenn Goddard, our Executive Vice President, Chief Financial Officer and Treasurer, David Lebwohl, our Executive Vice President and Chief Medical Officer, James Basta, our Executive Vice President, General Counsel and Corporate Secretary, Laura Sepp-Lorenzino, our Executive Vice President and Chief Scientific Officer, Eliana Clark, our Executive Vice President and Chief Technical Officer and Derek Hicks, our Executive Vice President and Chief Business Officer, as well as the other principal members of our management, scientific and clinical teams. Although we have entered into employment arrangements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be important for our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives, and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products using our technology. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies, universities and research institutions for similar personnel. The market for qualified personnel in the biotechnology space generally, and genome editing and gene therapy fields in particular, in and around the Cambridge, Massachusetts area is especially competitive. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategies. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. Further, some of the qualified personnel that we hire and recruit are not U.S. citizens, and there is uncertainty with regard to their future employment status due to the current U.S. administration’s announced intention of modifying the legal framework for non-U.S. citizens to be employed in the U.S. Finally, events such as the COVID-19 pandemic and government restrictions and directives, including immigration policy changes, could adversely impact our ability to recruit, retain or replace key employees necessary to achieve our objectives and strategic imperatives, If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
Risks Related to Government Regulation
Risks Related to Obtaining Regulatory Approval
While the regulatory framework for approval of gene therapy including genome editing products exists, the limited specific guidance and precedent for genome-edited products makes the regulatory approval process potentially
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more unpredictable and we may experience significant delays in the clinical development and regulatory approval, if any, of our product candidates.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products, including genome editing therapeutics and engineered cell therapies, are subject to extensive regulation by the FDA in the U.S. and other regulatory authorities in other jurisdictions. For example, we are not permitted to market any drug or biological product, including in vivo products or engineered cell therapies, until we receive regulatory approval from the relevant regulatory agency, such as the FDA in the U.S. or EMA in the EU. We expect the novel nature of our product candidates to create challenges or raise questions from regulatory agencies in obtaining regulatory approval. For example, in the U.S., the FDA has approved neither any in vivo gene editing-based therapeutic nor any nuclease edited cell therapy for human therapeutic use. The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support approval. The Advisory Committee’s opinion, although not binding, may significantly impact our ability to obtain approval of our product candidates. Moreover, while we are not aware of any specific genetic or biomarker tests for which regulatory approval would be necessary to advance any of our product candidates to clinical trials or commercialization, regulatory agencies could require the development and approval of such tests. Accordingly, the regulatory approval pathway for such product candidates may be uncertain, complex, expensive and lengthy, as well as different in each jurisdiction, and approval may not be obtained in any, some or all jurisdictions.
Other non-regulatory entities may impact the regulatory agencies and ethics committees’ evaluation and approval decision regarding our product candidates. For example, in December 2018, the World Health Organization (“WHO”) established the Expert Advisory Committee on Developing Global Standards for Governance and Oversight of Human Genome Editing. While the standards are expected to focus primarily on germline modifications, the guidelines could impact somatic cell editing research programs, such as ours. In March 2019, the WHO Expert Advisory Committee recommended initiating the first phase of a new global registry (the “Registry”) to track research on human genome editing. Accepting this recommendation, the WHO announced plans in August 2019 for an initial phase of the registry using the International Clinical Trials Registry Platform (“ICTRP”). This phase will include worldwide registries for both somatic cell editing and germline editing clinical trials. Although registration of these clinical trials in the WHO’s Registry currently is voluntary, failure to register could impact the evaluation by the regulators and ethics committees. In July 2021, the WHO Expert Advisory Committee issued recommendations and a governance framework for human genome editing research intended for the international, regional, national and institutional level. For example, the WHO recommended that: clinical trials using somatic human genome editing technologies be reviewed and approved by the appropriate research ethics committee before inclusion in its Registry; basic and preclinical gene editing research also be included in a registry; somatic or germline human genome editing research should only take place in jurisdictions with domestic policy and oversight mechanisms; and relevant patent holders help ensure equitable access to human genome editing interventions. We cannot predict the impact of the WHO’s current and future recommendations, or any policies or actions that ethics committees or regulatory agencies may take in response to such recommendations, on our research, clinical and business plans and results.
Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including willingness of physicians to use an experimental therapy, the availability of existing treatments, the trial’s geographic locations and the number of patients in each geographic location. In addition, our ability to enroll and dose patients may be delayed by the regulatory authority as well as, the IRB or another ethics committee (whether local or national). For example, as set forth in the National Institutes of Health (“NIH”) Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules (“NIH Guidelines”), gene therapy clinical trials are also subject to review and oversight by an institutional biosafety committee (“IBC”), a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. Before a clinical trial can begin at any institution, that institution’s IRB and its IBC assesses the safety of the research and identifies any potential risk to public health or the environment. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH guidelines voluntarily follow them. Further, a clinical trial may be suspended or terminated by us, the relevant IRBs or ethics committees of the trial’s DSMB, or the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience
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termination of, or delays in the completion of, any clinical trial of product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be impaired. In addition, any delays in completing any clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue.
We have received orphan drug designation for NTLA-2001 and may in the future seek orphan drug designation for some of our other product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.
Regulatory authorities in some jurisdictions, including the U.S. and Europe, may in response to a request from the sponsor designate products for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may grant orphan drug designation to a product intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the U.S., or a patient population of 200,000 or more in the U.S. when there is no reasonable expectation that the cost of developing and making available the product in the U.S. will be recovered from sales in the U.S. for that product. Orphan drug designation must be requested before submitting a BLA. In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the product and its potential orphan use are disclosed publicly by the FDA. In the EU, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) it is unlikely that the product, without the benefits derived from orphan status, would generate sufficient return in the EU to justify the necessary investment in its development; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the approval of another marketing application for the same drug for the same indication for that time period. The applicable period is seven years in the U.S. and ten years in the EU. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. In addition, the FDA can subsequently approve a marketing application for the same drug, or a product with the same active moiety, for treatment of the same disease or condition if it concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. Similarly, the EMA may grant a marketing authorization to a similar medicinal product for the same indication as an authorized orphan product at any time if it is established that the second product, although similar, is safer, more effective or otherwise clinically superior to the authorized product. The FDA and EMA also can approve a different drug for the same orphan indication, or the same drug for a different indication, during the orphan exclusivity period.
We have received orphan drug designation for NTLA-2001 for the treatment of TTR amyloidosis. We may seek orphan drug designation for some of our other product candidates in orphan indications in which there is a medically plausible basis for the use of these product candidates. Even where we obtain orphan drug designation, exclusive marketing rights in the U.S. may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. In addition, although we intend to seek orphan drug designation for other product candidates, we may never receive such designations.
The FDA may reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.
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Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA approves a product candidate, comparable regulatory authorities in foreign jurisdictions must also authorize the marketing and sale of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and review periods different from those in the U.S., including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the U.S., a product candidate must be approved for reimbursement before it can be sold in that jurisdiction. In some cases, the price that we are allowed to charge for our products is also subject to approval or to other legal restrictions.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the relevant regulatory requirements or to receive applicable marketing approvals, our target markets will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Risks Related to Ongoing Regulatory Obligations
Even if we receive regulatory approval of any product candidates or therapies, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
If any of our product candidates are approved, they may be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, sampling, record-keeping, and submission of safety and efficacy data, and other post-market information and potential obligations (such as post-marketing studies), including both federal and state requirements in the U.S. and requirements of comparable foreign regulatory authorities. In addition, we will be subject to continued compliance with cGMP and GCP, and in certain cases, cGTP, requirements for any clinical trials that we conduct post-approval.
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, as applicable, including ensuring that quality control and manufacturing procedures conform to cGMP and, in certain cases, cGTP requirements, and applicable product tracking and tracing requirements. As such, we and our CMOs will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any BLA, other marketing applications, and previous responses to inspection observations. 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.
Any regulatory approvals that we receive for our product candidates may 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, including Phase IV clinical trials and surveillance to monitor the safety and efficacy of the product candidate. For example, the FDA or other regulatory agency may also require a REMS or similar program as a condition of approval of our product candidates, which could entail requirements for long-term patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, we will have to comply with their respective legal or regulatory requirements including submissions of safety and other post-marketing information and reports and registration.
The FDA or other regulatory agencies may seek to impose consent decrees, withdraw approval or prohibit the export or import of a product if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or
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manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the U.S. market, and the relevant foreign regulatory agencies do the same in their respective jurisdictions. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, we or our collaborators may lose any marketing approval that we or our collaborators may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
Our employees, independent contractors, clinical investigators, CMOs, CROs, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of non-compliance, fraud, misconduct or other illegal activity by our employees, independent contractors, clinical investigators, CMOs, CROs, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with federal and state laws and those of other applicable jurisdictions; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; comply with manufacturing standards; comply with federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the U.S. and similar foreign privacy or fraudulent misconduct laws; or report financial information or data accurately; or disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with clinical investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare products and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, including promotion and marketing of off-label uses of our products, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials or creating fraudulent data in our preclinical studies or clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees 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 or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights,
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those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
Legal, political and economic uncertainty surrounding the exit of the United Kingdom from the EU is a source of instability and uncertainty.
The U.K.’s withdrawal from the EU, or Brexit, became effective on January 31, 2020. EU laws, including pharmaceutical laws, continued to apply in the U.K. during a transitional period, which ended on December 31, 2020. On December 24, 2020, the U.K. and EU signed an EU-U.K. Trade and Cooperation Agreement (“TCA”), which became provisionally applicable on January 1, 2021 and has been formally applicable since May 1, 2021. Although this agreement is comprehensive and provides some details on how aspects of the U.K. and EU’s relationship regarding medicinal products will operate, particularly in relation to GMP, it does not cover many areas of regulation pertinent to the biopharmaceutical industry, so many complexities remain. Many of the regulations that now apply in the U.K. following the transition period (including financial laws and regulations, tax, intellectual property rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations, medicine approval and regulations, immigration laws and employment laws), will likely be amended in future as the U.K. determines its new approach, which may result in significant divergence from EU regulations. This lack of clarity on future U.K. laws and regulations and their interaction with the EU laws and regulations increases our regulatory burden of operating in and doing business with both the U.K. and the EU.
The long-term effects of Brexit will depend in part on how the EU-U.K. TCA, and any future agreements signed by the U.K. and the EU, take effect in practice. Such a withdrawal from the EU is unprecedented, and it is unclear how the restrictions on the U.K.’s access to the European single market for goods, capital, services and labor within the EU and the wider commercial, legal and regulatory environment, could impact our current and future operations and clinical activities in the U.K.
We may also face new regulatory costs and challenges that could have an adverse effect on our operations as a result of Brexit. Since the regulatory framework in the U.K. covering quality, safety and efficacy of medicinal products, clinical trials, marketing authorization, commercial sales and distribution of medicinal products is derived from EU directives and regulations, Brexit could materially impact the future regulatory regime with respect to the approval of any of our future product candidates in the U.K., because U.K. legislation has the potential to diverge from EU legislation. For instance, Great Britain is no longer covered by the centralized procedure for obtaining EEA-wide marketing authorizations from the EMA for medicinal products and a separate process for authorization of drug products is required in the U.K. for Northern Ireland only under the Northern Ireland Protocol between the EU and the U.K., where the EU regulatory framework will continue to apply in Northern Ireland and centralized EU authorizations will continue to be recognized in Northern Ireland only. For a period of two years from January 1, 2021, the U.K.'s MHRA may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new U.K. marketing authorization, however a separate application will still be required. Any delay in obtaining, or an inability to obtain, any regulatory approvals, as a result of Brexit or otherwise, would delay or prevent us from commercializing our current or future product candidates in the U.K. and could restrict our ability to generate revenue from that market.
Until there is greater understanding on how the terms of the TCA will take effect in the long-term, and until the terms of other potential agreements that the U.K. may eventually enter into with the EU are known, it is not possible to determine the extent of the impact that the U.K.'s departure from the EU and/or any related matters may have on us; however any of these effects of Brexit, and others we cannot anticipate, could negatively impact our business and results of operations in the U.K. Likewise, similar actions taken by European and other countries in which we operate could have a similar or even more profound impact.
The uncertainty concerning the U.K.’s legal, political and economic relationship with the EU following Brexit may also be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).
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Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.
We and any potential collaborators, clinical investigators, CMOs, CROs, consultants or vendors may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the U.S., numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH, or by comparable laws in other jurisdictions. Depending on the facts and circumstances, we could be subject to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a covered entity in a manner that is not authorized or permitted by laws or regulations.
Compliance with U.S., both state and national, and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, 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.
Given that we are conducting clinical trials in the U.K. and EU, and our current and future requests for approval to conduct clinical trials are in the U.K., EU and other jurisdictions outside the U.S., we are and may be subject to additional privacy laws. For example, European Data Protection Law applies extraterritorially, and we are subject to the European Data Protection Law because of data processing activities that involve the personal data of individuals in the EU or the U.K. in connection with EU or U.K. clinical trials. As discussed above, the GDPR regulates the processing of personal data of data subjects in the EU or the U.K. by imposing a broad range of strict requirements on companies subject to the GDPR, including requirements relating to having legal bases for processing personal data and transferring such information outside the EU or the U.K., including to the U.S., providing robust disclosures to individuals regarding the processing of their personal data, keeping personal data secure, having data processing agreements with third parties who process personal data, responding to individuals’ requests to exercise their rights in respect of their personal data, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping. In the event of non-compliance with the GDPR, we could be subject to substantial fines and other penalties, including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. We face uncertainty as to the exact interpretation of the new requirements and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the law.
In addition, as it relates to processing and transfer of health and genetic data, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions, and European laws have historically differed quite substantially in this field, leading to additional uncertainty.
If we are investigated by a European data protection authority, we may face fines and other penalties. Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products and solutions due to the potential risk exposure as a result of the current (and, in particular, future) data protection
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obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business, prospects, financial condition and results of operations.
If we fail to comply with environmental, health and safety, and laboratory animal welfare laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous federal, state and local environmental, health and safety, and laboratory animal welfare laws and regulations. These legal requirements include those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes as well as those which regulate the care and use of animals in research. Our operations will involve research using research animals and the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also may produce hazardous waste products. We generally anticipate contracting with third parties for the disposal of these materials and wastes. We will not be able to eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from any use by us of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety, and laboratory animal welfare laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Failure to comply with labor and employment laws and regulations could subject us to legal liability and costs, including fines or penalties, as well as reputational damage that could harm our business.
We are subject to numerous federal, state and local laws and regulations relating to the recruiting, hiring, compensation and treatment of employees and contractors. These laws and regulations cover financial compensation (including wage and hour standards), benefits (including insurance and 401K plans), discrimination, workplace safety and health, benefits, and workers’ compensation.
The Commonwealth of Massachusetts also has laws that expand on federal laws or create additional rights for employees or obligations for employers. For example, on July 1, 2018, the Massachusetts Equal Pay Act went into effect, which added protections employers must comply with regarding pay equity for “comparable work”. There is currently uncertainty regarding the exact scope of these new legal limits and such uncertainty may remain for the foreseeable future. We may face increased employment and legal costs to ensure we are complying with this law. In addition, on October 1, 2018, a new Massachusetts non-compete law went into effect, placing additional restrictions on employers seeking to enter into non-competition agreements with employees. This law may negatively impact our ability to prevent employees from working with direct or indirect competitors in the future and may affect our ability to retain key talent in a competitive market.
Our failure to comply with these and other related laws could expose us to civil and, in some cases, criminal liability, including fines and penalties. Further, government or employee claims that we have violated any of these laws, even if ultimately disproven, could result in increased expense and management distraction, as well as have an adverse reputational impact on us.
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Risks Related to Intellectual Property
Risks Related to Third Party and Licensed Intellectual Property
Third-party claims of intellectual property infringement against us, our licensors or our collaborators may prevent or delay our product discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the valid patents and proprietary rights of third parties.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates and in areas potentially related to components and methods we use or may use in our research and development efforts. As industry, government, academia and other biotechnology and pharmaceutical research expands and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Our development candidates are complex and may include multiple components such as Cas9 protein or messenger RNA encoding Cas9 protein, guide RNAs (“gRNA”), targeting molecules, or formulation components such as lipids. We cannot guarantee that any of these components of our technology, processes, future product candidates or the use of such product candidates do not infringe third-party patents. It is also possible that we have failed to identify relevant third-party patents or applications. Because patent rights are granted jurisdiction-by-jurisdiction, our freedom to practice certain technologies, including our ability to research, develop and commercialize our product candidates, may differ by country.
Third parties may assert that we infringe their patents or that we are otherwise employing their proprietary technology without authorization, and may sue us. There may be third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture or methods of use or treatment that cover product candidates we discover and develop. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies or the manufacture, use or sale of our product candidates infringes upon these patents. If any such third-party patents were held by a court of competent jurisdiction to cover our technologies or product candidates, the holders of any such patents may be able to block our ability to commercialize the applicable product candidate unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing, manufacturing or importing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing one or more of our product candidates, force us to redesign our infringing products or force us to cease some or all of our business operations, any of which could materially harm our business and could prevent us from further developing and commercializing our proposed future product candidates thereby causing us significant harm. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.
Third parties may seek to claim intellectual property rights that encompass or overlap with intellectual property that we own or license from them or others. Legal proceedings may be initiated to determine the scope and ownership of these rights, and could result in our loss of rights, including injunctions or other equitable relief that could effectively block our ability to further develop and commercialize our product candidates. For example, through the Caribou License, we sublicense the rights of the Regents of the University of California and the University of Vienna (collectively, “UC/Vienna”) to a worldwide patent portfolio that covers methods of use and compositions relating to engineered CRISPR/Cas9 systems for, among other things, cleaving or editing DNA and altering gene product expression in various organisms, including eukaryotic cells. We sublicense the UC/Vienna rights to this portfolio for human therapeutic, prophylactic and palliative uses, including companion diagnostics, except for anti-fungal and anti-microbial uses. This patent portfolio to-date includes, for example, multiple granted, allowed, and/or allowable patent applications in the U.S., as well as granted patents from the European Patent Office, the United Kingdom’s Intellectual Property Office, the German Patent and Trade Mark Office, Australia’s Intellectual Property agency and China’s
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Intellectual Property Office, among others. Because UC/Vienna co-own this portfolio with Dr. Emmanuelle Charpentier (from whom we do not have sublicense rights), we refer to this co-owned worldwide patent portfolio as the UC/Vienna/Charpentier patent family. UC/Vienna could challenge Caribou’s rights under their license agreement, including Caribou’s right to sublicense its rights to others, such as Intellia, and on what terms such a sublicense would be granted, each of which could adversely impact our rights under our license agreement with Caribou.
Similarly, on October 17, 2018, we initiated an arbitration proceeding with JAMS against Caribou asserting that Caribou violated the terms and conditions of the Caribou License, as well as other contractual and legal rights, by using and seeking to license to third parties technology covered by two patent families (described in, for instance, PCT No. PCT/US2016/015145 and PCT No. PCT/US2016/064860, and related patents and applications) relating to specific structural or chemical modifications of gRNAs, that were purportedly invented or controlled by Caribou, in our exclusive human therapeutic field. Caribou asserted that the two families of IP are outside our exclusive license rights under the Caribou License.
On September 26, 2019, we announced that the arbitration panel issued an interim award concluding that both the structural and chemical gRNAs modification technologies were exclusively licensed to us by Caribou under the Caribou License. After concluding that the chemical modification technology was within the scope of our exclusive license from Caribou, the arbitration panel nevertheless noted that its decision could delay or otherwise adversely impact the development of these modified gRNAs as human therapeutics. It also noted that we currently are not using these modified gRNAs in any of our active programs. Thus, solely with respect to the particular modified gRNAs, the arbitration panel stated that it will declare that Caribou has an equitable “leaseback,” which it described as exclusive, perpetual and worldwide.
On June 16, 2021, we executed a Leaseback agreement with Caribou, which settled the arbitration with Caribou. Under the Leaseback agreement, in exchange for an upfront payment, potential future regulatory and sales milestones, and single-digit royalties payable by Caribou to us, we have agreed to leaseback or sublicense certain CRISPR/Cas9 intellectual property, including our chemical gRNA modification technology and foundational CRISPR/Cas9 intellectual property, to Caribou so that it can develop and commercialize CB-010. Caribou also will be responsible for any payments required in respect of our in-licensed intellectual property, such as the foundational CRISPR/Cas9 intellectual property. Under the Leaseback agreement, Caribou will be able to compete with us (or our licensees) in the development of CAR-T cell human therapeutics directed at CD19, which could adversely affect our business.
Third parties could assert that UC/Vienna/Charpentier do not have rights to the CRISPR/Cas9 technology, including inventorship and ownership rights to currently issued or allowable patents, or that any rights owned by UC/Vienna/Charpentier are limited. If such third parties were found to have rights to the CRISPR/Cas9 technology, we could be required to obtain rights from such parties or cease our development and commercialization efforts. For example, under our sublicense from Caribou, we have rights to patent applications owned by UC/Vienna Charpentier covering certain aspects of CRISPR/Cas9 systems to edit genes in eukaryotic cells, including human cells (collectively, the “UC/Vienna/Charpentier eukaryotic patent family”). The Broad Institute, Massachusetts Institute of Technology, the President and Fellows of Harvard College and the Rockefeller University (collectively, the “Broad Institute”) co-own patents and patent applications that also claim CRISPR/Cas9 systems to edit genes in eukaryotic cells (collectively, the “Broad Institute patent family”). Because the respective owners of various UC/Vienna/Charpentier patent applications and the Broad Institute patent family both allege owning intellectual property claiming overlapping aspects of CRISPR/Cas9 systems and methods to edit genes in eukaryotic cells, including human cells, our ability to market and sell CRISPR/Cas9-based human therapeutics may be adversely impacted depending on the scope and actual ownership over the inventions claimed in the competing patent portfolios. On June 25, 2019, the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office (“USPTO”) declared an interference between the UC/Vienna/Charpentier eukaryotic patent family and the Broad Institute patent family to determine which research group first invented the use of the CRISPR/Cas9 technology in eukaryotic cells and, therefore, is entitled to the patents covering the invention. On August 26, 2019, the PTAB redeclared the interference to include additional UC/Vienna/Charpentier patent applications covering the invention that had also been found allowable by the USPTO. On September 10, 2020, the PTAB issued an order that, among other matters, advanced the proceeding to the priority phase, where both UC/Vienna/Charpentier, which will have the burden of proof, and the Broad Institute will present their respective evidence seeking to prove that they, invented first. As of December 31, 2021, the interference involves 14 allowable patent applications from the UC/Vienna/Charpentier eukaryotic patent family and 13 patents and one patent application from the Broad Institute patent family.
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On December 14, 2020, the PTAB declared an additional interference between the same 14 allowable patent applications in the UC/Vienna/Charpentier portfolio, and one patent application owned by ToolGen, Inc. And, on June 21, 2021, the PTAB declared another interference between the same UC/Vienna/Charpentier 14 allowable patent applications and one patent application owned by Sigma-Aldrich Co. LLC (a subsidiary of Merck KGaA). Because the patent applications involved in these interferences also purport to cover the use of CRISPR/Cas9 for gene editing in eukaryotic cells, the PTAB seeks to determine between the various groups which one invented first and is entitled to the resulting patents. These two latter interferences are still in their motion phases where the PTAB may consider, among other matters, which party will have the burden of proof in their respective priority phases. If either the Broad, ToolGen or Sigma-Aldrich were to succeed in their respective interference, the prevailing party or parties could seek to assert its issued patents against us based on our CRISPR/Cas9-based activities, including commercialization.
In addition, other third parties, such as Vilnius University, and Harvard University, filed patent applications claiming CRISPR/Cas9-related inventions around or within a year after the UC/Vienna/Charpentier application was filed and allege (or may allege) that they invented one or more of the inventions claimed by UC/Vienna/Charpentier before UC/Vienna/Charpentier. If the USPTO deems the scope of the claims of one or more of these parties to sufficiently overlap with the allowable claims from the UC/Vienna/Charpentier application, the USPTO could declare other interference proceedings to determine the actual inventor of such claims. If these third-parties were to prevail in their inventorship claims or obtain patent claims that cover our product candidates or related activities through these various legal proceedings, then we could be prevented from utilizing the intellectual property we have licensed from Caribou, as well as from developing and commercializing all or some of our products candidates unless we can obtain rights to the third-parties’ intellectual property, or avoid or invalidate it.
Further, these third-parties, and others, have also filed patent applications and obtained patents covering aspects of the CRISPR/Cas9 technology in other key jurisdictions, including the EU members, the U.K., China and Japan. If these patents are deemed valid and cover our product candidates or related activities, we could be prevented from developing and commercializing all or some of our product candidates unless we license the relevant intellectual property or avoid it.
Defense of any potential infringement claims, regardless of their merit, would involve substantial litigation expense, would be a substantial diversion of management and other employee resources from our business and may impact our reputation. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. In that event, we could be unable to further develop and commercialize our product candidates, which could harm our business significantly.
We depend on intellectual property licensed from third parties and termination or modification of any of these licenses could result in the loss of significant rights, which would harm our business.
We are dependent on patents, know-how and proprietary technology, both our own and licensed from others, including Caribou, Novartis, Regeneron and Ospedale San Raffaele (“OSR”). Any termination of these licenses, loss by our licensors of the rights they receive from others, diminution of our rights or those of our licensors, or a finding that such intellectual property lacks legal effect, could result in the loss of significant rights and could harm our ability to commercialize any product candidates. For example, UC/Vienna could challenge Caribou’s rights under their agreement, including Caribou’s right to sublicense its rights to others, such as Intellia, and on what terms such a sublicense would be granted, each of which could adversely impact our rights under our agreement with Caribou. Similarly, Caribou or other licensors, or other third parties from which we derive rights, could challenge the scope of our licensed rights or fields under our license agreement, which could adversely impact our exclusive rights to use CRISPR/Cas9 technology in our human therapeutics field.
Disputes have and may arise between us and our licensors, our licensors and their licensors, or us and third parties that co-own intellectual property with our licensors or their licensors, regarding intellectual property subject to a license agreement, including those relating to:
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If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, or are insufficient to provide us the necessary rights to use the intellectual property, we may be unable to successfully develop and commercialize the affected product candidates. If we or any such licensors fail to adequately protect this intellectual property, our ability to commercialize our products could suffer.
We depend, in part, on our licensors to file, prosecute, maintain, defend and enforce patents and patent applications that are material to our business.
Patents relating to our product candidates are controlled by certain of our licensors or their respective licensors. Each of our licensors or their licensors generally has rights to file, prosecute, maintain and defend the patents we have licensed from such licensor. If these licensors or any future licensees and in some cases, co-owners from which we do not yet have licenses, having rights to file, prosecute, maintain, and defend our patent rights fail to adequately conduct these activities for patents or patent applications covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using or selling competing products. We cannot be certain that such activities by our licensors or their respective licensors have been or will be conducted in compliance with applicable laws and regulations or in our best interests, or will result in valid and enforceable patents or other intellectual property rights. Pursuant to the terms of the license agreements with our licensors, the licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents and, even if we are permitted to pursue such enforcement or defense, we cannot ensure the cooperation of our licensors or, in some cases, other necessary parties, such as the co-owners of the intellectual property from which we have not yet obtained a license. We cannot be certain that our licensors or their licensors, and in some cases, their respective co-owners, will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. For example, with respect to our sublicensed rights from Caribou to UC/Vienna/Charpentier intellectual property, UC retained the right to control the prosecution, enforcement and defense of this intellectual property in its license agreement with Caribou and, pursuant to an Invention Management Agreement, shares these responsibilities with CRISPR Therapeutics AG and, under certain circumstances, ERS Genomics, Ltd., as the designated managers of the intellectual property. For these reasons, UC may be unable or unwilling to prosecute certain patent claims that would be best for our product candidates, or enforce its patent rights against infringers of the UC/Vienna/Charpentier patent family.
Even if we are not a party to legal actions or other disputes involving our licensed intellectual property, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that we may need to operate our business. In addition, even when we have the right to control patent prosecution of licensed patents and patent applications, enforcement of licensed patents, or defense of claims asserting the invalidity of those
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patents, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to or after our assuming control.
We may not be successful in obtaining or maintaining necessary rights to product components and processes or other technology for our product development pipeline.
The growth of our business will likely depend in part on our ability to acquire or in-license additional proprietary rights. For example, our programs may involve additional product candidates, delivery systems or technologies that may require the use of additional proprietary rights held by third parties, including competitors. Our ultimate product candidates may also require specific modifications or formulations to work effectively and efficiently. These modifications or formulations may be covered by intellectual property rights held by others, including competitors. We may be unable to acquire or in-license any relevant third-party intellectual property rights that we identify as necessary or important to our business operations.
Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.
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.
If we are unable to successfully obtain rights to valid third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer.
We may be required to pay certain milestones and royalties under our license agreements with third-party licensors.
Under our current and future license agreements, we may be required to pay milestones and royalties based on our revenues, including sales revenues of our products, utilizing the technologies licensed or sublicensed from third parties, including Caribou, OSR and Rewrite, and these milestones and royalty payments could adversely affect our ability to research, develop and obtain approval of product candidates, as well as the overall profitability for us of any products that we may seek to commercialize. In order to maintain our license rights under these license agreements, we will need to meet certain specified milestones, subject to certain cure provisions, in the development of our product candidates. Further, our licensors (or their licensors) or licensees may dispute the terms, including amounts, that we are required to pay under the respective license agreements. If these claims were to result in a material increase in the amounts that we are required to pay to our licensors, or in a claim of breach of the license, our ability to research, develop and obtain approval of product candidates, or to commercialize products, could be significantly impaired.
In addition, these agreements contain diligence milestones and we may not be successful in meeting all of the milestones in the future on a timely basis or at all. We will need to outsource and rely on third parties for many aspects of the clinical development, sales and marketing of our products covered under our license agreements. Delay or failure by these third parties could adversely affect the continuation of our license agreements with their third-party licensors.
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Risks Related to Patents and Trademarks
We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates, or asserting and defending our intellectual property rights that protect our products and technologies.
We anticipate that we will file additional patent applications both in the U.S. and in other countries, as appropriate. However, we cannot predict:
Composition of matter patents for biological and pharmaceutical products are generally considered to be the strongest form of intellectual property protection for those types of products, as such patents provide protection without regard to any method of use. We cannot be certain, however, that any claims in our pending or future patent applications covering the composition of matter of our product candidates will be considered patentable by the USPTO or by patent offices in foreign countries, or that the claims in any of our ultimately issued patents will be considered valid and enforceable by courts in the U.S. or foreign countries. Method of use patents protect the use of a product for the specified method, for example a method of treating a certain indication using a product. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label” for those uses that are covered by our method of use patents. Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.
The strength of patents in the biotechnology and pharmaceutical field can be uncertain, and evaluating the scope of such patents involves complex legal and scientific analyses. The patent applications that we own or in-license may fail to result in issued patents with claims that cover any product candidates or uses thereof in the U.S. or in other foreign countries.
Further, 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, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. We may also require the cooperation of our licensors or other necessary parties, such as the co-owners of the intellectual property from which we have not yet obtained a license, in order to enforce the licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. and we may fail to seek or obtain patent protection in all major markets. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we will be unable to know with certainty whether we were the first to make any inventions claimed in any patents or patent applications, or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the first to file.
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The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the U.S. and abroad. There is a substantial amount of litigation as well as administrative proceedings for challenging patents, including interference, derivation, reexamination, and other post-grant proceedings before the USPTO and oppositions and other comparable proceedings in foreign jurisdictions, involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, and we expect this to be true for the CRISPR/Cas9 space as well. Indeed, a number of third parties have filed oppositions challenging the validity, and seeking the revocation, of several CRISPR/Cas9 genome editing patents granted to UC/Vienna/Charpentier by the European Patent Office (“EPO”). To date, UC/Vienna/Charpentier have successfully defended before the EPO’s opposition division the validity of their first European patent, which covers compositions comprising Cas9 and single gRNA molecules, as well as methods of editing DNA in vitro or ex vivo using Cas9 and single gRNAs. The opponents to this patent have appealed the decision of the EPO’s opposition division. If UC/Vienna/Charpentier fail in defending the validity of its first European patent, we may lose valuable intellectual property rights, such as the right to exclude others from using such intellectual property. Such an outcome could have a material adverse effect on our business in Europe. Similarly, third parties are opposing the other patents issued by the EPO to UC/Vienna/Charpentier, including their second European patent that was recently revoked by the EPO’s opposition division, a decision that UC/Vienna/Charpentier have appealed. Although the claims of these other patents are more limited in scope compared to the first European patent, the inability to defend their respective validity could result in loss of valuable rights. In addition, since the passage of the America Invents Act in 2013, U.S. law also provides for other procedures to challenge patents, including inter partes reviews and post-grant reviews, that add uncertainty to the possibility of challenge to our developed or licensed patents and patent applications in the future. Furthermore, for U.S. applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. See the above risk factor titled “Third-party claims of intellectual property infringement against us, our licensors or our collaborators may prevent or delay our product discovery and development efforts.”
Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to practice the invention or stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing their products to avoid being covered by our claims. If the breadth or strength of protection provided by the patent applications we hold is threatened, this could dissuade companies from collaborating with us to develop, and could threaten our ability to commercialize, product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market product candidates under patent protection would be reduced. Because patent applications in the U.S. and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.
Our pending and future patent applications or the patent applications that we obtain rights to through in-licensing arrangements may not result in patents being issued which protect our technology or future product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Litigation or other administrative proceedings challenging our intellectual property, including interferences, derivation, reexamination, inter partes reviews and post-grant reviews, may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. Furthermore, there could be public announcement of the results of hearings, motions or other interim proceedings or developments in any proceeding challenging the issuance, scope, validity and enforceability of our developed or licensed intellectual property. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
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Any of these potential negative developments could impact the scope, validity, enforceability or commercial value of our patent rights and, as a result, have material adverse effect on our business, financial condition, results of operations or prospects.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We may in the future be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor or other claims challenging the inventorship of our patents or ownership of our intellectual property (including patents and intellectual property that we in-license). For example, the UC/Vienna/Charpentier patent family that is covered by our license agreement with Caribou is co-owned by UC/Vienna and Dr. Charpentier, and our sublicense rights are derived from the first two co-owners and not from Dr. Charpentier. Therefore, our rights to these patents are not exclusive and third parties, including competitors, may have access to intellectual property that is important to our business. In addition, we may have inventorship disputes arise from conflicting obligations of collaborators, consultants or others who are involved in developing our technology and product candidates. Litigation or other legal proceedings may be necessary to defend against these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.
We have limited intellectual property rights outside the U.S. Filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the U.S. can have a different scope and strength than do those in the U.S. In addition, the laws of some foreign countries, such as China, Brazil, Russia, India and South Africa, do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the U.S. These products may compete with our products and our patents or other intellectual property rights may not be effective or adequate to prevent them from competing. In addition, in jurisdictions outside the U.S., a license may not be enforceable unless all the owners of the intellectual property agree or consent to the license. Further, patients may choose to travel to countries in which we do not have intellectual property rights or which do not enforce these rights to obtain the products or treatment from competitors in such countries.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, such as China, Brazil, Russia, India and South Africa, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patents or other intellectual property rights, or the marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Furthermore, such proceedings could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
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We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our licenses, which could be expensive, time-consuming, and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To cease such infringement or unauthorized use, we may be required to file patent infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding or a declaratory judgment action against us, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Interference or derivation proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation, interference or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees.
Further, if a party to our licenses, either a licensee or licensor, were to breach or challenge our rights under the relevant license agreement (or if one of our licensor’s own licensors were to challenge our licensor’s rights), we may have to initiate or participate in a legal proceeding to enforce our rights. Any such legal proceeding could be expensive and time-consuming. In addition, if a court or other tribunal were to rule against us, we could lose key intellectual property and financial rights. Pursuing or defending against these legal claims, regardless of merits, would involve substantial legal expense and would be a substantial diversion of employee resources from our business. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or contractual litigation there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or proceeding. In addition, there could 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, it could have a substantial adverse effect on the price of our common stock.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or before the USPTO or comparable foreign authority.
If we or one of our licensing partners initiate legal proceedings against a third-party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace, and there are numerous grounds upon which a third-party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or other jurisdictions, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post-grant review and equivalent proceedings in foreign jurisdictions, such as opposition or derivation proceedings. Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity of our patents, for example, we cannot be certain that there is no invalidating prior art of which we, our patent counsel, and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity, unpatentability and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. For example, as highlighted in the above risk factor entitled “We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our products or product candidates, or asserting and defending our intellectual property rights that protect our products and technologies”, various third parties have filed challenges to the validity of UC/Vienna/Charpentier’s European patents, which cover compositions comprising Cas9 and gRNA molecules, as well as methods of editing DNA in vitro or ex vivo using Cas9 and gRNAs. If UC/Vienna/Charpentier fail in defending the validity of these patents, we may lose valuable intellectual property rights, such as the exclusive right to use such intellectual property. Such an outcome could have a material adverse effect on our business in Europe.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. Although an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, 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. Noncompliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would have a material adverse effect on our business.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected. Our unregistered 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, which we need to build name recognition among potential partners or future, potential customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Over the long term, if we are unable to successfully register our trademarks and trade names and establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.
Risks Related to Confidentiality
Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.
In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect our proprietary and confidential information. We also utilize proprietary processes for which it would be difficult to enforce patents. In addition, other elements of our product discovery and development processes involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, outside scientific advisors, contractors, and collaborators, and we also rely on national and state laws requiring our directors, employees, contractors and collaborators to protect our proprietary information. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, outside scientific advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results, and financial condition. Our trade secrets and other confidential information of ours may also be exposed through cybersecurity attacks, ransomware attacks, and other hacking attempts directed at our information technology systems and those of our employees, consultants, outside scientific advisors, contractors, vendors and collaborators. For more information, please see the risk factor section entitled “Risks Related to Data and Privacy”.
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We may be subject to claims that our employees, directors, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies as well as academic research institutions. We may be subject to claims that we or our employees, directors, consultants, or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims, which could result in money damages or a judicial order prohibiting the use of certain intellectual property. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.
Risks Related to Our Common Stock
Risks Related to Investment in Securities
An active trading market for our common stock may not be sustained.
If an active market for our common stock does not continue, it may be difficult for our stockholders to sell their shares without depressing the market price for the shares or sell their shares at or above the prices at which they acquired their shares or sell their shares at the time they would like to sell. Any inactive trading market for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
The price of our common stock historically has been volatile, which may affect the price at which you could sell any shares of our common stock.
The market price for our common stock historically has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. This volatility may affect the price at which you could sell the shares of our common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including:
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In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. The extent to which the outbreak may impact our business, preclinical studies and ongoing and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the emergence of new variants of the disease, the ability of governments to vaccinate their populations and that existing vaccines can treat any new variants effectively, the ultimate containment of the disease, the modification or lifting of travel restrictions and other actions implemented to contain the outbreak or address its impact, such as social distancing and quarantines or lock-downs in the U.S. and other countries, business closures or business disruptions, and the ultimate effectiveness of other actions taken in the U.S. and other countries to contain and address the disease. A resurgence or other negative developments relating to the pandemic may require us to again restrict access to our offices and laboratories, or to pause or suspend preclinical research and our clinical trial; and, further, may disrupt our manufacturing and supply chain or those of our third-party suppliers and manufacturers.
Companies trading in the stock market in general, and in The Nasdaq Global Market in particular, have also experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts may not publish an adequate amount of research on us, which may negatively impact the trading price for our stock. In addition, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. Further, if our operating results fail to meet the forecasts of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Risk Related to Ownership Generally
Our principal stockholders and management own a significant percentage of our stock and, if they choose to act together, will be able to control or exercise significant influence over matters subject to stockholder approval.
As of December 31, 2021, our executive officers, directors, 5% or greater stockholders and their affiliates beneficially owned approximately 34.1% of our outstanding voting stock. These stockholders may have the ability to influence us through their ownership positions. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.
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We have broad discretion over the use of our cash, cash equivalents and marketable securities, and may not use them effectively.
Our management has broad discretion to use our cash, cash equivalents and marketable securities to fund our operations and could spend these funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending our use to fund operations, we may invest our cash, cash equivalents and marketable securities in a manner that does not produce income or that loses value.
We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives and corporate governance practices.
As a public company, and particularly since we are no longer an “emerging growth company” under applicable SEC regulations, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“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. We conduct a process each year to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude 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 consolidated financial statements.
Risks Related to Future Financial Condition
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of stockholders and could cause our stock price to fall.
We will need additional capital in the future to continue our planned operations in addition to the proceeds we received from our initial public offering (“IPO”) in May 2016 and follow-on public offerings in November 2017, June 2020, December 2020, and July 2021. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
On August 23, 2019, we filed a Registration Statement on Form S-3, as amended (the “2019 Shelf”) with the SEC, which was declared effective on September 12, 2019 (File No. 333-233448) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof. We also simultaneously entered into an Open Market Sale Agreement (the “2019 Sale Agreement”) with the Sales Agent, to provide for the offering, issuance and sale of up to an aggregate amount of $150.0 million of our common stock from time to time in “at-the-market” offerings under the 2019 Shelf and subject to the limitations thereof. We will pay to the Sales Agent cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sale Agreement. In December 2019, we issued 287,231 shares of our common stock at an average price of $16.48 per share in accordance with the 2019 Sale Agreement for aggregate net proceeds of $4.4 million, after payment of cash commissions to the Sales Agent and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. During the year ended December 31, 2020, we issued 2,270,161 shares of our common stock in a series of sales at an average
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price of $22.53 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $49.5 million after payment of cash commissions to the Sales Agent and legal, accounting and other fees in connection with the sales. During the year ended December 31, 2021, we issued 641,709 shares of our common stock in a series of sales at an average price of $72.79 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $45.3 million after payment of cash commissions to Jefferies and approximately $0.1 million related to legal, accounting and other fees in connection with the sales. In June 2020, we issued 6,301,370 shares of our common stock, including the exercise in full by the underwriters of their option to purchase an additional 821,917 shares, at the public offering price of $18.25 per share pursuant to the 2019 Shelf for aggregate cash consideration of $107.7 million, after payment of commissions and fees and approximately $0.4 million related to legal, accounting and other fees in connection with the sales. In June 2020 we also issued 925,218 shares of our common stock to Regeneron in a private placement for an aggregate cash consideration of $30.0 million, or $32.42 per share, representing a 100% premium over the volume-weighted average trading price of the Company’s common stock during the 30-day period prior to the closing. On November 30, 2020, we filed a Registration Statement on Form S-3ASR (the “Universal Shelf”) with the SEC, which was automatically declared effective upon filing (File No. 333-251022) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof. In December 2020, we issued 5,513,699 shares of our common stock, including the exercise in full by the underwriters of their option to purchase an additional 719,178 shares, at the public offering price of $36.50 per share pursuant to the Universal Shelf for aggregate cash consideration of $188.9 million, after deducting the underwriting discount, commissions and offering expenses. In July 2021, we issued 4,758,620 shares of our common stock, including the exercise in full by the underwriters of their option to purchase an additional 620,689 shares, at the public offering price of $145.00 per share pursuant to the Universal Shelf for aggregate cash consideration of approximately $648.3 million, after deducting the underwriting discount, commissions and estimated offering expenses. In addition, sales of a substantial number of shares of our outstanding common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. Persons who were our stockholders prior to our IPO continue to hold a substantial number of shares of our common stock that many of them are now able to sell in the public market. Significant portions of these shares are held by a relatively small number of stockholders. Sales by our stockholders of a substantial number of shares, or the expectation that such sales may occur, could significantly reduce the market price of our common stock.
Risks Related to our Charter and Bylaws
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and adversely affect our stock price.
Provisions of our certificate of incorporation and by-laws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate of incorporation and by-laws:
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In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Our certificate of incorporation and by-laws designate certain courts as the sole and exclusive forums for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation and by-laws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any state law claims for any derivative action or proceeding brought on our behalf alleging state law claims, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our by-laws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine (the “Delaware Forum Provision”). The Delaware Forum Provision does not apply to claims arising under the Exchange Act or the Securities Act. Our by-laws further provide that the U.S. District Court for the District of Massachusetts will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). We have chosen the U.S. District Court for the District of Massachusetts as the exclusive forum for such Securities Act causes of action because our principal executive offices are located in Cambridge, Massachusetts. Our by-laws provide that any person or entity purchasing or otherwise acquiring any interest in any shares of our common stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and the Federal Forum Provision.
The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing the claims identified above, particularly if the stockholders do not reside in or near the State of Delaware or the Commonwealth of Massachusetts. Additionally, the Delaware Forum Provision and the Federal Forum Provision 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 other employees. Alternatively, if a court were to find the Delaware Forum Provision and the Federal Forum Provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. The Court of Chancery of the State of Delaware or the U.S. District Court for the District of Massachusetts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
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Risks Related to Tax Matters
Changes in tax law may adversely affect our business and financial condition.
The laws and rules dealing with U.S. federal, state and local income taxation are routinely being reviewed and modified by governmental bodies, officials and regulatory agencies, including the Internal Revenue Service and the U.S. Treasury Department. Since we were founded in 2014, many such changes have been made and changes are likely to continue to occur in the future. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or issued, that could result in an increase in our or our stockholders’ tax liability.
Our ability to use our net operating loss (“NOL”) carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. As of December 31, 2021, we had federal and state NOLs of $800.5 million and $767.8 million, respectively, some of which begin to expire in 2034. Federal and certain state NOLs generated in taxable years ending after December 31, 2017 are not subject to expiration. As of December 31, 2021, we had federal and state research and development and other credit carryforwards of approximately $37.9 million and $30.2 million, which begin to expire in 2034 and 2029, respectively. Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOLs, and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of our initial public offering in May of 2016, follow-on offerings and/or subsequent shifts in our stock ownership (some of which shifts are outside our control). As a result, if we earn net taxable income, our ability to use our pre-change NOLs and research and development tax credits to offset such taxable income and income tax, respectively, could be subject to limitations. Similar provisions of state tax law may also apply. As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Our headquarters are located at 40 Erie Street in Cambridge, Massachusetts, where we occupy approximately 65,000 square feet of office and laboratory space. We have a ten-year lease agreement expiring in September 2026, with an option to extend the term of the lease for an additional three years. In addition, we lease approximately 15,200 square feet of office and laboratory space at 130 Brookline Street in Cambridge, Massachusetts, which expires in 2031. In March 2020, we entered into an agreement to lease approximately 39,000 square feet of office and laboratory space at 281 Albany Street in Cambridge, Massachusetts with an initial term of ten years and an option to extend the lease for two successive five-year terms. In July 2021, we entered into an agreement to lease approximately 14,000 square feet of office space at 17 Tudor Street in Cambridge, Massachusetts with an initial term of five years and an option to extend the lease for one three-year term. We also entered into a lease modification in July 2021 that extended an existing lease for a clean room located in Waltham, Massachusetts for an additional two years. In January 2022, we entered into an agreement to lease approximately 38,000 square feet at 730 Main Street, Cambridge, Massachusetts with an initial term of ten years and an option to extend the lease for one five-year term. In February 2022, we entered into an agreement to lease approximately 140,000 square feet at 840 Winter Street, Waltham Massachusetts, which will provide us with the ability to manufacture products in a good manufacturing practice (“GMP”) compliant facility. This lease is expected to commence on February 1, 2024 with an initial term of twelve years and an option to extend the lease for two five-year terms.
Item 3. Legal Proceedings
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation related to intellectual property (“IP”), commercial arrangements and other matters, including the matter described below. The outcome of any such legal proceedings, regardless of the merits, is inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other activities. If we were unable to prevail in any such legal proceedings, our business, results of operations, liquidity and financial condition could be adversely affected.
Caribou Intellectual Property Arbitration
On October 17, 2018, we initiated an arbitration proceeding against Caribou Biosciences, Inc. (“Caribou”) asserting that Caribou violated the terms and conditions of a license agreement we entered into with them in July 2014 related to certain IP (the “Caribou License”), as well as other contractual and legal obligations to us, by using and seeking to license to third parties two patent families relating to specific structural or chemical modifications of guide RNAs (“gRNAs”), that were purportedly invented or controlled by Caribou, in our exclusive human therapeutic field, before an agreed-upon cutoff date of January 30, 2018.
On September 26, 2019, we announced that the arbitration panel issued an interim award concluding that both the structural and chemical gRNA modification technologies were exclusively licensed to us by Caribou pursuant to the Caribou License. Nevertheless, the arbitration panel, solely with respect to the clinically modified gRNAs, stated that it will declare that Caribou has an equitable “leaseback”, which it described as exclusive, perpetual and worldwide (the “Caribou Award”). The Caribou Award does not include the structural guide modifications IP also at issue in the arbitration, any other IP exclusively licensed or sublicensed by Caribou to us under the Caribou License (including but not limited to the foundational CRISPR/Cas9 IP co-owned by the Regents of the University of California, University of Vienna and Dr. Emmanuelle Charpentier), or any other of our IP. On February 6, 2020, the panel clarified that the Caribou Award is limited to a particular on-going Caribou program, known as CB-010, which seeks to develop a CAR-T product directed at CD19.
On June 16, 2021, we executed a Leaseback Agreement (“Leaseback”) with Caribou, which settled the ongoing arbitration. Under the Leaseback negotiated by the parties, in exchange for an upfront payment, potential future regulatory and sales milestones, and single-digit royalties payable by Caribou, we agreed to leaseback or sublicense certain CRISPR/Cas9 IP, including our chemical gRNA modification technology and foundational CRISPR/Cas9 IP, to Caribou so that it can develop and commercialize CB-010. Caribou also will be responsible for any payments required in respect of our in-licensed IP. We recorded $1.0 million within “Collaboration Revenue” in the second quarter of 2021 on the condensed consolidated statement of operations and comprehensive loss for an upfront payment related to the Leaseback and received the payment in the third quarter of 2021.
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Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the Nasdaq Global Market under the symbol “NTLA”.
As of February 17, 2022, the number of holders of record of our common stock was 12. The actual number of holders of our common stock is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees. This holders of record number also does not include stockholders whose shares may be held in trust by other entities.
Dividends
We have never declared or paid cash dividends on our capital stock. We intend to retain all of our future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends to our stockholders in the foreseeable future.
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Stock Performance Graph
The following graph shows a comparison from May 6, 2016, the first date that shares of our common stock were publicly traded, through December 31, 2021, of the cumulative total return on an assumed investment of $100.00 in cash in our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index for the same period. Such returns are based on historical results and are not intended to suggest future performance. Data for the Nasdaq Composite Index and the Nasdaq Biotechnology Index assume reinvestment of dividends.
The performance graph in this Item 5 is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.
Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
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Item 6. Reserved.
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in this Annual Report on Form 10-K, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with Regulation S-X, promulgated under the Securities Exchange Act of 1934, as amended. This discussion and analysis should be read in conjunction with these consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Information pertaining to fiscal year 2019 was included in our Annual Report on Form 10-K for the year ended December 31, 2020 on pages 91 through 100 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2021.
Management Overview
Intellia Therapeutics, Inc. (“we,” “us,” “our,” “Intellia,” or the “Company”) is a leading clinical-stage genome editing company, focused on developing novel, potentially curative CRISPR/Cas9-based therapeutics. CRISPR/Cas9, an acronym for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). To realize the transformative potential of CRISPR/Cas9-based technologies, we are building a full-spectrum genome editing company, by leveraging our modular platform, to advance in vivo and ex vivo therapies for diseases with high unmet need. For our in vivo programs to address genetic diseases, we use intravenously administered CRISPR as the therapy, in which our proprietary delivery technology enables highly precise editing of disease-causing genes directly within specific target tissues. For our ex vivo programs to address immuno-oncology and autoimmune diseases, we use CRISPR to create the therapy by engineering cells outside of the body. Our deep scientific, technical and clinical development experience, along with our robust intellectual property (“IP”) portfolio, enables us to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine. For more information regarding our business, mission and pipeline, see above sections in Part I entitled “Overview”, “Strategy” and “Our Pipeline”.
Financial Overview
Collaboration Revenue
Our revenue consists of collaboration revenue, including amounts recognized related to upfront technology access payments for licenses, technology access fees, research funding and milestone payments earned under our collaboration and license agreements with Regeneron Pharmaceuticals, Inc. (“Regeneron”), Novartis Institutes for BioMedical Research, Inc. (“Novartis”) and AvenCell Therapeutics, Inc. (“AvenCell”), a new universal CAR-T cell therapy joint venture and privately held company that was formed by us, Cellex Cell Professionals GmbH (“Cellex”) and funds managed by Blackstone Life Sciences Advisors L.L.C. (“BXLS”).
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, such as compensation and benefits, which includes equity-based compensation, for full-time research and development employees, allocated facility-related expenses, overhead expenses, license and milestone fees, contract research, development and manufacturing services, clinical trial costs and other related costs.
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General and Administrative
General and administrative expenses consist primarily of compensation and benefits, including equity-based compensation, for our executive, finance, legal, human resources, business development and support functions. Also included in general and administrative expenses are allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing, tax and legal services, including IP-related legal services, and other consulting fees and expenses.
Interest Income
Interest income is income earned on our cash, cash equivalents, restricted cash equivalents and marketable securities.
Results of Operations
The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.
Comparison of Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):
|
|
Year Ended December 31, |
|
|
Period-to- |
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Period Change |
|
|||
Collaboration revenue |
|
$ |
33,053 |
|
|
$ |
57,994 |
|
|
$ |
(24,941 |
) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
229,807 |
|
|
|
150,408 |
|
|
|
79,399 |
|
General and administrative |
|
|
71,096 |
|
|
|
44,169 |
|
|
|
26,927 |
|
Total operating expenses |
|
|
300,903 |
|
|
|
194,577 |
|
|
|
106,326 |
|
Operating loss |
|
|
(267,850 |
) |
|
|
(136,583 |
) |
|
|
(131,267 |
) |
Other (expense) income, net: |
|
|
|
|
|
|
|
|
|
|||
Loss from equity method investment |
|
|
(1,325 |
) |
|
|
- |
|
|
|
(1,325 |
) |
Interest income |
|
|
1,283 |
|
|
|
2,352 |
|
|
|
(1,069 |
) |
Total other (expense) income, net |
|
|
(42 |
) |
|
|
2,352 |
|
|
|
(2,394 |
) |
Net loss |
|
$ |
(267,892 |
) |
|
$ |
(134,231 |
) |
|
$ |
(133,661 |
) |
|
|
|
|
|
|
|
|
|
|
Collaboration Revenue
Collaboration revenue decreased by $24.9 million to $33.1 million during the year ended December 31, 2021, as compared to $58.0 million during the year ended December 31, 2020. The decrease in collaboration revenue during the year ended December 31, 2021 is primarily due to our recording $15.3 million related to the transfer of control of the license to develop the Factor VIII target for hemophilia A, an $8.4 million one-time cumulative catch-up adjustment related to the modification of our agreement with Regeneron, and a $5.0 million milestone payment earned from Novartis for the Investigational New Drug (“IND”) application submission of OTQ923, all of which were recorded in 2020. These decreases are offset in part by $6.1 million in revenue recorded in 2021 from our joint venture with AvenCell. Refer to Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further details.
Research and Development
Research and development expenses increased by $79.4 million to $229.8 million during the year ended December 31, 2021, as compared to $150.4 million during the year ended December 31, 2020.
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The following table summarizes our research and development expenses for the years ended December 31, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change.
|
|
|
Year Ended December 31, |
|
|
Period-to- |
|
|
Percent |
|
|||||||
|
|
|
2021 |
|
|
2020 |
|
|
Period Change |
|
|
Change |
|
||||
External development expenses by program: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NTLA-2001 |
|
|
$ |
24,350 |
|
|
$ |
22,248 |
|
|
$ |
2,102 |
|
|
|
9 |
% |
NTLA-2002 |
|
|
|
7,375 |
|
|
|
5,858 |
|
|
|
1,517 |
|
|
|
26 |
% |
NTLA-5001 |
|
|
|
22,157 |
|
|
|
14,431 |
|
|
|
7,726 |
|
|
|
54 |
% |
Unallocated research and development expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee-related expenses |
|
|
|
70,798 |
|
|
|
42,193 |
|
|
|
28,605 |
|
|
|
68 |
% |
Research materials and contracted services |
|
|
|
49,796 |
|
|
|
34,266 |
|
|
|
15,530 |
|
|
|
45 |
% |
Facility-related expenses |
|
|
|
26,873 |
|
|
|
19,530 |
|
|
|
7,343 |
|
|
|
38 |
% |
Stock-based compensation |
|
|
|
26,712 |
|
|
|
10,202 |
|
|
|
16,510 |
|
|
|
162 |
% |
Other |
|
|
|
1,746 |
|
|
|
1,680 |
|
|
|
66 |
|
|
|
4 |
% |
Total research and development expenses |
|
|
$ |
229,807 |
|
|
$ |
150,408 |
|
|
$ |
79,399 |
|
|
|
53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in research and development expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to:
During 2022, we expect research and development expenses to increase as we continue to grow our development team, execute clinical trials for NTLA-2001 and NTLA-2002, progress our NTLA-5001 program and nominate new development candidates to enter the clinic.
General and Administrative
General and administrative expenses increased by approximately $26.9 million to $71.1 million during the year ended December 31, 2021, compared to $44.2 million during the year ended December 31, 2020. This increase was primarily related to an increase in employee-related expenses, including stock-based compensation of $10.6 million, driven by our larger workforce as well as our increased stock price as compared to the prior year.
Loss from Equity Method Investment
Loss from equity method investment represents our share of two months of AvenCell's losses generated in the third quarter of 2021, amounting to $1.3 million, as we are recording our share of their losses on a one-quarter lag. Refer to Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further details.
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Interest Income
Interest income decreased by approximately $1.1 million to $1.3 million during the year ended December 31, 2021 as compared to $2.4 million during the year ended December 31, 2020. This decrease was due to a decline in investment income due to overall market conditions.
Liquidity and Capital Resources
Since our inception through December 31, 2021, we have raised an aggregate of $1,817.9 million to fund our operations through our initial public offering (“IPO”) and concurrent private placements, follow-on public offerings, at-the-market offerings and the sale of convertible preferred stock, as well as through our collaboration agreements.
As of December 31, 2021, we had $1,086.0 million in cash, cash equivalents and marketable securities.
We are eligible to earn a significant amount of milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis and SparingVision SAS (“SparingVision”), on a per-target basis under our collaboration with Regeneron and upon achievement of certain events under our collaboration with Kyverna Therapeutics, Inc. (“Kyverna”). Our ability to earn these milestone payments and the timing of achieving these milestones is dependent upon the outcome of our research and development activities and is uncertain at this time. Our rights to payments under our collaboration agreements are our only committed external source of funds.
Follow-on Offerings
On June 1, 2020, we entered into an underwriting agreement related to a public offering of 6,301,370 shares of our common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase an additional 821,917 shares, at the public offering price of $18.25 per share. The offering closed on June 5, 2020 and we received net proceeds of $107.7 million, after deducting the underwriting discount, commissions and offering expenses.
On December 1, 2020, we entered into an underwriting agreement related to a public offering of 5,513,699 shares of our common stock, par value $0.0001 per share, including the exercise in full by the underwriters of their option to purchase an additional 719,178 shares, at the public offering price of $36.50 per share. The offering closed on December 4, 2020 and we received net proceeds of $188.9 million, after deducting the underwriting discount, commissions and offering expenses.
In July 2021, we closed an underwritten public offering of 4,758,620 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 620,689 shares of common stock, at the public offering price of $145.00 per share, for aggregate net proceeds of $648.3 million, after deducting approximately $41.7 million in underwriting discounts and offering costs.
At-the-Market Offering Programs
In August 2019, we entered into an Open Market Sale Agreement (the “2019 Sale Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies is able to offer and sell, from time to time in “at-the-market” offerings, shares of our common stock having aggregate gross proceeds of up to $150.0 million. We agreed to pay to Jefferies cash commissions of 3.0% of the gross proceeds of sales of common stock under the 2019 Sale Agreement. During the year ended December 31, 2019, we issued 287,231 shares of our common stock, in a series of sales, at an average price of $16.48 per share, in accordance with the 2019 Sale Agreement for aggregate net proceeds of $4.4 million, after payment of cash commissions to Jefferies and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. During the year ended December 31, 2020, we issued 2,270,161 shares of our common stock in a series of sales at an average price of $22.53 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $49.5 million after payment of cash commissions to Jefferies and approximately $0.2 million related to legal, accounting and other fees in connection with the sales. During the year ended December 31, 2021, we issued 641,709 shares of our common stock in a series of sales at an average price of $72.79 per share in accordance with the 2019 Sale Agreement, for aggregate net proceeds of $45.3 million after payment of cash commissions to Jefferies and approximately $0.1 million related to legal, accounting and other fees in connection with the sales.
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As of December 31, 2021, $47.4 million in shares of common stock remain eligible for sale under the 2019 Sale Agreement.
Shares Issued in Private Placement to Regeneron
As described in Note 9 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, in May 2020 we entered into the 2020 Regeneron Amendment. Simultaneously with the 2020 Regeneron Amendment, we and Regeneron entered into the 2020 Stock Purchase Agreement, under which we sold to Regeneron 925,218 shares of our common stock, par value $0.0001 per share, for aggregate cash consideration of $30.0 million, or $32.42 per share, representing a 100% premium over the volume-weighted average trading price of our common stock during the 30-day period prior to the closing. Under the 2020 Stock Purchase Agreement, Regeneron will not dispose of any shares of common stock it beneficially owns in Intellia until the termination of the Technology Collaboration Term (see Note 9). After applying equity accounting guidance to measure the issuance of the shares, $12.6 million was recorded as fair value in the consolidated statement of stockholders’ equity for the shares.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, research and development contracted services, clinical trial costs, compensation and related expenses, laboratory and office facilities, research supplies, legal and regulatory expenses, patent prosecution filing and maintenance costs for our licensed IP, milestone and royalty payments and general overhead costs. During 2022, we expect our expenses to increase compared to prior periods in connection with our ongoing activities as we continue to grow our research and development team and clinical development in NTLA-2001, NTLA-2002 and NTLA-5001 and advance additional programs into clinical development.
Because our lead programs are still in the early clinical stage and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any future product candidates or whether, or when, we may achieve profitability. Until such time as we can generate substantial product revenues, if ever, we expect to finance our ongoing cash needs through equity financings and collaboration arrangements. We receive cost reimbursements from Regeneron for the transthyretin (“ATTR”) amyloidosis and hemophilia programs. Additionally, we are eligible to earn milestone payments and royalties, in each case, on a per-product basis under our collaborations with Novartis and SparingVision, on a per-target basis under our collaboration with Regeneron, and upon achievement of certain events with Kyverna, subject to the provisions of our agreements with each of them. Except for these sources of funding, we will not have any committed external source of liquidity. To the extent that we raise additional capital through the future sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we raise additional funds through collaboration arrangements in the future, 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 through equity financings 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.
Outlook
Based on our research and development plans and our expectations related to the progress of our programs, we expect that our cash, cash equivalents and marketable securities as of December 31, 2021, as well as research and cost reimbursement funding from Regeneron, AvenCell and SparingVision, will enable us to fund our ongoing operating expenses and capital expenditure requirements beyond the next 24 months, excluding any potential milestone payments or extension fees that could be earned and distributed under our collaboration agreements or any strategic use of capital not currently in the base case planning assumptions. We have based this estimate on current assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.
Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including: developing our delivery technologies and our CRISPR/Cas9 technology platform; selecting appropriate product candidates to develop; completing research and preclinical and clinical development of selected product candidates; obtaining regulatory approvals and marketing authorizations for product candidates for which we complete clinical
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trials; developing a sustainable and scalable manufacturing process for product candidates; launching and commercializing product candidates for which we obtain regulatory approvals and marketing authorizations, either directly or with a collaborator or distributor; obtaining market acceptance of our product candidates; addressing any competing technological and market developments; negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter; maintaining good relationships with our collaborators and licensors; maintaining, protecting, and expanding our portfolio of IP rights, including patents, trade secrets, and know-how; and attracting, hiring, and retaining qualified personnel.
Cash Flows
The following is a summary of cash flows for the years ended December 31, 2021 and 2020:
|
|
Year Ended December 31, |
|
|
|||||
|
|
2021 |
|
|
2020 |
|
|
||
|
|
(In millions) |
|||||||
Net cash used in operating activities |
|
$ |
(225.0 |
) |
|
$ |
(49.9 |
) |
|
Net cash used in investing activities |
|
|
(550.8 |
) |
|
|
(214.5 |
) |
|
Net cash provided by financing activities |
|
|
736.7 |
|
|
|
371.8 |
|
|
Net cash used in operating activities
Net cash used in operating activities of $225.0 million during the year ended December 31, 2021 primarily reflects increased spend in our research and development activities offset by the receipt of $6.7 million in payments from our collaboration partners during that period. Net cash used in operating activities of $49.9 million during the year ended December 31, 2020 primarily reflects increased spend in our research and development activities, offset in part by the receipt of a $70.0 million up-front payment and $12.2 million in additional payments under our collaboration with Regeneron and $6.0 million in payments from Novartis.
Net cash used in investing activities
During the year ended December 31, 2021, our investing activities used net cash of $550.8 million. The increase in the year ended December 31, 2021 is primarily due to marketable securities activity during the period, as $1,020.6 million in marketable securities were purchased and $485.6 million in marketable securities matured, as well as the use of $12.8 million in cash for the purchase of property and equipment and $3.0 million for an investment in Kyverna. During the year ended December 31, 2020, our investing activities used net cash of $214.5 million. The decrease in the year ended December 31, 2020 is primarily related to a decrease of $210.9 million from marketable securities activity during the period, as $473.7 million in marketable securities were purchased and $262.8 million in marketable securities matured, as well as the use of $3.6 million in cash for the purchase of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities of $736.7 million during the year ended December 31, 2021 is primarily due to the receipt of $648.3 million in net proceeds from a follow-on offering of our common stock, $45.3 million in net proceeds from at-the-market offerings, $41.1 million in cash received from the exercise of stock options and $2.0 million in cash received from the issuance of shares through our employee stock purchase plan. Net cash provided by financing activities of $371.8 million during the year ended December 31, 2020 includes $296.6 million in proceeds from follow-on offerings, $49.5 million in net proceeds from at-the-market offerings, $12.6 million in proceeds from the issuance of common stock to Regeneron in a private placement, $11.6 million in cash received from the exercise of stock options and $1.6 million in cash received from the issuance of shares through our employee stock purchase plan.
Contractual and Other Obligations
We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.
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Property Leases - Commenced
As of December 31, 2021, our contractual commitments for leases were $91.8 million, which will be paid over the term of such leases. For additional information on our leases and timing of future payments refer to Note 11 of the consolidated financial statements included in this Annual Report on Form 10-K.
Property Leases – Not Yet Commenced
In January 2022, we entered into a lease agreement for office and laboratory space at 730 Main Street in Cambridge, Massachusetts, which is described in further detail in Note 17 of the consolidated financial statements included in this Annual Report on Form 10-K. In connection therewith, we have committed to making at least $56.1 million in rental payments over a lease term of 120 months.
In February 2022, we entered into a lease agreement for good manufacturing practice (“GMP”) manufacturing space at 840 Winter Street in Waltham, Massachusetts, which is described in further detail in Note 17 of the consolidated financial statements included in this Annual Report on Form 10-K. In connection therewith, we have committed to making at least $146.0 million in rental payments over a lease term of 144 months estimated to begin in 2024.
Other Obligations
We enter into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies, supply manufacturing and other services and products for operating purposes. As of December 31, 2021, we have $9.1 million of commitments that are legally enforceable and due within one year.
We do not include any potential future pass-through milestone payments or royalty payments we may be required to make under our existing license agreements or the merger agreement related to our acquisition of Rewrite Therapeutics, Inc. (“Rewrite”) due to the uncertainty of the occurrence of the events requiring payment under those agreements. These payments are not reflected in the disclosures above.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheets and the reported amounts of collaboration revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments and assumptions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements prospectively from the date of the change in estimate. Refer to Note 2 to our consolidated financial statements of this Annual Report on Form 10-K for our significant accounting policies related to our critical accounting estimates.
We define our critical accounting policies as those accounting principles generally accepted in the U.S. that require the most significant estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our consolidated financial statements which require significant estimates and judgments are as follows:
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments (collectively known as Accounting Standard Codification (“ASC”) 606 “ASC 606”).
At inception, we determine whether contracts are within the scope of ASC 606 or other topics. For contracts that are determined to be within the scope of ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to
107
receive in exchange for these goods and services. To achieve this core principle, we apply the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation. We only apply the five-step model to contracts when we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
As of December 31, 2021, our only revenue recognized is related to collaboration agreements with third parties which are either within the scope of ASC 606, under which we license certain rights to our product candidates to third parties, or within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) if it involves a joint operating activity pursuant to which we are an active participant and are exposed to significant risks and rewards with respect to the arrangement. As discussed in further detail in Note 9 to our consolidated financial statements of this Annual Report on Form 10-K, we enter into out-licensing agreements which are within the scope of ASC 606, under which we license certain rights to our product candidates to third parties and may provide services related to the research and development of the product candidates. The terms of these arrangements typically include consideration payable to us of one or more of the following: nonrefundable, upfront fees; development, regulatory, and commercial milestone payments; research and development funding payments; and royalties on the net sales of licensed products. Additionally, the terms of certain arrangements may include an equity interest in the other company. Consideration received from each of these payments results in collaboration revenues, except for revenues from royalties on the net sales of licensed products, which are classified as royalty revenues. For arrangements within the scope of ASC 808, the terms of these arrangements typically include payments received or made under the cost sharing provisions which are recognized as a component of collaboration revenues in the consolidated statements of operations and comprehensive loss.
In determining the accounting for each contract, the significant areas of management judgement or estimation include determining the transaction price, identifying the distinct performance obligations within a contract, determining the standalone selling prices for distinct performance obligations when more than one distinct performance obligation is identified within a contract and determining the revenue recognition pattern for each performance obligation that best reflects the timing of when we transfer control of goods and services to the customer. If the consideration received in exchange for entering into a contract is in the form of noncash consideration, we are required to estimate the fair value of the noncash consideration received. If our estimates of the noncash consideration received are not appropriate it could impact the total amount of revenue recognized for the contract. Furthermore, many of our performance obligations, whether distinct or combined, do not have readily available standalone selling prices and therefore we are required to make judgements and estimates regarding the standalone selling prices when relevant. To the extent the estimates are not appropriate in the circumstances, it could impact the timing of our revenue recognition. We evaluate the measure of progress each reporting period and if estimates related to the measure of progress change, related revenue recognition is adjusted accordingly.
Investment Valuation
As discussed in Notes 9 and 10 to our consolidated financial statements of this Annual Report on Form 10-K, during the year ended December 31, 2021, we entered into agreements with AvenCell, SparingVision and Kyverna, which resulted in us applying judgment in determining the accounting for the agreements, and in particular, measuring the fair value of the non-cash consideration we received in exchange for our licenses granted and related research and development services, which includes equity in private companies in which the fair value is not readily available. The fair value of these investments represents the transaction price of the arrangement and will drive the amount of revenue we recognize in future periods.
We engaged an independent valuation specialist to determine the fair value of the equity interest received related to the AvenCell and SparingVision investments; see Note 10 to our consolidated financial statements for specifics related to the valuation model and inputs utilized. One of the key inputs in the AvenCell model is the anticipated holding period to an exit and liquidity event. An increase in this input by 1 year would increase the value of the AvenCell investment by $5.7 million. A decrease in this input by 1 year would decrease the value of the AvenCell investment by $6.3 million.
108
In the SparingVision model, the key input is the internal rate of return. A 10% increase in this input would increase the value of the SparingVision investment by $0.8 million. A 10% decrease in this assumption would decrease the value of the SparingVision investment by $0.9 million.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our 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 the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to vendors in connection with clinical research organizations (“CROs”) in connection with clinical studies, vendors in connection with preclinical development activities and vendors related to development, manufacturing and distribution of clinical trial materials.
We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies 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.
Equity-Based Compensation
We measure employee equity-based compensation based on the grant date fair value of the equity awards using the Black-Scholes option pricing model. Equity-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur. For equity awards that have a performance condition, we recognize stock-based compensation expense using the accelerated attribution method, based on our assessment of the probability that the performance condition will be achieved. Our stock price is a key input that will drive the grant date fair value of the equity awards.
We classify equity-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified.
Recent Accounting Pronouncements
Please read Note 2 to our consolidated financial statements included in Part IV, Item 15, “Notes to Consolidated Financial Statements,” of this Annual report on Form 10-K for a description of recent accounting pronouncements applicable to our business.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of December 31, 2021, we had cash equivalents, restricted cash equivalents and marketable securities of $1,087.3 million consisting of interest-bearing money market accounts, commercial paper, corporate and financial institution debt securities, U.S. Treasury securities and asset-backed securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are primarily in marketable securities. Due to the short-term duration of our investment portfolios and the low risk profile of our investments, we do not believe an immediate change of 100 basis points, or one percentage point, would have a material effect on the fair market value of our investment portfolio. Declines in interest rates, however, would reduce future investment income.
We do not have any foreign currency or derivative financial instruments. Inflation generally affects us by increasing our cost of labor, preclinical and clinical trial costs. We do not believe that inflation had a material effect on our results of operations during the year ended December 31, 2021.
109
Item 8. Financial Statements and Supplementary Data
The information required by this item is presented at the end of this report beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer), to allow timely decisions regarding required disclosure.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 framework) (“COSO”). Based on its assessment, management believes that, as of December 31, 2021, our internal control over financial reporting is effective based on those criteria.
110
Deloitte & Touche LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting, which is included below.
Changes in Internal Controls over Financial Reporting
No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
111
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Intellia Therapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Intellia Therapeutics, Inc. and subsidiary (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 24, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 24, 2022
112
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
113
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated by reference from our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, which we expect to file with the SEC no later than April 30, 2022.
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding our directors, including the audit committee and audit committee financial experts, and executive officers and compliance with Section 16(a) of the Exchange Act will be included in our 2022 Proxy Statement and is incorporated herein by reference.
We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees as required by Nasdaq governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Conduct and Ethics on our website at www.intelliatx.com or request a copy without charge from:
Intellia Therapeutics, Inc.
Attention: Investor Relations
40 Erie Street, Suite 130
Cambridge, MA 02139
We will post to our website any amendments to the Code of Business Conduct and Ethics, and any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq.
Item 11. Executive Compensation
The information required by this item regarding executive compensation will be included in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item regarding security ownership of certain beneficial owners and management and securities authorized for issuance under equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
The information required by this item regarding certain relationships and related transactions and director independence will be included in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information about aggregate fees billed to us by our independent principal accountant, Deloitte & Touche LLP (PCAOB ID No. 34), located in Boston, Massachusetts, will be presented in our definitive proxy statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders under the caption “Audit Committee Matters — Principal Accounting Firm Fees” and is incorporated herein by reference.
114
PART IV
Item 15. Exhibits, Financial Statement Schedules
Report of Independent Registered Public Accounting Firm (PCAOB ID No.34)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 16. Form 10-K Summary
The Company has elected not to include summary information.
115
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID No. |
F-2 |
F-4 |
|
Consolidated Statements of Operations and Comprehensive Loss |
F-5 |
Consolidated Statements of Stockholders’ Equity |
F-Error! Bookmark not defined. |
F-7 |
|
F-8 |
|
|
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Intellia Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Intellia Therapeutics, Inc. and subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with 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 financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Collaboration Arrangements – Refer to Notes 2 and 9 to the financial statements and Investment Valuation – Refer to Notes 2, 4, and 10 to the financial statements.
Critical Audit Matter Description
The Company recognizes collaboration revenue on license and collaboration agreements as they satisfy performance obligations and transfer control of goods and services to the customer. During 2021, the Company entered into two new license and collaboration agreements with counterparties in exchange for a non-controlling equity ownership in each respective counterparty. This resulted in management applying judgments in determining the accounting for these arrangements. Specifically, management applied judgment in (1) identifying the performance obligations
F-2
within the arrangements and (2) measuring the arrangement consideration. Measuring the arrangement consideration required management to estimate the fair value of the equity interests received, which were equity interests in private entities that did not have readily determinable market values. The Company recognized $77.7 million of deferred revenue at the inception of the arrangements, which represented the fair value of the equity interests received.
Auditing the Company’s accounting for revenues pertaining to the new arrangements required an increased extent of effort and a high degree of auditor judgment due to the complex and judgmental nature of evaluating the performance obligations included within the license and collaboration agreements. Additionally, given management used unobservable inputs to estimate the fair value of the equity interests received, performing audit procedures to evaluate these inputs required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to the Company’s revenue recognition and valuation of the equity interests received included the following, among others:
/s/
February 24, 2022
We have served as the Company's auditor since 2015.
F-3
INTELLIA THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share and per share data)
|
|
December 31, |
|
|
December 31, |
|
||
ASSETS |
|
|||||||
Current Assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Marketable securities |
|
|
|
|
|
|
||
Accounts receivable ($ |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Marketable securities - noncurrent |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Equity method investment |
|
|
|
|
|
|
||
Investments and other assets ($ |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|||||||
Current Liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Current portion of operating lease liability |
|
|
|
|
|
|
||
Current portion of deferred revenue ($ |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Deferred revenue, net of current portion ($ |
|
|
|
|
|
|
||
Long-term operating lease liability |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ Equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive (loss)/income |
|
|
( |
) |
|
|
|
|
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total Liabilities and Stockholders’ Equity |
|
$ |
|
|
$ |
|
See notes to consolidated financial statements.
F-4
INTELLIA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands except per share data)
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Collaboration (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|||
Operating loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other (expense) income, net: |
|
|
|
|
|
|
|
|
|
|||
Loss from equity method investment |
|
|
( |
) |
|
|
|
|
|
|
||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Total other (expense) income, net |
|
|
( |
) |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding, basic and diluted |
|
|
|
|
|
|
|
|
|
|||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|||
Unrealized (loss) gain on marketable securities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Other comprehensive loss from equity method investment |
|
|
( |
) |
|
|
|
|
|
|
||
Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) Including the following revenue from related party (see Notes 9 and 15): |
|
$ |
|
|
$ |
|
|
$ |
|
See notes to consolidated financial statements.
F-5
INTELLIA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
|
|
|
|
|
|
|
|
Additional |
|
|
Accumulated |
|
|
|
|
|
Total |
|
||||||
|
|
Common |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
(Loss) Income |
|
|
Deficit |
|
|
Equity |
|
||||||
Balance at December 31, 2018 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Retroactive adjustment to beginning accumulated deficit for |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Issuance of common stock through at-the-market offerings, net |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Exercise of stock options |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Other comprehensive income - unrealized gain on marketable securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Issuance of common stock through follow-on offerings, |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Issuance of common stock to Regeneron |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Issuance of common stock through at-the-market offerings, net |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Exercise of stock options |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Other comprehensive loss - unrealized loss on marketable securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Issuance of common stock through follow-on offerings, |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Issuance of common stock through at-the-market offerings, net |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Exercise of stock options |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Equity-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Other comprehensive loss - unrealized loss on marketable securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss - equity method investment |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
F-6
INTELLIA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Equity-based compensation |
|
|
|
|
|
|
|
|
|
|||
Amortization/(accretion) of investment premiums/(discounts) |
|
|
|
|
|
|
|
|
( |
) |
||
Loss from equity method investment |
|
|
|
|
|
|
|
|
|
|||
Deferral of equity method investment intra-entity profit on sales |
|
|
|
|
|
|
|
|
|
|||
Loss on disposal of property and equipment |
|
|
|
|
|
|
|
|
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Operating lease right-of-use assets |
|
|
|
|
|
|
|
|
|
|||
Other assets |
|
|
|
|
|
|
|
|
|
|||
Accounts payable |
|
|
|
|
|
|
|
|
|
|||
Accrued expenses |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Maturities of marketable securities |
|
|
|
|
|
|
|
|
|
|||
Investment in Kyverna Therapeutics, Inc. |
|
|
( |
) |
|
|
|
|
|
|
||
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
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|
|
|
|
|
|
|
|
|||
Proceeds from issuance of common stock through follow-on |
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|
|
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|
|
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|
|||
Proceeds from issuance of common stock through at-the-market |
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|
|
|
|
|
|
|||
Proceeds from issuance of common stock to Regeneron Pharmaceuticals, Inc. |
|
|
|
|
|
|
|
|
|
|||
Proceeds from options exercised |
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|
|||
Issuance of shares through employee stock purchase plan |
|
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|
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|
|||
Net cash provided by financing activities |
|
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|
|
|
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|
|||
Net (decrease) increase in cash and cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents and restricted cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents and restricted cash equivalents, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Reconciliation of cash and cash equivalents and restricted cash equivalents to consolidated balance sheet: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Restricted cash equivalents, included in investments and other assets |
|
|
|
|
|
|
|
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|
|||
Total cash and cash equivalents and restricted cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
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|
|||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
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|
|
|
|
|
|
|||
Purchases of property and equipment unpaid at period end |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets acquired under operating leases |
|
|
|
|
|
|
|
|
|
|||
Non-cash contribution of intellectual property to AvenCell Therapeutics, Inc. |
|
|
|
|
|
|
|
|
|
|||
Non-cash contribution of intellectual property to SparingVision SAS |
|
|
|
|
|
|
|
|
|
|||
Non-cash contribution of intellectual property to Kyverna Therapeutics, Inc. |
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-7
INTELLIA THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intellia Therapeutics, Inc. (“Intellia” or the “Company”) is a leading clinical-stage genome editing company, focused on developing novel, potentially curative CRISPR/Cas9-based therapeutics. CRISPR/Cas9, an acronym for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). To realize the transformative potential of CRISPR/Cas9-based technologies, Intellia is building a full-spectrum genome editing company, by leveraging its modular platform, to advance in vivo and ex vivo therapies for diseases with high unmet need. For the Company's in vivo programs to address genetic diseases, intravenously administered CRISPR is used as the therapy, in which the Company's proprietary delivery technology enables highly precise editing of disease-causing genes directly within specific target tissues. For the Company's ex vivo programs to address immuno-oncology and autoimmune diseases, CRISPR is used to create the therapy by engineering cells outside of the body. The Company's deep scientific, technical and clinical development experience, along with its robust intellectual property (“IP”) portfolio, enables it to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine.
The Company was founded and commenced active operations in mid-2014. The Company will require substantial additional capital to fund its research and development. The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry, including, but not limited to, development by competitors of more advanced or effective therapies, dependence on key executives, protection of and dependence on proprietary technology, compliance with government regulations and ability to secure additional capital to fund operations. Programs currently in development or moving into development will require significant additional research and development efforts, including preclinical 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. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Liquidity
Since its inception through December 31, 2021, the Company has raised an aggregate of $
Basis of Presentation
The consolidated financial statements include the accounts of Intellia Therapeutics, Inc. and its wholly owned, controlled subsidiary, Intellia Securities Corp. All intercompany balances and transactions have been eliminated in consolidation. Comprehensive loss is comprised of net loss and gain/loss on marketable securities and equity method investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these consolidated financial statements have been made in connection with the calculation of revenues, research and development expenses, valuation of equity and fair value method investments, and equity-based compensation expense. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances at the time such estimates are made. Actual results could differ from those estimates. The Company periodically reviews its estimates in light of changes in circumstances, facts and experience.
F-8
The extent of the impact of the coronavirus disease 19 (“COVID-19”) pandemic on the Company’s operational and financial performance will depend on certain developments, including the length and severity of this pandemic, as well as its effect on the Company's employees, collaborators and vendors, all of which are uncertain and cannot be predicted. The Company cannot reasonably estimate the extent to which the disruption may materially impact its consolidated results of operations or financial position.
The effects of material revisions in estimates are reflected in the consolidated financial statements prospectively from the date of the change in estimate.
Fair Value Measurements
The Company’s financial instruments include cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses. Certain of the Company’s financial assets, including cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value.
Refer to Note 4 for further information regarding the Company’s fair value measurements.
Other financial instruments, including accounts receivable, accounts payable and accrued expenses, are carried at cost, which approximate fair value due to the short duration and term to maturity.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. As of December 31, 2021 and 2020, cash equivalents consisted of interest-bearing money market accounts.
Restricted Cash Equivalents
The Company has restricted cash equivalents made up of money market funds held in collateral accounts that are restricted to secure letters of credit in accordance with the leases for 281 Albany Street and 17 Tudor Street, which the Company entered into in March of 2020 and July of 2021, respectively (see Note 11). The letters of credit, in the amount of $
The Company has also received funds from certain grants that were restricted as to their use and were therefore classified as restricted cash equivalents. These funds amounted to approximately $
Marketable Securities
The Company’s marketable securities are accounted for as available-for-sale and recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive (loss)/income, a component of stockholders’ equity.
The Company reviews its investment portfolio to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
Refer to Note 3 for further information regarding the Company’s marketable securities.
F-9
Non-Marketable Equity Securities
The Company also invests in equity securities of companies whose securities are not publicly traded and where fair value is not readily available. These investments are accounted for using the measurement alternative at cost minus impairment adjusted for changes in observable prices. The Company monitors these investments to evaluate whether any increase or decline in their value has occurred, based on the implied value of recent company financings and general market conditions, or if the investment has a readily determinable fair value. These investments are included in “Investments and other assets” in the Company’s consolidated balance sheets. Refer to Note 10 for further information regarding the Company’s investments in non-marketable equity securities.
Concentrations of Credit Risk
The Company’s cash, cash equivalents and marketable securities may potentially be subject to concentrations of credit risk. The Company generally maintains balances in various accounts in excess of federally insured limits with financial institutions that management believes to be of high credit quality.
Property and Equipment
The Company records property and equipment at cost and recognizes depreciation and amortization using the straight-line method over the following estimated useful lives of the respective assets:
Asset Category |
|
Useful Life |
Laboratory equipment |
|
|
Office furniture and equipment |
|
|
Computer software |
|
|
Computer equipment |
|
|
Leasehold improvements |
|
Impairment of Long-Lived Assets
The Company tests long-lived assets to be held and used, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of assets or asset groups 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.
F-10
Income Taxes
The Company accounts 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 attributable to differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes and for operating loss and tax credit carryforwards. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.
The Company’s deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which these temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce deferred tax assets if it is determined that it is more likely than not that all or a portion of the deferred tax asset will not be realized. The Company considers many factors when assessing the likelihood of future realization of deferred tax assets, including recent earnings results, expectations of future taxable income, carryforward periods available and other relevant factors. The Company records changes in the required valuation allowance in the period that the determination is made.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments (collectively known as Accounting Standard Codification (“ASC”) 606 (“ASC 606”).
At inception, the Company determines whether contracts are within the scope of ASC 606 or other topics. For contracts that are determined to be within the scope of ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when the Company determines that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
F-11
Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract. To the extent a contract includes multiple promised goods and services, the Company applies judgment to determine whether promised goods and services are both capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods and services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period for any changes. Determining the transaction price requires significant judgment, which is discussed in further detail for each of the Company’s collaboration agreements in Note 9. In addition, none of the Company’s contracts as of December 31, 2021 contained a significant financing component.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone selling prices. The Company typically determines standalone selling prices using an adjusted market assessment approach model.
The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized over time if either (i) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
As of December 31, 2021, the Company’s only revenue recognized is related to collaboration agreements with third parties which are either within the scope of ASC 606, under which the Company licenses certain rights to its product candidates to third parties, or within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) if it involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement. For the collaboration arrangements under the scope of ASC 606, as discussed in further detail in Note 9, the terms of these arrangements typically include payment to the Company of one or more of the following: nonrefundable, upfront fees; development, regulatory, and commercial milestone payments; research and development funding payments; and royalties on the net sales of licensed products. Additionally, the terms of certain arrangements may include an equity interest in the other company. Each of these payments results in collaboration revenues, except for revenues from royalties on the net sales of licensed products, which are classified as royalty revenues. For arrangements within the scope of ASC 808, the terms of these arrangements typically include payments received or made under the cost sharing provisions which are recognized as a component of revenues in the consolidated statements of operations and comprehensive loss.
Licenses of intellectual property: If the license to the Company’s IP is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from consideration allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the licenses. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.
F-12
Milestone payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates the probability of reaching the milestones and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur in the future, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore revenue recognized is constrained as management is unable to assert that a reversal of revenue would not be probable. The transaction price is then allocated to each performance obligation on a relative standalone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on levels of sales, if the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its collaboration agreements.
The Company receives payments from its customers based on billing schedules or upon the achievement of milestones established in each contract. The Company’s contract liabilities consist of deferred revenue. Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company satisfies its obligations under these arrangements.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses consist of expenses incurred in performing research and development activities, such as salaries, equity-based compensation and benefits of employees, allocated facility-related expenses, overhead expenses, license, sublicense and milestone fees, contract research, clinical trial costs, development and manufacturing services, and other related costs.
Equity-Based Compensation
The Company measures employee equity-based compensation based on the grant date fair value of the equity awards using the Black-Scholes option pricing model. Equity-based compensation expense is recognized on a straight-line basis over the requisite service period of the awards and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur. For equity awards that have a performance condition, the Company recognizes stock-based compensation expense using the accelerated attribution method, based on its assessment of the probability that the performance condition will be achieved.
F-13
(Loss) Earnings per Share
Segment Information
Variable Interest Entity
Equity Method of Accounting
In circumstances where the Company has the ability to exercise significant influence, but not control, over the operating and financial policies of an entity in which the Company has a common stock or in-substance common stock investment, the Company utilizes the equity method of accounting for recording related investment activity. In assessing whether the Company exercises significant influence, the Company considers the nature and magnitude of the investment, the voting and protective rights the Company holds, any participation in the governance of the other entity and other relevant factors such as the presence of a collaborative or other business relationship.
Under the equity method of accounting, the Company’s investments are initially recorded at cost on the consolidated balance sheets. Upon recording an equity method investment, the Company evaluates whether there are basis differences between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets. Typically, the Company amortizes basis differences identified on a straight-line basis over the underlying assets’ estimated useful lives when calculating the attributable earnings or losses, excluding the basis differences attributable to in-process research and development (“IPR&D”) that has no alternative future use. If the Company is unable to attribute all of the basis difference to specific assets or liabilities of the investee, the residual excess of the cost of the investment over the proportional fair value of the investee’s assets and liabilities is considered to be Equity Method Goodwill and is recognized within the equity investment balance, which is tracked separately within the Company’s memo accounts. The Company subsequently records in the consolidated statements of operations and comprehensive loss its share of income or loss of the other entity within other income/expense. If the share of losses exceeds the carrying value of the Company’s investment, the Company will suspend recognizing additional losses and will continue to do so unless it commits to providing additional funding; however, if there are intra-entity profits this can cause the investment balance to go negative.
F-14
The Company evaluates its equity method investments for impairment whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired and considers qualitative and quantitative factors including the investee's financial metrics, product and commercial outlook and cash usage. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period and the investment is written down to fair value.
At December 31, 2021, the Company accounted for its investment in AvenCell under the equity method of accounting and no impairment charges were recognized during the year ended December 31, 2021. Refer to Note 10 for further details.
Recent Accounting Pronouncements – Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 on January 1, 2021. The adoption did not have a material effect on the Company’s consolidated financial statements.
The following table summarizes the Company’s available-for-sale marketable securities as of December 31, 2021 and 2020 at net book value:
|
|
December 31, 2021 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Estimated Fair |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and other government securities |
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
||
Financial institution debt securities |
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
Corporate debt securities |
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
Other asset-backed securities |
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
December 31, 2020 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Estimated Fair |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and other government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Financial institution debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At December 31, 2021 and 2020, the balance in the Company’s accumulated other comprehensive (loss)/income was composed of activity related to the Company’s available-for-sale marketable securities and equity method investment. There were
F-15
The Company's available-for-sale securities that are classified as short-term marketable securities in the consolidated balance sheet mature within one year or less as of the balance sheet date. Available-for-sale securities that are classified as noncurrent in the consolidated balance sheet are those that mature after
The Company classifies fair value-based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
As of December 31, 2021 and 2020, the Company’s financial assets recognized at fair value on a recurring basis consisted of the following:
|
|
Fair Value as of December 31, 2021 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Cash equivalents and restricted cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and other government securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Financial institution debt securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Corporate debt securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other asset-backed securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value as of December 31, 2020 |
|
|||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Cash equivalents and restricted cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury and other government securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Financial institution debt securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Corporate debt securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other asset-backed securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
Certain of the Company’s financial assets, including cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2021 or 2020.
The Company's investment in AvenCell was recorded at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. Refer to Note 10 for further details.
The Company's investment in SparingVision SAS (“SparingVision”) was recorded at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. The Company's investment in Kyverna Therapeutics, Inc. (“Kyverna”) was recorded at cost, which is representative of fair value. Refer to Note 10 for further details. The
F-16
SparingVision and Kyverna investments (the “investments”) are included in “Investments and other assets” on the consolidated balance sheet. There were no changes in observable prices of these investments as of December 31, 2021.
Property and equipment, net consisted of the following:
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Laboratory equipment |
|
$ |
|
|
$ |
|
||
Office furniture and equipment |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer software |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
Depreciation and amortization expense was $
Accrued expenses consisted of the following:
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Employee compensation and benefits |
|
$ |
|
|
$ |
|
||
Accrued research and development |
|
|
|
|
|
|
||
Accrued legal and professional expenses |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
The Company did not record net income tax benefits for the operating losses incurred during the periods presented due to the uncertainty of realizing a tax benefit from those losses. Accordingly, any benefit recorded related to these deferred tax assets was offset by a valuation allowance reflecting management’s conclusion that realization of those assets was not more likely than not.
A reconciliation of the federal statutory income tax rate and the Company’s effective income tax rate is as follows:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Federal statutory income tax rate |
|
|
( |
)% |
|
|
( |
)% |
|
|
( |
)% |
State income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Research and development tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
162m |
|
|
|
|
|
- |
|
|
|
- |
|
|
Change in valuation allowance |
|
|
|
|
|
|
|
|
|
|||
Effective income tax rate |
|
|
— |
% |
|
|
— |
% |
|
|
— |
% |
F-17
The Company’s net deferred tax assets (liabilities) consisted of the following:
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
Deferred tax assets: |
|
|
|
|
|
|
||
Intangibles, including acquired in-process |
|
$ |
|
|
$ |
|
||
Capitalized start-up costs |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
|
|
|
|
|
||
Research and development credit carryforwards |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
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|
|
|
||
Accruals and allowances |
|
|
|
|
|
|
||
Prepaid rent |
|
|
|
|
|
- |
|
|
Equity investment adjustments |
|
|
|
|
|
- |
|
|
Gross deferred tax assets |
|
|
|
|
|
|
||
Deferred tax asset valuation allowance |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets |
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Fixed assets |
|
|
( |
) |
|
|
( |
) |
Operating lease right-of-use assets |
|
|
( |
) |
|
|
( |
) |
Total deferred tax liabilities |
|
|
( |
) |
|
|
( |
) |
Net deferred tax asset (liability) |
|
$ |
|
|
$ |
|
As of December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $
Approximately $
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, (the “CARES Act”) was enacted in the U.S. The CARES Act temporarily removes the
As of December 31, 2021 and 2020, the Company also had state net operating loss carryforwards of $
As of December 31, 2021 and 2020, the Company had federal tax credit carryforwards of approximately $
The Company evaluated the expected realizability of its net deferred tax assets and determined that there was significant negative evidence due to its net operating loss position and insufficient positive evidence to support the realizability of these net deferred tax assets. The Company concluded it is more likely than not that its net deferred
F-18
tax assets would not be realized in the future; therefore, the Company has provided a full valuation allowance against its net deferred tax asset balance as of December 31, 2021 and 2020. The valuation allowance increased by $
Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax expense, respectively. The Company has not yet conducted a study to assess whether a change of control, as defined in Section 382, has occurred or whether there have been multiple changes in control since inception, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the net operating loss carryforward or research credit carryforward before utilization. A full valuation allowance has been provided against the Company’s net operating loss and tax credit carryforwards and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations if an adjustment is required.
As of December 31, 2021, the Company had
Caribou Arbitration
On October 17, 2018, the Company initiated an arbitration proceeding against Caribou Biosciences, Inc. (“Caribou”) asserting that Caribou violated the terms and conditions of a license agreement the Company entered into with them in July 2014 related to certain IP (the “Caribou License”), as well as other contractual and legal obligations to the Company, by using and seeking to license to third parties two patent families relating to specific structural or chemical modifications of guide RNAs (“gRNAs”), that were purportedly invented or controlled by Caribou, in the Company’s exclusive human therapeutic field, before an agreed-upon cutoff date of January 30, 2018.
On September 26, 2019, the Company announced that the arbitration panel issued an interim award concluding that both the structural and chemical gRNA modification technologies were exclusively licensed to the Company by Caribou pursuant to the Caribou License. Nevertheless, the arbitration panel, solely with respect to the clinically modified gRNAs, stated that it will declare that Caribou has an equitable “leaseback”, which it described as exclusive, perpetual and worldwide (the “Caribou Award”). The Caribou Award does not include the structural guide modifications IP also at issue in the arbitration, any other IP exclusively licensed or sublicensed by Caribou to the Company under the Caribou License (including but not limited to the foundational CRISPR/Cas9 IP co-owned by the Regents of the University of California, University of Vienna and Dr. Emmanuelle Charpentier), or any other of the Company’s IP. On February 6, 2020, the panel clarified that the Caribou Award is limited to a particular on-going Caribou program, which seeks to develop a CAR-T product directed at CD19.
On June 16, 2021, the Company executed a Leaseback Agreement (“Leaseback”) with Caribou, which settled the ongoing arbitration. Under the Leaseback negotiated by the parties, in exchange for an upfront payment, potential future regulatory and sales milestones, and single-digit royalties payable by Caribou, the Company has agreed to leaseback or sublicense certain CRISPR/Cas9 IP, including the Company’s chemical gRNA modification technology and foundational CRISPR/Cas9 IP, to Caribou so that it can develop and commercialize CB-010. Caribou also will be responsible for any payments required in respect of the Company’s in-licensed IP. The Company recorded $
F-19
License Agreements
The Company is party to license agreements, which include contingent payments. These payments will become payable if and when certain development, regulatory and commercial milestones are achieved. As of December 31, 2021, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.
To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, the Company has formed, and intends to seek other opportunities to form, strategic alliances with collaborators who can augment its leadership in CRISPR/Cas9 therapeutic development. As of December 31, 2021, the Company’s accounts receivable were related to its collaborations with Regeneron and AvenCell. As of December 31, 2021 the Company's contract liabilities were related to its collaborations with Regeneron, AvenCell, SparingVision and Kyverna. As of December 31, 2020, the Company’s accounts receivable and contract liabilities were related to the Company’s collaboration with Regeneron.
The following table presents changes in the Company’s accounts receivable and contract liabilities during the years ended December 31, 2021 and 2020 (in thousands):
|
|
Balance at |
|
|
Additions |
|
|
Deductions |
|
|
Balance at End |
|
||||
Year Ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts receivable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Contract liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Balance at |
|
|
Additions |
|
|
Deductions |
|
|
Balance at End |
|
||||
Year Ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts receivable |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Contract liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred revenue |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
During the years ended December 31, 2021 and 2020, the Company recognized the following revenues as a result of changes in the contract liability balance (in thousands):
Revenue recognized in the period from: |
|
Year Ended |
|
|
Year Ended |
|
||
Amounts included in the contract liability at the beginning of the period |
|
$ |
|
|
$ |
|
Costs to obtain and fulfill a contract
The Company did
Regeneron Pharmaceuticals, Inc.
In April 2016, the Company entered into a license and collaboration agreement with Regeneron (the “2016 Regeneron Agreement”). The 2016 Regeneron Agreement has two principal components: i) a product development component under which the parties will research, develop and commercialize CRISPR/Cas-based therapeutic products primarily focused on genome editing in the liver, and ii) a technology collaboration component, pursuant to which the Company and Regeneron will engage in research-related activities aimed at discovering and developing novel technologies and improvements to CRISPR/Cas technology to enhance the Company’s genome editing platform. Under this agreement, the Company also may access the Regeneron Genetics Center and proprietary mouse models to be provided by Regeneron for a limited number of the Company’s liver programs. At the inception of the 2016 Regeneron Agreement,
F-20
Regeneron selected the first of its 10 targets, transthyretin (“ATTR”) amyloidosis, which is subject to a co-development and co-promotion agreement between the Company and Regeneron (the “ATTR Co/Co”).
On May 30, 2020, the Company entered into (i) amendment no. 1 (the “2020 Regeneron Amendment”) to the 2016 Regeneron Agreement, (ii) co-development and co-funding agreements for the treatment of hemophilia A and hemophilia B (the “Hemophilia Co/Co”) agreements and (iii) a stock purchase agreement. The collaboration expansion builds upon the jointly developed targeted transgene insertion capabilities designed to durably restore missing therapeutic protein, and to overcome the limitations of traditional gene therapy. The collaboration was extended until April 2024, at which point Regeneron has an option to renew for an additional two years. The 2020 Regeneron Amendment also grants Regeneron exclusive rights to develop products for five additional in vivo CRISPR/Cas-based therapeutic liver targets and non-exclusive rights to independently develop and commercialize up to 10 ex vivo gene edited products made using certain defined cell types.
Since December 31, 2020, there have been no material changes to the key terms of the 2016 Regeneron Agreement and the 2020 Regeneron Amendment (the “Amended Agreements”). For further information on the terms and conditions of these agreements, please see the notes to the consolidated financial statements included in the Company’s Annual Report for the year ended December 31, 2020.
Revenue Recognition: Collaboration Revenue. Through December 31, 2021, excluding amounts allocated to Regeneron’s purchase of the Company’s common stock, the Company recorded $
As of December 31, 2021, there was approximately $
As of December 31, 2021 and 2020, the Company had accounts receivable of $
AvenCell Therapeutics, Inc.
On July 30, 2021 (the “Effective Date”), the Company entered into two agreements with AvenCell, a privately held CAR-T cell therapy company formed on that date in a joint venture between the Company, Cellex and BXLS: (i) a license and collaboration agreement (the “LCA”), under which the Company will collaborate to develop allogeneic universal CAR-T cell therapies and which granted AvenCell a license to develop and commercialize genome edited universal CAR-T cell therapies (limited to its use with their switchable, universal CAR-T cell UniCAR and RevCAR platforms); and (ii) a co-development and co-funding agreement (the “AvenCell Co/Co”), under which the Company will co-develop and co-commercialize allogeneic universal CAR-T cell products for an immuno-oncology indication.
Scope: The Company granted AvenCell an exclusive license to combine the Company’s CRISPR/Cas9 technology platform with AvenCell’s switchable, universal CAR-T cell technology platform and made available to AvenCell certain know-how and materials. For an eighteen-month period after the Effective Date, the Company will provide to AvenCell any improvements with respect to the underlying technology that are developed. For the two-year period immediately following the Effective Date, the Company will perform certain activities, at the Company’s cost and expense, including providing to AvenCell certain know-how and materials to enable AvenCell to use the Company's CRISPR/Cas9 technology platform, as well as making available employees with requisite knowledge and experience to provide advice and answer questions regarding such know-how and materials for a limited number of hours per year (the “Knowledge Transfer Period”). In addition, the Company and AvenCell will collaborate on at least seven
F-21
universal CAR-T cell products that combine the Company's allogeneic T cell technology with AvenCell's switchable, universal CAR-T cell technology, referred to as the (“Allo Collaboration”).
AvenCell will pay the Company to provide supply and manufacturing services for them, including supplying GMP CRISPR reagents to support the research and development of all CRISPR Products (as defined in the LCA) under the Allo Collaboration until the completion of the first Pivotal Trial (as defined in the LCA) of the first such CRISPR Product.
Financial Terms: In exchange for the license, the Company received a
Governance: The parties formed a joint steering committee (“JSC”), which is responsible for setting research objectives and overseeing the general strategies and research and development activities undertaken by the parties under the LCA. The JSC will meet quarterly until the expiration or termination of the Allo Collaboration.
Term and Termination: The term of the Allo Collaboration is from the Effective Date of the LCA until the completion of all activities under the then-current Allo Collaboration with respect to all relevant CRISPR Products. The LCA contains termination provisions, including termination for insolvency, material breach, patent challenge, convenience, and cessation.
Co-Development and Co-Promotion Agreement: Under the AvenCell Co/Co the parties will co-develop and co-commercialize in the U.S. and key European countries certain allogeneic universal CAR-T products directed to an immuno-oncology target. The Company is the lead commercialization party in the U.S., and AvenCell is the lead commercialization party in the European countries. The parties will share equally in the profits and development costs. The Company will have one additional option to enter into a second co-development and co-funding agreement from selected allogeneic universal CAR-T cell therapy products that the parties intend to develop under the Allo Collaboration for a payment of $
AvenCell LCA - Accounting Analysis: The Company concluded that the accounting treatment for the LCA is within the scope of ASC 606. The Company evaluated the promised goods and services under the LCA and determined that it included one performance obligation: a combined performance obligation including the license to the allogeneic technology, initial know-how and ongoing support services, including participation in the JSC during the two-year Knowledge Transfer Period.
The transaction price was determined to be $
As of December 31, 2021 the Company had deferred revenue of $
F-22
The payments attributable to the supply and manufacturing services are variable and are commensurate with the standalone selling prices of the services, and as such, will be attributed to those services. The Company did not record any consideration related to the supply and manufacturing services in 2021.
AvenCell Co/Co - Accounting Analysis: The Company concluded that the AvenCell Co/Co agreement meets the definition of a collaborative arrangement per ASC 808, which is outside of the scope of ASC 606. Since ASC 808 does not provide recognition and measurement guidance for collaborative arrangements, the Company has analogized to ASC 606. As such, the Company classifies cumulative amounts paid or received under the cost sharing provisions of the AvenCell Co/Co as a component of revenues in the consolidated statements of operations and comprehensive loss, to the extent that this does not result in a cumulative “negative revenue” amount, in which case the cumulative shortfall would be reclassified as an expense. The Company recognized $
SparingVision SAS
In October 2021, the Company and SparingVision, a genomic medicine company developing vision saving treatments for ocular diseases, entered into a license and collaboration agreement (the “SparingVision LCA”), to develop novel genomic medicines utilizing CRISPR/Cas9 technology for the treatment of ocular diseases.
Scope: The Company granted SparingVision exclusive rights to its proprietary in vivo CRISPR/Cas9-based genome editing technology for up to three ocular targets addressing diseases with significant unmet medical need. In addition, the parties will research and develop novel self-inactivating adeno-associated virus (“AAV”) vectors and lipid nanoparticle-based approaches to address delivery of CRISPR/Cas9 genome editing reagents to the retina.
SparingVision will lead and fund the preclinical and clinical development for the genome editing product candidates pursued under the collaboration.
The Company will have an option to obtain exclusive U.S. commercialization rights for product candidates arising from two of three collaboration targets.
Financial Terms: In exchange for the license, the Company received
Governance: The parties formed a JSC, which is responsible for monitoring and managing the collaboration prior to program completion.
SparingVision LCA - Accounting Analysis: The Company determined that the accounting for the SparingVision LCA is within the scope of ASC 606. The Company evaluated the promised goods and services and determined that it included one performance obligation: a combined performance obligation including the license to the CRISPR technology as well as ongoing research and support services, including participation in the JSC.
The transaction price was determined to be $
The Company will use a costs-incurred input method to recognize revenue, measuring the progress of the programs based on the costs incurred against budget, which in management's judgment is the best measure of progress towards satisfying the performance obligation. These costs will be recorded as revenue when the expenses are incurred. There was no revenue recognized in the year ended December 31, 2021 related to the SparingVision LCA. As of December
F-23
31, 2021, the Company had deferred revenue of $
Kyverna Therapeutics, Inc.
In December 2021, the Company and Kyverna, a cell therapy company engineering a new class of therapies for autoimmune and inflammatory diseases, entered into a licensing and collaboration agreement (the “Kyverna LCA”), for the development of an allogeneic CD19 CAR-T cell therapy for the treatment of a variety of B cell-mediated autoimmune diseases.
Scope: The Company granted Kyverna rights to its proprietary ex vivo CRISPR/Cas9-based allogeneic platform for the development of KYV-201, an allogeneic CD19 CAR-T cell investigational candidate for the treatment of select autoimmune diseases. This is a novel approach aimed at targeting CD19 for inflammatory diseases as compared to traditional oncology indications. Kyverna will lead and fund preclinical and clinical development for KYV-201.
The Company will have an option to lead U.S. commercialization for KYV-201 under a co-development and co-commercialization agreement. If the Company chooses to co-develop and co-commercialize KYV-201, it will pay an opt-in fee of $
Financial Terms: In exchange for the license, the Company received an equity ownership of approximately 7% in Kyverna at the time of closing. The Company will be eligible to receive certain development and commercial milestone payments, as well as low-to-mid-single-digit royalties on potential future sales of KYV-201.
Kyverna LCA – Accounting Analysis: The Company determined that the accounting for the Kyverna LCA is within the scope of ASC 606. The Company evaluated the promised goods and services and determined that it included one performance obligation: a combined performance obligation related to the transfer of the license related to the allogeneic platform technology, a technology transfer, and other supply and research and development activities.
The transaction price was determined to be $
Revenue will be recognized under a time-elapsed input model starting at the completion of the technology transfer, which in management's judgment is the best measure of progress towards satisfying the performance obligation. Progress will be measured and reassessed quarterly. There was no revenue recognized in the year ended December 31, 2021 related to the Kyverna LCA. As of December 31, 2021, the Company had deferred revenue of $
F-24
Novartis Institutes for BioMedical Research, Inc.
In December 2014, the Company entered into a strategic collaboration agreement with Novartis (the “2014 Novartis Agreement”), primarily focused on the research of new ex vivo CRISPR/Cas9-edited therapies using CAR-T cells and hematopoietic stem cells (“HSCs”). The agreement was amended in
Revenue Recognition – Collaboration Revenue. Through December 31, 2021, excluding amounts allocated to Novartis’ purchase of the Company’s Class A-1 and Class A-2 Preferred Units, the Company had recorded a total of $62.4 million in cash under the 2014 Novartis Agreement and the Novartis Amendment. Through December 31, 2021, the Company recognized $
Revenue Recognition – Milestone. In March 2020, the U.S. Food and Drug Administration (“FDA”) accepted the Investigational New Drug (“IND”) application submitted by Novartis for a CRISPR/Cas9-based engineered cell therapy for the treatment of sickle cell disease. As a result of meeting this milestone, the Company recognized $
As of December 31, 2021 and 2020, the Company had
AvenCell Therapeutics, Inc.
On July 30, 2021, the Company finalized a transaction in which the Company, Cellex and BXLS established AvenCell, a joint venture and privately held company. In exchange for contributing an exclusive license to the joint venture, the Company entered into a Preferred Stock Purchase Agreement with AvenCell for a
The Company has significant influence over, but does not control, AvenCell through its noncontrolling representation on AvenCell’s Board of Directors and the Company’s equity interest in AvenCell. The Company has determined that the preferred stock it owns is in-substance common stock. The Company is not the primary beneficiary as it does not have the power to direct the activities of AvenCell that most significantly impact AvenCell’s economic performance. Accordingly, the Company does not consolidate the financial statements of AvenCell and accounts for its investment using the equity method of accounting.
F-25
As of the closing date, the fair value of the Company’s investment in AvenCell was $
The Company recorded the initial investment in AvenCell of $
At December 31, 2021, the maximum exposure to loss is limited to the Company’s equity investment in the joint venture.
SparingVision SAS
In connection with the SparingVision LCA (See Note 9), the Company received
Kyverna Therapeutics, Inc.
In connection with the Kyverna LCA (See Note 9), the Company received
F-26
In March 2019, the Company entered into a separate agreement to sublease additional office and laboratory space at 130 Brookline Street in Cambridge, Massachusetts under an operating sublease agreement with a term through
F-27
in order to begin work on lessee-owned tenant improvements and, accordingly, the Company recognized a right-of-use asset and a lease liability of approximately $
In July 2021, the Company entered into an agreement to extend an existing lease for a clean room located in Waltham, Massachusetts under an operating lease agreement (the “Waltham Lease”) for an additional two years. The Company determined, in accordance with ASC 842, that the extension should be accounted for as a lease modification and, accordingly, recorded an adjustment to the right-of-use asset and lease liability of approximately $
Throughout the term of its leases, the Company is responsible for paying certain costs and expenses, in addition to the rent, as specified in the lease, including a proportionate share of applicable taxes, operating expenses and utilities. The variable portion of these costs are expensed as incurred and are disclosed as variable lease cost.
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the years ended December 31, 2021 and 2020:
|
|
Year Ended December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Lease cost |
|
|
|
|
|
|
||
Operating lease cost |
|
$ |
|
|
$ |
|
||
Short-term lease cost |
|
|
|
|
|
|
||
Variable lease cost |
|
|
|
|
|
|
||
Total lease cost |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
Year Ended December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Other information |
|
|
|
|
|
|
||
Operating cash flows used for operating leases |
|
$ |
|
|
$ |
|
||
Operating lease liabilities arising from obtaining right-of-use |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
As Of December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Lease term and discount rate |
|
|
|
|||||
Weighted average remaining lease term |
|
|
|
|
||||
Weighted average discount rate |
|
|
|
|
F-28
The table below reconciles the undiscounted cash flows for each of the next five years and total of the remaining years to the operating lease liabilities recorded in the consolidated balance sheet as of December 31, 2021:
Future Operating Lease Payments |
|
|||
Year Ending December 31, |
|
(in thousands) |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Less: imputed interest |
|
|
( |
) |
Total operating lease liabilities at December 31, 2021 |
|
$ |
|
Equity-based compensation expense is classified in the consolidated statements of operations and comprehensive loss as follows:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
|
(In thousands) |
|
|||||||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|||
General and administrative |
|
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|
|
|
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|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
Amended and Restated 2015 Stock Option and Incentive Plan
In April 2016, the Company adopted the Amended and Restated 2015 Stock Option and Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and other stock-based awards. Recipients of incentive stock options and non-qualified stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the fair value of such stock on the grant date.
As of December 31, 2021, there were
F-29
shares of stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares of stock as determined by the board of directors.
Restricted Stock Units
RSUs are measured at fair value based on the quoted price of the Company’s common stock.
The following table summarizes the Company’s RSU activity for the year ended December 31, 2021:
|
|
Number of |
|
|
Weighted |
|
||
Unvested restricted stock units as of December 31, 2020 |
|
|
|
|
$ |
|
||
Granted |
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|
|
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|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled |
|
|
( |
) |
|
|
|
|
Unvested restricted stock units as of December 31, 2021 |
|
|
|
|
$ |
|
In January 2020, the Company granted
The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2021, 2020 and 2019 was $
As of December 31, 2021, there was $
Stock Options
The weighted average grant date fair value of options, estimated as of the grant date using the Black-Scholes option pricing model, was $
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected life of options |
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|
||||||
Expected volatility of underlying stock |
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|
% |
|
|
% |
|
|
% |
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
Risk-free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with maturities approximately equal to the option’s expected term.
Expected Dividend Yield. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.
F-30
Expected Volatility. The expected volatility was derived from a blend of the Company’s historical volatility and an average of the historical stock volatilities of several peer companies within the Company’s industry, both over a period equivalent to the expected term of the stock option grants.
Expected Term. The expected term represents the period that stock option awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term.
The Company uses the market closing price of its common stock as reported on the Nasdaq Global Select Market to determine the fair value of the shares of common stock underlying stock options.
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
|
|
|
|
|
|
|
|
(In years) |
|
|
(In thousands) |
|
||||
Outstanding at December 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
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|
|
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|
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|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
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|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
As of December 31, 2021, there was $
2016 Employee Stock Purchase Plan
In May 2016, the Company adopted the 2016 Employee Stock Purchase Plan (the “2016 Plan”).
As of December 31, 2021, there were
During the years ended December 31, 2021, 2020, and 2019, the Company issued
The fair value of the awards issued under the 2016 Plan to employees was estimated at the beginning of the offering period using a Black-Scholes option-pricing model with the following assumptions:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
Risk-free interest rate |
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|
|
|
||||||
Expected term (in years) |
|
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|
||||||
Expected volatility of underlying stock |
|
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|
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|
||||||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
F-31
Basic and diluted loss per share was calculated as follows:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
|
(In thousands) |
|
|||||||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|||
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following common stock equivalents were excluded from the calculation of diluted loss per share in 2021, 2020 and 2019 because their inclusion would have been anti-dilutive:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||
|
|
(In thousands) |
|
|||||||||
Unvested restricted stock |
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|
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|
|||
Stock options |
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|
|||
|
|
|
|
|
|
|
|
|
|
Follow-on Offerings
On June 1, 2020, the Company entered into an underwriting agreement related to a public offering of
On December 1, 2020, the Company entered into an underwriting agreement related to a public offering of
On June 29, 2021, the Company entered into an underwriting agreement related to a public offering of
At-the-Market Offering Programs
In October 2018, the Company entered into an Open Market Sale Agreement (the “2018 Sale Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies was able to offer and sell, from time to time in “at-the-market” offerings, shares of its common stock having aggregate gross proceeds of up to $
In August 2019, the Company entered into an Open Market Sale Agreement (the “2019 Sale Agreement”) with Jefferies, under which Jefferies was able to offer and sell, from time to time in “at-the-market” offerings, common stock having aggregate gross proceeds of up to $
F-32
December 31, 2019, the Company issued
As of December 31, 2021, $
Shares Issued in Private Placement to Regeneron
As described in Note 9 above, in May 2020 the Company entered into an amendment to its collaboration agreement with Regeneron that was entered into in April 2016. Simultaneously, the Company and Regeneron entered into the 2020 Stock Purchase Agreement, under which the Company sold to Regeneron
In the ordinary course of business, the Company may purchase materials or supplies from entities that are associated with a party that meets the criteria of a related party of the Company. These transactions are reviewed quarterly and to date have not been material to the Company’s consolidated financial statements.
The Company and AvenCell are parties to the AvenCell LCA and AvenCell Co/Co, as described in Note 9. The Company’s relationship with AvenCell is considered to be as a related party due to the Company’s
The Company and Kyverna are parties to the Kyverna LCA and are considered to be related parties because they have a common board member (see Note 9). The Company owns preferred stock of Kyverna, the value of which is included in “Investments and other assets” in the consolidated balance sheet. The value of this investment was $
In 2015, the Company established the Intellia Therapeutics, Inc. 401(k) Plan (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. The Company makes matching contributions of
F-33
On February 2, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with RW Acquisition Corp., a Delaware corporation and a wholly-owned direct subsidiary of the Company (“Merger Sub”), Rewrite Therapeutics, Inc., a Delaware corporation (“Rewrite”) and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative of the Rewrite Holders (as defined below). On the effective date of the Merger Agreement, Merger Sub merged with and into Rewrite, with Rewrite surviving as a wholly-owned direct subsidiary of the Company.
Pursuant to the Merger Agreement, and subject to the terms and conditions thereof, the Company paid Rewrite’s former stockholders and optionholders (the “Rewrite Holders”) upfront consideration in an aggregate amount of approximately $
On February 12, 2022 the Company entered into a license, collaboration and option agreement with ONK Therapeutics, Ltd. (“ONK”), an innovative company dedicated to developing optimally engineered natural killer (“NK”) cell therapies to cure patients with cancer. The agreement grants ONK a non-exclusive license to the Company's proprietary ex vivo CRISPR/Cas9-based genome editing platform and its LNP-based delivery technologies for development of up to five allogeneic NK cell therapies, which license is exclusive with respect to certain gRNAs. ONK will be responsible for preclinical and clinical development for the engineered NK cell therapies enabled by the agreement. The Company will be eligible to receive up to $
In February 2022, the Company entered into a Lease Agreement (the “Winter Street Lease”) with ARE-Winter Street Property, LLC (the “Landlord”) for manufacturing space located at 840 Winter Street, Waltham, Massachusetts (the “Premises”). Under the terms of the Winter Street Lease, the Company will lease approximately
F-34
EXHIBIT INDEX
Exhibit No. |
|
Exhibit Index |
|
|
|
3.1 |
|
Second Amended and Restated Certificate of Incorporation of the Registrant (1) |
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
Amendment to the Second Amended and Restated By-laws of the Registrant (11) |
|
|
|
4.1 |
|
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|
|
10.1# |
|
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10.2# |
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10.3 |
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10.4 |
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10.5 |
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10.6# |
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10.7 |
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10.8 |
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|
10.9# |
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10.10 |
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10.11 |
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10.12 |
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10.13 |
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10.14 |
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10.15# |
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|
|
10.16* |
|
|
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|
|
10.17# |
|
|
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|
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10.18 |
|
|
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|
|
F-35
10.19 |
|
|
|
|
|
10.20 |
|
|
|
|
|
10.21# |
|
Fourth Amended and Restated Non-Employee Director Compensation Policy (4) |
|
|
|
10.22 |
|
|
|
|
|
10.23 |
|
|
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10.24 |
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10.25 |
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10.26 |
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10.27 |
|
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|
|
10.28* |
|
|
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|
|
10.29* |
|
|
|
|
|
21.1* |
|
|
|
|
|
23.1* |
|
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm |
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1 |
|
|
|
|
|
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. |
|
|
|
104* |
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101*) |
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
* Filed herewith.
# Indicates a management contract or any compensatory plan, contract or arrangement
F-36
F-37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTELLIA THERAPEUTICS, INC. |
|
|
|
By: |
/s/ John M. Leonard |
|
John M. Leonard, M.D. |
|
President and Chief Executive Officer |
Dated: February 24, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ John M. Leonard |
|
President, Chief Executive Officer and Director |
|
February 24, 2022 |
John M. Leonard, M.D. |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Glenn Goddard |
|
Executive Vice President, Chief Financial Officer |
|
February 24, 2022 |
Glenn Goddard |
|
(Principal Financial and Accounting Officer) |
|
|
/s/ Fred Cohen |
|
Director |
|
February 24, 2022 |
Fred Cohen, M.D. |
|
|
|
|
|
|
|
|
|
/s/ John Crowley |
|
Director |
|
February 24, 2022 |
John Crowley |
|
|
|
|
|
|
|
|
|
/s/ Caroline Dorsa |
|
Director |
|
February 24, 2022 |
Caroline Dorsa |
|
|
|
|
|
|
|
|
|
/s/ Jean François Formela |
|
Director |
|
February 24, 2022 |
Jean François Formela, M.D. |
|
|
|
|
|
|
|
|
|
/s/ Jesse Goodman |
|
Director |
|
February 24, 2022 |
Jesse Goodman, M.D. |
|
|
|
|
|
|
|
|
|
/s/ Georgia Keresty |
|
Director |
|
February 24, 2022 |
Georgia Keresty |
|
|
|
|
|
|
|
|
|
/s/ Frank Verwiel |
|
Director |
|
February 24, 2022 |
Frank Verwiel, M.D. |
|
|
|
|
F-38
CERTAIN CONFIDENTIAL INFORMATION MARKED BY [***] HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL
Execution Copy
EXHIBIT 10.16
CONSENT TO ASSIGNMENTS, LICENSING AND COMMON OWNERSHIP AND
INVENTION MANAGEMENT AGREEMENT FOR
A PROGRAMMABLE DNA RESTRICTION ENZYME FOR GENOME EDITING
UC Case No: BK-2012-115
CRISPR Reference: CHARPENTIER-2012
Caribou Reference: UC-UV Agreement
This Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement for a Programmable DNA Restriction Enzyme for Genome Editing (the “Invention Management Agreement,” “IMA” or “Agreement”) is effective as of December 15, 2016 (the “Effective Date”), and is by and among the following individual and entities:
Dr. Emmanuelle Charpentier, an individual having an address at the Max Planck Institute for Infection Biology, Department of Regulation in Infection Biology, Chariteplatz 1, 10117 Berlin, Germany, (“Charpentier”);
The Regents of the University of California, a California public corporation, having its statewide administrative offices located at 1111 Franklin Street, Twelfth Floor, Oakland, CA 946075200, United States, acting through its Office of Technology Licensing, at the University of California, Berkeley, 2150 Shattuck Avenue, Suite 510, Berkeley, CA 94704-1347, United States (“Regents”);
University of Vienna, having an address at Universitatsring 1, A-1010 Vienna, Austria, acting through its office of Research Services and Career Development, University of Vienna, Berggasse 7, 2nd floor, 1090 Vienna, Austria (“Vienna”);
CRISPR Therapeutics AG, a Swiss company (Aktiengesellschaft) having an address at Aeschenvorstadt 36, CH-4051 Basel, Switzerland (“CRISPR”);
ERS Genomics Ltd., a limited liability company incorporated in Ireland and having an address at 88 Harcourt Street, Dublin 2, Ireland (“ERS”);
TRACR Hematology Ltd., a limited liability company incorporated in England & Wales and having an address at 85 Tottenham Court Road, London W1T 4TQ, United Kingdom (“TRACR”);
Caribou Biosciences, Inc., a Delaware corporation, having an address at 2929 7th Street, Suite 105, Berkeley, CA 94710, United States (“Caribou”); and
Invention Management Agreement Page 1 of NUMPAGES 43 CONFIDENTIAL
Execution Copy
Intellia Therapeutics, Inc., a Delaware corporation, having an address at 40 Erie Street, Suite 130, Cambridge, MA 02139, United States (“Intellia”); each of the foregoing is individually referred to as a “Party” to this Agreement, and collectively as “Parties” to this Agreement.
Invention Management Agreement Page 2 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
WHEREAS, it has been and it remains the mutual desire of the Parties to enter into this Agreement to cooperate regarding development and management of the Patent Rights and to
Invention Management Agreement Page 3 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
facilitate the full commercial exploitation of their rights in the Patent Applications, including by permitting the licensing and sublicensing of the same in order to develop and market products based upon or employing the Inventions both in the United States and in other jurisdictions worldwide;
NOW, THEREFORE, and in consideration of the commitments provided herein, the Parties agree as follows:
Invention Management Agreement Page 4 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 5 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 6 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 7 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 8 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 9 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 10 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 11 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 12 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Notwithstanding the foregoing, in the event that a statute, regulation, or other legal provision (such as, for example, the Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman), as amended, the Biologics Price Competition and Innovation Act, amended, or similar laws outside of the United States) require that an infringement or similar action be commenced prior to the [***] period set forth above, the [***] period will be shortened to effectively be [***] prior to the final deadline imposed by the applicable legal requirement. Within [***] days after the Infringement Notice, the Party seeking to shorten the [***] period due to an applicable legal requirement shall inform the other Parties of the need and basis for shortening the time period. A Party will immediately forward to the other Parties any and all notices of infringement received pursuant to such regulatory procedures.
Invention Management Agreement Page 13 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 14 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Prof. Dr. Emmanuelle Charpentier
Max Planck Institute for Infection Biology
Department of Regulation in Infection Biology
Chariteplatz 1
10117 Berlin
Germany
(with copies by email to: LEGAL@crisprtx.com and Legalnotices@ersgenomics.com)
CRISPR Therapeutics AG
Aeschenvorstadt 36
CH-4051 Basel
Switzerland
Attention: Chief Legal Officer
(with a copy by email to: LEGAL@crisprtx.com)
ERS Genomics Ltd.
88 Harcourt Street
Dublin 2
Ireland
(with a copy by email to: Legalnotices@ersgenomics.com)
TRACR Hematology Ltd.
85 Tottenham Court Road
London W1T 4TQ
United Kingdom
Attention: Chief Legal Officer
(with a copy by email to: LEGAL@crisprtx.com)
Regents of the University of California
Office of Technology Licensing
2150 Shattuck Avenue, Suite 510
Berkeley, CA 94704-1347
United States
Attention: Director
(Case No. BK-2012-115)
Invention Management Agreement Page 15 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
University of Vienna
Research Services and Career Development
Berggasse 7, 2nd floor
1090 Vienna
Austria
Attention: Vice-Rector for Research and International Affairs
(with a copy by email to: techtransfer@univie.ac.at)
Caribou Biosciences, Inc.
2929 7th Street, Suite 105
Berkeley, CA 94710
United States
Attention: Chief Legal Officer
(with a copy by email to: legalnotices@cariboubio.com)
Intellia Therapeutics, Inc.
40 Erie Street, Suite 130
Cambridge, MA 02139
United States
(with a copy by email to: NTLANOTICE@intelliatx.com)
Invention Management Agreement Page 16 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 17 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
Invention Management Agreement Page 18 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
[Signature Page Follows]
Invention Management Agreement Page 19 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
The Parties hereto have executed this Agreement as of the Effective Date, as attested by the signatures below of authorized representatives of each Party.
DR. EMMANUELLE CHARPENTIER |
THE REGENTS OF THE |
|
|
Signature /s/ Emmanuelle Charpentier |
Signature /s/ Javed Afzal |
|
Name Javed Afzal |
|
Title Associate Director |
Date December 15, 2016 |
Date December 6, 2016 |
UNIVERSITY OF VIENNA |
CRISPR THERAPEUTICS AG |
Signature /s/ Heinz Fassmann |
Signature /s/ Rodger Novak |
Name Heinz Fassmann |
Name Rodger Novak |
Title Vice Rector for Research and International Affairs |
Title CEO |
Date December 6, 2016 |
Date December 13, 2016 |
ERS GENOMICS LTD. |
TRACR HEMATOLOGY LTD. |
Signature /s/ Derek O’Reilly |
Signature /s/ Tyler Dylan-Hyde |
Name Derek O’Reilly |
Name Tyler Dylan-Hyde |
Title Director |
Title Chief Legal Officer |
Date December 6, 2016 |
Date December 15, 2016 |
CARIBOU BIOSCIENCES, INC. |
INTELLIA THERAPEUTICS INC. |
Signature /s/ Rachel E. Haurwitz |
Signature /s/ Nessan Bermingham |
Name Rachel E. Haurwitz, Ph.D. |
Name Nessan Bermingham |
Title President and CEO |
Title CEO and President |
Date December 2, 2016 |
Date December 15, 2016 |
|
|
|
|
Invention Management Agreement Page 20 of NUMPAGES 40 CONFIDENTIAL
Execution Copy
LIST OF EXHIBITS
Exhibit A Patent Applications
Exhibit B ERS Patent Delegation
Exhibit C Definition of SPCs
Exhibit D Inter-Institutional Agreement between The Regents of the University of California and University of Vienna (copy)
Exhibit E Adverse Claimants
Exhibit F Non-U.S. Filings
Exhibit G Cost-Sharing Agreement
Exhibit H Dispute Resolution
Exhibit I Confidential Common Legal Interest and Nondisclosure Agreement (copy)
Exhibit J First Amendment to the Confidential Common Legal Interest and Nondisclosure Agreement
Invention Management Agreement Page 21 of NUMPAGES 40 CONFIDENTIAL
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit A to
Invention Management Agreement
Patent Applications
Patent Applications refer to any and all of the following:
(i) any of the following U.S. and PCT patent applications:
Patent Application Number |
Filing Date |
UC Case Number |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(ii) any U.S. patent application that claims priority to or common priority with any of the above-referenced patent applications, regardless of inventorship, including but not limited to, any divisions, continuations, or continuations-in-part thereof;
(iii) any non-U.S. patent applications claiming priority to or common priority with any of the above-referenced patent applications, or constituting the national phase counterparts of the above-referenced PCT application, as well as divisionals or continuations of such non-U.S. patent applications;
Invention Management Agreement CONFIDENTIAL
ACTIVE/115160038.2
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(iv) any U.S. or non-U.S. patents issued from any of the foregoing applications; and
(v) any reissues, renewals, substitutions, registrations, revalidations, reexaminations, patent term restorations, patent term extensions, patent term adjustments, supplementary protection certificates (“SPCs”) and the like arising from any of the foregoing cases.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit B to
Invention Management Agreement
ERS Patent Delegation
ERS has been delegated certain invention management rights by Charpentier (the “ERS Patent Delegation”) within the ERS field. The delegated rights are:
1. Prosecution and maintenance rights for Patent Applications that have applicability or utility exclusively in the ERS field (“ERS-Delegated Patent Applications”) and has comment rights in respect of all other Patent Applications that have applicability or utility in the ERS field.
2. Patent enforcement rights in the ERS field for all Patent Applications including any Patent Applications that have applicability or utility in both the ERS and CRISPR/TRACR fields.
The ERS field is [***]. The CRISPR and TRACR fields means:
Researching, developing, making, using or selling:
(1) Therapeutic Products - [***], or
(2) Diagnostic Products - [***].
Companion Diagnostics means companion diagnostic tools and/or diagnostic assays developed and used to (i) [***], (ii) [***], and/or (iii) [***].
Covered Product means [***].
Covered Animal means an animal [***].
Covered Animal-Derived Product means [***].
Covered Method means any process or method, [***].
Invention means the invention entitled “[***]” as described in the Patent Applications, including all improvements thereto that are disclosed in the Patent Applications.
Technology means the Invention, the Patent Applications and certain know-how.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit C to
Invention Management Agreement
Definition of SPCs
“SPCs” refer to Supplementary Protection Certificates that extend patent terms based on regulatory filings for marketing authorization undertaken and approved in the United Kingdom (UK), countries of the European Union (EU) and the European Economic Area (EEA) and certain other countries in Europe including, but not limited to, Switzerland, and equivalents thereto available in other jurisdictions (including, but not limited to, Australia, Canada (effective with the Comprehensive Economic and Trade Agreement (CETA) implementation), Chile, Costa Rica, Israel, Japan, Russia and Commonwealth of Independent States (CIS) countries, Singapore, South Korea and Taiwan), as well as “pediatric extensions” to SPC terms available in the UK, EU/EEA and other countries, and other such patent term extensions currently available or which become available during the Term.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit D to
Invention Management Agreement
Inter-Institutional Agreement between The Regents of the University of California and University of Vienna (copy)
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit E to
Invention Management Agreement
Adverse Claimants
The Adverse Claimants are the applicants and the direct, first-tier exclusive licensees of patent applications and/or issued patents claiming priority to or common priority with the applications identified below, which claim subject matter comprising all or portions of the Patent Rights:
Patent Application Number |
Filing Date / Claimed Priority Date |
Inventors |
Applicant(s) / Direct, First-Tier |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
and further including any U.S. patent application that claims priority to or common priority with such patent applications, regardless of inventorship, including but not limited to, any divisions, continuations, or continuations-in-part thereof; any non-U.S. patent applications claiming priority to or common priority with any of the above-referenced U.S. patent applications, or constituting the national phase counterparts of the above-referenced PCT application, as well as divisionals or continuations of such non-U.S. patent applications; and any U.S. or non-U.S. patents issued thereon; as well as reissues, renewals, substitutions, registrations, revalidations, reexaminations, patent term restorations, patent term extensions, patent term adjustments, SPCs arising from any of the preceding cases, and the like.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit F to
Invention Management Agreement
Non-U.S. Filings
The “Jointly Elected Jurisdictions” are the following:
[***]
The “Additional Jurisdictions” are the following:
[***]
ACTIVE/115160038.2
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Exhibit G to
Invention Management Agreement
Cost-Sharing Agreement
This Cost-Sharing Agreement (“Agreement”), having a date of December __, 2016 (“Effective Date”), is by and between CRISPR Therapeutics AG, having a corporate address at Aeschenvorstadt 36, CH-4051 Basel, Switzerland (“CRISPR”), and Caribou Biosciences, Inc., having a corporate address at 2929 7th Street, Suite 105, Berkeley, CA 94710 USA (“Caribou”). CRISPR and Caribou are each referred to as a “Party,” and jointly as the “Parties.”
WHEREAS, CRISPR and Caribou are parties to a Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement for a Programmable DNA Restriction Enzyme for Genome Editing Agreement (“IMA”), to which this Agreement is attached as Exhibit G thereto and having the same date as this Agreement;
WHEREAS, pursuant to an Exclusive License Agreement, by and among Caribou, University of Vienna (“Vienna”), and The Regents of the University of California (“Regents”), dated April 16, 2013 (“Caribou License”), Caribou has been reimbursing and will continue to reimburse Regents for patent costs and attorney fees for prosecuting and maintaining the Patent Applications (as defined in the IMA), including [***] relating to [***], as set forth in the Caribou License (collectively, “Patent Costs”);
WHEREAS, as of the date of this Agreement, [***] is Regents’ counsel for [***], and [***] is Regents’ counsel for all other Patent Applications (collectively, “Regents’ Counsel”);
WHEREAS, the Parties desire to come to a resolution regarding reimbursement of past and future Patent Costs of Regents’ Counsel; and
NOW, THEREFORE, in consideration of the mutual agreements contained in this Agreement, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:
1. Within [***] of the Effective Date of this Agreement, CRISPR will reimburse Caribou $[***], as an adjusted settlement of [***] of the Patent Costs invoiced by UC and paid by Caribou during the period [***] through [***]. Caribou will provide wire instructions to CRISPR within [***] of the Effective Date.
2. For all invoices that Caribou received or will receive from UC for Patent Costs that were not paid by Caribou on or before [***], and which are: (i) invoiced by UC to Caribou before [***], for which payment was not due until after [***]; (ii) invoiced by UC to Caribou after [***], but prior to the effective date of the IMA (whether or not payment was or is due before the effective date of the IMA), or (iii) invoiced by UC to Caribou after the effective date of the IMA, Caribou will invoice CRISPR for [***] of the invoiced amount within [***] after Caribou’s payment to Regents, together with a copy of the invoice(s) received from Regents and proof of payment to Regents. Within [***] after receipt of each such Caribou invoice, CRISPR will wire the amount set forth on the invoice to Caribou.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
3. As long as CRISPR has and is making the timely payments as set forth in Sections 1 and 2, Caribou will indemnify and defend CRISPR in any collection actions taken by Regents against CRISPR for Patent Costs.
4. In the event that Caribou is required to take legal action to collect amounts due to it by CRISPR under this Agreement, CRISPR will pay all costs, including attorneys’ fees, incurred in such collection.
5. Reimbursed Patent Costs shall not include fees or costs of attorneys retained by and/or representing CRISPR, Caribou, or any third party (including but not limited to Emmanuelle Charpentier and ERS Genomics Ltd.). As of the Effective Date of this Agreement, Patent Costs include those of [***], [***], and all foreign associates prosecuting the Patent Applications under the instruction of, and invoiced by, [***] (collectively and individually, the “Foreign Associates”), in accordance with Section C of the IMA. CRISPR acknowledges that Regents may, at its sole discretion, replace [***], [***], or any of the Foreign Associates as Regents’ Counsel, and that, in such event, CRISPR’s obligations with respect to the Patent Costs associated with replacement Regents’ Counsel (including Foreign Associates) shall be subject to this Agreement.
6. This Agreement shall be governed in accordance with the Governing Laws and Dispute Resolution procedures as provided in Section D of the IMA.
7. This Agreement may be executed in any number of counterparts, including facsimile or scanned PDF documents. Each such counterpart, facsimile, or scanned PDF document shall be deemed an original instrument and all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Parties have caused this Cost-Sharing Agreement to be executed by their respective authorized representations as of the Effective Date.
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CRISPR Therapeutics AG |
Caribou Biosciences, Inc. |
By: /s/ Rodger Novak |
By: /s/ Rachel E. Haurwitz |
Rodger Novak |
Rachel E. Haurwitz, Ph.D. |
Chief Executive Officer |
President & Chief Executive Officer |
Date: December 13, 2016 |
Date: December 2, 2016 |
Copies of Invoices to be delivered to: Legal@crisprtx.com |
Copies of remittance statements to be delivered to: |
|
|
Address for Notice: |
Address for Notice: |
CRISPR Therapeutics Limited |
Caribou Biosciences, Inc. |
|
|
With a copy (which shall not constitute notice) to: Legal@crisprtx.com |
With a copy (which shall not constitute notice) to: legalnotices@cariboubio.com |
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit H to
Invention Management Agreement
Dispute Resolution
Disputes of any nature between the Parties arising under this Agreement (a “Dispute”) will be resolved exclusively through mediation and binding arbitration as set forth in this Exhibit H (“Mediation/Arbitration”), including without limitation the determination of the scope or applicability of this Agreement to arbitrate. The Parties agree and acknowledge that any good faith dispute in Mediation/Arbitration will not be deemed to be a material breach of this Agreement. For the purposes of provisions (b) through (j), the term “Parties” shall mean the Parties involved in the Dispute.
(a) The Mediation/Arbitration will be conducted in [***] and shall be administered by JAMS (formerly Judicial Arbitration and Mediation Services, Inc.) strictly in accordance with the below-described process.
(b) The Parties will appoint a single mediator and a single arbitrator to be selected by mutual agreement or, if the Parties are unable to agree on an arbitrator within [***] after such matter is referred to Mediation/Arbitration (all days being calendar days unless otherwise specifically provided herein), the Parties will request that JAMS select the arbitrator, in each case satisfying the criteria set forth below to the maximum extent possible.
(c) In all cases:
1. involving a disagreement over patent matters (including without limitation the conduct of the Patent Activities), the arbitrator should be a patent attorney registered to practice by the U.S. Patent & Trademark Office with [***];
2. not involving patent matters patent matters, the arbitrator should be an attorney with [***].
Under no circumstances shall the arbitrator be a current or former employee or consultant of any of the Parties, an affiliated company that controls or is controlled by or is under common control with any of the Parties, an exclusive licensee of any of the Parties, or a non-exclusive licensee of any of the Parties that is involved in the dispute or has a direct interest in its outcome. In all cases, the arbitrator shall be fluent in the English language.
(d) Within [***] after such matter is referred to Mediation/Arbitration, each Party will provide the arbitrator with its one proposed resolution and a written memorandum in support of its position regarding the Dispute and its proposed resolution (each an “Opening Brief), which shall not exceed thirty (30) pages in total. In connection with the submission of an Opening Brief, a Party may also submit documentary evidence in support thereof which had both (x) existed prior to commencement of such Mediation/Arbitration and (y) been shared with the other Parties at least [***] prior to the date for submission of the Opening Brief. The arbitrator will provide each Party’s Opening Brief, along with copies of any supporting documentation, to the other Parties after he or she has received an Opening Briefs from all
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Parties. The arbitrator shall not consider any untimely Opening Brief(s) received after the arbitrator has provided copies of the Opening Briefs received to the other Party(ies).
(e) Within [***] after a Party receives another Party’s Opening Brief from the arbitrator, such receiving Party will have the right to submit to the arbitrator a response to the other Party’s Opening Brief (each, a “Response Brief), which shall not exceed twenty (20) pages in total. In connection with the submission of a Response Brief, a Party may also submit documentary evidence in support thereof which had both (x) existed prior to commencement of such Mediation/Arbitration and (y) been shared with the other Parties at least [***] prior to the date for submission of the Response Brief. The arbitrator will provide each Party’s Response Brief, along with copies of any supporting documentation, if any, to the other Parties after he or she has received a Response Brief from all Parties (or at the expiration of such [***] period if any Party fails to submit a Response Brief).
(f) Within [***] of the timely receipt by the arbitrator of each Party’s Response Brief (or expiration of such [***] period if any Party fails to submit a Response Brief), the mediator will conduct a single [***] meeting during which each Party will have present, in addition to its counsel, a person with authority to reach a binding agreement resolving the dispute.
(g) If the dispute is not resolved by mediation within [***] following the meeting referred to in (f) above, the arbitrator will conduct a single [***] hearing during which each Party will have [***] to present its position. At the hearing, each Party will have the right to call up to [***] witnesses, [***] of whom may be an employee, consultant or other advisor to another Party. Each Party will notify the other Parties and the arbitrator of the identity of the witnesses it intends to call at least [***] in advance of the hearing. Notwithstanding the foregoing, the time periods and other aspects of this provision may be modified if (x) the Parties agree to such modification, (y) the arbitrator determines that such modification is reasonably necessary in view of the factual circumstances of the matter to be decided, or (z) if more than two Parties are participating in the Dispute and the arbitrator determines that more than two of the Parties (or sets of Parties) are in good faith seeking different resolutions.
(h) The Parties shall submit Opening Briefs and Response Briefs, as well as any documentary evidence, to the arbitrator in electronic form by midnight Eastern Standard/Daylight Time of the applicable deadline and, if the arbitrator so requests, will also submit a hard copy to the arbitrator.
(i) There shall be no discovery in the Mediation/Arbitration (e.g., document requests, interrogatories, depositions, etc.), except as follows:
1. Opposing Parties may take a deposition of any declarant of the other Party and obtain copies of all documents on which each declarant relies upon in his or her declaration; provided that the Party(ies) taking such deposition must complete questioning of the declarant within [***];
2. As may be ordered by the arbitrator following request(s) of a Party; provided, however, that the arbitrator’s decision to grant any discovery shall be subject to the
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
following conditions: (a) the arbitrator must conclude that the requested discovery will result in information that is necessary and essential under applicable laws to reach a fair and equitable decision; no interrogatories or requests to admit shall be allowed under any circumstances; no more than [***] depositions of non-declarants or non-witnesses shall be permitted and the Party seeking
3. the deposition must complete questioning within [***] for each deponent; and no more than [***] document requests shall be allowed, and each request must identify the document(s) sought with particularity (e.g., a Party may request a particular email sent from one individual to another on a certain date, but cannot request all emails sent by a particular individual).
All discovery must be completed prior to [***] in advance of the hearing. If a Party refuses or cannot provide the requested discovery in a timely manner (the “Refusing Party”), such Refusing Party shall lose its right to take discovery (or, if such Refusing Party already took discovery, shall lose its right to present the discovery obtained to the arbitrator) and the arbitrator shall not consider discovery evidence presented by the Refusing Party during the hearing to reach a decision.
The arbitrator will also have the right to perform independent research and analysis and to request any Party to provide additional documentary evidence that existed and was controlled by such Party prior to the arbitrator making such request.
(j) Within [***] of such hearing, or within such other time to which the Parties and the arbitrator agree or the arbitrator determines is reasonably necessary in view of the factual circumstances of the matter to be decided, the arbitrator will deliver his/her decision regarding the Dispute in writing. The arbitrator may but shall not be required to select the resolution or position proposed by one of the Parties. As part of any such decision, the arbitrator may also mandate that the Party or Parties whose proposed resolution is further from the resolution determined by the arbitrator to pay some or all of the other Party’s or Parties’ reasonable attorneys’ fees and expenses in connection with the Mediation/Arbitration, as well as the costs and expenses of such Mediation/Arbitration (“Costs”).
(k) Each of the Parties irrevocably and unconditionally submits to the exclusive jurisdiction of the [***] (and, if such federal court rejects jurisdiction for any reason, then solely and exclusively in the state courts of the [***]) solely and specifically for the purposes of compelling arbitration or enforcing the decision in any Mediation/Arbitration, with the proportioning of Costs of any court proceeding to enforce the decision in any Mediation/Arbitration to be established by the arbitrator in connection with the decision of the arbitrator.
Nothing set forth herein shall be deemed to preclude either Party from seeking appropriate judicial injunctive relief from any court of competent jurisdiction in order to prevent immediate and irreparable injury, loss, or damage on a provisional basis, pending a decision on the ultimate merits of any dispute.
ACTIVE/115160038.2
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ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit I to
Invention Management Agreement
Confidential Common Legal Interest and Nondisclosure Agreement (copy)
ACTIVE/115160038.2
[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit J to
Invention Management Agreement
First Amendment to the Confidential Common Legal Interest and
Nondisclosure Agreement
This First Amendment to the Confidential Common Legal Interest and Nondisclosure Agreement (“First Amendment”), is entered into as of December __, 2016 (the “First Amendment Effective Date”), [***].
RECITALS
WHEREAS, The Original Parties are parties to that certain Confidential Common Legal Interest and Nondisclosure Agreement (the “CLIA”), dated as of [***]; and
WHEREAS, pursuant to Section D-4.1 of the Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement for a Programmable DNA Restriction Enzyme for Genome Engineering, by and among The Regents, Caribou, TRACR, CRISPR, ERS, Vienna, Charpentier, and Intellia, (“IMA”), [***] and having the same date as this First Amendment, [***] has the right to become part of the CLIA under the terms and conditions set forth in the IMA, the CLIA, and this First Amendment;
NOW, THEREFORE, in consideration of the covenants and agreements contained in this First Amendment, the Parties hereby agree as follows:
1. [***].
2. The Original Parties hereby accept [***] as a Party to the CLIA.
3. Each Original Party acknowledges that the CLIA is in full force and effect and that each such Original Party has no claims, causes of action, defenses, or rights of offset with respect to its obligations under the CLIA.
4. Except as explicitly set forth in this First Amendment, all terms and conditions of the CLIA shall remain in full force and effect, and the CLIA, as modified by this First Amendment, is ratified and confirmed in all respects.
5. This First Amendment may be executed in counterparts (whether delivered by facsimile, electronically by image or PDF or otherwise) with the same effect as if each Party had executed the same physical document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties, through their authorized representatives, have executed this First Amendment to the Confidential Common Legal Interest and Nondisclosure Agreement as of the First Amendment Effective Date.
ACTIVE/115160038.2
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[Signatures set forth on the following page]
ACTIVE/115160038.2
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ACTIVE/115160038.2
CERTAIN CONFIDENTIAL INFORMATION MARKED BY [***] HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL
EXHIBIT 10.28
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTELLIA THERAPEUTICS, INC.,
Rewrite Therapeutics, Inc.,
RW ACQUISITION CORP.,
AND
SHAREHOLDER REPRESENTATIVE SERVICES, LLC,
AS SECURITYHOLDER REPRESENTATIVE
Dated as of February 2, 2022
ACTIVE/114926920.3
TABLE OF CONTENTS
Page
Article 1 DEFINITIONS |
2 |
|
Article 2 THE MERGER |
13 |
|
2.1 |
The Merger; Effect of the Merger; |
13 |
2.2 |
Effective Time; Closing |
13 |
2.3 |
[Reserved] |
13 |
2.4 |
Certificate of Incorporation and Bylaws of the Surviving Corporation |
13 |
2.5 |
Directors and Officers |
14 |
2.6 |
Effect of Merger on the Securities of the Company |
14 |
2.7 |
Dissenting Shares |
16 |
2.8 |
Exchange Mechanics |
16 |
2.9 |
Net Debt Adjustment |
21 |
2.10 |
Notices |
23 |
2.11 |
Withholding |
23 |
2.12 |
Tax Consequences |
24 |
2.13 |
Taking of Necessary Action; Further Action |
24 |
2.14 |
Expense Fund |
24 |
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
24 |
|
3.1 |
Organization of the Company |
24 |
3.2 |
Company Capital Structure |
25 |
3.3 |
Subsidiaries |
26 |
3.4 |
Authority; Enforceability |
27 |
3.5 |
Stockholder Consent |
27 |
3.6 |
No Conflict |
27 |
3.7 |
Consents |
28 |
3.8 |
Company Financial Statements |
28 |
3.9 |
No Undisclosed Liabilities, No Company Material Adverse Effect; Ordinary Course |
28 |
3.10 |
Tax Matters |
28 |
3.11 |
Restrictions on Business Activities |
30 |
3.12 |
Title to Properties; Status of Liens and Encumbrances |
31 |
3.13 |
Intellectual Property |
31 |
3.14 |
Material Contracts |
35 |
3.15 |
Interested Party Transactions |
36 |
3.16 |
Permits |
37 |
3.17 |
Litigation |
37 |
3.18 |
Minute Books |
37 |
3.19 |
Environmental Matters |
37 |
3.20 |
Brokers’ and Finders’ Fees |
38 |
3.21 |
Employee Benefit Plans |
38 |
3.22 |
Employment |
39 |
3.23 |
Insurance |
40 |
3.24 |
Regulatory |
40 |
3.25 |
Cybersecurity; Data Protection |
41 |
3.26 |
Compliance with Laws |
41 |
3.27 |
Export Controls and Governmental Sanctions |
41 |
3.28 |
Foreign Corrupt Practices and Anti-Bribery |
42 |
ACTIVE/114926920.3
3.29 |
Bank Accounts |
43 |
3.30 |
No Other Representation and Warranties; Non-Reliance; Due Diligence |
43 |
Article 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
43 |
|
4.1 |
Organization |
43 |
4.2 |
Authority and Enforceability |
44 |
4.3 |
No Conflict |
44 |
4.4 |
Consents |
45 |
4.5 |
Parent Capital Structure |
45 |
4.6 |
Valid Issuance of Parent Common Stock |
45 |
4.7 |
Parent SEC Reports |
45 |
4.8 |
Securities Law Matters |
46 |
4.9 |
Absence of Certain Changes or Events |
46 |
4.10 |
Compliance |
46 |
4.11 |
Permits |
47 |
4.12 |
Litigation |
47 |
4.13 |
No Prior Merger Sub Operations |
47 |
4.14 |
Brokers |
47 |
4.15 |
Financial Capability |
47 |
4.16 |
No Other Representation and Warranties |
47 |
Article 5 [RESERVED] |
47 |
|
Article 6 ADDITIONAL AGREEMENTS |
47 |
|
6.1 |
[Reserved]. |
47 |
6.2 |
Confidentiality |
47 |
6.3 |
Public Disclosure |
48 |
6.4 |
FIRPTA Compliance |
49 |
6.5 |
[Reserved] |
49 |
6.6 |
[Reserved] |
49 |
6.7 |
[Reserved] |
49 |
6.8 |
[Reserved] |
49 |
6.9 |
Resignation of Officers and Directors |
49 |
6.10 |
[Reserved] |
49 |
6.11 |
Termination of Employees and Consultants |
49 |
6.12 |
[Reserved] |
49 |
6.13 |
Indemnification of Officers and Directors |
49 |
6.14 |
[Reserved] |
50 |
6.15 |
[Reserved] |
50 |
6.16 |
Additional Covenants |
50 |
Article 7 CONDITIONS TO THE MERGER |
50 |
|
7.1 |
Conditions to Obligations of Each Party to Effect the Merger |
50 |
7.2 |
Conditions to Obligations of Parent and Merger Sub |
50 |
7.3 |
Conditions to Obligations of the Company |
52 |
Article 8 TAX MATTERS |
53 |
|
8.1 |
Tax Returns |
53 |
8.2 |
Tax Contests |
53 |
8.3 |
Straddle Periods |
53 |
8.4 |
Tax Cooperation |
54 |
ACTIVE/114926920.3
8.5 |
Transfer Taxes |
54 |
Article 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW |
54 |
|
9.1 |
Survival of Representations and Warranties |
54 |
9.2 |
Indemnification |
55 |
9.3 |
Maximum Payments; Remedy |
56 |
9.4 |
Claims for Indemnification; Resolution of Conflicts |
57 |
9.5 |
Escrow Arrangements |
60 |
9.6 |
Third Party Claims |
60 |
9.7 |
Securityholder Representative |
61 |
9.8 |
Tax Treatment |
64 |
9.9 |
Parent Indemnity |
64 |
Article 10 TERMINATION, AMENDMENT AND WAIVER |
65 |
|
10.1 |
[Reserved] |
65 |
10.2 |
[Reserved] |
65 |
10.3 |
Amendment |
65 |
10.4 |
Extension; Waiver |
65 |
Article 11 GENERAL PROVISIONS |
65 |
|
11.1 |
Notices |
65 |
11.2 |
Interpretation |
66 |
11.3 |
Counterparts |
67 |
11.4 |
Entire Agreement; Assignment |
67 |
11.5 |
Severability |
67 |
11.6 |
Specific Performance |
67 |
11.7 |
Submission to Jurisdiction; Consent to Service of Process. |
67 |
11.8 |
Governing Law |
68 |
11.9 |
WAIVER OF JURY TRIAL |
68 |
11.10 |
Rules of Construction |
68 |
11.11 |
No Third Party Beneficiary |
68 |
11.12 |
Costs and Expenses |
68 |
11.13 |
Conflict Waiver; Attorney-Client Privilege |
68 |
ACTIVE/114926920.3
INDEX OF EXHIBITS AND ANNEXES AND SCHEDULES
Exhibit Description
Exhibit A Joinder Agreement
Annex A-1 Company Securityholders
Annex A-2 Key Consultant
Annex A-3 Additional Consultant #1
Annex A-4 Additional Consultant #2
Annex A-5 Restrictive Covenant Agreements
Annex A-6 Persons with Completed Certification Forms
Exhibit B Stockholder Consent
Exhibit C Certificate of Merger
Exhibit D Stockholder Letter of Transmittal
Exhibit E-1 Employee Optionholders
Exhibit E-2 Executed Optionholder Letter of Transmittal
Exhibit F Director and Officer Resignation Letter
Exhibit G Escrow Agreement
Exhibit H Certification Form
Exhibit I-1 Primary TSA
Exhibit I-2 Additional TSA#1
Exhibit I-2 Additional TSA #2
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***]
ACTIVE/114926920.3
THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of February 2, 2022, by and among Intellia Therapeutics, Inc., a Delaware corporation (“Parent”), RW Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), Rewrite Therapeutics, Inc., a Delaware corporation (the “Company”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative of the Company Securityholders (the “Securityholder Representative”).
RECITALS
A. Parent, Merger Sub and the Company wish to effect a business combination through a merger (the “Merger”) of Merger Sub with and into the Company on the terms and conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law, as amended (the “DGCL”).
B. The board of directors of the Company has unanimously approved this Agreement, the Merger and the other transactions contemplated hereby and determined that entering into this Agreement and the Merger are advisable and in the best interest of the Company and the Company Stockholders.
C. Parent and Merger Sub have obtained all required company approvals to enter into this Agreement and consummate the Merger and the other transactions contemplated hereby.
D. Pursuant to and in connection with the Merger, among other things, and subject to the terms and conditions of this Agreement, at the Effective Time:
(i) all of the issued and outstanding shares of Company Capital Stock: owned by any Company Stockholder shall be converted into a right to receive (a) cash as provided for in this Agreement, (b) a number of shares of Common Stock, par value $0.0001 per share, of Parent (“Parent Common Stock”), and cash, if any, for the achievement of certain milestones as provided for in this Agreement and (c) distributions, if any, of cash to be held in an escrow account from and after the Effective Time to secure indemnification obligations to the Parent Indemnified Parties; and
(ii) all of the issued and outstanding Company Options shall be cancelled and extinguished and shall be converted into a right to receive: (a) for any holder of Company Options who is an Accredited Investor (I) cash as provided for in this Agreement, (II) a number of shares of Parent Common Stock and cash, if any, for the achievement of certain milestones as provided for in this Agreement, and (III) distributions, if any, of cash to be held in an escrow account from and after the Effective Time to secure indemnification obligations to the Parent Indemnified Parties; and (b) for any holder of Company Options who is a Non-Accredited Investor (I) cash as provided for in this Agreement, (II) cash, if any, for the achievement of certain milestones as provided for in this Agreement, and (III) distributions, if any, of cash to be held in an escrow account from and after the Effective Time to secure indemnification obligations to the Parent Indemnified Parties.
E. Concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent to enter into this Agreement: (i) each Company Securityholder listed on Annex A-1 has entered into and delivered to Parent a written consent, joinder, release and waiver in the form attached hereto as Exhibit A (each, a “Joinder Agreement”); (ii) the Person listed on Annex A-2 (the “Key Consultant”) has entered into a transition services agreement in the form attached as Exhibit I-1 (the “Primary TSA”) with Parent to be contingent on and effective immediately after the Closing; (iii) the Person listed on Annex A-3 (the “Additional Consultant #1”) has entered into a transition services agreement in the form attached as Exhibit I-2 (the “Additional TSA #1”) with Parent to be contingent on and effective immediately after the Closing; (iv) the Person listed on Annex A-4 (the “Additional Consultant #2”) has entered into a transition services agreement in the form attached as Exhibit I-3 (the “Additional TSA #2”) with Parent to be contingent on and effective immediately after the Closing; (v) the Person listed on Annex A-5 has entered into and delivered to Parent a restrictive covenants agreement in a form acceptable to Parent (each, a “Covenants Agreement”); and (vi) each of the Persons listed on Annex
ACTIVE/114926920.3
A-6 has delivered to Parent its, his or her completed and executed Certification Form evidencing the fact that such Person is an Accredited Investor in the form attached as Exhibit H (each, a “Certification Form”).
F. As an inducement to the willingness of Parent and Merger Sub to enter into this Agreement, the Company shall deliver to Parent the irrevocable approval of the adoption of this Agreement and the principal terms of the Merger pursuant to a written consent of stockholders in the form attached hereto as Exhibit B (the “Stockholder Consent”), executed by all Company Stockholders in respect of all of the outstanding shares of Common Stock (including as a result of the conversion of the Company SAFEs as contemplated by Section 2.6(c)) pursuant to and in accordance with the applicable provisions of the DGCL and the Charter Documents.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and other premises set forth herein, the mutual benefits to be gained by the performance thereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereby agree as follows:
Article 1
DEFINITIONS
For all purposes of this Agreement, the following terms shall have the following respective meanings:
“2020 Financials” means the Company’s unaudited balance sheet as of December 31, 2020 (the “Balance Sheet Date”) and the related statements of income and cash flow for the twelve month period ending December 31, 2020.
“2021 Financials” means the Company’s unaudited balance sheet as of October 31, 2021 and the related unaudited statements of income and cash flow for the ten month period ending October 31, 2021.
“280G Stockholder Approval” means the requisite approval of the Company Stockholders as is required by the terms of Section 280G(b)(5)(B) of the Code of a proposal to render the parachute payment provisions of Section 280G of the Code and the Treasury Regulations thereunder inapplicable to any and all payments and/or benefits provided that might result, separately or in the aggregate, in the payment of any amount and/or the provision of any benefit that would not be deductible by reason of Section 280G or that would be subject to an excise Tax under Section 4999 of the Code.
“Accredited Investor” means any holder of Company Capital Stock that is an “accredited investor” within the meaning of Rule 501 of the Securities Act.
“Additional Per Share Escrow Consideration” means with respect to each share of Company Capital Stock outstanding immediately prior to the Effective Time and each share of Company Capital Stock subject to a Company Option immediately prior to the Effective Time, the amount in cash to be released from the Escrow Fund pursuant to Section 9.4(f).
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this Agreement, “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities or by Contract or otherwise, and the terms “controlling” and “controlled by” have correlative meanings to the foregoing. Without limiting the foregoing, Affiliates of the Company shall include Schaked Omar Halperin and his Affiliates but not Civilization Ventures II, LP or any of its Affiliates.
“Aggregate Exercise Price” means the aggregate exercise price of all Company Options.
“[***].
ACTIVE/114926920.3
“[***].
“[***]”
“Business Day(s)” means each day that is not a Saturday, Sunday or other day on which Parent is closed for business or banking institutions located in Boston, Massachusetts are authorized or obligated by Law or executive order to close.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136), together with all rules and regulations and guidance issued by any Governmental Entity with respect thereto and any similar or successor statute with respect thereto (including for the avoidance of doubt the Consolidated Appropriations Act of 2021, P.L. 116-260).
“Cash” means the sum of (a) all cash and (b) all cash equivalents (including deposits, amounts held in escrow, marketable securities and short term investments) of the Company determined in accordance with GAAP as of immediately prior to the Closing; provided that any restricted cash and cash collateralizing any letter-of-credit, bond or guarantee obligations shall be excluded from the definition of Cash hereunder. Notwithstanding the foregoing, for purposes of calculating the Net Debt Adjustment Amount and the Closing Net Debt Amount, any cash or cash equivalents excluded from the definition of Cash by reason of the proviso to the immediately preceding sentence shall be added back to, and included in, Cash (on a dollar-for-dollar basis) to the extent such restricted cash or cash equivalents relate to Indebtedness included such calculations.
“Certificates” means the certificates certifying (i) the Spreadsheet, (ii) the Closing Statement delivered pursuant to Section 2.9(a), and (iii) any other certificates delivered by or on behalf of the Company and/or an officer of the Company pursuant to Article 7.
“Closing Consideration” means (i) $45,000,000 plus (ii) the Aggregate Exercise Price minus (iii) the Net Debt Adjustment Amount.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” means the Common Stock, par value $0.0001, of the Company.
“Company Capital Stock” means collectively shares of Common Stock, including for purposes of determining outstanding shares as of immediately prior to the Effective Time, any shares of Common Stock issued upon the conversion of the Company SAFEs prior to, and contingent upon the occurrence of, the Effective Time as contemplated by Section 2.6(c).
“Company Employee Plan” means (a) an employee benefit plan within the meaning of Section 3(3) of ERISA whether or not subject to ERISA; (b) stock option plans, stock purchase plans, bonus or incentive award plans, equity-based plans, retention plans, profit sharing plans, severance pay plans, programs or arrangements, deferred compensation arrangements or agreements, employment agreements, offer letters, compensation plans, programs, agreements or arrangements, change in control plans, programs or arrangements, supplemental income arrangements, vacation plans, and all other employee benefit plans, agreements, and arrangements, not described in (a) above; and (c) plans or arrangements providing compensation to employee and non-employee directors, in each case which the Company sponsors, contributes to, or provides benefits under or through, or has any obligation to contribute to or provide benefits under or through, or if such plan provides benefits to or otherwise covers any current or former employee, officer or director of the Company (or their spouses, dependents, or beneficiaries), or under which the Company has or may have any Liability (contingent or otherwise, including be reason of being an ERISA Affiliate).
“Company Material Adverse Effect” means [***].
ACTIVE/114926920.3
“Company Options” means all issued and outstanding options, rights and warrants (including commitments to grant options) to purchase or otherwise acquire Company Capital Stock issued or granted by or on behalf of the Company (whether or not vested) held by any Person.
“Company Products” means all products, product candidates, technology and services currently or previously developed (including products, product candidates, technology and services for which development is ongoing), manufactured, made commercially available, marketed, distributed, supported, sold, imported for resale or licensed out by or on behalf of the Company or any of its Subsidiaries, in each of the foregoing cases that have been offered or made available to any third party prior to the date hereof, including as listed on Section 3.13(b) of the Company Disclosure Schedules.
“Company SAFE Holder” means any holder of a Company SAFE.
“Company SAFEs” means the outstanding Simple Agreements for Future Equity of the Company convertible into Company Capital Stock.
“Company Securityholder” means any holder of Company Options, any Company Stockholder and any Company SAFE Holder (as contemplated by Section 2.6(c)), as of immediately prior to the Effective Time or, with respect to any time before immediately prior to the Effective Time, any Person that would be a Company Securityholder if the Effective Time were to occur at such time.
“Company Stockholder” means any holder of Company Capital Stock (including as a result of the conversion of the Company SAFEs as contemplated by Section 2.6(c)) as of immediately prior the Effective Time or, with respect to any time before immediately prior to the Effective Time, any Person that would hold Company Capital Stock if the Effective Time were to occur at such time.
“Contract” means any legally binding mortgage, indenture, lease, contract, license, covenant, plan, insurance policy, purchase order (including any related terms and conditions), work order or other agreement, instrument, arrangement, obligation, understanding or commitment, permit, concession or franchise, whether oral or written and including any amendment, waiver or modification made thereto.
“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemics or disease outbreaks.
“DGCL” means the Delaware General Corporation Law, as amended.
“Dollars” or “$” means United States Dollars.
“Effective Time” means the time of the filing of the Certificate of Merger, or, if different, the time of effectiveness of the Merger that is specified therein.
“Environment” means any soil, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins and wetlands), groundwaters, drinking water supplies, land, sediments, surface or subsurface strata, flora, fauna, ambient air (including indoor air), and any other environmental medium or natural resource.
“Environmental Law” means any federal, state or local law, common law, regulation, ordinance, bylaw or other applicable and binding legal authority, relating to: (a) the manufacture, transport, use, treatment, storage, disposal, recycling, export, release or threatened release of Hazardous Materials; (b) protection of human health; or (c) pollution or protection of the Environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any entity, trade or business that is, or at any applicable time was, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA that includes the Company.
ACTIVE/114926920.3
“Escrow Agent” means Wilmington Trust, N.A. or another institution reasonably acceptable to Parent and the Company.
“Escrow Agreement” means the Escrow Agreement to be entered into at the Closing by and among Parent, the Securityholder Representative and the Escrow Agent in the form attached hereto as Exhibit G.
“Escrow Amount” means an amount in cash equal to $[***].
“Escrow Fund” means the Escrow Amount, as the same may be reduced from time to time by any payments to Parent and other Parent Indemnified Parties pursuant to Sections 9.4(f). or Section 9.5(b).
“Escrow Release Time” means the first Business Day after the expiration of the Survival Date.
“Exchange Documents” means the Stockholder Letter of Transmittal and Certification Form.
“Expense Fund” means $[***].
“FDA” means United States Food and Drug Administration and any successor agency thereto.
“Financials” mean the 2020 Financials and 2021 Financials.
“Fraud” means [***].
“Fully Diluted Share Count” means the sum of the following (without double-counting): (a) the aggregate number of shares of Company Capital Stock that are issued and outstanding as of immediately prior to the Effective Time (including the outstanding shares of Company Capital Stock issued upon the conversion of Company SAFEs prior to, and contingent upon the occurrence of, the Effective Time as contemplated by Section 2.6(c)); and (b) the number of shares of Company Capital Stock issuable upon exercise of all Company Options (vested and unvested) issued and outstanding as of immediately prior to the Effective Time (assuming payment in full of the exercise price of such Company Options in cash).
“GAAP” means United States generally accepted accounting principles consistently applied.
“Governmental Entity” means any federal, national, foreign, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body of competent jurisdiction.
“Hazardous Material” means: (a) any petroleum, petroleum products, petroleum by-products or breakdown products, radioactive materials, asbestos-containing materials or polychlorinated biphenyls; (b) any waste, chemical, material or substance defined, controlled or regulated as toxic or hazardous or as a pollutant or contaminant under any Environmental Law.
“Health Care Law” means all applicable Laws relating to Company Products, including such applicable Laws pertaining to: (a) the research, development, testing, production, manufacturing, marketing, transfer, distribution and sale of drugs or biologics, including the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et seq.) and the regulations and rules promulgated thereunder and the Public Health Service Act and the regulations and rules promulgated thereunder; (b) Permits required to be held by individuals and entities involved in the research, development, testing, production, manufacturing, marketing, transfer, distribution and sale of Company Products; (c) any federal health care program (as such term is defined in 42 U.S.C. section 1320a-7b(f)), including those pertaining to providers of goods or services that are paid for by any federal health care program, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), Medicare exclusion and civil money penalties, Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code, Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), all related rules and regulations of the foregoing and all equivalent applicable Law of other Governmental Entities (d) the privacy and security of patient-identifying health care information, including the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 1320d et seq.) and any
ACTIVE/114926920.3
corresponding state and local Laws applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, storage, import, export or disposal of any Company Products.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“Indebtedness” of any Person means, as of any specified date, the amount equal to the sum (without any double-counting) of the following obligations (whether or not then due and payable), to the extent they are either obligations of such Person or its Subsidiary or guaranteed by such Person or its Subsidiary, including through the grant of a security interest upon any assets of such Person: (a) all outstanding indebtedness for borrowed money owed to third parties or Affiliates; (b) all obligations for the deferred purchase price of property or services (including any potential future earn-out, purchase price adjustment, releases of “holdbacks” or similar payments but excluding any royalty payment obligations, license payment obligations or similar obligations based on future sales, revenue, profit or other performance-based or time-based metrics, including any such payments under the Exclusive License Agreement, dated May 19, 2021, by and between the Company and the Regents of the University of California) (“Deferred Purchase Price”); (c) all obligations evidenced by notes, bonds, debentures or other similar instruments (whether or not convertible) or arising under indentures (including the amount that Company owes to Parent under the promissory note between Company and Parent, dated as of January 11, 2022); (d) all obligations under any financial hedging, swap or similar arrangements (valued at the termination value thereof); (e) all obligations as lessee that would be required to be capitalized in accordance with GAAP (other than real property leases); (f) all obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance, guarantee, surety, performance or appeal bond, or similar credit transaction; (g) any unpaid wages, commissions or bonuses, unpaid severance Liabilities paid or payable under any legally binding arrangement, plan or agreement of the Company in respect of employees and service providers of the Company whose employment or service to the Company ceases on or prior to the Closing, deferred compensation Liabilities of the Companies, employee expenses and paid time off required to be accrued by GAAP or paid under applicable Law or earned prior to or at the Closing; (i) any accrued but unpaid Taxes of the Company for any Pre-Closing Tax Period; (j) any Taxes with respect to any Pre-Closing Tax Period deferred to a period that is not a Pre-Closing Tax Period under Section 2302 of the CARES Act or IRS Notice 2020-65, or any similar state or local Law; (k) any mortgage or other obligation secured by a Lien; and (l) the aggregate amount of all accrued interest payable on such items under clauses (a) through (l) in accordance with the applicable definitive documents with respect thereto and prepayment premiums, penalties, breakage costs, “make whole amounts,” costs, expenses and other payment obligations of such Person that would arise whether or not then due and payable if all such items under clauses (a) through (l) were prepaid, extinguished, unwound and settled in full in accordance with their respective terms; provided, that “Indebtedness” shall not include (1) any employment Liabilities arising in connection with any termination of any employee or other service provider by the Company immediately prior to Closing pursuant to Section 6.11 except as expressly set forth in subsection (g) above (“Excluded Employment Liabilities”) or (2) [***]. For purposes of determining the Deferred Purchase Price obligations as of a specified date, such obligations shall be deemed to be the maximum amount of Deferred Purchase Price owing as of such specified date (whether or not then due and payable) or potentially owing at a future date.
“Indemnifying Holders” means the holders of Company Capital Stock and Company Options that receive any portion of the Merger Consideration.
“Inventory” means all raw materials, works-in-progress, finished goods, supplies and other inventories of the Company, wherever situated.
“[***]”.
“[***]”.
ACTIVE/114926920.3
“[***]”.
“[***]”.
“[***]”.
“IRS” means the United States Internal Revenue Service.
“Knowledge” or “Known” means, whether or not capitalized, with respect to the Company, the knowledge of [***], after a reasonable inquiry.
“Laws” means constitutions, laws (including common law), statutes, regulations, ordinances, codes, orders, decrees, judgments, rules, standards, and rulings of any Governmental Entity.
“Letter of Intent” means that certain letter, dated as of November 1, 2021 by and between Parent and the Company.
“Liability” or “Liabilities” means debts, liabilities, commitments, losses, deficiencies, duties, charges, claims, damages, demands, costs, fees, Taxes, expenses and obligations (including guarantees, endorsements and other forms of credit support), whether accrued or fixed, absolute or contingent, matured or unmatured, Known or not Known, on- or off-balance sheet, including those arising under any Contract, Law, statute, ordinance, regulation, rule, code, common law or other requirement or rule enacted or promulgated by any Governmental Entity or under any litigation, court action or proceeding, lawsuit, originating application to an employment tribunal, or binding arbitration.
“Lien” means any lien, pledge, charge, claim, mortgage, security interest, defect in title, preemptive right, vesting limitation, right of first offer, notice, negotiation or refusal, last matching right, community or marital property interest, transfer restriction of any kind or other encumbrance of any sort.
“Loss” means any [***].
“made available to Parent” means contained and accessible for a continuous period of at least twenty-four (24) hours immediately prior to the date of this Agreement in the virtual data room hosted by DocSend established by the Company in connection with the Merger (the “Data Room”) to which Parent and its designated representatives had unrestricted access and notification rights during such period.
“Merger Consideration” means the aggregate consideration paid or payable to the holders of Company Capital Stock and Company Options pursuant to Section 2.6 (including any portion of the Escrow Fund).
“Milestone Consideration” means [***].
“Multiemployer Plan” shall have the meaning set forth in Section 3(37) of ERISA.
“Nasdaq” means the Nasdaq Global Market.
“Net Debt Adjustment Amount” has the meaning set forth in Section 2.9.
“Non-Accredited Investor” means any holder of Company Capital Stock and/or Company Options that is not an Accredited Investor.
“Order” means any applicable order, writ, injunction or decree of any Governmental Entity, arbitrator or mediator and any settlement agreement or compliance agreement entered into in connection with any Proceeding.
“Parent Certificates” means the certificate of Parent delivered pursuant to Section 2.9(d)(i) and any other certificates delivered by or on behalf of Parent and Merger Sub (or any of them) and/or any officer of any such Persons pursuant to Article 7.
“Parent Common Stock” means Common Stock, par value $0.0001 per share, of Parent.
ACTIVE/114926920.3
“Parent Common Stock Price” means, with respect to a share of Parent Common Stock issuable upon payment of the [***] Milestone Consideration, an amount equal to the volume-weighted average trading price of a share of Parent Common Stock during the 10 consecutive trading day period ending on and including the trading day that is two (2) trading days immediately prior to the Parent’s issuance of the [***] Milestone Consideration.
“Parent Indemnified Parties” means the Parent, the Surviving Corporation, their respective Affiliates and the respective officers, directors, employees, agents and representatives of Parent, the Surviving Corporation and their respective Affiliates.
“Parent’s Knowledge” shall mean the knowledge of the executive officers (as defined in Rule 405 under the Securities Act) of the Parent, after reasonable inquiry.
“Parent Material Adverse Effect” means [***].
“Per Company Option Closing Consideration” means, in respect of each share of Company Capital Stock subject to a Company Option, an amount in cash equal to (i) the Per Share Closing Consideration minus (ii) the exercise price per share of such Company Option.
“Per Share [***] Milestone Consideration” means an amount in cash equal to (i) the [***] Milestone Consideration divided by (ii) the Fully Diluted Share Count.
“Per Share Closing Consideration” means an amount in cash equal to the (i) Closing Consideration divided by (ii) Fully Diluted Share Count.
“Per Share Escrow Amount” means an amount in cash equal to (i) the Escrow Amount divided by (ii) the Fully Diluted Share Count.
“Per Share [***] Milestone Consideration” means a number of shares of Parent Common Stock equal to (i) (A) the [***] Milestone Consideration, divided by (B) the Parent Common Stock Price divided by (ii) Fully Diluted Share Count.
“Per Share [***] Milestone Consideration Value” means an amount in cash equal to (i) the [***] Milestone Consideration divided by (ii)the Fully Diluted Share Count.
“Per Share [***] Milestone Consideration” means an amount in cash equal to (i) the [***] Milestone Consideration divided by (ii) the Fully Diluted Share Count.
“Per Share Overpayment Amount” means an amount in cash equal to the (i) Overpayment Amount divided by (ii) Fully Diluted Share Count.
“Per Share Underpayment Amount” means an amount in cash equal to the (i) Underpayment Amount divided by (ii) Fully Diluted Share Count.
“Permit” means all consents, licenses, permits, grants, agreements and authorizations required by any Governmental Entity to lawfully operate the business of the Company (including any pending applications for such all consents, licenses, permits, grants, agreements and authorizations).
“Person” means an individual or entity, including a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a cooperative, a foundation, a joint venture, an unincorporated organization, or a Governmental Entity (or any department, agency, or political subdivision thereof).
“Pre-Closing Tax Period” means any taxable period (or a portion thereof) ending on or prior to the end of the day on the Closing Date.
“Pre-Closing Taxes” means, without duplication (a) any and all Taxes of the Company attributable to any Pre-Closing Tax Period (b) all Taxes of any member of an Affiliated, consolidated, combined or unitary group of which the Company (or any predecessor of the Company) is or was a member on or prior
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to the Closing Date, including pursuant to Treasury Regulation 1.1502-6 or any analogous or similar state, local, or non-U.S. Laws, (c) any and all Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor, by Contract or pursuant to any Laws, which Taxes relates to an event or transaction occurring on or before the Closing Date, (d) the employer portion of any payroll or employment Taxes with respect to any payments contemplated by this Agreement to be paid on or before the Closing Date or to the extent accrued for U.S. federal income tax purposes on or before the Closing Date, (e) any Transfer Taxes payable by the Indemnifying Holders under Section 8.5 and (f) any Taxes with respect to any Pre-Closing Tax Period deferred to a period that is not a Pre-Closing Tax Period under Section 2302 of the CARES Act or IRS Notice 2020-65, or any similar state or local Law.
“Pro Rata Share” means, with respect to each Company Securityholder, a percentage (rounded to four (4) decimal places) equal to: (a) the sum of the following (without double-counting): (i) the aggregate number of shares of Company Capital Stock that are issued and outstanding as of immediately prior to the Effective Time (including the outstanding shares of Company Capital Stock issued upon the conversion of Company SAFEs prior to, and contingent upon the occurrence of, the Effective Time as contemplated by Section 2.6(c)) and owned by such Company Securityholder and (ii) the number of shares of Company Capital Stock issuable upon exercise of all Company Options (vested and unvested) that are issued and outstanding as of immediately prior to the Effective Time and that are owned by such Company Securityholder (assuming payment in full of the exercise price of such Company Options in cash), divided by (b) the Fully Diluted Share Count. At all times, the sum of all Pro Rata Shares of Company Securityholders shall equal 100%.
“Proceeding” means any audit, litigation (in Law or in equity), arbitration, review, re-examination, opposition, mediation, action, lawsuit, proceeding, complaint, charge, claim (including any counterclaim), demand, hearing, examination, inquiry, petition, subpoena, discovery, request, investigation or like matter before or by any arbitrator or Governmental Entity, whether administrative, judicial or arbitrative in nature, at Law or in equity.
“Related Agreements” means the Escrow Agreement, the Certification Forms, the Joinder Agreements, the Covenants Agreements, the Letters of Transmittal, and all other agreements and certificates executed and delivered by or on behalf of the Company or any Subsidiary of the Company, or any of the Company Securityholders in connection with this Agreement.
“Restricted Shares” means all shares of Parent Common Stock issuable hereunder other than shares of Parent Common Stock (a) the offer and sale of which have been registered under a registration statement pursuant to the Securities Act and sold thereunder, (b) with respect to which a sale or other disposition may be made in reliance on and in accordance with Rule 144 (or any successor provision) under the Securities Act (including under Rule 144(d)(1)(i)) or (c) with respect to which the holder thereof shall have delivered to Parent either (i) an opinion of counsel in form and substance reasonably satisfactory to Parent, delivered by counsel reasonably satisfactory to Parent, or (ii) a “no action” letter from the SEC, in either case to the effect that subsequent transfers of such shares of Parent Common Stock may be effected without registration under the Securities Act.
“SEC” means the Securities and Exchange Commission.
“Section 280G” means Section 280G of the Code and the Treasury Regulations thereunder.
“Section 280G Payments” means any and all payments and/or benefits provided that might result, separately or in the aggregate, in the payment of any amount and/or the provision of any benefit that would not be deductible by reason of Section 280G or that would be subject to an excise Tax under Section 4999 of the Code.
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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“Special Representations” means, [***].
[***]
“Spreadsheet” means:
(a) With respect to each holder of Company Capital Stock: (i) (A) such Person’s name, (B) the number, class and series of Company Capital Stock held by such Person, (C) the portion of the Per Share Closing Consideration to be paid to such Person in respect of such holder’s shares at the Closing, (D) the maximum Per Share Closing Consideration that may become payable hereunder to such Person in respect of such shares, (E) such Person’s Pro Rata Share expressed as a percentage (but excluding the Pro Rata Share of such Person represented by Company Options and disclosed in clause (b)(i)(I) below), (F) any amount required to be withheld from any payment to be made hereunder (including the employer withholding taxes) and the net cash amount to be paid to such Person as a result of any such withholding amount, (G) whether an election under Section 83(b) of the Code was timely made with respect to such Company Capital Stock, (H) whether any such shares are “covered securities” (as defined in §6045 of the Code), and if so, the acquisition price of such shares, and (I) the respective date(s) of acquisition of such shares of Company Capital Stock held by such Person (collectively, items in the foregoing clauses (A) through (I), the “Fundamental Spreadsheet Stockholder Information”), and (ii) such Person’s domicile address (and if different, last known mailing address) and email address.
(b) With respect to each holder of an unexercised Company Option: (i) (A) such Person’s name, (B) the number, class and series of shares of Company Capital Stock issuable upon the exercise of each unexercised Company Option held by such Person, (C) the respective exercise price per share of Company Capital Stock purchasable under such unexercised Company Options, (D) the respective grant date(s) of such unexercised Company Options, the term of such Company Options and whether such Company Option is fully vested, (E) whether such unexercised Company Options are incentive stock options or non-qualified stock options, (F) whether such Person was an employee of the Company at the time of grant of such Company Option, (G) the portion of the Per Company Option Closing Consideration to be paid to such Person in respect of such Company Option at the Closing, (H) the maximum Per Company Option Closing Consideration that may become payable hereunder to such Person in respect of such Company Option, (I) such Person’s Pro Rata Share with respect to such Company Options, and (J) any amounts required to be withheld from any payments to be made hereunder (including the employer withholding taxes) and the net cash amount to be paid to such Person as a result of any such withholding amount (collectively, items in the foregoing clauses (A) through (J), the “Fundamental Spreadsheet Optionholder Information”, together, the Fundamental Spreadsheet Stockholder Information, the “Fundamental Spreadsheet Information”) and (ii) such Person’s domicile address (and if different, last known mailing address) and email address.
“Stockholder Letter of Transmittal” means a stockholder letter of transmittal in substantially the form attached hereto as Exhibit D.
“Straddle Period” means a taxable period beginning on or before, and ending after, the Closing Date.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, cooperative, association or other organization (including any branch), whether incorporated or unincorporated, which is directly or indirectly controlled by such Person, whether through ownership of securities or otherwise.
“Tax” or “Taxes” means any and all U.S. federal, state, local and non-U.S. taxes, assessments and other governmental charges, duties (including stamp duty), fees, impositions of any kind whatsoever
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including taxes based upon or measured by gross receipts, income, profits, gains, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, environmental, employment, unclaimed property, escheat, excise and property taxes as well as public imposts, and social security charges (including health, unemployment, workers’ compensation and pension insurance), together with all interest, penalties, and additions imposed with respect to such amounts.
“Tax Returns” means any return, declaration, report, statement, information statement or other document filed or required to be filed with respect to Taxes, including any claims for refunds of Taxes, any information returns and any amendments or supplements of any of the foregoing.
“Transaction Expenses” means any (a) fees and expenses to the extent incurred by or on behalf of the Company (or any Affiliate thereof or any Company Securityholder, in each case, if required to be paid by the Company) prior to the Closing in connection with the negotiation and execution of the Letter of Intent, this Agreement, the Related Agreements (including all fees, costs and expenses of any brokers, accountants, financial advisors, attorneys, consultants, auditors and other experts); (b) all brokers’, finders’ or similar fees to the extent incurred by or on behalf of the Company (or any Affiliate thereof or any Company Securityholder, in each case, if required to be paid by the Company) prior to the Closing owed by any such Person in connection with the transactions contemplated hereby; (c) any change of control payments, bonuses, severance, final wages, accrued but unused vacation, termination or retention obligations or similar amounts payable by or due from the Company that are triggered solely by the transactions contemplated hereby (including the cessation of employment by certain employees of the Company prior to the Closing) and the amount of any payroll or employment Taxes related thereto; (d) the amount of the Expense Fund to the extent not (A) funded from cash of the Company prior to the Closing and (B) not reflected on the certificate delivered under Section 2.9(a); and (e) any payments owed to the Securityholder Representative by the Company, in each case, to the extent such fees and expenses have not been, and will not be, paid by the Company at or prior to the Closing or through the Expense Fund; provided, that “Transaction Expenses” shall not include (1) any Excluded Employment Liabilities or (2) [***].
“Transferred Assets” shall have the meaning set forth in the [***].
[***]
“Willful Breach” means [***].
Each of the following terms is defined in the Section set forth opposite such term:
Term |
Section |
Agreement |
Preamble |
Antitrust Laws |
3.7 |
Balance Sheet Date |
Article 1 |
Certificate of Merger |
2.2 |
Certification Form |
Recital E |
Charter Documents |
3.1(a) |
Claim Date |
9.4(b) |
Closing |
2.2 |
Closing Date |
2.2 |
Closing Statement |
2.9(d)(i) |
Company |
Preamble |
Company Controlled Technology |
3.13(a) |
Company Disclosure Schedule |
Article 3 |
Company Indemnified Parties |
9.9(a) |
Company Intellectual Property |
3.13(a) |
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Company Registered Intellectual Property |
3.13(a) |
Conflict |
3.6 |
Contingent Worker |
3.22(a) |
Covenants Agreement |
Recital E |
Current Balance Sheet |
3.8(a) |
Current Company Technology |
3.13(a) |
D&O Indemnified Parties |
6.13(b) |
Direct Claim |
9.4(a) |
Dissenting Shares |
2.7(a) |
EAR |
3.27 |
Environmental Permits |
3.19(a) |
Estimated Closing Statement |
2.9(a) |
Exchange Documents |
Article 1 |
Excluded Employment Liabilities |
Article 1 |
FCPA |
3.28 |
Fundamental Representations |
[] |
Indemnifiable Matters |
9.2(a) |
Indemnified Party |
9.1 |
Indemnifying Holder |
Article 1 |
Indemnifying Holder Proceeds |
9.3(b) |
Intellectual Property |
3.13(a) |
Intellectual Property Rights |
3.13(a) |
Interested Party |
3.15(a) |
Issued Shares |
2.6(e) |
ITAR |
3.27 |
Joinder Agreement |
Recital E |
Letters of Transmittal |
2.8(b)(ii) |
Material Contract |
3.14(b) |
Merger |
Recital A |
Merger Sub |
Preamble |
NDA |
6.2(a) |
Objection Deadline |
9.4(c)(i) |
Objection Notice |
9.4(c)(i) |
OFAC |
3.27 |
Officer’s Certificate |
9.4(b) |
Official |
3.28 |
Parent |
Preamble |
Parent Common Stock |
Recital D(i) |
Patents |
3.13(a) |
Payable Claim |
9.4(e) |
Registered Intellectual Property |
3.13(a) |
Resolved Claims |
9.4(d) |
Securityholder Representative |
Preamble |
Settled Claims |
9.4(d) |
Special Representations |
Article 1 |
Spreadsheet |
Article 1 |
Stock Plan |
3.2(c) |
Stockholder Consent |
Recital F |
Survival Date |
9.1 |
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Surviving Corporation |
2.1 |
Tax Contest |
8.2 |
Technology |
3.13(a) |
Third Party Claim |
9.6 |
Trade Secrets |
3.13(a) |
Trademarks |
3.13(a) |
Transfer Taxes |
8.5 |
Unobjected Claim |
9.4(c)(ii) |
Unresolved Claim |
9.4(e) |
Article 2
THE MERGER
2.1 The Merger; Effect of the Merger;. Subject to the terms and conditions of this Agreement and in accordance with the DGCL, at the Effective Time, the Company and Merger Sub shall consummate the Merger pursuant to which (a) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease, (b) the Company shall be the surviving corporation in the Merger (the “Surviving Corporation”), become a wholly-owned Subsidiary of Parent and shall continue to be governed by the laws of the State of Delaware and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger. The Merger shall have the effects specified in the DGCL.
2.2 Effective Time; Closing. The closing of the Merger (the “Closing”) will take place remotely by the electronic exchange of documents and signature pages on the date of this Agreement assuming the prior satisfaction or, if permissible by the express terms of this Agreement, waiver of the conditions set forth in Article 7 and, if such conditions have not then been so satisfied or waived then promptly following such later time as such conditions are so satisfied or waived, unless another time or place is mutually agreed upon in writing by Parent and the Company. The date upon which the Closing actually occurs shall be referred to herein as the “Closing Date.” On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger substantially in the form attached hereto as Exhibit C (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of the DGCL.
2.3 [Reserved].
2.4 Certificate of Incorporation and Bylaws of the Surviving Corporation.
(a) Unless otherwise determined by Parent prior to the Effective Time, as of the Effective Time, the certificate of incorporation of the Company as the Surviving Corporation shall be amended and restated to read the same as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, until thereafter further amended in accordance with the DGCL and as provided in such amended and restated certificate of incorporation, except that ARTICLE I of the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: “The name of this corporation is Rewrite Therapeutics, Inc. (the “Corporation”)”
(b) Unless otherwise determined by Parent prior to the Effective Time, as of the Effective Time, the bylaws of the Company as the Surviving Corporation shall be amended and restated to read the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, until thereafter further amended in accordance with the DGCL and as provided in the certificate of incorporation of the Surviving Corporation and such bylaws, except that all references to Merger Sub in the bylaws of the Surviving Corporation shall be changed to references to Rewrite Therapeutics, Inc.
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2.5 Directors and Officers.
(a) Unless otherwise determined by Parent prior to the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation immediately after the Effective Time, each to hold office in accordance with the provisions of the DGCL and the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected and qualified.
(b) Unless otherwise determined by Parent prior to the Effective Time, the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation immediately after the Effective Time, each to hold office in accordance with the bylaws of the Surviving Corporation until their successors are duly appointed and qualified.
2.6 Effect of Merger on the Securities of the Company.
(a) Effect on Company Capital Stock.
(i) At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the Company Stockholders, each share of Company Capital Stock that is issued and outstanding immediately prior to the Effective Time (excluding any shares of Company Capital Stock to be canceled pursuant to Section (b)(ii) and any Dissenting Shares) shall be canceled and extinguished and shall be converted into the right to receive (1) (x) the Per Share Closing Consideration, minus (y) the Per Share Escrow Amount plus (2) any Additional Per Share Escrow Consideration plus (3) any Per Share [***] Milestone Consideration, plus (4) any Per Share [***] Milestone Consideration, plus (5) any Per Share [***] Milestone Consideration, plus (6) the Per Share Underpayment Amount minus (7) the Per Share Overpayment Amount; provided, that the Parent Common Stock to be delivered to holders of Company Capital Stock shall in each case be rounded down to the nearest whole number of shares after aggregating all shares delivered to a Company Securityholder and cash in lieu of such fractional Parent Common Stock shall be delivered to the applicable holder(s) of Company Capital Stock in accordance with Section 2.8(b).
(ii) Each share of Company Capital Stock held in the treasury of the Company or by Parent or Merger Sub immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment or distribution shall be made with respect thereto.
(b) Treatment of Company Options. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of Company Options, each then outstanding and unexercised Company Option (whether vested or unvested) shall, by virtue of the Merger, be immediately canceled and the holder thereof shall be entitled to receive, in consideration of such cancellation and subject to compliance with and in the manner provided in Section 2.8, including the delivery of a duly executed and completed Optionholder Letter of Transmittal:
(i) in the case of an Accredited Investor, for each share of Company Capital Stock subject to such Company Options, (1) (x) the Per Company Option Closing Consideration, minus (y) the Per Share Escrow Amount to be withheld and contributed to the Escrow Fund, plus (2) any Additional Per Share Escrow Consideration, plus (3) any Per Share [***] Milestone Consideration, plus (4) any Per Share [***] Milestone Consideration, plus (5) any Per Share [***] Milestone Consideration, plus (6) the Per Share Underpayment Amount, minus (7) the Per Share Overpayment Amount; provided, that the Parent Common Stock to be delivered to holders of Company Capital Stock shall in each case be rounded down to the nearest whole number of shares after aggregating all shares delivered to a Company Securityholder and cash in lieu of such fractional Parent Common Stock shall be delivered to the applicable holder(s) of Company Capital Stock in accordance with Section 2.8(h); and
(ii) in the case of a Non-Accredited Investor, for each share of Company Capital Stock subject to such Company Options, (1) (x) the Per Company Option Closing Consideration minus
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(y) an amount of cash equal to the Per Share Escrow Amount, to be withheld and contributed to the Escrow Fund, plus (2) any Additional Per Share Escrow Consideration, plus (3) an amount of cash equal to any Per Share [***] Milestone Consideration Value, plus (4) any Per Share [***] Milestone Consideration, plus (5) any Per Share [***] Milestone Consideration, plus (6) the Per Share Underpayment Amount, minus (7) the Per Share Overpayment Amount.
(iii) To the extent applicable, any amounts payable under this Section 2.6(b) to holders of Company Options who are current or former employees of the Company shall be paid in accordance with Treasury Regulation Section 1.409A-3(i)(5)(iv)(A), and, in connection therewith, if required by Section 409A of the Code, all such amounts shall either be paid not later than (1) five years following consummation of the transactions contemplated by this Agreement or (2) two and one-half months following the end of the calendar year in which the applicable payment is no longer subject to a substantial risk of forfeiture.
(c) Treatment of Company SAFEs.
(i) Prior to the Effective Time, the Company shall deliver notice of the transactions contemplated hereby to each Company SAFE Holder in accordance with the terms of the relevant Company SAFE. Prior to the Effective Time, the Company shall cause each Company SAFE to be converted into shares of Common Stock, in which case such shares of Common Stock that are outstanding immediately prior to the Effective Time shall be automatically converted into the right to receive the consideration in accordance with Section 2.6(a)(i).
(ii) Prior to the Closing, the Company shall take or cause to be taken such actions, including providing any required notices, and obtain all such consents as may be required to effect the foregoing provisions of Section 2.6(c)(i) and to cause each of the Company SAFEs to be converted in accordance with the terms thereof, and to ensure that, from and after the Effective Time, Company SAFE Holders have no rights with respect thereto other than those specifically provided in Section 2.6(a)(i) and Section 2.6(c)(i).
(d) Effect on Capital Stock of Merger Sub.
(i) Merger Sub. Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any shares of common stock shall continue to evidence ownership of such share of common stock of the Surviving Corporation.
(e) In no event shall the aggregate number of shares of Parent Common Stock issued hereunder (the “Issued Shares”) exceed a number of shares equal to 19.9% of the number of shares of Parent Common Stock outstanding immediately prior to the Closing (the “19.9% Threshold”). In the event that the number of shares of Parent Common Stock otherwise comprising the Issued Shares would exceed the 19.9% Threshold, the number of shares of Parent Common Stock issued as part of the Merger Consideration will be cut back to the 19.9% Threshold and the cash paid as part of the Merger Consideration will be increased by an amount equal to the Parent Common Stock Price with respect to each cut back share of Parent Common Stock.
2.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Capital Stock that are outstanding immediately prior to the Effective Time and which are held by Company Stockholders who have exercised and perfected appraisal rights for such shares of Company Capital Stock in accordance with the DGCL (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive any portion of the Merger Consideration. Such Company Stockholders shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares, unless and until
ACTIVE/114926920.3
such Company Stockholders fail to perfect or effectively withdraw or otherwise lose their appraisal rights under the DGCL. All Dissenting Shares held by Company Stockholders who shall have failed to perfect or who effectively shall have withdrawn or lost their right to appraisal of such shares of Company Capital Stock under the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the applicable portion of the Merger Consideration, without any interest thereon and less any applicable Tax withholding.
(b) The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.
2.8 Exchange Mechanics.
(a) At the Closing, Parent shall make, or cause to be made, (i) the payment and delivery to each Company Stockholder of the Per Share Closing Consideration in respect of each share of Company Capital Stock held by such Company Stockholder at the Effective Time, excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6, (ii) the payment and delivery to each holder of Company Options (other than Employee Optionholders) the Per Company Option Closing Consideration in respect of each share of Company Capital Stock subject to such holder’s Company Options that are surrendered for cancellation by such holder in accordance with Section 2.8(b)(i), in each case excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6, and (iii) payment of all Transaction Expenses included in the Estimated Transaction Expenses to the applicable counterparties in cash in immediately available funds. As soon as commercially practicable after the Effective Time (and in any event no later than the first regularly scheduled payroll of Parent immediately following the Closing), Parent shall make, or cause to be made, the payment and delivery to each Employee Optionholder the Per Company Option Closing Consideration in respect of each share of Company Capital Stock subject to such Employee Optionholder’s Company Options that are surrendered for cancellation by such holder in accordance with Section 2.8(b)(i), in each case excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6.
(b) Exchange Procedures. Subject to the conditions set forth in this Agreement:
(i) Immediately prior to the Effective Time, each holder of Company Options shall deliver (A) in the case of holders of Company Options who are subject to income or employment Tax withholding by Parent, the Surviving Corporation or the Company and who are to receive their portion of the Merger Consideration from Parent, the Surviving Corporation or the Company (“Employee Optionholders”), an executed optionholder letter of transmittal in substantially the form attached hereto as Exhibit E-1 or (B) in the case of holders of Company Options who are not subject to income or employment Tax withholding by Parent, the Surviving Corporation or the Company and who are to receive their portion of the Merger Consideration from Parent, an executed optionholder letter of transmittal in substantially the form attached hereto as Exhibit E-2 (in each case, including a release in respect of Company securities and a provision whereby such holder agrees to be bound by the provisions of Article 2, Article 9 and the other applicable provisions of this Agreement) (each an “Optionholder Letter of Transmittal”). In the case of Employee Optionholders, Parent shall pay, or cause to be paid, as soon as commercially practicable after the Effective Time (and in any event no later than the first regularly scheduled payroll of Parent immediately following the Closing) to each such Employee Optionholder the Per Company Option Closing Consideration in respect of each share of Company Capital Stock subject to such Employee Optionholder’s Company Options so surrendered for cancellation by such holder, in each case excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6. In the case of each holder of Company Options other
ACTIVE/114926920.3
than Employee Optionholders, Parent shall pay, or cause to be paid, at the Closing to each such holder the Per Company Option Closing Consideration in respect of each share of Company Capital Stock subject to such holder’s Company Options so surrendered for cancellation by such holder, in each case excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6). No portion of the Per Company Option Closing Consideration (excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6) or the Additional Per Share Escrow Consideration, the Per Share [***] Milestone Consideration (in the form of cash or stock, as applicable), the Per Share [***] Milestone Consideration or the Per Share [***] Milestone Consideration shall be delivered to the holder of any Company Option until the holder of record of such Company Option shall have delivered to Parent the Optionholder Letter of Transmittal.
(ii) Immediately prior to the Effective Time, each Company Stockholder shall deliver a stockholder letter of transmittal in substantially the form attached hereto as Exhibit D (the “Stockholder Letter of Transmittal” and together with the Optionholder Letters of Transmittal, the “Letters of Transmittal”) to the address set forth opposite such holder’s name on the Spreadsheet. Parent shall pay at the Closing to each Company Stockholder the Per Share Closing Consideration in respect of each share of Company Capital Stock held by such Company Stockholder at the Effective Time, excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6. No portion of the Per Share Closing Consideration, the Per Share [***] Milestone Consideration, the Per Share [***] Milestone Consideration, the Per Share [***] Milestone Consideration or any Additional Per Share Escrow Consideration, as the case may be, in each case excluding the amounts to be withheld and contributed to the Escrow Fund in accordance with Section 2.6, shall be paid to any Company Stockholder until the holder of record of such Company Capital Stock shall have delivered to Parent the Stockholder Letter of Transmittal pursuant hereto.
(c) Legends. In the event that [***] Milestone Shares are issued to Company Securityholders prior to the [***], such shares of Parent Common Stock shall be subject to the following legend (along with any other legends that may be required under applicable Laws):
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO TRANSFER MAY BE EFFECTED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (2) IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT OR (3) PURSUANT TO ANOTHER EXEMPTION FROM SUCH REGISTRATION, WHICH SHALL BE ESTABLISHED BY DELIVERY OF AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”
In the event that [***] Milestone Shares are issued on or after [***], such shares of Parent Common Stock shall not be subject to any such legends. At such time that any shares of Parent Common Stock issuable hereunder shall cease to be Restricted Shares, Parent shall direct the Parent’s transfer agent to remove the legend required by the foregoing for such shares of Parent Common Stock immediately upon such shares ceasing to be Restricted Shares.
(d) Rule 144.
(i) With a view to making available to Company Securityholders the benefits of Rule 144 promulgated under the Securities Act (“Rule 144”) or any other similar rule or regulation of the SEC that may at any time permit Company Securityholders to sell securities of Parent to the public without registration, for one (1) year following the Effective Time Parent will (i) make and keep public
ACTIVE/114926920.3
information available, as those terms are understood and defined in Rule 144; and (ii) file with the SEC in a timely manner all reports and other documents required of the Parent under the Securities Act and the Securities and Exchange Act of 1934, as amended, so long as Parent remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144. In furtherance of the foregoing, to the extent that [***] Milestone Shares have been issued by Parent to the Company Securityholders prior to the six-month anniversary of the Closing, then Parent shall, at the six-month anniversary of the Closing, cause (i) any stop-transfer orders to be removed or lifted with respect to any such shares of Parent Common Stock and (ii) all stock legends regarding any such shares of Parent Common Stock removed.
(ii) In the event that any [***] Milestone Shares are issued but are not be publicly resalable under Rule 144 without restriction on and after the six month anniversary of the Closing Date by reason of Parent’s failure to comply with the first sentence of Section 2.8(d)(i), the following provisions shall apply:
(A) Parent shall file a Registration Statement on Form S-3 (or file an amendment to an existing Registration Statement on Form S-3) pursuant to Rule 415 under the Securities Act covering all [***] Milestone Shares to enable the resale on a delayed or continuous basis of such shares of Parent Common Stock by the Company Securityholders (in either case, the “Registration Statement”) as soon as reasonably possible (and subject to applicable Law) after the later of (i) the six month anniversary of the Closing Date or (ii) the date of issuance of the [***] Milestone Shares pursuant to this Agreement. Parent shall use its commercially reasonable efforts to cause any such Registration Statement to become effective as soon as practicable following the filing thereof. Within two Business Days of effectiveness of the Registration Statement, Parent shall file a final prospectus thereunder to facilitate the resale by Company Securityholders of all [***] Milestone Shares in ordinary brokerage transactions and transactions in which a broker-dealer solicits purchases and in such other manner as may be requested by the Securityholder Representative.
(B) Each Company Securityholder shall furnish all information regarding the distribution of such Company Securityholder’s shares of Parent Common Stock and such other information relating to such Company Securityholder and his, her or its ownership of such shares of Parent Common Stock as reasonably requested by Parent in writing for inclusion in the Registration Statement and any related prospectus, and if any such Company Securityholder fails to provide such information within a reasonable time after receiving such request, Parent may exclude from registration such Company Securityholder.
(C) Parent shall use its reasonable best efforts to have the Registration Statement promptly declared effective by the SEC. Parent shall use reasonable best efforts to keep the Registration Statement continuously effective pursuant to Rule 415 promulgated under the Securities Act, and available for resales of [***] Milestone Shares at all times until the earlier of (i) the date as of which all such shares of Parent Common Stock shall cease to be Restricted Shares or (ii) the date on which all such shares of Parent Common Stock have been sold (the “Registration Period”). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that Parent shall not be liable with respect to any information furnished to Parent by the Securityholder Representative on behalf of the Company Securityholders in writing specifically for use in the preparation of such Registration Statement (including any amendments or supplements thereto and prospectuses contained therein).
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(D) Parent shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with sale of the [***] Milestone Shares under the Registration Statement.
(E) Parent shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with such Registration Statement, as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of the [***] Milestone Shares covered by the Registration Statement until such time as all of such shares of Parent Common Stock shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement.
(F) Parent shall promptly notify the Securityholder Representative of the effectiveness of the Registration Statement applicable to the [***] Milestone Shares. Upon request of Securityholder Representative, Parent shall furnish to Securityholder Representative, without charge, (i) promptly after the same is prepared and filed with the SEC, as many copies of the Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any Registration Statement, as many copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Securityholder Representative may reasonably request) and (iii) as many copies of such other documents, including copies of any preliminary or final prospectus, in each case as the Securityholder Representative may reasonably request from time to time to facilitate the resale of the [***] Milestone Shares as described in the Registration Statement.
(G) Parent shall immediately notify the Securityholder Representative (A) of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (B) in such event, to suspend sales of such shares of Parent Common Stock. In such event, Parent shall promptly prepare and file a supplement to or an amendment of such prospectus as may be necessary so that such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. Parent shall, if necessary, promptly amend the Registration Statement of which such prospectus is a part to reflect such amendment or supplement.
(H) Parent shall use commercially reasonable efforts to (i) register and qualify the [***] Milestone Shares covered by the Registration Statement on or prior to the date on which the Registration Statement is declared effective under such other securities or “blue sky” laws of such jurisdictions in the United States as Securityholder Representative reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the [***] Milestone Shares for sale in such jurisdictions; provided, that Parent shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section, (y) subject itself to general
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taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. Parent shall promptly notify Securityholder Representative of the receipt by Parent of any notification with respect to the suspension of the registration or qualification of any of the [***] Milestone Shares for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
(I) Parent shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of the Registration Statement, or the suspension of the qualification of any [***] Milestone Shares for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension as promptly as possible. Parent shall as promptly as practicable notify the Securityholder Representative of the issuance of such order and the resolution thereof or its receipt of notice of the initiation or threat of any proceeding for such purpose.
(J) Parent shall, with the cooperation of the Securityholder Representative as reasonably requested, to facilitate the timely preparation and delivery of certificates in book entry form representing the shares of Parent Common Stock to be sold (not bearing any restrictive legends) in connection with permitted resales thereof under the Registration Statement following and during the effectiveness of the Registration Statement.
(K) Notwithstanding anything to the contrary in this Agreement, Parent shall be entitled to delay the filing or effectiveness of, or suspend the use of, the Registration Statement if [***].
(L) All expenses of incident to Parent’s performance of or compliance with this Section shall be paid by Parent.
(M) [***]
(e) Return of the Merger Consideration. Any former holder of Company Capital Stock or holder of Company Options that has not complied with this Section 2.8 by delivering the requisite Letter of Transmittal and Compliance Certificate (if applicable) as of the Effective Time shall thereafter look only to Parent (subject to abandoned property, escheat or other similar Laws) but only as a general creditor thereof for payment of its claim for its portion of the Merger Consideration. Any portion of the Merger Consideration that remains unclaimed immediately prior to the date on which it would otherwise become subject to any abandoned property, escheat or similar Law, shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto. No interest shall be payable for any shares of Parent Common Stock delivered to Parent pursuant to this Section 2.8(e) or cash which is subsequently delivered to any former holder of Company Capital Stock or holder of Company Options.
(f) No Further Rights in the Company Capital Stock. The applicable portion of the Merger Consideration paid or payable in respect of the surrender for exchange of shares of the Company Capital Stock in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares and there shall be no further registration of transfer on the records of the Surviving Corporation of such shares that were outstanding immediately prior to the Effective Time.
(g) No Liability. Notwithstanding anything to the contrary in this Section 2.8, none of Parent, the Surviving Corporation or any other party hereto shall be liable to any holder of any Company Capital Stock or any holder of any Company Options for any amount paid to a public official pursuant to any abandoned property, escheat or similar Law.
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(h) No Fractional Shares. Notwithstanding any other provision of this Agreement, in connection with the payment and delivery of [***] Milestone Shares, no fractional shares of Parent Common Stock shall be issued in exchange for any Company Capital Stock or Company Options, and no holder of any of the foregoing shall be entitled to receive a fractional share of Parent Common Stock. In the event that any holder of Company Capital Stock or Company Options would otherwise be entitled to receive a fractional share of Parent Common Stock (after aggregating all shares and fractional shares of Parent Common Stock issuable to such holder), then such holder shall be paid an amount in Dollars (without interest) determined by multiplying (i) the Parent Common Stock Price by (ii) the fraction of a share of Parent Common Stock to which such holder would otherwise be entitled. The parties acknowledge that payment of cash consideration in lieu of issuing fractional shares of Parent Common Stock was not separately bargained for consideration but represents merely a mechanical rounding off for purposes of simplifying the problems that would otherwise be caused by the issuance of fractional shares of Parent Common Stock.
2.9 Net Debt Adjustment.
(a) The Company has prepared in good faith and delivered to Parent a certificate, dated as of the date hereof, certified by the Company setting forth the Company’s good faith estimated calculation of: (A) the unpaid Transaction Expenses as of immediately prior to the Closing (“Estimated Transaction Expenses”), (B) the unpaid Indebtedness of the Company as of immediately prior to the Closing (“Estimated Indebtedness”), (C) Cash as of immediately prior to the Closing (“Estimated Cash”), and (D) a calculation of the Net Debt Adjustment Amount, as any such amounts may be modified as agreed to between the Company and Parent pursuant to this Section 2.9 (the “Estimated Closing Statement”). The Estimated Transaction Expenses, the Estimated Indebtedness and the Estimated Cash shall be prepared in accordance with the definitions for each such amount. The Company shall also provide reasonable detail supporting each such calculation.
(b) Following receipt of the Estimated Closing Statement, the Company shall permit Parent and its representatives at all reasonable times and upon reasonable notice to review the Company’s working papers relating to the Estimated Closing Statement (including the Estimated Transaction Expenses, the Estimated Indebtedness and the Estimated Cash) as well as all of the Company’s accounting books and records relating to the determination of the Estimated Closing Statement, and the Company shall make reasonably available its representatives responsible for the preparation of the Estimated Closing Statement in order to respond to the reasonable inquiries of Parent.
(c) The “Net Debt Adjustment Amount” means an amount equal to (i) the Estimated Indebtedness plus (ii) the Estimated Transaction Expenses minus (iii) the Estimated Cash.
(d) Post-Closing Adjustment.
(i) Within [***] after the Closing Date, Parent shall prepare in good faith and deliver to the Securityholder Representative a certificate certified by Parent setting forth Parent’s calculation of (A) the unpaid Transaction Expenses as of immediately prior to the Closing (the “Closing Transaction Expenses”), (B) the unpaid Indebtedness of the Company as of immediately prior to the Closing (the “Closing Indebtedness”), (C) Cash as of immediately prior to the Closing (“Closing Cash”) and (D) a calculation of the Closing Net Debt Amount, as any such amounts may be modified as agreed to between the Company and Parent pursuant to this Section 2.9 (the “Closing Statement”). The Closing Transaction Expenses, the Closing Indebtedness and the Closing Cash shall be prepared in accordance with the definitions for each such amount. Parent shall also provide reasonable detail supporting each such calculation. The “Closing Net Debt Amount” means an amount equal to (x) the Closing Indebtedness plus (y) the Closing Transaction Expenses minus (z) the Closing Cash.
(ii) Following delivery to the Securityholder Representative of Parent’s Closing Statement and until the Closing Adjustment is finally determined pursuant to this Section 2.9(d), the
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Securityholder Representative shall be permitted to review Company’s working papers and such other information as it may reasonably request, in each case, related to the Closing Statement and determination of the amounts included therein. The Closing Net Debt Amount in the Closing Statement shall become final and binding on the parties [***] following Parent’s delivery of the Closing Statement to the Securityholder Representative, unless the Securityholder Representative delivers written notice of its disagreement thereto or with respect to the Closing Transaction Expenses, the Closing Indebtedness, or Closing Cash included in the Closing Statement (“Notice of Disagreement”) to Parent in either case on or prior to such date. If a timely Notice of Disagreement is delivered by the Securityholder Representative, then on the earlier of (a) the date Parent and the Securityholder Representative resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement, and (b) the date all matters in dispute are finally resolved in writing by the Firm, the Closing Net Debt Amount (as adjusted in accordance with this Section 2.9(d)) shall become final and binding on the parties. For purposes of this Section 2.9(d), “Firm” means a nationally recognized accounting firm (other than the auditor for either Parent or Company) that is reasonably acceptable to Parent and the Securityholder Representative.
(iii) During the [***] following delivery of a Notice of Disagreement, Parent and the Securityholder Representative shall use commercially reasonable efforts to resolve in writing any differences which they may have with respect to the matters specified in the Notice of Disagreement. At the end of such [***] period, if no resolution has been reached, Parent and the Securityholder Representative shall submit such dispute to the Firm for resolution of all matters which remain in dispute which were included in the Notice of Disagreement, and the Firm shall make a final determination of the Closing Cash, Closing Indebtedness, Closing Transaction Expenses and Closing Net Debt Amount in accordance with the terms of this Agreement (with it being understood that the parties will request that the Firm deliver to the parties its resolution in writing not more than [***] after its engagement). The Firm shall make a determination only with respect to the matters still in dispute and, with respect to each such matter, its determination shall be within the range of the dispute between Parent and the Securityholder Representative. The Firm’s determination shall be based solely on written materials submitted by Parent and the Securityholder Representative (i.e., not on independent review) and on the definitions included herein and the provisions of this Agreement. Any determinations by the Firm, and any work or analyses performed by the Firm in connection with its resolution of any dispute under this Section 2.9(d) shall not be admissible in evidence in any suit, action or other proceeding between the parties, other than to the extent necessary to enforce payment obligations under this Section 2.9(d).
(iv) The costs and expenses of the Firm shall be allocated between Parent and the Securityholder Representative (on behalf of the Company Securityholders) based upon the percentage of the portion of the contested amount not awarded to Parent or the Company Securityholders compared to the amount actually contested by such party. For example, if the Securityholder Representative claims the Closing Net Debt Amount is $1,000 lower than the amount claimed by Parent, and Parent contests only $500 of the amount claimed by the Securityholder Representative, and if the Firm ultimately resolves the dispute by awarding the Company Securityholders $300 of the $500 contested, then the costs and expenses of the Firm will be allocated 60% (i.e., 300 ÷ 500) to Parent and 40% (i.e., 200 ÷ 500) to the Securityholder Representative (on behalf of the Company Securityholders).
(v) If the difference between the Net Debt Adjustment Amount and the Closing Net Debt Amount as finally determined under this Section 2.9(d) is negative (the inverse of the amount of such difference, the “Underpayment Amount”), then, reasonably promptly after the date on which the Closing Net Debt Amount shall be finalized in accordance with this Section 2.9(d), such Underpayment Amount shall be deemed additional Merger Consideration and shall be paid pursuant to the terms of Section 2.6 to the Company Securityholders.
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(vi) If the difference between the Net Debt Adjustment Amount and the Closing Net Debt Amount as finally determined under this Section 2.9(d) is positive (the amount of such difference, the “Overpayment Amount”; any Underpayment Amount or Overpayment Amount determined in accordance with this Section 2.9(d) shall be the “Closing Adjustment”), then, reasonably promptly after the date on which the Closing Net Debt Amount shall be finalized in accordance with this Section 2.9(d), Parent and the Securityholder Representative shall provide joint written instructions to the Escrow Agent to transfer to Parent, out of the Escrow Fund, the Overpayment Amount.
(vii) All payments required pursuant to this Section 2.9(d) shall be deemed to be adjustments for Tax purposes to the aggregate purchase price paid by Parent for the Company Capital Stock.
2.10 Notices.
(a) Immediately following the execution and delivery of this Agreement and prior to the Effective Time, the Company shall deliver the Stockholder Consent, which shall constitute all requisite approvals by any holders of Company Capital Stock of this Agreement, the Merger and the other transactions contemplated hereby.
2.11 Withholding. Notwithstanding any other provision of this Agreement, the Company, Parent, the Surviving Corporation and the Escrow Agent shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement, such amounts as are required to be deducted or withheld therefrom under any provision of applicable Laws; provided, that Parent shall use commercially reasonable efforts to consult with the applicable payee prior to withholding any amounts payable hereunder and to cooperate with the applicable payee to minimize or eliminate any such withholding. To the extent such amounts are so deducted or withheld and remitted to the applicable Governmental Entity, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid. Any amounts payable to Company Securityholders that require employment Tax withholding shall be paid through the Company’s payroll.
2.12 Tax Consequences. Other than as expressly set forth in this Agreement, no party to this Agreement makes any representations or warranties to any other party regarding the Tax treatment of the transactions pursuant to this Agreement, including the Merger, or any of the Tax consequences to any other party of this Agreement, the Merger or any of the other transactions or agreements contemplated hereby. Each party to this Agreement acknowledges that it is relying solely on its own Tax advisors in connection with this Agreement, the Merger and the other transactions and agreements contemplated hereby.
2.13 Taking of Necessary Action; Further Action. If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company in accordance with this Agreement and the DGCL, then the officers and directors of the Surviving Corporation, Parent and Merger Sub are fully authorized to take, and will take, all such lawful and necessary actions.
2.14 Expense Fund. Immediately prior to the Closing, the Company, or if and to the extent requested by the Company, Parent, will wire, in immediately available funds, the Expense Fund to the Securityholder Representative, which Expense Fund will be governed by the terms and conditions set forth in Section 9.7(d). Any amount of the Expense Fund that is wired by Parent to the Securityholder Representative upon the Company’s request shall be deemed to be a Transaction Expense and included in the Estimated Transaction Expenses.
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Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as of the date hereof and as of the Closing, subject to such exceptions as are specifically disclosed in the disclosure schedule (referencing the appropriate section and subsection numbers or disclosed in any other section or subsection of the disclosure schedule, provided, that it is reasonably apparent upon reading the disclosure in such other section or subsection that such disclosure is responsive to the appropriate section or subsection of this Article 3) supplied by the Company to Parent (the “Company Disclosure Schedule”) concurrently with the execution of this Agreement:
3.1 Organization of the Company.
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as currently conducted. The Company is duly qualified or licensed as a foreign corporation or company to do business, and is in good standing, in each jurisdiction where the character or location of its assets or properties (whether owned, leased or licensed) or the nature of its activities make such qualification or licensing necessary to the business of the Company as currently conducted except where the failure to be so qualified or licensed, individually or in the aggregate, both (i) has not had and would not reasonably be expected to have a Company Material Adverse Effect and (ii) has not had and would not be reasonably expected to have a material adverse effect on the ability of the Company to perform its obligations under this Agreement or any Related Agreement to which it is a party or to consummate the transactions contemplated hereby or thereby and would not materially impede or delay or be reasonably expected to materially impede or delay the consummation of the transactions contemplated hereby or thereby. The Company has made available to Parent a true and correct copy of its certificate of incorporation, as amended to date, and bylaws or articles of association, as amended to date, each of which is in full force and effect on the date hereof (or equivalent documents for limited liability companies, collectively, the “Charter Documents”). The Board of Directors of the Company has not approved or currently proposed any amendment to any of the Charter Documents to the Company Stockholders.
(b) Section 3.1(b) of the Company Disclosure Schedule lists the respective directors, managers, partners and officers of the Company.
(c) Section 3.1(c) of the Company Disclosure Schedule lists, by legal entity, every state or foreign jurisdiction in which the Company has employees or facilities since inception of the Company or such Subsidiary.
3.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of [***] shares of Company Capital Stock, of which (i) [***] shares are authorized as Common Stock, (ii) [***] shares are issued and outstanding as of the time of execution of this Agreement, and (iii) [***] shares will be issued and outstanding as of the Closing (including [***] shares issuable pursuant to Company SAFEs and [***]). All of the issued and outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to any Liens, preemptive rights created by statute, the Charter Documents, or any agreement to which the Company or any Subsidiary of the Company is a party or by which it is bound. Except as set forth on Section 3.3 of the Company Disclosure Schedule, all of the issued and outstanding equity securities of each Subsidiary of the Company are duly authorized, validly issued, fully paid and non-assessable and are not subject to any Liens, preemptive rights created by statute, organizational documents, or any agreement to which the Company or any Subsidiary of the Company is a party or by which it is bound. As of the date hereof, the Company Capital Stock is held by the Persons with
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the domicile addresses and in the amounts of each class as set forth on Section 3.2(a) of the Company Disclosure Schedule, which further sets forth for each such Person the number, class and series of shares held by such Person, the percentage held by such Person relative to each class or series of shares such Person owns and the total issued and outstanding shares of Company Capital Stock as of the date hereof. Except as set forth on Section 3.2(a) of the Company Disclosure Schedule, the number of vested and unvested shares as of the date hereof, and each repurchase and redemption right held by the Company to which any shares of Company Capital Stock are subject, there are no outstanding shares of Company Capital Stock or any equity securities of any Subsidiary of the Company that constitute restricted stock or that are otherwise subject to a repurchase or redemption right. There have been no dividends with respect to any shares of Company Capital Stock or any equity securities of any Subsidiary of the Company, and there are no declared or accrued but unpaid dividends with respect to any shares of Company Capital Stock or any equity securities of any Subsidiary of the Company. Except as set forth in this Section 3.2(a), the Company has no other capital stock authorized, issued or outstanding.
(b) All outstanding shares of Company Capital Stock, equity securities of each Subsidiary of the Company, Company Options, and other equity or equity based awards of the Company or any Subsidiary of the Company have been issued in compliance with all applicable federal, state, local or foreign statutes, Laws, rules or regulations, including federal securities Laws and any applicable state securities or “blue sky” Laws.
(c) Except as set forth in Section 3.2(c) of the Company Disclosure Schedule, the Company has never adopted, sponsored or maintained any stock option plan or any other plan or agreement providing for equity or equity related compensation to any Person. The Company has reserved [***] shares of Company Capital Stock for issuance under the Company’s 2018 Equity Incentive Plan (as amended, the “Stock Plan”), of which options to purchase [***] shares of Company Capital Stock are outstanding as of the date of this Agreement Section 3.2(c) of the Company Disclosure Schedule also sets forth with respect to each Company Option that is outstanding: (i) the name and domicile address of the holder of such Company Option; (ii) whether such Company Option has vested and the vesting schedule applicable to such Company Option (including any acceleration provisions); (iii) the type and number of shares of Company Capital Stock issuable upon the exercise of such Company Option; (iv) the grant date and expiration date of such Company Option; (v) the exercise price per share of Company Capital Stock purchasable under such Company Option; and (vi) whether such Company Option qualifies as an “incentive stock option” as defined in Section 422 of the Code.
(d) Section 3.2(d) of the Company Disclosure Schedule sets forth, as of the date hereof, for each Company SAFE, the name of the holder thereof, the date of issuance of such Company SAFE and the purchase amount of such Company SAFE. True and complete copies of all agreements and instruments evidencing or otherwise relating to the Company SAFEs have been made available to Parent, and such agreements and instruments have not been amended, modified or supplemented other than as provided in this Agreement, and there are no agreements to amend, modify or supplement such agreements or instruments from the agreements made available to Parent. No Company SAFEs are subject to any right of rescission, right of first refusal or preemptive right and all Company SAFEs have been issued in compliance with Law and all requirements set forth in applicable Contracts. All Company SAFEs and any shares of Company Capital Stock issued upon the conversion thereof have been granted in compliance with applicable Law and all requirements set forth in applicable Contracts.
(e) Except as set forth in Section 3.2(e) of the Company Disclosure Schedule, there are no options, warrants, calls, rights, convertible securities, commitments or agreements of any character, written or oral, to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company is bound obligating the Company or any Subsidiary of the Company to reduce its capital or issue, deliver, sell, repurchase, cancel or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Company Capital Stock or any equity securities of any Subsidiary of the Company or obligating the Company or any Subsidiary of the Company to grant,
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extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to the Company or any Subsidiary of the Company.
(f) Except as set forth in Section 3.2(f) of the Company Disclosure Schedule and except as contemplated hereby, there are no (i) voting trusts, proxies, or other agreements or understandings with respect to the voting stock of the Company or any Subsidiary of the Company or (ii) agreements to which the Company or any Subsidiary of the Company is a party relating to the registration, sale or transfer (including agreements relating to rights of first refusal, co sale rights or “drag along” rights) of any Company Capital Stock or any equity securities of any Subsidiary of the Company.
(g) The Fundamental Spreadsheet Information in the Spreadsheet is accurate, correct and complete in all respects and it reflects an allocation of the Merger Consideration that is in all respects consistent with, and determined in accordance with, the applicable provisions of the Charter Documents.
(h) The information provided in the Spreadsheet that is not Fundamental Spreadsheet Information is accurate, correct and complete in all respects.
3.3 Subsidiaries. The Company does not own or control and has never owned or controlled, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. The Company is not and has never been a partner, member or other equity holder in any joint venture, partnership or similar legal entity or organization.
3.4 Authority; Enforceability.
(a) The Company has all requisite power and authority to enter into this Agreement and any Related Agreements to which it is a party and, subject to obtaining the Stockholder Consent, to consummate the Merger and to consummate the other transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and any Related Agreements to which the Company is a party and the consummation of the Merger and other transactions by the Company contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company and no further corporate action is required on the part of the Company to authorize this Agreement and any Related Agreements to which it is a party, the Merger or the other transactions contemplated hereby and thereby (other than, in the case of the consummation of the Merger, obtaining the Stockholder Consent and the filing and recordation of the Certificate of Merger as required by the DGCL).
(b) This Agreement and the Merger have been unanimously approved by the Board of Directors of the Company. This Agreement and each of the Related Agreements to which the Company is a party have been duly executed and delivered by the Company and assuming the due authorization, execution and delivery by the other parties hereto and thereto, constitute the valid and binding obligations of the Company enforceable against it in accordance with their respective terms, subject to (i) Laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of Law governing specific performance, injunctive relief and other equitable remedies.
3.5 Stockholder Consent. The Stockholder Consent, when executed and delivered, will satisfy all requirements for consents, votes or approvals by the holders of any classes or series of Company Capital Stock necessary to approve and adopt, and consummate, this Agreement, the Merger, the Related Agreements to which the Company is party and the transactions contemplated hereby and thereby in accordance with the Charter Documents and applicable Law.
3.6 No Conflict. The execution and delivery by each of the Company of this Agreement and any Related Agreement to which it is a party, and the consummation of the Merger or any other transactions contemplated hereby and thereby, will not conflict with or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of notice or termination, cancellation,
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modification or acceleration of any right or obligation or loss of any benefit under (any such event, a “Conflict”), (i) any provision of the Charter Documents or any organizational documents of any Subsidiary of the Company, (ii) any Contract to which the Company or any Subsidiary of the Company is a party or by which any of the Company’s properties or assets are bound, or (iii) any Laws applicable to the Company or any of its properties or assets (whether tangible or intangible). Section 3.6 of the Company Disclosure Schedule sets forth all necessary consents, waivers, amendments or approvals of parties to any Contracts to which the Company or any Subsidiary of the Company is a party or by which any of the Company’s properties or assets may be bound as are required thereunder in connection with the Merger, or for any such Contract to remain in full force and effect without limitation, modification, acceleration of payment or other obligations thereunder, or alteration after the closing of the transactions contemplated hereby. Following the Closing, the Company will continue to be permitted to exercise all of its rights under the Contracts without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay (without acceleration) pursuant to the terms of such Contracts had the transactions contemplated by this Agreement not occurred, except in each case any such restrictions or payments arising as a result of any Contract to which Parent or any of its Affiliates is a party or otherwise bound or any Law or Order to which Parent or any of its Affiliates is subject.
3.7 Consents. No consent, notice, waiver, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required by, or with respect to, the Company in connection with the execution and delivery of this Agreement and any Related Agreement to which the Company is a party or the consummation of the Merger and the other transactions contemplated hereby and thereby, except for (i) the filing of a Certificate of Merger as provided in Section 2.2, (ii) such consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable securities Laws and (iii) such filings and notifications as may be required under the HSR Act, or any other applicable federal, state or foreign Laws or other legal restraint designed to govern competition or prohibit, restrict or regulate actions with the purpose or effect of monopolization or restraint of trade (collectively “Antitrust Laws”), to be made by the Company, or by its “ultimate parent entity” as that term is defined in the HSR Act, and the expiration or early termination of any applicable waiting periods under the HSR Act or applicable foreign Antitrust Laws.
3.8 Company Financial Statements.
(a) Section 3.8(a) of the Company Disclosure Schedule sets forth the Financials. The Financials are true and correct in all material respects. The Company’s balance sheet as of the Balance Sheet Date is referred to hereinafter as the “Current Balance Sheet.”
3.9 No Undisclosed Liabilities, No Company Material Adverse Effect; Ordinary Course.
(a) The Company has no material Liabilities of any type, whether or not accrued, absolute, contingent, matured, unmatured, known or not known, on- or off-balance sheet, except for those which (i) have been reflected in the Current Balance Sheet, (ii) have arisen in the ordinary course of business since the Balance Sheet Date and are reflected in the certificate delivered under Section 2.9(a), (iii) for Transaction Expenses or Indebtedness or (iv) are Excluded Employment Liabilities.
(b) Since the Balance Sheet Date, there has not occurred any Company Material Adverse Effect.
3.10 Tax Matters.
(a) Taxes.
(i) The Company has (A) prepared and filed all Tax Returns required to be filed by the Company and all such Tax Returns are true and correct in all material respects, and (B) paid all Taxes that were due and payable (whether or not shown on a Tax Return).
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(ii) The Company has paid or withheld with respect to its employees, stockholders and other third parties, all U.S. federal, state and non-U.S. income Taxes and social security charges and similar fees, Federal Insurance Contribution Act taxes, Federal Unemployment Tax Act taxes and other Taxes required to be paid or withheld, and have paid over any such Taxes to the appropriate authorities.
(iii) There is no Tax deficiency outstanding, assessed or proposed in writing against the Company, nor has the Company executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax, which waiver or extension or still in effect.
(iv) Except as set forth on Section 3.10(a)(iv) of the Company Disclosure Schedule, no audit or other examination of any Tax Return of the Company is presently in progress, nor has the Company been notified in writing of any request for such an audit or other examination. No adjustment relating to any Tax Return filed by the Company has been proposed in writing by any Tax authority, which adjustment has not been resolved.
(v) The Company has delivered to Parent or made available to Parent, copies of all income and other material Tax Returns for the Company filed for all periods since and including the taxable period ended December 31, 2018.
(vi) No written claim has ever been made by a Tax authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(vii) The Company (A) is not a party to any Tax sharing, indemnification or allocation agreement, nor does the Company owe any amount under any such agreement, other than any agreement entered into in the ordinary course of business and the primary purpose of which is unrelated to Taxes or Tax Returns, (B) has no Liability for the Taxes of any Person (other than Company) under Treasury Regulation §1.1502-6 (or any similar provision of state, local or non-U.S. Law), as a transferee or successor, by Contract, by operation of Law or otherwise or (C) is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for Tax purposes.
(viii) The Company has not been, at any time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(ix) There are (and immediately following the Effective Time there will be) no Liens on the assets of the Company relating or attributable to Taxes other than Liens for Taxes not yet due and payable or that are being contested in good faith pursuant to appropriate proceedings and for which adequate reserves have been established on the Financials in accordance with GAAP.
(x) The Company has not engaged in a “listed transaction,” as set forth in Section 6707A(c)(2) of the Code and Treasury Regulation §1.6011-4(b) or any similar provision of state, local or non-U.S. Law, or any transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation or other form of published guidance as a listed transaction as set forth in Section 6707A(c)(1) of the Code and Treasury Regulation §1.6011-4(b)(2).
(xi) The Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code.
(xii) Any transfer of property which was subject to a substantial risk of forfeiture and which would otherwise have been subject to taxation under Section 83(a) of the Code is covered by a valid and timely filed election under Section 83(b) of the Code, and a copy of such election has been provided to the Company.
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(xiii) The Company will not be required to include any item of material income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (A) any installment sale or open transaction disposition made prior to the Closing, (B) any prepaid amount or deferred revenue received prior to the Closing, (C) any “closing agreement,” as described in Section 7121 of the Code (or any corresponding provision of state, local or foreign income tax Law) entered into prior to the Closing, (D) a change in the method of accounting made prior to the Closing, including any adjustment pursuant to Code Sections 481 or 263A (or any corresponding or similar provision of state, local, or foreign income Tax law), (E) an election under Section 108(i) of the Code, (F) the use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, or (G) application of Section 951 of the Code with respect to income earned or recognized or payments received prior to the Closing.
(xiv) The Company is not subject to any private letter ruling or closing agreement of the IRS or comparable rulings of any other Governmental Entity. There is no power of attorney given by or binding upon the Company with respect to Taxes for any period for which the statute of limitations (including any waivers or extensions) has not yet expired that is currently in effect.
(xv) The Company is not a party to a gain recognition agreement under Section 367 of the Code that is currently in effect.
(xvi) The Company has made available to Parent all documentation relating to any Tax holidays or incentives currently applicable to the Company. To the Knowledge of the Company, no amounts attributable to any Tax holidays or Tax incentives will be required to be repaid or reimbursed by the Company as a result of the transactions contemplated in this Agreement.
(xvii) The Company has not been and is not subject to Tax in a country other than its country of organization by virtue of having a place of business, a permanent establishment or branch in any country outside the country of its organization.
(xviii) The prices for any property or services (or for the use of any property) provided by or to the Company are arm’s length prices for purposes of the relevant transfer pricing laws, including Treasury Regulations under Code Section 482.
(xix) The Company has not deferred any Taxes with respect to any Pre-Closing Tax Period to a period that is not a Pre-Closing Tax Period under Section 2302 of the CARES Act or IRS Notice 2020-65, or any similar state or local Law.
(b) Executive Compensation Tax and Parachute Payments. Except as set forth on Section 3.10(b) of the Company Disclosure Schedule or as expressly provided in this Agreement, none of the execution or delivery of this Agreement, the shareholder approval of this Agreement or the consummation of the transactions contemplated by this Agreement would be reasonably expected to, either alone or in conjunction with any other event (whether contingent or otherwise) (i) result in or cause the accelerated vesting payment, funding or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer, director or other service provider of the Company, (ii) result in the forgiveness of any indebtedness of any employee, officer, director or other service provider of the Company, (iii) further restrict any rights of the Company to amend or terminate any Company Employee Plan or (iv) result in any “excess parachute payment” as defined in Section 280G(b)(2) of the Code (whether or not such payment is considered to be reasonable compensation for services rendered). No Company Employee Plan provides for any tax “gross-up” or similar “make-whole” payments. The per share exercise price of each Company Option was no less than the fair market value of a share of Company Capital Stock on the date of grant of such Company Option determined in a manner consistent with Section 409A of the Code. Each Company Employee Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code has been operated and maintained in all material respects in operational and documentary compliance with Section 409A of the Code and applicable
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guidance thereunder. No payment to be made under any Company Employee Plan is, or to the Knowledge of the Company will be, subject to the penalties of Section 409A(a)(1) of the Code.
3.11 Restrictions on Business Activities. There is no Contract (non-competition or otherwise), judgment, injunction, order or decree to which the Company is a party or otherwise binding upon the Company which has or may reasonably be expected to have the effect of prohibiting or impairing any business practice of the Company, any acquisition of property and assets (including tangible and intangible property and assets) by the Company, the conduct of business by the Company, or otherwise limiting the freedom of the Company to engage in any line of business or to compete with any Person. Without limiting the generality of the foregoing, the Company has not entered into any Contract under which the Company is restricted from developing, selling, licensing, manufacturing or otherwise distributing or commercializing any Company Intellectual Property or Company Products or from providing services to customers or potential customers or any class of customers, in any geographic area, during any period of time, or in any segment of the market, including by means of any grant of exclusivity.
3.12 Title to Properties; Status of Liens and Encumbrances.
(a) The Company does not own any real property, nor has the Company ever owned any real property.
(b) Except as set forth in Section 3.12(b) of the Company Disclosure Schedule, the Company has not entered into, nor is bound by, any lease, lease guaranty, sublease, agreement for the leasing, tenancy, license, other use or occupancy of, or otherwise granting a right in or relating to any real property nor is any Person in the course of acquiring any such rights or interests.
(c) The Company has good and valid title to, ownership of, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used or held for use in or necessary for the conduct of the business of the Company as currently conducted, free and clear of any Liens, except Liens for Taxes not yet due and payable or that are being contested in good faith pursuant to appropriate proceedings and for which adequate reserves have been set forth on the Estimated Closing Statement in accordance with GAAP.
(d) Section 3.12(d) of the Company Disclosure Schedule sets forth a complete of real property leases that the Company is a party to and each such lease is valid and in full force and effect, and the Company has not received or provided any written or oral notice of any default or event that with notice of lapse of time, or both, would constitute a default by the Company, or any other party thereto under any of the real property leases identified in the Company Disclosure Schedule. The Company have timely and fully performed all covenants and obligations under the property leases identified in the Company Disclosure Schedule. The Company does not have any existing offsets, defenses, counterclaims, or credits against rentals under any provision of the real property leases identified in the Company Disclosure Schedule, other than any security deposit.
(e) Except as set forth in Section 3.12(e) of the Company Disclosure Schedule, the Company has not previously assigned, transferred, or conveyed all or any part of its right, title, or interest under any of the real property leases identified in the Company Disclosure Schedule to any other Person.
(f) The property and assets of the Company constitute all of the properties and assets (whether real, personal or mixed and whether tangible or intangible) necessary and sufficient to permit Parent and its Subsidiaries (including the Surviving Corporation) to conduct the business of the Company immediately after the Closing in the ordinary course of business consistent with past practice.
(g) To the Knowledge of Company, there is no action or proceeding pending or threatened relating to the real property identified in the Company Disclosure Schedule.
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3.13 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the following terms shall have the following respective meanings:
“Company Associate” means [***].
“Company Controlled Technology” means all Technology that is a part of the Company Intellectual Property.
“Company Intellectual Property” means [***].
“Company IT Systems” means all computer systems, including software, hardware, firmware, middleware and platforms, interfaces, systems, networks, information technology equipment, facilities, website, infrastructure, workstations, switches, data communications lines and associated documentation used or held for use by or on behalf of the Company.
“Company Owned IP” shall mean all Intellectual Property Rights that are owned or purported to be owned by the Company or any of its Affiliates [***].
“Company Registered Intellectual Property” means all Registered Intellectual Property that is part of Company Intellectual Property.
“Current Company Technology” means, as of the date of this Agreement, [***].
“DNA Writing Technology” means [***].
“Exploitation” means to make, have made, import, export, use, sell or offer for sale, including to research, develop, register, modify, enhance, improve, manufacture, have manufactured, store, formulate, export, transport, distribute, promote, market or otherwise dispose of.
“Intellectual Property” means any and all Intellectual Property Rights and Technology.
“Intellectual Property Rights” means all intellectual property and industrial property rights and rights in confidential information throughout the world, including all U.S. and foreign (a) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof (“Patents”); (b) trademarks, service marks, names, corporate names, trade names, domain names, URLs, social media addresses, logos, slogans, trade dress, design rights, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing (“Trademarks”); (c) copyrights and copyrightable subject matter (“Copyrights”); (d) rights in computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, technology supporting the foregoing, and all documentation, including user manuals and training materials, related to any of the foregoing; (e) trade secrets and all other confidential information, ideas, know-how, inventions, proprietary processes, protocols, specifications, techniques, data, results, plans, formulae, formulations, compositions, models, and methodologies (“Trade Secrets”); (f) rights in the foregoing and in other similar intangible assets; and (g) applications and registrations for the foregoing.
“Registered Intellectual Property” means all Patents (including related applications), Trademark applications and registrations (including domain names) and Copyright registrations and applications.
“Technology” means (a) works of authorship including computer programs, in source code and executable code form, and their architecture and documentation; (b) inventions (whether or not patentable), discoveries and improvements; (c) Trade Secrets; (d) databases, data compilations and collections, and customer and technical data and related information; (e) methods and processes; (f) devices, prototypes, designs and schematics; and (g) tangible items related to, constituting, disclosing or embodying any or all of the foregoing, including all versions thereof in any media or form (including electronic records and
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computer files, laboratory notebooks, and any other written or recorded materials) and all technology from which such items were derived.
(b) Section 3.13(b) of the Company Disclosure Schedule sets forth a correct and complete list of all Company Registered Intellectual Property (which includes any and all Registered Intellectual Property licensed to the Company pursuant to inbound license agreements (“Company Licensed IP”)), identifying for each: (i) the current assignee, (ii) the title, (iii) the jurisdiction of application or registration, (iv) the application or registration number, and (v) the filing date.
(c) The development of the Company Intellectual Property has not involved the misappropriation of any Trade Secrets from any third party. The existing claims in the patents and patent applications included in the Company Intellectual Property do not include a claimed invention derived from (conceived by and communicated from) any Person who has a right, title, or interest in such claimed invention and who has not assigned their entire right, title, and interest in and to such Intellectual Property to the Company or, in the case of Company Licensed IP, such Company Licensed IP to the licensor of such Company Licensed IP, as established pursuant to a derivation proceeding under 35 U.S.C. § 135.
(d) With respect to Company Owned IP, the Company is the sole and exclusive beneficial and record owner of each such item of Registered Intellectual Property that is also Company Owned IP (“Company Owned Registered IP”) and, to the Company’s Knowledge, the Company is the sole and exclusive beneficial owner of all other Company Owned IP. To the Company’s Knowledge, all Company Owned Registered IP has been validly assigned to the Company or, in the case of Company Licensed IP, such Company Licensed IP has been validly assigned to the licensor of such Company Licensed IP.
(e) All Company Owned Registered IP is subsisting, valid and enforceable. There is no, and in the past three (3) years there has been no, pending or, to the Company’s Knowledge, threatened Proceeding related to the scope, validity, registrability, patentability, enforceability, priority, inventorship or ownership of any Company Registered Intellectual Property or, to the Company’s Knowledge, any other Company Intellectual Property. None of the Company Owned IP or, to the Company’s Knowledge, any other Company Intellectual Property is or has been subject to any Order or Proceeding that adversely restricts the use, transfer, registration or licensing of any such Company Intellectual Property by the Company, or otherwise adversely affects (including, for the avoidance of doubt, any Order or Proceeding alleging or asserting that any Company Intellectual Property involved misappropriation or derivation of any Intellectual Property of another Person) the validity, scope, use, registrability, patentability, enforceability, priority, inventorship or ownership of any such Company Intellectual Property. All Company Owned Registered IP and, to the Company’s Knowledge, all other Company Registered Intellectual Property has been filed, prosecuted and maintained (as applicable) in accordance with all applicable Laws, including all Laws regarding the duty to disclose and duties of candor.
(f) Except as set forth in Section 3.13(f) of the Company Disclosure Schedule, to the Company’s Knowledge, the Company owns and possesses all right, title and interest in and to or has the right to use all Company Intellectual Property and all other Intellectual Property Rights used in their business as currently conducted and as currently contemplated to be conducted, free and clear of all Liens. Nothing in this Section 3.13(f) shall be deemed to be a representation that the Company Intellectual Property does not infringe or misappropriate the Intellectual Property Rights of a third party (a “Non-Infringement Representation”). The only Non-Infringement Representations provided by Company under this Agreement are included in Section 3.13(c), the second sentence of Section 3.13(e) and Section 3.13(h).
(g) No Company Associate owns or has any claim, right (whether or not currently exercisable) or interest to or in any Company Owned IP, and each Company Associate who participated in the creation, invention, development or modification of any Company Owned IP, or any other Intellectual Property Rights for, or by or on behalf of, the Company, has signed a valid, enforceable (except as such
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enforceability may be limited by bankruptcy or insolvency laws or principles of equity) written agreement containing an assignment of all right, title and interest with respect to such Intellectual Property Rights to the Company and confidentiality provisions protecting such Company Intellectual Property, and, to the Company’s Knowledge, there is no material breach under any such agreement (each such agreement, a “Company Associate Agreement”). To the Company’s Knowledge, no Company Associate is in breach of any of its obligations to any other Person (including any current or former employer) as a result of its compliance with the Company Associate Agreement or any of its activities in connection with the Company. To the Company’s Knowledge, no Company Associate has refused to comply with the Company Associate Agreement, or alleged or asserted that any provision of a Company Associate Agreement is inapplicable or unenforceable.
(h) There are no Proceedings, and no Proceeding has been initiated, asserted or, to the Company’s Knowledge, threatened against the Company, relating to any actual, alleged or suspected infringement of any Intellectual Property owned or controlled by a third party.
(i) Section 3.13(i) of the Company Disclosure Schedule sets forth each Contract pursuant to which the Company receives or has received funding, facilities or personnel of any Governmental Entity or any university, college, research institute or other educational institution that is being or has been used to create, in whole or in part, Company Owned IP.
(j) The Company has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce their rights in all material Trade Secrets included in the Company Owned IP or otherwise disclosed in confidence to the Company, including requiring all Persons having access thereto to execute written non-disclosure agreements and storing such Trade Secrets in a manner that is reasonably expected to maintain the confidentiality of and otherwise protect such Trade Secrets. To the Company’s Knowledge, there has not been any disclosure of or access to any such Trade Secret to any Person in a manner that has resulted or is likely to result in the loss of trade secret or other rights in and to such information.
(k) No Proceedings have been or are pending, or to the Company’s Knowledge, threatened in writing, against the Company that allege or assert any actual, alleged or suspected infringement, misappropriation or other violation of any Intellectual Property Rights of another Person.
(l) No Proceeding has been initiated, asserted or threatened in writing against a Person by the Company that alleges or asserts any actual, alleged or suspected infringement of any Company Intellectual Property.
(m) The Company IT Systems have adequate capability and capacity to enable the Company to conduct its business, in all material respects, in the manner currently conducted, and there has been no failure of the Company IT Systems that has resulted in a material disruption or interruption in the operation of the Company’s business for the last three (3) years. For the last three (3) years, to the Company’s Knowledge, the Company IT Systems have not had any device or feature designed to disrupt, disable or otherwise impair the functioning thereof or any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device” or other code or routines that permit unauthorized access or the unauthorized disablement of the Company IT Systems, or erasure of any information or data, in each case that would have a material effect on the functioning of the Company IT Systems taken as a whole. Section 3.13(m) of the Company Disclosure Schedule describes the Company’s current back-up, disaster recovery and business continuity plans and procedures.
(n) Except as set forth in Section 3.13(n) of the Company Disclosure Schedule, the consummation of the Merger will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, any Company Intellectual Property.
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(o) [***].
(i) [***].
(ii) [***].
(iii) [***].
(iv) [***].
(v) [***].
(vi) [***].
[***].
3.14 Material Contracts.
(a) Except as set forth in Section 3.14(a) of the Company Disclosure Schedule (specifying the appropriate paragraph), the Company is not a party to, or has any obligations, rights or benefits under:
(i) any Contract that restricts or purports to restrict the ability of the Company or any of its controlled Affiliates (including, after the Closing Date, Parent, the Surviving Corporation or any of its Affiliates) to (A) conduct or compete with any line of business or operations or in any geographic area or during any period of time, (B) solicit or engage any customer, vendor or service provider, or (C) beneficially own any assets, properties or rights, anywhere at any time;
(ii) any employment, contractor or consulting Contract with any officer of the Company or any other employee, contractor or consultant, and any employment, contractor or consulting Contract with an employee consultant or contractor that provides for any severance or termination pay (in cash or otherwise) or retention or change in control compensation or benefits to any employee, consultant or contractor;
(iii) any Contract with any professional employer organization or similar entity or Person pursuant to which such entity or Person performs or provides the Company or any Subsidiary thereof with employment, employer and/or human resources-related services (or similar administrative services) in regard to employees and/or Contingent Workers of or working for the Company;
(iv) any Contract for Indebtedness (excluding purchase orders) and any Contract pursuant to which any assets or property of the Company are subject to a Lien;
(v) any lease of personal property or other Contract affecting the ownership of, leasing of, or other interest in, any personal property of the Company;
(vi) any surety or guarantee agreement or other similar undertaking with respect to contractual performance;
(vii) any Contract (including purchase orders) with a supplier or for the purchase of equipment, materials, products, supplies or services by the Company with obligations in excess of [***] in a calendar year;
(viii) any Contract (other than any Contract disclosed under clause (vii)) relating to capital expenditures and involving payments by the Company in excess of [***] in a calendar year;
(ix) any Contract relating to the disposition or acquisition of material assets or any interest in any business enterprise outside the ordinary course of business in excess of [***];
(x) any Contract (including purchase orders) with a customer in an amount or value in excess of [***] in aggregate in a calendar year;
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(xi) any dealer, distribution, joint marketing, joint venture, partnership, strategic alliance, Affiliate or development agreement or outsourcing arrangement;
(xii) any Contract that contains a right of first refusal, first offer, first negotiation, take or pay, exclusivity, minimum purchase commitments, or “most favored nation” provision in favor of any Person;
(xiii) any Contract providing for the settlement of any suit, claim, action, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity or arbitrator;
(xiv) any sales representative, original equipment manufacturer, manufacturing, value added, remarketer, reseller, or independent software vendor, or other Contract for use or distribution of the Company Products, Company Controlled Technology, Company Intellectual Property or services of the Company;
(xv) any Contracts under which a third party licenses or provides any Intellectual Property to the Company;
(xvi) any other Contract that requires payments by the Company in excess of [***] which is not cancelable by the Company without penalty within thirty (30) days.
(b) True and complete copies of each Contract disclosed in the Company Disclosure Schedule or required to be disclosed pursuant to this Section 3.14(b) as well as Section 3.13(i) of the Company Disclosure Schedule (each, a “Material Contract” and collectively, the “Material Contracts”) have been made available to Parent.
(c) Each Material Contract to which the Company is a party or any of its properties or assets (whether tangible or intangible) is subject is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, and is in full force and effect with respect to the Company and, to the Knowledge of the Company, any other party thereto subject to (A) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (B) rules of law governing specific performance, injunctive relief and other equitable remedies. The Company is in material compliance with and has not materially breached, violated or defaulted under, or, to the Knowledge of the Company, received written notice that it has materially breached, violated or defaulted under, any of the terms or conditions of any Material Contract, nor to the Knowledge of the Company is any party obligated to the Company pursuant to any Material Contract subject to any material breach, violation or default thereunder, nor does the Company have Knowledge of any presently existing facts or circumstances that, with the lapse of time, giving of notice, or both would constitute such a material breach, violation or default by the Company or its Subsidiary or any such other party.
(d) As of the date hereof, the Company has performed all material obligations required to have been performed by the Company prior to the Effective Time pursuant to each Material Contract.
3.15 Interested Party Transactions.
(a) Except as set forth on Section 3.15 of the Company Disclosure Schedule, no (i) Company Securityholder, officer, manager, partner or director of the Company or any Subsidiary of the Company, (ii) Affiliate or immediate family member of any such Person listed in (i), or (iii) Person that any Person listed in (i) or (ii) has or has had an equity or other ownership or financial interest (each, an “Interested Party”), has or has had in the prior three (3) years, directly or indirectly, (A) any interest in property (including real and personal property) or assets (including tangible and intangible assets) used or held for use in the business of the Company, (B) any Person that furnished, licensed or sold, or furnishes, licenses or sells, services, products, or technology that the Company furnishes or sells, or proposes to furnish or sell, (C) any interest in any Person that purchases from or sells, licenses or furnishes to the
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Company, any services, products or technology, (D) any interest in Company SAFEs, or (E) any interest in, or is a party to, any Contract or has any right or claim against the Company or any of their respective assets.
(b) All transactions pursuant to which any Interested Party has purchased any material services, products, or technology from, or sold or furnished any services, products or technology to, the Company that were entered into have been on an arms’ length basis on terms no less favorable to the Company than would be available from an unaffiliated party.
3.16 Permits. The Company possesses and has possessed all Permits required for the operation of its business, and is, and in the last [***] has been, in compliance in all material respects with the terms and conditions of all such Permits. All such Permits are listed on Section 3.16 of the Company Disclosure Schedule. All such Permits are valid and in full force and effect and such Permits constitute all Permits required to permit the Company to operate or conduct their respective businesses or hold any interest in their respective properties, rights or assets.
3.17 Litigation. There is, and in the last [***] there has been, no material action, suit, claim, litigation, investigation, arbitration or proceeding of any nature pending, or to the Knowledge of the Company, threatened in writing, against the Company, their respective properties or assets (tangible or intangible) or any of the Company’s employees, officers or directors (in their capacities as such).
3.18 Minute Books. The minutes of the Company made available to Parent contain complete and accurate records of all material actions taken, and summaries of all meetings held, by the equityholders and the Board of Directors (or similar governing body) of the Company (and any committees thereof) since the time of incorporation of the Company. At the Closing, the minute books of the Company will be in the possession of the Company.
3.19 Environmental Matters. Except as set forth on Section 3.19 of the Company Disclosure Schedule:
(a) (i) The Company is, and for the last [***] has been, in compliance in all material respects with all applicable Environmental Laws, and (ii) the Company holds and is, and for the last three (3) years has been, in compliance in all material respects with all permits, certificates, licenses, approvals, registrations and authorizations required under all Environmental Laws in connection with the business of the Company (“Environmental Permits”). All Environmental Permits are in full force and effect.
(b) To the Knowledge of the Company, neither the Company nor any Subsidiary of the Company may be held responsible, has transported or disposed of, or allowed or arranged for any third party to transport or dispose of, any Hazardous Material to or at any location that is listed or proposed for listing on the National Priorities List promulgated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Comprehensive Environmental Response, Compensation, and Liability Information System, or any equivalent list of sites for cleanup under any federal, state or local program.
(c) To the Knowledge of the Company, the Company or any Person for whose conduct the Company may be held responsible, has not Released any Hazardous Material on, in, from, under or at any property now or formerly owned, operated or leased by the Company, except as authorized by, and in compliance with, validly issued Environmental Permits. To the Knowledge of the Company, no Hazardous Material is present or has come to be located in the Environment at any property now or formerly owned, operated or leased by the Company in an amount, manner, condition or concentration that requires any reporting, notification, investigation, remediation, abatement or other response action by the Company pursuant to any Environmental Laws.
(d) To the Knowledge of the Company, there are no active or abandoned underground storage tanks present at, on, or under the real property owned, operated or leased by the Company.
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(e) The Company has not: (i) received written notice under the citizen suit provisions of any Environmental Law; (ii) received any written notice, demand, complaint or claim under any Environmental Law; or (iii) been subject to or, to the Knowledge of the Company, threatened (orally or in writing) with any governmental or citizen enforcement action with respect to any Environmental Law.
(f) The Company has provided or made available to Parent all documents, records and information possessed by the Company concerning any environmental or health and safety matter relevant to the business of the Company or to any property now or formerly owned, operated or leased by the Company at any time since [***], including environmental audits, environmental risk assessments, site assessments, documentation regarding waste disposal, Environmental Permits, and reports or correspondence submitted to or issued by any Governmental Entity.
3.20 Brokers’ and Finders’ Fees. The Company has not incurred, or will incur, directly or indirectly, any Liability for brokerage or finders’ fees or agents’ commissions, fees related to investment banking or similar advisory services or any similar charges in connection with this Agreement or any transaction contemplated hereby, nor will Parent, the Company or the Surviving Corporation incur, directly or indirectly, any such Liability based on arrangements made by or on behalf of the Company.
3.21 Employee Benefit Plans.
(a) Section 3.21(a) of the Company Disclosure Schedule sets forth a true, complete and correct list of each material Company Employee Plan (other than any offer letters that may be terminated without any payment or Liability).
(b) True, complete and correct copies of the following documents, with respect to each material Company Employee Plan, where applicable, have previously been made available to Parent: (i) all documents embodying or governing such Company Employee Plan (or for unwritten Company Employee Plans a written description of the material terms of such Company Employee Plan) and any funding medium for the Company Employee Plan; (ii) the most recent IRS determination or opinion letter; (iii) the most recently filed Form 5500; (iv) the most recent actuarial valuation report; (v) the most recent summary plan description (or other descriptions provided to employees) and all modifications thereto; (vi) the last three years of non-discrimination testing results; and (vii) all non-routine correspondence to and from any Governmental Entity.
(c) Each Company Employee Plan that is intended to qualify under Section 401(a) of the Code is so qualified and has received a favorable determination or approval letter from the IRS with respect to such qualification, or may rely on an opinion letter issued by the IRS with respect to a prototype plan adopted in accordance with the requirements for such reliance, or has time remaining for application to the IRS for a determination of the qualified status of such Company Employee Plan for any period for which such Company Employee Plan would not otherwise be covered by an IRS determination and, to the knowledge of the Company, no event or omission has occurred that would cause any Company Employee Plan to lose such qualification or require corrective action to the IRS or Employee Plan Compliance Resolution System to maintain such qualification.
(d) (i) Each Company Employee Plan is, and has been established, operated, and administered in all material respects in compliance with applicable Laws and with its terms, including without limitation ERISA, the Code, and the Affordable Care Act. (ii) No claim, litigation or governmental or administrative proceeding, audit, investigation or other proceeding (other than those relating to routine claims for benefits) is pending or, to the Knowledge of the Company, threatened with respect to any Company Employee Plan or any fiduciary or service provider thereof, and, to the Knowledge of the Company, there is no reasonable basis for any such claim, litigation, audit, investigation or proceeding. (iii) All payments and/or contributions required to have been made with respect to all Company Employee Plans either have been timely made or have been accrued in accordance with the terms of the applicable Company Employee Plan and applicable Law.
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(e) No Company Employee Plan is and neither the Company nor any ERISA Affiliate has ever maintained, contributed to, or been required to contribute to or had any Liability (whether contingent or otherwise) or obligation (including on account of any ERISA Affiliate) with respect to (i) any employee benefit plan that is or was subject to Title IV of ERISA, Section 412 of the Code, Section 302 of ERISA, (ii) a Multiemployer Plan, (iii) any funded welfare benefit plan within the meaning of Section 419 of the Code, (iv) any “multiple employer plan” (within the meaning of Section 210 of ERISA or Section 413(c) of the Code), or (v) any “multiple employer welfare arrangement” (as such term is defined in Section 3(40) of ERISA), and neither the Company nor any ERISA Affiliate has ever incurred any liability under Title IV of ERISA that has not been paid in full.
(f) No Company Employee Plans provide health care or any other non-pension benefits to any employees or other service providers after their employment is terminated (other than as required by Part 6 of Subtitle B of Title I of ERISA or similar state law), and the Company has no obligation to provide such post-termination benefits.
(g) The Company has not announced its intention to modify or terminate any material Company Employee Plan or adopt any arrangement or program which, once established, would come within the definition of a Company Employee Plan. No Company Employee Plan provides health or long-term disability benefits that are not fully insured through an insurance contract.
(h) No Company Employee Plan is subject to the laws of any jurisdiction outside the United States.
3.22 Employment.
(a) The Company (i) is, and at all times during the past four (4) years has been, in compliance, in all material respects, with all applicable Laws and collective bargaining agreements and arrangements, in each case respecting labor and employment matters, including Laws relating to employment practices, work authorization and immigration (including the Immigration Reform and Control Act of 1986 and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA)), terms and conditions of employment, fair employment practices, discrimination, harassment, retaliation, whistleblowing, disability, fair labor standards, workers compensation, wrongful discharge, immigration (including the requirements of the Immigration Reform Control Act of 1986), occupational safety and health, family and medical leave, wages and hours, (including with respect to overtime, minimum wage, California wage and hour laws, and meal and rest breaks), the classification of Contingent Workers, and employee terminations, and in each case, with respect to any current or former employee, consultant, independent contractor, manager, partner or director of the Company or any ERISA Affiliate, and (ii) has withheld and reported all amounts required by applicable Laws or by agreement to be withheld and reported with respect to wages, salaries, bonuses, commissions, fees and any other compensation, remuneration and payments to any current or former employee, consultant, independent contractor, manager, partner or director of the Company except as would not reasonably be expected to result in a material Liability to the Company. There are no, and at no time during the past four (4) years have there been any, actions, suits, litigations, governmental audits, governmental investigations, internal investigations arbitrations, claims or administrative matters or proceedings pending, or to the Knowledge of the Company, threatened in writing, against the Company relating to any employment or labor matter. Except as would not reasonably be expected to result in a material Liability to the Company, to the extent that the Company has engaged or engages the services of any Person as an independent contractor, consultant, temporary or leased worker, or other servant or agent who is or has been classified and treated as other than an “employee” and/or compensates or has compensated such Person other than through wages paid through payroll and reported on a form W-2 (each such Person, a “Contingent Worker”), the Company has properly classified and treated all such Persons in accordance with applicable Laws in all material respects, and for purposes of all employee benefit plans and perquisites.
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(b) None of the employment policies or practices of the Company is currently being audited, or, to the Knowledge of the Company, investigated or subject to imminent audit by any Governmental Entity. The Company is not, nor within the last four (4) years has been, subject to any material order, decree, injunction, fine, penalty or judgment by any Governmental Entity or private settlement contract in respect of any labor or employment matters.
(c) Section 3.22(c) of the Company Disclosure Schedule contains a complete and accurate list of the employees of the Company as of immediately prior to Closing and shows with respect to each such employee (i) the employee’s name, position held, and principal place of employment, (ii) base salary, hourly wage rate, and/or commission rate(s), as applicable, including each employee’s designation as either exempt or non-exempt from the overtime requirements of the Fair Labor Standards Act and/or exempt or non-exempt for state wage and hour law purposes, bonus eligibility for the current year, (iii) the date of hire, and (iv) leave status. With respect to each Contingent Worker as of immediately prior to Closing, Section 3.22(c) of the Company Disclosure Schedule sets forth each such Contingent Worker’s role in the business of the Company, location, and fee or compensation arrangements.
(d) Except as set forth on Section 3.22(d) of the Company Disclosure Schedule, all employees of the Company are employed on an at-will basis.
(e) The Company is not a government contractor or subcontractor for purposes of any Laws with respect to the terms and conditions of employment, including without limitation, the Service Contracts Act or prevailing wage laws.
3.23 Insurance. Section 3.23 of the Company Disclosure Schedule lists all insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company, including the type of coverage, the carrier, the amount of coverage, the term and the annual premiums of such policies. There are and have been no claims since the Company’s inception for which an insurance carrier has denied. All premiums due and payable under all such policies and bonds have been paid (or if installment payments are due, will be paid if incurred prior to the Closing Date), and the Company is otherwise in material compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage).
3.24 Regulatory. Since inception of the Company, the Company has been and is in compliance in all material respects with applicable Health Care Laws. The Company has filed with the applicable Governmental Entities (including the FDA or any other Governmental Entity performing functions similar to those performed by the FDA) all required filings, representations, declarations, listings, registrations, reports or submissions. All such filings, representations, declarations, listings, registrations, reports or submissions were in compliance in all material respects with applicable Health Care Laws when filed, and no material deficiency has been asserted by any applicable Governmental Entity with respect to any such filings, representations, declarations, listing, registrations, reports or submissions. The Company has not received any material written, or to the Company’s Knowledge, oral, notice or other material correspondence from any Governmental Entity, including the FDA or any other Governmental Entity, with respect to any Company Product. There is no pending or threatened action, suit, claim, order, injunction, investigation or proceeding of any nature pending or threatened, or enforcement of any sort arising under any Health Care Law, the FDA or any other Governmental Entity regarding the Company. All Company Products are being and have been developed, manufactured, distributed, used, processed, packaged, labeled, stored and tested in material compliance with applicable Health Care Law. The Company has not made an untrue statement of a material fact or fraudulent statement to the FDA or any Governmental Entity responsible for enforcement or oversight with respect to Health Care Laws, or failed to disclose a material fact required to be disclosed to the FDA or other such Governmental Entity. All applications, notifications, submissions, information, claims, reports and statistics and other data that have been utilized, or prepared with the intention to be utilized, as the basis for or submitted in connection with any regulatory or marketing approvals or Permits from the FDA or any other Governmental Entity relating to the Company Products
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were true, correct and complete in all material respects as of the date of preparation and submission, as applicable, and any necessary or required update, change, correction or modification to such applications, submissions, information and data have been submitted to the FDA or other Governmental Entity. The Company has not received any Form FDA 483, warning letter, untitled letter, or other similar written notice or communication from the FDA or any other Governmental Entity alleging that the Company has violated or failed to comply with applicable Health Care Laws of the FDA or other Governmental Entity, including with respect to activities involving any Company Product. None of the Company, any Person(s) engaged by the Company who have performed work related to the Company Products, nor any equity holder with five (5) percent or greater interest, has been convicted of any crime or is or has been debarred, excluded or disqualified under applicable Health Care Laws, including 21 U.S.C. Section 335a, or, to the Company’s Knowledge has engaged in any conduct that has resulted, or would reasonably be expected to result, in such criminal conviction or debarment, exclusion or disqualification. No action that would reasonably be expected to result in any such criminal conviction, debarment, exclusion or disqualification are pending or threatened against the Company, any Person(s) engaged by the Company who have performed work related to the Company Products, or such equity holders, and, to the Company’s Knowledge and the Company, there is no fact that could reasonably give rise to such an action.
3.25 Cybersecurity; Data Protection. The Company’s and its subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company as currently conducted, and to the Company’s Knowledge, are free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its subsidiaries have implemented and maintained commercially reasonable physical, technical and administrative controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data, including “Personal Data,” used in connection with their businesses. “Personal Data” means (i) a natural person’s name, street address, telephone number, e-mail address, photograph, social security number or tax identification number, driver’s license number, passport number, credit card number, bank information, or customer or account number; (ii) “personal data” as defined by the European Union General Data Protection Regulation (EU 2016/679) (“GDPR”); (iii) any information which would qualify as “protected health information” under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”); and (iv) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any data related to an identified person’s health or sexual orientation. To the Company’s Knowledge, there have been no breaches, violations, outages or unauthorized uses of or accesses to Personal Data, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same. The Company and its subsidiaries are and have been in material compliance with all applicable laws, directives or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification. The Company and its subsidiaries have taken all necessary actions to materially comply with the GDPR and all other applicable laws and regulations with respect to Personal Data, and for which any non-compliance with same would be reasonably likely to create a material liability.
3.26 Compliance with Laws. Except as set forth on Section 3.26 of the Company Disclosure Schedule, the Company is conducting, and has conducted in the last [***], its business in compliance in all material respects with all Laws applicable to the Company. None of the Company is, or has been, (a) in violation of any Laws applicable to the Company in any material respect or (b) received written notice of violation of any Laws applicable to the Company that remains uncured.
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3.27 Export Controls and Governmental Sanctions. Except as set forth on Section 3.27 of the Company Disclosure Schedule, the Company, its predecessor, and its current and former Subsidiaries have at all times been in compliance with all applicable trade laws, including import and export control laws, trade embargoes, and anti-boycott laws, and, except as specifically authorized by a Permit, license exception, or other permit or applicable authorization of a Governmental Entity, or except as set forth as an exception on Section 3.27 of the Company Disclosure Schedule, have not: (a) exported, reexported, transferred, or brokered the sale of any goods, services, technology, or technical data to any destination to which, or individual for whom, a license or other authorization is required under the U.S. Export Administration Regulations (the “EAR,” 15 C.F.R. § 730 et seq.), the International Traffic in Arms Regulations (the “ITAR,” 22 C.F.R. § 120 et seq.), or the U.S. economic sanctions administered by the Office of Foreign Assets Control (“OFAC,” 31 C.F.R. Part 500 et seq.); (b) exported, reexported, or transferred any goods, services, technology, or technical data to, on behalf of, or for the benefit of any person or entity (i) designated as a Specially Designated National or appearing on OFAC’s Consolidated Sanctions List, or (ii) on the Denied Persons, Entity, or Unverified Lists of the Bureau of Industry and Security, or (iii) on the Debarred List of the Directorate of Defense Trade Controls (if applicable); (c) exported any goods, services, technology, or technical data that have been or will be used for any purposes associated with nuclear activities, missiles, chemical or biological weapons, or terrorist activities, or that have been or will be used, transshipped or diverted contrary to applicable U.S. trade controls; (d) exported, reexported, transferred, or imported any goods, services, technology, or technical data to or from Cuba, Crimea, Iran, Libya, North Korea, Syria, or Sudan during a time at which such country/region and/or its government was subject to U.S. trade embargoes under OFAC regulations, the EAR, or any other applicable statute or Executive Order; (e) manufactured any defense article as defined in the ITAR, including within the United States and without regard to whether such defense article was subsequently exported, without being registered and in good standing with the Directorate of Defense Trade Controls, U.S. Department of State; (f) imported any goods except in full compliance with the import and customs laws of the United States, including but not limited to Title 19 of the United States Code, Title 19 of the Code of Federal Regulations, and all other regulations administered or enforced by the Bureau of Customs and Border Protection; or (g) violated the antiboycott prohibitions, or failed to comply with the reporting requirements, of the EAR (15 C.F.R. § 760) and the Tax Reform Act of 1976 (26 U.S.C. § 999). The Company has obtained all required Permits for each item made or exported by the Company, and has obtained or identified the correct Export Control Classification Number (under the Commerce Control List of the EAR) or United States Munitions List Category (of the ITAR) for each item. The Company has in place adequate controls to ensure compliance with any applicable laws pertaining the export and import of goods, services, and technology, including without limitation the EAR, the ITAR, the U.S. economic sanctions administered by OFAC, and the import and customs laws. Neither the Company, nor its predecessors, has undergone or is undergoing, any audit, review, inspection, investigation, survey or examination by a Governmental Entity relating to export, import, or other trade-related activity. To the Knowledge of the Company, there are no threatened claims, nor presently existing facts or circumstances that would constitute a reasonable basis for any future claims, with respect to exports, imports, or other trade-related activity by the Company nor its predecessors. No authorization from any Governmental Entity for the transfer to the Surviving Corporation of any Permits material to the Company’s or any of its Subsidiary’s business is required, or such authorization can be obtained expeditiously without material cost.
3.28 Foreign Corrupt Practices and Anti-Bribery. Neither the Company nor any of its respective directors, managers, partners, officers or employees nor, to the Knowledge of the Company, any third party representative of the Company with respect to any matter relating to the Company, (a) has used or is using any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) has used or is using any corporate funds for any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or any other Person, (c) has violated or is violating any provision of the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), 15 U.S.C. §§ 78dd 1 et seq. or its equivalent in any jurisdiction where the Company conducts business, if the Company
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or such Subsidiary were subject thereto, (d) has established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties or (e) has made any bribe, unlawful rebate, payoff, influence payment, kickback or other unlawful payment of any nature. To the Knowledge of the Company, the Company has in place adequate controls and systems to ensure compliance with applicable laws pertaining to anticorruption, including the FCPA, in each of the jurisdictions in which the Company currently does business or has done business in the last five (5) years. To the Knowledge of the Company, no event, fact or circumstance has occurred in the five (5) years prior to the date hereof or exists that is reasonably likely to result in a finding of noncompliance with any applicable law relating to anticorruption. Neither the Company nor any of their respective directors, managers, partners, officers or employees nor, to the Knowledge of the Company, any third party representative of the Company with respect to any matter relating to the Company, has taken or failed to take any action which would cause the Company or any such Subsidiary to be in violation of the FCPA, or any rules or regulations thereunder if such law, rules and regulations were applicable thereto. Neither the Company nor any of their respective directors, managers, partners, officers or employees nor, to the Knowledge of the Company, any third party representative of the Company with respect to any matter relating to the Company, has offered, paid, promised to pay, or authorized, or will offer, pay, promise to pay, or authorize, directly or indirectly, the giving of money or anything of value to any Official, or to any other Person while knowing or being aware of a high probability that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to any Official, for the purpose of: (i) influencing any act or decision of such Official in his, her or its official capacity, including a decision to fail to perform his, her or its official duties or functions; or (ii) inducing such Official to use his, her or its influence with any Governmental Entity to affect or influence any act or decision of such Governmental Entity, or to obtain an improper advantage in order to assist the Company or any such Subsidiary, or any third-party in obtaining or retaining business for or with, or directing business to, the Company. For purposes of this Agreement, an “Official” shall include any appointed or elected official, any government employee, any political party, party official, or candidate for political office, or any officer, manager, director or employee of any Governmental Entity.
3.29 Bank Accounts. Section 3.29 of the Company Disclosure Schedule lists the names, account numbers, authorized signatories and locations of all banks and other financial institutions at which the Company has an account or safe deposit box and the name of each Person authorized to draft on or have access to any such account or safe deposit box.
3.30 No Other Representation and Warranties; Non-Reliance; Due Diligence. [***].
Article 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent hereby represents and warrants to the Company as of the date hereof and as of the Closing, except as disclosed in the Parent SEC Reports (including exhibits and other information incorporated by reference therein) filed by Parent and publicly available prior to the date of this Agreement (“Filed Parent SEC Reports”) (but excluding any forward looking disclosures or “risk factors” disclosure, except in each case for statements of historical fact regarding Parent contained therein):
4.1 Organization. Each of Parent and Merger Sub is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the state of incorporation or formation and has the requisite corporate or company power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each of Parent and Merger Sub is duly qualified or licensed as a foreign corporation or limited liability company to do business, and is in good standing, in each jurisdiction where the character of the properties or assets owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing
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would not, individually or in the aggregate, be reasonably expected to have a Parent Material Adverse Effect. The copies of the Certificate of Incorporation and By-Laws of Parent most recently filed with the SEC are true, correct, and complete copies of such documents as in effect as of the date of this Agreement. Parent has delivered or made available to the Company a true and correct copy of the certificate of incorporation and bylaws of Merger Sub, as amended to the date of this Agreement. Such certificates of incorporation and bylaws and such certificate of formation and operating agreement are in full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of its certificate of incorporation, certificate of formation, bylaws, operating agreement or equivalent organizational documents.
4.2 Authority and Enforceability. Each of Parent and Merger Sub has all requisite corporate or limited liability company power and authority to enter into this Agreement and any Related Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each of Parent and Merger Sub of this Agreement and any Related Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or limited liability company action on the part of each of Parent and Merger Sub, including in the case of Merger Sub, the requisite approval of its stockholders, and no other corporate on the part of Parent or Merger Sub are necessary to authorize this Agreement or any Related Agreement to which it is a party or to consummate the transactions contemplated hereby and thereby (other than, with respect to the Merger and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware). This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all Laws relating to fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity). Each Related Agreement to which any of Parent or Merger Sub is party has been duly and validly executed and delivered by such first Person and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding obligation of such first Person, enforceable against such first Person in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency (including all Laws relating to fraudulent transfers), reorganization, moratorium or similar Laws affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity). No vote of the stockholders of Parent is required by Law, Parent’s certificate of incorporation or bylaws or otherwise in order for Parent to execute and deliver this Agreement, and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The adoption of this Agreement by Parent, as sole stockholder of Merger Sub, is the only vote of stockholders required in order for Merger Sub to consummate the Merger, which adoption has been received as of the date hereof.
4.3 No Conflict. The execution and delivery by Parent and Merger Sub of this Agreement and any Related Agreement to which Parent or any of Merger Sub is a party, and the consummation of the Merger or any other transactions contemplated hereby and thereby, will not result in a Conflict under (a) any provision of any organizational documents of Parent or Merger Sub, (b) any Contract to which Parent or Merger Sub is a party or by which any of Parent’s or Merger Sub’s respective properties or assets may be bound, or (c) any judgment, order, decree, statute, Law, ordinance, rule or regulation applicable to Parent or Merger Sub or any of their respective properties or assets (whether tangible or intangible), except, in the case of clauses (b) and (c), where such Conflict, individually or in the aggregate, for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
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4.4 Consents. No consent, notice, waiver, approval, order or authorization of, or registration, declaration or filing with any Governmental Entity is required by, or with respect to, Parent or any Merger Sub in connection with the execution and delivery of this Agreement and any Related Agreement to which Parent or any Merger Sub is a party or the consummation of the Merger and the other transactions contemplated hereby and thereby, except for (a) the filing of a Certificate of Merger as provided in Section 2.2, (b) such consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable securities laws, and (c) those required for compliance with any applicable requirements of the Securities Act, the Exchange Act and any other U.S. state or federal securities laws and the rules of Nasdaq in connection with the issuance and listing on Nasdaq of the shares of Parent Common Stock issuable in the transactions contemplated by this Agreement.
4.5 Parent Capital Structure.
(a) As of the date hereof, the authorized capital stock of Parent is 120,000,000 shares of Parent Common Stock and 5,000,000 shares of preferred stock, none of which are outstanding. All of the outstanding shares of capital stock of Parent were duly authorized and validly issued and are fully paid and non-assessable. Except as set forth in this Section 4.5, there are no options, calls, warrants, convertible debt or other convertible or exchangeable instruments or other rights, agreements, arrangements or commitments of any character made or issued by Merger Sub relating to the issued or unissued capital stock of Merger Sub or obligating Merger Sub to issue, deliver or sell any shares of capital stock, voting securities or other equity interests or securities convertible into or exchangeable or exercisable for capital stock, voting securities or other equity interests of Merger Sub.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per share, all of which are duly authorized, validly issued, fully paid and non‑assessable and free of any preemptive rights in respect thereof and all of which are owned by Parent. Each outstanding share of capital stock of Merger Sub is owned by Parent free and clear of all Liens, except where failure to own such shares free and clear would not, individually or in the aggregate, materially adversely affect Parent’s ability to consummate the Merger.
4.6 Valid Issuance of Parent Common Stock. The shares of Parent Common Stock to be issued pursuant to this Agreement will, when issued, be duly authorized, validly issued, fully paid and non-assessable and issued in compliance with federal and state securities laws, and be listed on Nasdaq. All of the outstanding shares of capital stock of Parent are, and all shares of capital stock of Parent which may be issued as contemplated or permitted by this Agreement, including the [***] Milestone Shares, will be, when issued, duly authorized, validly issued, fully paid, and non-assessable, and not subject to any pre-emptive rights. No Subsidiary of Parent owns any shares of Parent Common Stock.
4.7 Parent SEC Reports.
(a) Since January 1, 2020, Parent has timely filed with the SEC all reports, schedules, forms, statements or other documents required to be filed or furnished by it under the Exchange Act and the rules of Nasdaq (collectively, the “Parent SEC Reports”). Such reports, including any financial statements or schedules included therein, (i) as of their respective dates or, if amended, as of the date of the last such amendment, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and (ii) when filed, complied in all material respects with the applicable requirements of the Exchange Act, Sarbanes-Oxley Act, and the applicable rules and regulations of the SEC thereunder. True, correct, and complete copies of all of the Parent SEC Reports are publicly available on EDGAR. To the Knowledge of Parent, none of the Parent SEC Reports are the subject of ongoing SEC review or outstanding SEC investigation and there are no outstanding or unresolved comments received from the SEC with respect to any of the Parent SEC Reports.
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(b) Each of the consolidated financial statements (including, in each case, any notes and schedules thereto) contained in or incorporated by reference into the Parent SEC Reports: (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto as of their respective dates; (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q); and (iii) fairly presented in all material respects the consolidated financial position and the results of operations, changes in stockholders’ equity, and cash flows of Parent and its consolidated Subsidiaries as of the respective dates of and for the periods referred to in such financial statements, subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by the applicable rules and regulations of the SEC (but only if the effect of such adjustments would not, individually or in the aggregate, be material).
(c) The audited consolidated balance sheet of Parent dated as of December 31, 2020 contained in the Parent SEC Reports filed prior to the date hereof is hereinafter referred to as the “Parent Balance Sheet.” Neither Parent nor any of its Subsidiaries has any Liabilities other than Liabilities that: (i) are reflected or reserved against in the Parent Balance Sheet (including in the notes thereto); (ii) were incurred since the date of the Parent Balance Sheet in the ordinary course of business consistent with past practice; (iii) are incurred in connection with the transactions contemplated by this Agreement; or (iv) would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(d) Parent maintains disclosure controls and procedures required by Rule 13a‑15 or Rule 15d‑15 under the Exchange Act and such controls and procedures are effective to ensure that all material information concerning Parent and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Parent’s SEC filings and other public disclosure documents.
4.8 Securities Law Matters.
(a) The Parent Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and no securities commission or similar regulatory authority has issued any order preventing or suspending trading of any securities of Parent.
(b) Parent is in compliance in all material respects with all of the applicable listing and corporate governance rules of Nasdaq for the continued listing of the Parent Common Stock thereon.
(c) Trading in shares of the Parent Common Stock on Nasdaq is not currently halted or suspended. To the Knowledge of Parent, no delisting, suspension oftrading or cease trading order with respect to any securities of Parent is pending or threatened. To the Knowledge of Parent, as of the date of this Agreement, no inquiry, review or investigation of Parent by any securities commission or similar regulatory authority under applicable U.S. Securities Laws or Nasdaq is in effect or ongoing.
4.9 Absence of Certain Changes or Events. Since the date of the Parent Balance Sheet, except in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, there has not been or occurred any Parent Material Adverse Effect or any event, condition, change, or effect that would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
4.10 Compliance. Since [***], Parent and its Subsidiaries have operated and conducted their businesses in compliance with all Laws of any Governmental Entity applicable to their respective businesses or operations, except where such non-compliance would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
4.11 Permits. Parent and its Subsidiaries hold, to the extent necessary to operate their respective businesses as such businesses are being operated as of the date hereof, all Permits except for any Permits
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for which the failure to obtain or hold would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
4.12 Litigation. There is no action, suit, claim, litigation, investigation, arbitration or proceeding of any nature pending or, to the knowledge of Parent, threatened in writing (i) against or involving Parent or Merger Sub, any of their respective Subsidiaries that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect, or (ii) that seeks to restrain or enjoin the consummation of the transactions contemplated hereby or any Related Agreement or that would reasonably be expected to affect the ability of Parent or Merger Sub to perform its obligations under this Agreement or any Related Agreement to which it is a party or prevent or materially impede or delay the consummation of the transactions contemplated hereby or thereby. There is no Order of any Governmental Entity or arbitrator outstanding against, or, to the knowledge of Parent, investigation by any Governmental Entity involving, Parent, any of its Subsidiaries that would reasonably be expected to affect the ability of Parent or Merger Sub to perform its obligations under this Agreement or any Related Agreement to which it is a party or prevent or materially impede or delay the consummation of the transactions contemplated hereby or thereby.
4.13 No Prior Merger Sub Operations. Merger Sub was formed solely for the purpose of effecting the Merger and have not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby.
4.14 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Related Agreement based upon arrangements made by or on behalf of Parent or Merger Sub.
4.15 Financial Capability. Parent has sufficient funds to pay the Closing Consideration and the aggregate Milestone Consideration contemplated by this Agreement and to perform the other obligations of Parent and Merger Sub contemplated by this Agreement.
4.16 No Other Representation and Warranties. [***].
Article 5
[RESERVED]
Article 6
ADDITIONAL AGREEMENTS
6.1 [Reserved].
6.2 Confidentiality.
(a) Each of the parties hereto hereby agrees that the disclosure of information obtained hereunder or pursuant to the negotiation and execution of this Agreement or the consummation of the transactions contemplated hereby shall be governed by the terms of the Confidentiality Agreement dated as of August 20, 2021, between the Company and Parent (the “NDA”); provided, that the NDA shall terminate and be of no further force and effect effective as of the Closing; provided, further, that notwithstanding anything to the contrary set forth herein or therein, Parent shall not be restricted from making disclosures required by applicable securities laws or under applicable stock exchange rules if Parent makes available to the Company any such disclosure (solely to the extent it would have otherwise been restricted by the NDA) and considers in good faith the inclusion of any reasonable and timely comments provided to Parent by the Company. The Securityholder Representative shall hold in confidence all documents and information furnished to it in connection with the transactions contemplated hereby.
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(b) Notwithstanding the foregoing, Parent shall ensure that all [***] Confidential Information shall not be used by Parent, any of its Affiliates or any of their respective representatives except solely for the purposes of this Agreement, shall be maintained in confidence by such Persons, and shall not otherwise be disclosed to any other Person, without the prior written consent of the Company, if prior to the Closing or the Securityholder Representative, if after the Closing except to the extent that the [***] Confidential Information (i) is lawfully disclosed to the receiving party by sources (other than the disclosing party) rightfully in possession of the [***] Confidential Information through no breach or violation of any existing confidentiality obligation or duty, or (ii) becomes published or generally known to the public, without any receiving party violating this Section 6.2(b). Notwithstanding the foregoing, this Section 6.2(b) shall not prohibit Parent from disclosing [***] Confidential Information to the extent required (1) by applicable securities laws or under applicable stock exchange rules if Parent makes available to the Company if prior to the Closing, or to the Securityholder Representative if after the Closing, any such disclosure (solely to the extent it would have otherwise been restricted by this Section 6.2(b)) and considers in good faith the inclusion of any reasonable and timely comments provided to Parent by the Company or the Securityholder Representative, as applicable, or (2) to enforce the terms of this Agreement. For purposes of this Section 6.2(b), “[***] Confidential Information” shall mean any information disclosed or made available by or on behalf of the Company or any representative thereof to Parent, any of its Affiliates or any of their respective representatives in connection with the Letter of Intent, this Agreement, the Related Agreements and the transactions contemplated hereby and thereby in each case to the extent related to the [***] Company, including, without limitation, any such information or material that has not been made generally available to the public, such as: (a) corporate information, including plans, strategies, methods, policies, resolutions, contractual negotiations or legal proceedings; (b) marketing information, including strategies, methods, customer identities or other information about customers, prospect identities or other information about prospects, or market analyses or projections; (c) financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings, purchasing and sales data and price lists; (d) operational and technological information, including plans, specifications, manuals, forms, templates, software, designs, methods, procedures, formulas, discoveries, inventions, improvements, concepts and ideas; and (e) personnel information, including personnel lists, employee information (which may include personably identifiable information), reporting or organizational structure, resumes, personnel data, compensation structure, performance evaluations and termination arrangements or documents.
6.3 Public Disclosure. Parent and the Company agree to issue a press release announcing this Agreement and the Closing in the form attached as Annex B. Except as expressly provided for herein, the Company shall not (nor shall it authorize any Company Securityholder or the Securityholder Representative to), directly or indirectly, issue or make any statement or communication to any third party (other than its legal, accounting and financial advisors that are bound by confidentiality restrictions) regarding the existence or subject matter of this Agreement or the transactions contemplated hereby (including any claim or dispute arising out of or related to this Agreement, or the interpretation, making, performance, breach or termination hereof and the reasons therefor) without the consent of Parent or as expressly provided for herein. Notwithstanding anything herein to the contrary, following Closing, the Securityholder Representative shall be permitted to: (i) after the public announcement of the Merger, announce that it has been engaged to serve as the Securityholder Representative in connection herewith as long as such announcement does not disclose any of the terms hereof not already otherwise publicly announced; and (ii) disclose information as required by law or to advisors and representatives of the Securityholder Representative and to the Company Securityholders, in each case who have a need to know such information, provided that such persons are subject to confidentiality obligations with respect thereto.
6.4 FIRPTA Compliance. At or prior to the Closing, the Company shall deliver to Parent a properly executed statement and executed notice to the IRS dated within thirty (30) days of the Closing Date (with written authorization for Parent to deliver such notice to the IRS) in a form reasonably acceptable
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to Parent under Treasury Regulation Section 1.1445-2(c)(3) and 1.897-2(h)(2), as applicable (“FIRPTA Compliance Certificate”).
6.5 [Reserved].
6.6 [Reserved].
6.7 [Reserved].
6.8 [Reserved].
6.9 Resignation of Officers and Directors. The Company shall cause each officer and director (or similar positions) of the Company, respectively, to execute a resignation and release letter in the form attached hereto as Exhibit F (the “Director and Officer Resignation Letter”), effective as of the Effective Time (unless otherwise instructed in writing by Parent prior to the Closing).
6.10 [Reserved].
6.11 Termination of Employees and Consultants. Subject to, and effective as of immediately prior to, the Closing, the Company shall terminate or otherwise end the service of all employees and consultants of the Company.
6.12 [Reserved].
6.13 Indemnification of Officers and Directors.
(a) Prior to the Closing Date, the Company shall purchase and fully pay the premium (or include the premium payable as a Transaction Expense if not paid prior to the Closing) (the “D&O Tail Insurance”) for directors’ and officers’ liability insurance policy in respect of acts or omissions occurring at or prior to the Effective Time for six years from the Effective Time, covering each director and executive office of the Company as of immediately prior to the Closing.
(b) The indemnification, advancement of expenses and exculpation provisions applicable to current and former directors, officers and employees of the Company as set forth in the Charter Documents as of the date hereof are incorporated herein by reference as if set forth herein in full and made an integral part of this Agreement. Parent agrees that all rights to indemnification, advancement of expenses and exculpation existing in favor of, and all limitations on the personal liability of, each present and former director and officer of the Company (the “D&O Indemnified Parties”) provided for therein shall continue for six (6) years after the Closing Date (or, if longer, during the continuation of any claim which was asserted during such time period). Nothing set forth herein shall require the maintenance or continuation of any provision of the organizational documents of the Company by Parent, its Affiliates (including the Surviving Corporation) or any of its successors, and it is intended that this Section 6.13(b) is a full and complete alternative in lieu thereof.
(c) The obligations under this Section 6.13 shall not be terminated or modified in such a manner as to adversely affect any D&O Indemnified Party without the prior written consent of such D&O Indemnified Party (it being expressly agreed that the D&O Indemnified Parties shall be third party beneficiaries of this Section 6.13 and shall be entitled to enforce the covenants contained herein).
6.14 [Reserved].
6.15 [Reserved].
6.16 Additional Covenants.
(a) Parent shall deliver to the Securityholders Representative, prior to the issuance, if any, of the [***] Milestone Shares, documentation from The Nasdaq Stock Market LLC evidencing that the application for the Listing of Additional Shares covering the [***] Milestone Shares has been submitted,
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and Parent shall take all actions necessary to cause such shares of Parent Common Stock to be listed on Nasdaq from and after the issuance thereof hereunder.
(b) Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement.
(c) Schedule I is hereby incorporated by reference into, and made an essential part of, this Agreement. Parent and Merger Sub shall, and shall cause each of their respective Affiliates to, abide by, and timely perform, all of Parent’s, Merger Sub’s and its Affiliate’s obligations set forth in Schedule I in full.
Article 7
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of the Company, Parent and Merger Sub to effect the Merger shall be subject to the satisfaction or written waiver, at or prior to the Closing, of the following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Order which is in effect and which has the effect of making the Merger, this Agreement, any of the Related Agreements or any of the transactions contemplated hereby or thereby illegal or otherwise prohibiting or preventing the consummation of the Merger, this Agreement, any of the Related Agreements or any of the transactions contemplated hereby or thereby.
(b) No Injunctions; Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger, this Agreement, any of the Related Agreements or any of the transactions contemplated hereby or thereby shall be in effect.
7.2 Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. (i) Each of the representations and warranties of the Company in this Agreement shall be (A) true and correct as of the date hereof and (B) true and correct in all material respects (without giving effect to “material,” “material adverse effect,” “Company Material Adverse Effect” or any other materiality qualifications in such representations and warranties) as of the Closing as though such representations and warranties were made as of the Closing, except for those representations and warranties that refer to facts existing at a specific date, which shall be true, correct and complete in all material respects (without giving effect to “material,” “material adverse effect,” “Company Material Adverse Effect” or any other materiality qualifications in such representations and warranties) as of such date; and (ii) the Company and the Company Securityholders shall have performed and complied in all material respects with all covenants and obligations under this Agreement and the Related Agreements required to be performed and complied with by such parties as of or prior to the Closing.
(b) [Reserved].
(c) Joinder Agreements, Letters of Transmittals and Certification Forms. Parent shall have received executed Joinder Agreements signed by the Company Securityholders, Certification Forms from each Company Securityholder who is an Accredited Investor, and duly executed and completed Letters of Transmittals from Company Securityholders that hold shares of Company Capital Stock and Company Options that, taken together, constitute 100% of the Fully Diluted Share Count as of immediately prior to the Closing, each of which shall be in full force and effect.
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(d) [Reserved].
(e) Employment and Consultants. Parent shall have received reasonably acceptable documentation that each (i) employee of the Company and (ii) consultant of the Company shall have ceased their employment or service relationship, as the case may be, with the Company, subject to, and effective as of immediately prior to, the Closing. Parent shall also have received an executed release agreement from each such employee and consultant who is not a party to the Joinder Agreement, in form and substance reasonably acceptable to the Parent.
(f) Resignation of Officers and Directors. Parent shall have received from each officer and director of the Company as of immediately prior to the Closing a Director and Officer Resignation Letter.
(g) Certificates of the Company. Parent shall have received (i) a certificate from the Company, validly executed by the Chief Executive Officer of the Company for and on the Company’s behalf, to the effect that, as of the Closing, the conditions set forth in Section 7.2(g) have been satisfied, and (ii) the Closing Statement in accordance with Section 2.9.
(h) Certificate of Secretary of the Company. Parent shall have received a certificate, validly executed by the Secretary of the Company, certifying as to (i) the terms and effectiveness of the Charter Documents, (ii) the valid adoption of resolutions of the Board of Directors of the Company (whereby the Merger, this Agreement, the Related Agreements to which the Company is or will be a party, and the other transactions contemplated hereby and thereby were unanimously approved by the Board of Directors and the Stock Plan was terminated, effective as of the Closing), and (iii) the valid adoption of this Agreement and approval of the Merger, the Related Agreements to which the Company is or will be a party and the other transactions contemplated hereby and thereby, in each case, by the Stockholder Consent whereby all requisite approvals by the Company of this Agreement, the Merger, the Related Agreements to which the Company is or will be a party and the consummation of the transactions contemplated hereby and thereby were obtained.
(i) FIRPTA Compliance Certificate. Parent shall have received a copy of the FIRPTA Compliance Certificate, validly executed by a duly authorized officer of the Company.
(j) Section 280G Payments. The Company shall have delivered to Parent evidence of the 280G Stockholder Approval in form and substance reasonably acceptable to Parent.
(k) Spreadsheet. Parent shall have received from the Company the Spreadsheet in form and substance reasonably acceptable to Parent.
(l) Invention Assignment Agreements. The Company shall have delivered to Parent the duly executed invention assignment agreements in the form attached at Schedule 7.2(l) for any Person listed on Schedule 7.2(l).
(m) [***] Documentation. The Company shall have delivered to Parent a copy of the duly executed [***].
(n) Escrow Agreement. The Escrow Agreement, dated as of the Closing Date, and having been executed and delivered by the Securityholder Representative, shall be in full force and effect.
(o) Transition Services Agreements. Parent shall have received (i) a duly executed Primary TSA from the Key Consultant, (ii) a duly executed Additional TSA #1 from Additional Consultant #1 and (iii) a duly executed Additional TSA #2 from Additional Consultant #2.
(p) Covenant Agreement. Parent shall have received a duly executed Covenants Agreement from the Person listed on Annex A-4.
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7.3 Conditions to Obligations of the Company. The obligations of the Company to effect the Merger shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. (i) Each of the representations and warranties of Parent and Merger Sub in this Agreement shall be (A) true and correct as of the date hereof and (B) true and correct in all material respects (without giving effect to “material,” “material adverse effect,” or any other materiality qualifications in such representations and warranties) as of the Closing as though such representations and warranties were made as of the Closing, except for those representations and warranties that refer to facts existing at a specific date, which shall be true, correct and complete in all material respects (without giving effect to “material,” “material adverse effect,” or any other materiality qualifications in such representations and warranties) as of such date; and (ii) Parent and Merger Sub shall have performed and complied in all material respects with all covenants and obligations under this Agreement and the Related Agreements required to be performed and complied with by such parties as of or prior to the Closing.
(b) Certificate of Parent. The Company shall have received a certificate executed on behalf of Parent by an officer of Parent and on its behalf to the effect that, as of the Closing, the conditions set forth in Section 7.3(a) have been satisfied.
(c) Escrow Agreement. The Escrow Agreement, dated as of the Closing Date, and having been executed and delivered by Parent and the Escrow Agent, shall be in full force and effect.
(d) Payment of Estimated Transaction Expenses. Parent shall have delivered to the Company documentation reasonably satisfactory to the Company evidencing payment of the Estimated Transaction Expenses, in each case to the applicable counterparty.
(e) Certificate of Secretary of Parent. The Company shall have received a certificate, validly executed by the Secretary of Parent, certifying as to the valid adoption of resolutions of the Board of Directors of Parent (whereby the Merger, this Agreement, the Related Agreements to which Parent is or will be a party, the payment and/or issuance and delivery of the [***] Milestone Shares to the Company Securityholders, as applicable, of the Closing Consideration and any Milestone Consideration, and the other transactions contemplated hereby and thereby were unanimously approved by such Board of Directors).
(f) Certificate of Secretary of Merger Sub. The Company shall have received a certificate, validly executed by the Secretary of Merger Sub, certifying as to the valid adoption of resolutions of the Board of Directors of Merger Sub (whereby the Merger, this Agreement, the Related Agreements to which Merger Sub is or will be a party, and the other transactions contemplated hereby and thereby were unanimously approved by its Board of Directors).
Article 8
TAX MATTERS
8.1 Tax Returns.
(a) Tax Returns. Parent shall prepare and file or shall cause to be prepared and filed all Tax Returns required to be filed by the Company after the Closing Date for Pre-Closing Tax Periods, including Tax Returns with respect to a Straddle Period, it being understood that, all Taxes indicated as due and payable on such Tax Returns shall be the responsibility of the Indemnifying Holders to the extent such Indemnifying Holders are liable for such Taxes under Section 9.2(a). Such Tax Returns shall be prepared in accordance with past practices and customs unless otherwise required by applicable law. Parent shall provide the Securityholder Representative with a draft of each such Tax Return no later than 30 days (or, in the case of a non-income Tax Return, as soon as reasonably practicable) prior to the due date for filing thereof (taking into account all available extensions) for the Securityholder Representative’s review and
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comment and shall consider in good faith any reasonable comments provided in writing by the Securityholder Representative within 20 days (or, in the case of any such Tax Return due fewer than 30 days after the Closing Date, provided in writing by the Securityholder Representative at least 5 days prior to the due date thereof) after the Securityholder Representative’s receipt of such Tax Returns.
8.2 Tax Contests. Parent shall promptly notify the Securityholder Representative in writing upon receipt by Parent or the Company of notice in writing of any audit or other administrative proceeding or inquiry or judicial proceeding involving Taxes that could reasonably be expected to give rise to a claim for indemnification under Section 9.2 (a “Tax Contest”); provided, that the failure of the notified party to give any other party notice as provided herein shall not relieve such other party of its indemnification obligations under Article 9 except to the extent that such other party is actually and materially prejudiced thereby. Parent shall have the exclusive right to control and conduct any Tax Contest; provided, that, Parent (i) shall keep the Securityholder Representative reasonably informed of all material developments on a timely basis, and shall provide to the Securityholder Representative copies of any written material correspondence received from the Tax authority related to such Tax Contest as reasonably requested by the Non-Controlling Party, (ii) shall permit the Securityholder Representative, at its own expense, to attend and participate in all conferences, meetings and proceedings relating to such Tax Contest, and (iii) shall not, without the prior written consent of the Securityholder Representative (which consent shall not be unreasonably withheld, conditioned or delayed), enter into any compromise or settlement of such Tax Contest. In the event of any conflict or overlap between the provisions of this Section 8.2 and Section 9.6, the provisions of this Section 8.2 shall control.
8.3 Straddle Periods. For purposes of this Agreement, in order to apportion appropriately any Taxes relating to a Straddle Period, the portion of any such Taxes that are allocable to the Pre-Closing Tax Period shall be (a) in the case of income Taxes and all other Taxes that are not imposed on a periodic basis, the amount that would be payable if the taxable year or period ended on the Closing Date based on an interim closing of the books (and for such purpose, the Tax period of any controlled foreign corporation, partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time) and (b) in the case of any Taxes that are imposed on a periodic basis, the amount of such Taxes for the relevant period multiplied by a fraction the numerator of which shall be the number of days from the beginning of the period up to and including the Closing Date and the denominator of which shall be the number of days in the entire period.
8.4 Tax Cooperation. Parent, the Company, their respective Subsidiaries and the Securityholder Representative shall cooperate fully, as and to the extent reasonably requested by the other parties hereto, in connection with the filing, preparation and review of Tax Returns, and any Tax audits, Tax proceedings or other Tax-related claims (including claims under this Agreement). Such cooperation shall include providing records and information that are reasonably relevant to any such matters and in their possession (or if not in their possession, if reasonably able to obtain), making employees available on a mutually convenient basis to provide additional information, and explaining any materials provided pursuant to this Section 8.4. Parent, the Company, their respective Subsidiaries and the Securityholder Representative shall not destroy or dispose of any Tax workpapers, schedules or other materials and documents in their possession or under their control supporting Tax Returns of the Company for Pre-Closing Tax Periods until the seventh (7th) anniversary of the Closing Date.
8.5 Transfer Taxes. All sales, use, transfer, value added, goods and services, gross receipts, excise, conveyance and documentary, stamp, recording, registration, conveyance and similar Taxes and fees incurred in connection with the transactions pursuant to this Agreement (“Transfer Taxes”) shall be borne [***]. The party required by applicable Law to file any Tax Return with respect to Transfer Taxes shall do so in the time and manner prescribed by applicable Law.
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Article 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW
9.1 Survival of Representations and Warranties. The representations and warranties of the Company contained in this Agreement or the Certificates shall survive until the first (1st) anniversary of the Closing Date (the “Survival Date”); provided, that in the event of any breach of any such representation or warranty that results from Fraud committed by or on behalf of the Company, such claim shall survive without limitation; provided, further, that (a) [***] shall survive until the [***], (b) the representations and warranties of the Company contained in [***] (and the portion of the Certificates relating thereto) shall survive until the [***] of the Closing Date, and (c) that the representations and warranties of the Company contained in [***] shall survive until [***]. The representations and warranties of Parent and Merger Sub contained in Article 4 of this Agreement, the Related Agreements or in any certificate or other instrument delivered pursuant to this Agreement shall survive until the later of (i) the [***] of the Closing Date or (ii) the [***] of the [***] Milestone Shares (assuming the [***] Milestone is triggered); provided, that in the event of any breach of any such representation or warranty that results from Fraud committed by or on behalf of Parent or Merger Sub, such claim shall survive without limitation; provided, further, that the representations and warranties of Parent contained in [***] (and the portion of the Certificates relating thereto), shall survive until [***]. If an Officer’s Certificate complying with the requirements of Section 9.4(a) is delivered before the date on which such representation, warranty or indemnity ceases to survive hereunder, then the right to indemnification under this Article 9 shall survive for all Losses asserted therein and all other Losses reasonably relating to the breach(es) alleged therein shall survive for the benefit of all the Parent Indemnified Parties, on the one hand, or the Company Indemnified Parties, on the other hand (each, an “Indemnified Party”) beyond the expiration of the applicable survival period for such representation, warranty or indemnity until such claims are fully and finally resolved, in each case subject to the provisions of this Article 9. The parties further acknowledge that the time periods set forth in this Section 9.1 for the assertion of claims under this Agreement are the result of arms’ length negotiation among the parties and that they intend for the time periods to be enforced as agreed by the parties. For clarity, any covenant or obligation applicable to Parent, Company or Merger Sub contained in this Agreement and required to be performed or complied with prior to, as of or after, the Closing shall survive until its satisfaction in accordance with the terms of this Agreement.
9.2 Indemnification.
(a) By virtue of the Merger, subject to the provisions of this Article 9, from and after the consummation of the Merger, each of the Indemnifying Holders agrees, severally (based on such Indemnifying Holder’s Pro Rata Share of each Loss covered by this Section 9.2(a)) and not jointly, to indemnify and hold harmless the Parent Indemnified Parties, from and against, and shall compensate and reimburse the Parent Indemnified Parties for, all Losses incurred by the Parent Indemnified Parties, or any of them (including the Surviving Corporation), to the extent arising under, in connection with or as a result of the following (the “Indemnifiable Matters”):
(i) any breach of a representation or warranty of the Company contained in (A) Article 3 of this Agreement, (B) any Related Agreement or (C) any Certificate,
(ii) any amounts paid or payable by Parent with respect to any Dissenting Shares to the extent such payments exceed the amount of Merger Consideration to which the Person would have been entitled pursuant to this Agreement in respect of such Dissenting Shares of such Person but for the exercise of appraisal rights with respect to such Dissenting Shares,
(iii) (A) any inaccuracy or omission in the Spreadsheet that results in any Person being paid more or less than such Person’s applicable portion of the Merger Consideration or (B) any
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Person being omitted as a Company Securityholder therein who claims to be or is entitled to a portion of the Merger Consideration pursuant to this Agreement and applicable Law,
(iv) any Transaction Expenses or Indebtedness of the Company not accounted for or otherwise resolved in the calculation of the Closing Adjustment pursuant to Section 2.9, and/or
(v) any Pre-Closing Taxes, except to the extent taken into account in the final calculation of Closing Net Debt Amount.
(b) For the purpose of Section 9.2(a)(i) only (and excluding any breach of Sections 3.8 or 3.9), when determining the amount of Losses suffered by an Indemnified Party as a result of any breach of any representation or warranty of the Company that is qualified or limited in scope as to material, material adverse effect, Company Material Adverse Effect or any other materiality qualifications or limitations shall be deemed to be made or given without such qualification or limitation.
(c) The Indemnifying Holder, solely in its capacity as an indemnifying party under this Article 9, shall not have any right of contribution, indemnification or right of advancement from the Surviving Corporation or Parent or any of their respective Affiliates with respect to any Loss claimed by a Parent Indemnified Party.
(d) The Company and the Securityholder Representative (on behalf of the Company Securityholders) have agreed that the Parent Indemnified Parties’ rights to indemnification, compensation and reimbursement contained in this Article 9 relating to the representations, warranties and obligations of the Company or the Securityholder Representative are part of the basis of the bargain contemplated by this Agreement.
(e) This Article 9 shall constitute the sole and exclusive remedy of the Indemnified Parties after the Closing with respect to any and all claims based upon or arising out of any breach or inaccuracy of, or failure to perform, any representation, warranty, agreement or obligation of the Company set forth in this Agreement, any Related Agreement or Certificate or otherwise relating to the subject matter of this Agreement, any Related Agreement or Certificate or the transactions contemplated hereby or thereby, provided, that notwithstanding anything herein to the contrary, nothing in this Section 9.2(e) shall limit the rights or remedies of any Indemnified Party (i) for claims under this Article 9 arising from Fraud against the Person that committed such Fraud, (ii) against a signatory to a Related Agreement (other than the Company) for breaches of such Related Agreement by such signatory, (iii) with respect to specific performance, injunctive and other non-monetary equitable relief or (iv) any failure by Parent, Company or Merger Sub to perform or comply with any covenant or agreement applicable to such party contained in this Agreement and required to be performed or complied with prior to, as of or after the Closing (such rights and remedies, collectively, “Excluded Claims”). In furtherance of the foregoing, each Indemnified Party hereby waives, to the fullest extent permitted under Law, from and after Closing, any and all rights, claims, causes of action and remedies based upon or arising out of any breach or inaccuracy of, or failure to perform, any representation, warranty, agreement or obligation of the Company set forth in this Agreement, any Related Agreement or Certificate or otherwise relating to the subject matter of this Agreement, any Related Agreement or Certificate or the transactions contemplated hereby or thereby that such Indemnified Party may have against the other parties hereto and their Affiliates and each of their respective representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article 9 and except with respect to Excluded Claims.
9.3 Maximum Payments; Remedy.
(a) The Parent Indemnified Parties shall not be entitled to any recovery resulting from Section 9.2(a)(i) until such time (if at all) as the total amount of all Losses for which the Parent Indemnified Parties are entitled to indemnification under Section 9.2(a)(i) exceeds $[***] in the aggregate (the “Basket”) and in such event, the Parent Indemnified Parties shall, subject to the limitations set forth in the remaining subsections of Section 9.3, be entitled to be indemnified against and compensated and
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reimbursed for all Losses from the first dollar of Losses, including the Basket; provided, that the limitation set forth in this sentence of Section 9.3(a) shall not apply to any indemnification claims relating to any breach of any representation or warranty that results from Fraud committed by or on behalf of the Company. [***].
(b) Except in the case of any breach of a representation or warranty hereunder that results from Fraud committed by or on behalf of the Company prior to the Closing in connection with the transactions contemplated hereby, the maximum amount that the Parent Indemnified Parties may recover from each Indemnifying Holder under Sections 9.2(a)(i) and 9.2(a)(iv) shall be limited to such Indemnifying Holder’s Pro Rata Share of the then-available Escrow Fund (such amount, the “General Cap”); provided, that (i) in the case of any breach or inaccuracy of the Special Representations, the maximum amount that the Parent Indemnified Parties may recover from each Indemnifying Holder shall be limited to such Indemnifying Holder’s Pro Rata Share of $[***] (such amount, [***], the “Special Cap”) and (ii) in the case of any breach of the Fundamental Representations, the maximum amount that the Parent Indemnified Parties may recover from each Indemnifying Holder hereunder shall be limited to the aggregate consideration actually received (or receivable under the Milestone Consideration in connection with the exercise of the Offset Right) by such Indemnifying Holder pursuant to this Agreement (the “Indemnifying Holder Proceeds”). Except for Fraud committed by such Indemnifying Holder, no Indemnifying Holder shall be liable for any Fraud committed by the Company or any if its directors, officers, employees, advisors, agents or representatives beyond such Indemnifying Holder’s Indemnifying Holder Proceeds. Notwithstanding anything contained herein to the contrary, nothing herein shall limit the recovery amount against an Indemnifying Holder, or remedies available to a Parent Indemnified Party, for any breach of a representation or warranty hereunder that results from such Indemnifying Holder’s Fraud committed in connection with the transactions contemplated hereby.
(c) Except in the case of any breach of a representation or warranty that results from Fraud committed by or on behalf of the Parent prior to the Closing in connection with the transactions contemplated hereby, the maximum amount that the Company Indemnified Parties may recover [***] (the “Parent General Cap”); provided, that in the case of any breach of the Parent Fundamental Representations, the maximum amount that the Company Indemnified Parties may recover from each Parent and Merger Sub shall be limited to the aggregate Indemnifying Holder Proceeds (assuming for this purpose all Merger Consideration has been paid). Notwithstanding anything contained herein to the contrary, nothing herein shall limit the recovery amount against Parent, or remedies available to a Company Indemnified Party, for any breach of a representation or warranty hereunder that results from Fraud committed by or on behalf of the Parent in connection with the transactions contemplated hereby.
(d) The maximum amount that the Parent Indemnified Parties may recover from each Indemnifying Holder under Section 9.2(a) shall be limited to the Indemnifying Holder Proceeds.
(e) Nothing in this Article 9 (except as provided in Section 9.9) shall limit the Liability of any party hereto for any breach of any representation, warranty, covenant or agreement contained in this Agreement or any Related Agreement if the Merger does not close.
(f) For the avoidance of doubt, and notwithstanding anything to the contrary in this Agreement, in no event shall any Indemnified Party be entitled to any double recovery with respect to any particular Loss.
(g) [***].
(h) No Losses may be claimed under Section 9.2(a) by any Indemnified Party to the extent such Losses are included in the calculation of the Closing Net Debt Amount as finally determined under Section 9.2(d).
(i) [***].
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9.4 Claims for Indemnification; Resolution of Conflicts.
(a) Making a Claim for Indemnification; Officer’s Certificate. A claim for indemnification pursuant to Section 9.2(a) or Section 9.9(a) for any Loss not involving a Third Party Claim (a “Direct Claim”) may be asserted by written notice to Securityholder Representative or Parent, as applicable, in accordance with this Article 9 promptly after any Indemnified Party shall have knowledge of any such Loss; provided, however, that failure to notify the Securityholder Representative or Parent, as applicable, shall not preclude such Indemnified Parties from any indemnification which such Indemnified Party may claim in accordance with this Section 9.4(a), except to the extent that the Securityholder Representative, Indemnifying Holders or Parent, as applicable, suffer actual loss or prejudice or otherwise forfeits rights or defenses by reason of such failure to provide timely notice.
(b) In order for an Indemnified Party to seek recovery of Losses pursuant to this Article 9, an Indemnified Party shall deliver to the Securityholder Representative or Parent, as applicable, an Officer’s Certificate in respect of such claim. The date of such delivery of an Officer’s Certificate is referred to herein as the “Claim Date” of such Officer’s Certificate (and the claims for indemnification contained therein). For purposes hereof, “Officer’s Certificate” means a certificate signed by any authorized representative of an Indemnified Party (or, in the case of an Indemnified Party who is an individual, signed by such individual and, in the case of a Company Indemnified Party, the Securityholder Representative) (i) certifying that such Indemnified Party has paid, sustained or otherwise incurred, or reasonably anticipates that it will have to pay, sustain or otherwise incur, Losses for which such Indemnified Party is entitled to indemnification under this Article 9, and the amount of such Losses and reasonably anticipated Losses, and (ii) specifying in reasonable detail (A) the individual items of Losses included in the amount so stated and (B) the basis for indemnification under this Article 9 to which such item of Loss is related and (C) attaching copies of all reasonably procurable written evidence in support of such Losses and basis for indemnification. The Indemnified Party shall cooperate with the Securityholder Representative or Parent, as applicable, in its investigation of any matters set forth in such Officer’s Certificate by giving such information and assistance (including access to premises and personnel and the right to examine and copy any accounts, documents or records in support thereof) as the Securityholder Representative or Parent, as applicable, or any of their respective professional advisors may reasonably request.
(c) Objecting to a Claim for Indemnification.
(i) The Securityholder Representative or Parent, as applicable, may object to a claim for indemnification set forth in an Officer’s Certificate by delivering to the Indemnified Party seeking indemnification a written statement of objection to the claim made in the Officer’s Certificate (an “Objection Notice”); provided, that, to be effective, such Objection Notice must (A) be delivered to such Indemnified Party at the address on the respective Officer’s Certificate pursuant to Section 11.1 prior to 5:00 p.m. New York time on the [***] following the Claim Date of the Officer’s Certificate (such deadline, the “Objection Deadline” for such Officer’s Certificate and the claims for indemnification contained therein) and (B) set forth in reasonable detail the nature of the objections to the claims in respect of which the objection is made.
(ii) To the extent the Securityholder Representative or Parent, as applicable, does not object in writing (as provided in Section 9.4(c)(i)) to the claims contained in an Officer’s Certificate prior to the Objection Deadline for such Officer’s Certificate, such failure to so object shall be an irrevocable acknowledgment by the Securityholder Representative or the Parent, as applicable, that the Indemnified Party is entitled to indemnification for the full amount of the Losses set forth in such Officer’s Certificate or, in the case of reasonably anticipated Losses, for the Losses actually incurred by such Indemnified Party in respect thereof(and such entitlement shall be conclusively and irrefutably established) (any such claim, an “Unobjected Claim”). Within [***] of a claim becoming an
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Unobjected Claim, the Indemnifying Holders shall make the applicable payment to such Indemnified Party, subject to Sections 9.3, 9.4(f) and 9.4(b).
(d) Resolution of Conflicts. In case the Securityholder Representative or Parent, as applicable, timely delivers an Objection Notice in accordance with Section 9.4(c)(i) hereof, the Securityholder Representative, or Parent, as applicable, and the applicable Indemnified Parties shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims. If the Securityholder Representative or Parent, as applicable, and the Indemnified Parties reach an agreement, a memorandum setting forth such agreement shall be prepared and signed by all applicable parties (any claims covered by such an agreement, “Settled Claims”). Any amounts required to be paid as a result of a Settled Claim shall be paid by the Indemnifying Holder to the Indemnified Parties pursuant to the Settled Claim within [***] of the applicable claim becoming a Settled Claim, subject to Sections 9.3(b), 9.4(f) and 9.4(b). If the Securityholder Representative or Parent, as applicable, and the Indemnified Parties are unable to reach an agreement, the matter specified in the Objection Notice shall be resolved pursuant to Section 11.7 (any claims resolved pursuant thereto, “Resolved Claims”).
(e) Payable and Unresolved Claims. A “Payable Claim” means a claim for indemnification of Losses under this Article 9, to the extent that such claim has not yet been satisfied pursuant to Section 9.4(f), that is (i) a Resolved Claim, (ii) a Settled Claim, or (iii) an Unobjected Claim. An “Unresolved Claim” means any claim for indemnification of Losses under this Article 9 specified in any Officer’s Certificate in compliance with Section 9.4(b) to the extent that such claim is not a Payable Claim.
(f) Escrow Amount; Recovery of Losses.
(i) Subject to Sections 9.4(b), 9.4(c), 9.4(d) and 9.4(e) above, by virtue of this Agreement and as partial security for the indemnity obligations provided for in Sections 9.2(a) hereof, subject to the terms of this Agreement, the Parent Indemnified Parties shall have the right, and shall be required, in the manner provided in this Section 9.4(f) to recover the amount of any Losses with respect to which the Parent Indemnified Parties are entitled to indemnification hereunder:
(A) first, by the release from the Escrow Fund until the Escrow Fund has been exhausted;
(B) second, other than with respect to a breach of representations and warranties that are not Fundamental Representations or Special Representations (which Losses may only be deducted from the Escrow Fund under clause (A) above), from the Indemnifying Holders directly or by the offset against any Milestone Consideration not yet paid in accordance with Section 9.4(f)(v) (the “Offset Right”), which shall be based upon the Parent Common Stock Price for any offset against Milestone Consideration payable in shares of Parent Common Stock.
(ii) As promptly as practicable after the date any claim becomes a Payable Claim, payment of the amount of such Payable Claim, ratably in accordance with Section 9.4(f)(i), shall be made to the Indemnified Parties from the Escrow Fund in accordance with Section 9.5(b)(i).
(iii) At the Escrow Release Time, if and to the extent the dollar equivalent (calculated in accordance with Section 9.4(f)(i)) of the Escrow Fund exceeds the aggregate amount of Unresolved Claims as of the Escrow Release Time, then the amount of such excess shall be paid in accordance with Sections 9.4(f)(i), from the Escrow Fund in accordance with Section 9.5(b)(ii) to the Company Securityholders so that each Company Securityholder receives its, his or her Pro Rata Share of such cash representing such excess.
(iv) In the event that as of the Escrow Release Time there shall be any Unresolved Claims for which cash in the Escrow Fund was withheld from distribution under Section 9.4(f)(iv). from and after the Escrow Release Time until such time as the Escrow Fund has been fully depleted
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pursuant to Sections 9.4(f)(i) and 9.4(f)(iii) and the last sentence of this Section 9.4(f)(iv), Parent and the Securityholder Representative shall promptly deliver to the Escrow Agent a joint notice, as each Unresolved Claim becomes resolved as either a Payable Claim or a claim that is not a Payable Claim, of such resolution and either (A) if and to the extent such Unresolved Claim has been resolved as a Payable Claim, such notice shall specify the amount of such Payable Claim, and payment of such amount, ratably in accordance with Section 9.4(f)(i), shall be made to the Indemnified Parties from the Escrow Fund in accordance with Section 9.4(f) and Section 9.5(b)(i), and (B) if and to the extent such Unresolved Claim has been resolved as not a Payable Claim, such notice shall specify the amount of cash withheld from distribution as a result of such Unresolved Claim under Section 9.4(f)(iii). The amount, if any, of cash specified pursuant to the preceding clause (B), together with all other amounts then in the Escrow Fund (i.e., earnings (including interest and dividends) on the Escrow Amount and on any such earnings in accordance with the Escrow Agreement) shall be paid from the Escrow Fund in accordance with Section 9.5(b)(ii) to the Company Securityholders so that each Company Securityholder receives its, his or her Pro Rata Share of such cash.
(v) The parties hereby acknowledge and agree that the obligation of Parent to pay any [***] Milestone Consideration, [***] Milestone Consideration hereunder shall be qualified in its entirety by the right of Parent to set off, subject to the express limitations set forth in this Article 9 and solely on a dollar-for-dollar basis, the amount of any such [***] Milestone Consideration or [***] Milestone Consideration at the time that such [***] Milestone Consideration or [***] Milestone Consideration, as the case may be, becomes payable, by the aggregate amount of any Payable Claims as of the date on which the [***] Milestone Consideration or [***] Milestone Consideration, as the case may be, shall otherwise be payable hereunder and not yet paid or otherwise satisfied, with the remaining portion of such [***] Milestone Consideration or [***] Milestone Consideration, as the case may be, payable to the Company Securityholders in accordance with this Agreement. Such set off for any [***] Milestone Consideration shall be in the form of cash or cash and shares of the Parent Common Stock, as applicable.
9.5 Escrow Arrangements.
(a) Escrow Fund. At the Closing, Parent will deposit the Escrow Amount with the Escrow Agent, without any act of the Company Securityholders, such deposit of the Escrow Amount to be held in escrow by the Escrow Agent pursuant to the terms and conditions of this Agreement and the Escrow Agreement and to constitute an escrow fund to be governed by the terms set forth in the Escrow Agreement.
(b) Satisfaction of Claims.
(i) If payment is to be made to any Indemnified Party from the Escrow Fund pursuant to Section 9.4(f)(i), Parent and the Securityholder Representative shall promptly deliver joint written instructions to the Escrow Agent directing the Escrow Agent to release from the Escrow Fund to the applicable Indemnified Party the amount of cash so payable.
(ii) If payment is to be made to Company Securityholders from the Escrow Fund pursuant to Section 9.4(f)(iii) or the last sentence of Section 9.4(f)(iv), Parent and the Securityholder Representative shall promptly deliver joint written instructions to the Escrow Agent directing the Escrow Agent to release to the applicable Company Securityholders the amount of cash so payable.
9.6 Third Party Claims. If a Parent Indemnified Party becomes aware of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a representative of the foregoing (a “Third Party Claim”) which such Parent Indemnified Party reasonably believes may, if adversely determined, result in a claim for indemnification by any Parent Indemnified Party pursuant to this Article 9, such Parent Indemnified Party shall notify the Securityholder Representative promptly of such claim in writing, and the Securityholder Representative shall be entitled on behalf of the Company Securityholders,
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at their expense, to participate in, but not to determine or conduct, the defense of such Third Party Claim. Such notice by the Parent Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Parent Indemnified Party. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Holders of their indemnification obligations, except and only to the extent that the Securityholder Representative or any Indemnifying Holder forfeits rights or defenses by reason of such failure. The Parent Indemnified Party shall have the right in its sole discretion to conduct the defense of, and to settle, any such claim and the Securityholder Representative and the Company Securityholders shall not have a right of approval or consent with respect to any such Third Party Claim; provided, that except with the prior written consent of the Securityholder Representative (which may be withheld in Securityholder Representative’s sole discretion), no settlement of any such Third Party Claim with third party claimants shall be determinative of the right of indemnification for Losses in respect of such Third Party Claim under this Article 9 or the amount of Losses relating to such matter. If the Securityholder Representative has consented to any such settlement, the Company Securityholders and the Indemnifying Holders shall have no power or authority to object under any provision of this Article 9 to the amount of such settlement to which the Securityholder Representative expressly consented constituting a Payable Claim. [***].
If the Securityholder Representative (on behalf of any Company Indemnified Party) becomes aware of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a representative of the foregoing (a “Company Third Party Claim”) which the Securityholder Representative reasonably believes may, if adversely determined, result in a claim for indemnification by any Company Indemnified Party pursuant to this Article 9, the Securityholder Representative shall notify Parent promptly of such claim in writing, and the Securityholder Representative shall be entitled on behalf of the Company Indemnified Parties, at their expense, to participate in, but not to determine or conduct, the defense of such Company Third Party Claim. Such notice by the Securityholder Representative shall describe the Company Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Company Indemnified Party. The failure to give such prompt written notice shall not, however, relieve the Parent of its indemnification obligations, except and only to the extent that the Parent forfeits rights or defenses by reason of such failure. Parent shall have the right in its sole discretion to conduct the defense of, and to settle, any such claim and the Securityholder Representative and the Company Securityholders shall not have a right of approval or consent with respect to any such Company Third Party Claim; provided, that except with the prior written consent of the Securityholder Representative (which may be withheld in Securityholder Representative’s sole discretion), no settlement of any such Company Third Party Claim with third party claimants shall be determinative of the amount of Losses in respect of such Company Third Party Claim under this Article 9 or the right of indemnification for Losses relating to such matter; and provided, further, that Parent shall not, without the prior written consent of the Securityholder Representative (which may be withheld in Securityholder Representative’s sole discretion), settle or compromise any Company Third Party Claim or permit a default or consent to entry of any judgment; provided, however, that the prior written consent of the Securityholder Representative pursuant to the immediately preceding proviso shall not be required if such settlement, compromise or judgement creates no liability or obligation on the part of any such Company Indemnified Party and provides, in customary form, for the unconditional release of any such Company Indemnified Party from all liabilities and obligations in connection with such Company Third Party Claim.
9.7 Securityholder Representative.
(a) By virtue of the approval of this Agreement by the Company Securityholders and without any further action of any of the Company Securityholders or the Company, each Company
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Securityholder irrevocably approves the constitution and appointment of Shareholder Representative Services LLC as the Securityholder Representative, with all the rights, powers and obligations contemplated by this Section 9.7, and any successor Securityholder Representative(s) designated under this Section 9.7, as the sole, exclusive, true and lawful agent, representative and attorney-in-fact, with full power of substitution, for and on behalf of all the Company Securityholders, and each of them, with respect to any and all matters in connection with or arising out of this Agreement or any Related Agreement following the Closing (including in connection with the Escrow Agreement, the Securityholder Representative Engagement Agreement and any other Related Agreement to which the Company is a party), including for purposes of taking any action or omitting to take action on behalf of all the Company Securityholders or each of them hereunder. The powers, immunities and rights to indemnification granted to the Securityholder Representative Group hereunder: (i) are coupled with an interest and shall be irrevocable and survive the death, incompetence, bankruptcy or liquidation of any Company Securityholder and shall be binding on any successor thereto, and (ii) shall survive the delivery of an assignment by any Company Securityholder of the whole or any fraction of his, her or its interest in the Escrow Fund or any Milestone Consideration. All actions, notices, communications and determinations by or on behalf of the Company Securityholders in accordance herewith shall be given or made by the Securityholder Representative and all such actions, notices, and determinations by the Securityholder Representative shall conclusively be deemed to have been authorized by, and shall be binding upon, any and all Company Securityholders and their successors as if expressly confirmed and ratified in writing by the Company Securityholders, and all defenses which may be available to any Company Securityholder to contest, negate or disaffirm the action of the Securityholder Representative taken in good faith under this Agreement, the Escrow Agreement or the Securityholder Representative Engagement Agreement are waived.
(b) Without limiting the generality of the foregoing, from and after the Closing, the Securityholder Representative shall have full power and authority (a) to negotiate and sign all documents in connection with the transactions contemplated hereby, (b) to grant, provide, negotiate and sign all waivers, amendments, consents, instructions and authorizations and to take all other actions or exercise any rights called for under or contemplated by or that may otherwise be necessary or appropriate in connection with this Agreement or any of the foregoing agreements or instruments, (c) to prosecute, defend and settle in the Securityholder Representative’s discretion all indemnification disputes (including hiring counsel and other litigation assistance) and all actions for enforcement or defense of Securityholder Representative’s and/or Company Securityholders’ rights and remedies hereunder, including with respect to specific performance under Section 11.6, and (d) to receive all notices, requests and demands that may be made under and pursuant to this Agreement or in connection herewith. Notwithstanding the foregoing, the Securityholder Representative shall have no obligation to act on behalf of the Company Securityholders, except as expressly provided herein, in the Escrow Agreement and in the Securityholder Representative Engagement Agreement, and for purposes of clarity, there are no obligations of the Securityholder Representative in any ancillary agreement, schedule, exhibit or the Company Disclosure Schedules. From and after the Closing, Parent shall be entitled to deal exclusively with the Securityholder Representative in respect of any matter arising under this Agreement or any Related Agreement to which the Company is a party and the Company Securityholders shall be bound by all actions taken by the Securityholder Representative in connection with such matters. The Securityholder Representative shall be entitled to: (i) rely upon the Spreadsheet, (ii) rely upon any signature believed by it to be genuine, and (iii) reasonably assume that a signatory has proper authorization to sign on behalf of the applicable Company Securityholder or other party.
(c) Should the Securityholder Representative die, become legally incapacitated or bankrupt, dissolve, liquidate, resign or otherwise similarly be unable or unwilling to serve, Company Securityholder(s) representing more than 50% of the Pro Rata Share (the “Stockholders’ Majority”), shall designate in writing to Parent within five (5) Business Days a single Person to replace the deceased or legally incapacitated or resigned or otherwise similarly unable Securityholder Representative as the successor Securityholder Representative hereunder. If at any time there shall not be a Securityholder
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Representative and a Stockholders’ Majority fails to designate in writing a successor Securityholder Representative within five (5) Business Days after receipt of a written request delivered by Parent to the Stockholders’ Majority requesting that a successor Securityholder Representative be designated, then Parent may petition a court of competent jurisdiction to appoint a new Securityholder Representative hereunder. The immunities and rights to indemnification shall survive the resignation or removal of the Securityholder Representative or any member of the Advisory Group and the Closing and/or any termination of this Agreement and the Escrow Agreement.
(d) At the Closing in accordance with Section 2.14, the Expense Fund shall be deposited into an account designated by the Securityholder Representative and held in accordance with the terms of this Section 9.7(d). The Securityholder Representative will hold these funds separate from its corporate funds and will not voluntarily make these funds available to its creditors in the event of bankruptcy. The Expense Fund shall be held by the Securityholder Representative to be used by the Securityholder Representative solely (i) to pay for or reimburse any reasonable Securityholder Representative Expenses incurred by the Securityholder Representative, or to indemnify the Securityholder Representative for any liabilities incurred by the Securityholder Representative, in performing its duties in connection with or arising out of this Agreement, the Escrow Agreement or the Securityholder Representative Engagement Agreement, or (ii) as otherwise determined by the Advisory Group. The Securityholder Representative is not providing any investment supervision, recommendations or advice and shall have no responsibility or liability for any loss of principal of the Reserve other than as a result of its gross negligence or willful misconduct. The Securityholder Representative is not acting as a withholding agent or in any similar capacity in connection with the Expense Fund and has no tax reporting or income distribution obligations. The Company Securityholders will not receive any interest or earnings on the Expense Fund and irrevocably transfer and assign to the Securityholder Representative any ownership right that they may otherwise have had in any such interest or earnings. Subject to Advisory Group approval, the Securityholder Representative may contribute funds to the Expense Fund from any consideration otherwise distributable to the Company Securityholders. All of the costs and expenses incurred by the Securityholder Representative in connection with this Agreement shall be payable by the Company Securityholders, initially out of the Expense Fund. As soon as practicable following the completion of the Securityholder Representative’s responsibilities, the Securityholder Representative will deliver any remaining balance of the Expense Fund to the Parent for further distribution to the Company Securityholders (provided, that amounts payable in respect of Company Options shall be paid to the former holders of Company Options, subject to applicable withholding). For U.S. federal income tax purposes, the Expense Fund will be treated as having been received and voluntarily set aside by the Company Securityholders at the time of Closing.
(e) Certain Company Securityholders have entered into an engagement agreement (the “Securityholder Representative Engagement Agreement”) with the Securityholder Representative to provide direction to the Securityholder Representative in connection with its services under this Agreement, the Escrow Agreement and the Securityholder Representative Engagement Agreement (such Company Securityholders, including their individual representatives, collectively hereinafter referred to as the “Advisory Group”). Neither the Securityholder Representative nor any of its members, managers, directors, officers, contractors, agents and employees nor any member of the Advisory Group, solely in such Advisory Group members’ capacity as such, (collectively, the “Securityholder Representative Group”) shall be liable to the Company Securityholders for any act done or omitted in connection herewith or any agreements ancillary hereto by the Securityholder Representative or the Advisory Group, respectively, unless caused by, in the case of the Securityholder Representative, the Securityholder Representative’s willful misconduct, bad faith or gross negligence, or in the case of the Advisory Group, such Advisory Group’s willful misconduct, bad faith or gross negligence. The Securityholder Representative shall not be liable for any action or omission pursuant to the advice of counsel. Parent shall not be liable to the Company Securityholders for any act done or omitted hereunder by the Securityholder Representative.
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(f) The Company Securityholders shall indemnify and defend the Securityholder Representative Group and hold the Securityholder Representative Group harmless against its Pro Rata Share of any loss, liability, deficiency, damage, cost, expense, claim, fee, judgment, fine, amount paid in settlement or actions incurred by the Securityholder Representative and arising out of or in connection with the acceptance, performance or administration of the Securityholder Representative’s duties under this Agreement (including, to the extent applicable, the Escrow Agreement, the Securityholder Representative Engagement Agreement or any other Related Agreement to which the Company is a party), including the reasonable fees and expenses of any legal counsel, accountants, auditors and other advisors and skilled professionals retained by the Securityholder Representative and in connection with seeking recovery from insurers (collectively, the “Securityholder Representative Expenses”), in each case as such Securityholder Representative Expense is suffered or incurred; provided, that in the event that any such Securityholder Representative Expense is finally adjudicated to have been caused by the gross negligence or willful misconduct of the Securityholder Representative, the Securityholder Representative will reimburse the Company Securityholders the amount of such indemnified Securityholder Representative Expense to the extent attributable to such gross negligence or willful misconduct. Without limiting any remedy of the Securityholder Representative with respect to such Securityholder Representative Expenses, as aforesaid, the Securityholder Representative shall have recourse, first, against the Expense Fund, second, against any Milestone Consideration or any portion of the Escrow Fund required to be distributed to the Company Securityholders hereunder prior to any distribution thereof to the Company Securityholders, and third, directly from the Company Securityholders; provided, that while the Securityholder Representative may be paid from the aforementioned sources of funds, this does not relieve the Company Securityholders from their obligation to promptly pay such Securityholder Representative Expenses as they are suffered or incurred. In no event will the Securityholder Representative be required to advance its own funds on behalf of the Company Securityholders or otherwise. Furthermore, the Securityholder Representative shall not be required to take any action unless the Securityholder Representative has been provided with funds, security or indemnities which, in its determination, are sufficient to protect the Securityholder Representative against the costs, expenses and liabilities which may be incurred by the Securityholder Representative in performing such actions. Notwithstanding anything in this Agreement to the contrary, any restrictions or limitations on liability or indemnification obligations of, or provisions limiting the recourse against non-parties otherwise applicable to, the Company Securityholders set forth elsewhere in this Agreement are not intended to be applicable to the indemnities provided to the Securityholder Representative hereunder. The foregoing indemnities will survive the Closing, the resignation or removal of the Securityholder Representative or the termination of this Agreement.
9.8 Tax Treatment. Any payment under Section 2.9(d) or Article 9 of this Agreement shall be treated by the parties for U.S. federal, state, local and non-U.S. income Tax purposes as a purchase price adjustment unless otherwise required by applicable law.
[***]
9.9 Parent Indemnity.
(a) By virtue of the Merger, subject to the provisions of this Article 9, from and after the consummation of the Merger, Parent shall indemnify and hold harmless each Company Securityholder and their respective Affiliates (other than Persons who are Affiliates as a result of holding Company Capital Stock prior to the Effective Time), representatives, successors and permitted assigns (collectively, the “Company Indemnified Parties”) harmless from and against, and shall compensate and reimburse the Company Indemnified Parties for, all Losses incurred by the Company Indemnified Parties, or any of them, to the extent arising under, in connection with or as a result of the following:
(i) any breach of a representation or warranty of Parent or either Merger Sub contained in (A) Article 4 of this Agreement, (B) any Related Agreement or (C) any Parent Certificate; or
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(ii) any Taxes of the Company other than Pre-Closing Taxes.
Article 10
TERMINATION, AMENDMENT AND WAIVER
10.1 [Reserved].
10.2 [Reserved].
10.3 Amendment. This Agreement may be amended at any time prior to the Effective Time by the parties hereto, by action taken or authorized by their respective boards of directors, whether before or after adoption of this Agreement by the stockholders of the Company or Merger Sub; provided, that after any such stockholder adoption of this Agreement, no amendment shall be made to this Agreement that by law requires further approval or authorization by the stockholders of the Company or Merger Sub without such further approval or authorization. This Agreement may not be amended, except by an instrument in writing signed by the parties hereto. For purposes of resolution of disputes and other matters between any Indemnified Parties and one or more Company Securityholders after the Effective Time under Article 9 or otherwise, it is understood that the Securityholder Representative shall have the authority to bind all the Company Securityholders.
10.4 Extension; Waiver. At any time prior to the Closing, Parent, on the one hand, and the Company, on the other hand, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations of the other party hereto, (b) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the covenants, agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. For purposes of this Section 10.4, the Company Stockholders agree that any extension or waiver signed by the Securityholder Representative after the Closing shall be binding upon and effective against all Company Stockholders whether or not they have signed such extension or waiver. No delay or failure by any party to assert any of its rights or remedies shall constitute a waiver of such rights or remedies.
Article 11
GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed delivered, given and received (a) when delivered in person, (b) when transmitted by email or facsimile (with written confirmation of completed transmission), (c) on the third (3rd) Business Day following the mailing thereof by certified or registered mail (return receipt requested) or (d) when delivered by an express courier (with written confirmation of delivery) to the parties hereto at the following addresses (or to such other address or facsimile number as such party may have specified in a written notice given to the other parties):
(a) if to Parent or the Surviving Corporation, to:
Intellia Therapeutics, Inc.
40 Erie Street, Suite 130
Cambridge, MA 02139
[***]
with a copy (which shall not constitute notice) to:
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Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
[***]
(b) if to the Company, to:
Rewrite Therapeutics, Inc.
1250 Powell St. Apt 4
Emeryville, CA 94608
[***]
and, if on or before the Closing Date, with a copy (which shall not constitute notice) to:
Arnold & Porter Kaye Scholer LLP
Three Embarcadero Center, 10th Floor
San Francisco, CA 9411104024
[***]
(c) if to the Securityholder Representative, to:
Shareholder Representative Services LLC
950 17th Street, Suite 1400
Denver, CO 80202
[***]
with a copy (which shall not constitute notice) to:
Arnold & Porter Kaye Scholer LLP
Three Embarcadero Center, 10th Floor
San Francisco, CA 9411104024
[***]
(d) If to a Company Stockholder, to his, her or its address and facsimile on the Spreadsheet.
11.2 Interpretation. Unless a clear contrary intention appears: (a) the singular number shall include the plural, and vice versa; (b) reference to any gender includes each other gender; (c) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (d) “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation”; (e) all references in this Agreement to “Schedules,” “Sections,” “Annexes” and “Exhibits” are intended to refer to Schedules, Sections, Annexes and Exhibits to this Agreement, except as otherwise indicated; (f) the table of contents and headings in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement, and shall not be referred to in connection with the construction or interpretation of this Agreement; (g) “or” is used in the inclusive sense of “and/or”; (h) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; (i) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (j) “shall” and “will” are to be interpreted to have the same meaning hereunder;
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and (k) all references to “this Agreement” include this Agreement and all Schedules, Annexes and Exhibits thereto.
11.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). Any signature page delivered electronically or by facsimile (including transmission by Portable Document Format or other fixed image form) shall be binding to the same extent as an original signature page.
11.4 Entire Agreement; Assignment. This Agreement, the exhibits and annexes hereto, the Company Disclosure Schedule, Schedule I, the other schedules and the Related Agreements and the NDA: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings both written and oral (including the Letter of Intent, any letter of intent, term sheet or related discussions), among the parties with respect to the subject matter hereof, and (b) shall not be assigned by operation of law or otherwise, except (1) that Parent may assign its rights and delegate its obligations hereunder in their entirety (i) to a successor-in-interest of Parent by reason of merger or consolidation or sale of all or substantially all of the assets of Parent (provided that, as a condition to such assignment, such successor-in-interest shall expressly assume and agree to perform, by written agreement delivered to the Securityholder Representative, all of Parent’s liabilities, obligations and covenants hereunder in full); (ii) to one or more of its wholly owned and controlled Affiliates or (iii) any commercial lender of Parent or its Affiliates as collateral security in any financing transaction involving debt for borrowed money provided that no such assignment shall relieve Parent of any of its liabilities, obligations or covenants hereunder; and (2) any Company Securityholder who is an individual may assign its rights and delegate its obligations hereunder in their entirety on death by will or intestacy.
11.5 Severability. If any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
11.6 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
11.7 Submission to Jurisdiction; Consent to Service of Process.
(a) Except for a determination of the Closing Net Debt Amount, which shall be resolved exclusively by the Firm pursuant to Section 2.9, all disputes, claims, or controversies arising out of or relating to the Agreement, the Related Agreements (other than as expressly set forth therein) or any other agreement or document executed and delivered pursuant to the Agreement (other than as expressly set forth therein) or the negotiation, breach, validity or performance hereof and thereof or the transactions contemplated hereby and thereby, including claims of Fraud or fraud in the inducement, and including as well the determination of the scope or applicability of this forum selection provision, shall be resolved solely and exclusively in the federal and state courts in each case located in the City of Wilmington in the State of Delaware.
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(b) EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF The federal and state courts in each case located in the City of Wilmington in the State of Delaware IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 11.1.
11.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof.
11.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
11.10 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
11.11 No Third Party Beneficiary. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, or Liabilities under or by reason of this Agreement except that (i) Article 9 shall also be for the benefit of the Parent Indemnified Parties (with respect to Section 9.2) and the Company Indemnified Parties (with respect to Section 9.9), (ii) Section 6.13, from and after (and subject to the occurrence of) the Effective Time, shall be for the benefit of the D&O Indemnified Parties, and (iii) Section 11.13 shall be for the benefit of each Securityholder Group Law Firm.
11.12 Costs and Expenses. Except as otherwise expressly set forth herein, each party shall each be responsible for its own fees, costs and expenses (including legal and other fees and expenses) in connection with all aspects of the transactions contemplated hereby.
11.13 Conflict Waiver; Attorney-Client Privilege.
(a) Each of the parties hereto acknowledges and agrees, on its own behalf and on behalf of its directors, members, shareholders, partners, officers, employees and Affiliates, that:
(i) Each of Arnold & Porter Kaye Scholer LLP and Wilson, Sonsini, Goodrich & Rosati LLP has acted as counsel to (A) the Company and (B) the Company Securityholders and the Securityholder Representative (acting on behalf of the Company Securityholders) and their respective Affiliates (collectively, the “Securityholder Group”), in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. Parent agrees, and shall cause the Company and Merger Sub to agree, that, following
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consummation of the transactions contemplated hereby, such representation and any prior representation of the Company by Arnold & Porter Kaye Scholer LLP (or any successor) and/or Wilson, Sonsini, Goodrich & Rosati LLP (or any successor) (each a “Securityholder Group Law Firm”) shall not preclude either Securityholder Group Law Firm from serving as counsel to the Securityholder Group or any director, member, shareholder, partner, officer or employee of the Securityholder Group, in connection with any litigation, claim or obligation arising out of or relating to this Agreement, any Related Agreement or Certificate or the transactions contemplated hereby or thereby.
(ii) Parent shall not, and shall cause the Company, the Surviving Corporation and the Surviving Corporation not to, seek or have any Securityholder Group Law Firm disqualified from any such representation based on the prior representation of the Company by such Securityholder Group Law Firm. Each of the parties hereto hereby consents thereto and waives any conflict of interest arising from such prior representation, and each of such parties shall cause any of its Affiliates to consent to waive any conflict of interest arising from such representation. Each of the parties acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the parties have consulted with counsel or have been advised they should do so in connection herewith. The covenants, consent and waiver contained in this Section 11.13 shall not be deemed exclusive of any other rights to which any Securityholder Group Law Firm is entitled whether pursuant to law, contract or otherwise.
(b) All communications between the Securityholder Group or the Company, on the one hand, and any Securityholder Group Law Firm, on the other hand, and all communication between the Securityholder Group Law Firms (whether or not including the Securityholder Group or the Company), in each case relating to the negotiation, preparation, execution and delivery of this Agreement, any Related Agreement or any Certificate and the performance of the Company or any member of the Securityholder Group of any of its, his or her obligations hereunder or thereunder and the consummation of the transactions contemplated hereby and thereby (the “Privileged Communications”) shall be deemed to be attorney-client privileged and the expectation of client confidence relating thereto shall belong solely to the Securityholder Group and shall not pass to or be claimed by Parent, the Company, the Surviving Corporation or the Surviving Corporation (each, a “Parent Group Company”). Accordingly, each Parent Group Company shall not have access to any Privileged Communications or to the files of any Securityholder Group Law Firm relating to such engagement from and after Closing and may not use or rely on any Privileged Communications in any claim, dispute, action, suit or proceeding against or involving any of the Securityholder Group. Without limiting the generality of the foregoing, from and after the Closing, (i) the Securityholder Group (and not any Parent Group Company) shall be the sole holders of the attorney-client privilege with respect to such engagement, and no Parent Group Company shall be a holder thereof, (ii) to the extent that files of any Securityholder Group Law Firm in respect of such engagement constitute property of the client, only the Securityholder Group (and no Parent Group Company) shall hold such property rights and (iii) no Securityholder Group Law Firm shall have any duty whatsoever to reveal or disclose any such attorney-client communications or files to any Parent Group Company by reason of any attorney-client relationship between any such Securityholder Group Law Firm and the Company or otherwise. Notwithstanding the foregoing, in the event that a dispute arises between Parent or its Affiliates (including any Parent Group Company), on the one hand, and a third party other than any of the Securityholder Group, on the other hand, Parent and its Affiliates (including any Parent Group Company) may assert the attorney-client privilege to prevent disclosure of confidential communications to such third party; provided, however, that neither Parent nor any of its Affiliates (including any Parent Group Company) may waive such privilege without the prior written consent of the Securityholder Representative, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that Parent or any of its Affiliates (including any Parent Group Company) is legally required by governmental order or otherwise legally required to access or obtain a copy of all or a portion of the Privileged Communications, to the extent (x) permitted by applicable Law, and (y) advisable in the opinion of Parent’s counsel, then Parent shall immediately (and, in any event, within three (3) Business Days) notify Securityholder Representative in writing so that Securityholder Representative can seek a protective order.
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(c) This Section 11.13 is intended for the benefit of, and shall be enforceable by, each Securityholder Group Law Firm. This Section shall be irrevocable, and no term of this Section may be amended, waived or modified, without the prior written consent of each Securityholder Group Law Firm.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Securityholder Representative have caused this Agreement to be signed, all as of the date first written above.
INTELLIA THERAPEUTICS, INC
By: /s/ John Leonard
Name: John Leonard
Title: President and Chief Executive Officer
Rewrite Therapeutics, Inc.
By: /s/ Schaked Halperin
Name: Schaked Halperin
Title: CEO
RW Acquisition Corp.
By: /s/ Derek Hicks
Name: Derek Hicks
Title: President
SHAREHOLDER REPRESENTATIVE SERVICES LLC, solely in its capacity as the Securityholder Representative
By: /s/ Sam Riffe
Name: Sam Riffe
Title: Managing Director
Signature Page to Agreement and Plan of Merger
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Exhibit 10.29
LEASE AGREEMENT
THIS LEASE AGREEMENT (this “Lease”) is made this ___22__ day of February, 2022, between ARE-WINTER STREET PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and INTELLIA THERAPEUTICS, INC., a Delaware corporation (“Tenant”).
Building: That certain to-be-renovated 3-story building located at 840 Winter Street, Waltham, Massachusetts.
Premises: Those portions of the first, second and third floors of the Building, commonly known as Suite 100, containing approximately 139,984 rentable square feet, subject to re-measurement as set forth in Section 5 below, as shown on Exhibit A.
Project: The real property on which the Building in which the Premises are located, together with all improvements thereon and appurtenances thereto as described on Exhibit B.
Base Rent: Initially, $73.50 per rentable square foot of the Premises per year, subject to adjustment pursuant to Section 4 hereof.
Rentable Area of Premises: 139,984 sq. ft.
Rentable Area of Building and Project: 168,214 sq. ft.
Tenant’s Share of Operating Expenses: 83.22%
Security Deposit: $6,001,814.00, subject to adjustment pursuant to Section 6.
Target Commencement Date: April 19, 2024
Rent Adjustment Percentage: 3%
Base Term: Beginning on the Commencement Date and ending 144 months from the first day of the first full month following the Commencement Date. For clarity, if the Commencement Date occurs on the first day of a month, the expiration of the Base Term shall be measured from that date. If the Commencement Date occurs on a day other than the first day of a month, the expiration of the Base Term shall be measured from the first day of the following month.
Permitted Use: Life sciences research and development laboratory, manufacturing, general office, related mechanical space and other ancillary uses consistent with the character of the Project and otherwise in compliance with the provisions of Section 7 hereof.
Address for Rent Payment: Landlord’s Notice Address:
ARE-Winter Street Property, LLC 26 North Euclid Avenue
P.O. Box 22547 Pasadena, CA 91101
New York, NY 10087-2547 Attention: Corporate Secretary
Tenant’s Notice Address
40 Erie Street
Cambridge, Massachusetts 02139
Attention: Chief Financial Officer
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With a copy to:
Intellia Therapeutics, Inc.
20 Erie Street
Cambridge, Massachusetts 02139
Attention: Legal Department
As a courtesy, copies of notices provided by Landlord to Tenant under this Lease shall be sent to Glenn.Goddard@intelliatx.com and to ntlanotice@intelliatx.com.
The following Exhibits are attached hereto and incorporated herein by this reference:
[X] EXHIBIT A - PREMISES DESCRIPTION [X] EXHIBIT B - DESCRIPTION OF PROJECT
[X] EXHIBIT C - WORK LETTER [X] EXHIBIT D - COMMENCEMENT DATE
[X] EXHIBIT E - RULES AND REGULATIONS [X] EXHIBIT F - TENANT’S PERSONAL PROPERTY
[X] EXHIBIT G - BUILDING SIGN LOCATION
In addition, if the Premises ever consists of the entire rentable area of the Building pursuant to Section 39 and/or Section 40, Landlord shall have the right to require Tenant (and Tenant shall, promptly after Landlord’s request to do so) execute an amendment to the Lease in a commercially reasonable form reasonably acceptable to Tenant and Landlord, and prepared by Landlord to address, among other things, matters associated with converting the Building from a multi-tenant building to a single-tenant building, including, without limitation, (i) Common Areas, (ii) maintenance and repair responsibilities, (iii) Operating Expenses, (iv) the Building signage (which may be exclusive), (v) allocation of parking and reserved parking spaces, and (vi) rules and regulations.
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The “Commencement Date” shall be the earlier of: (i) the date Landlord Delivers the Premises to Tenant with Landlord’s Work Substantially Completed; or (ii) the date Landlord could have Delivered the Premises but for Tenant Delays. Upon request of either party, Landlord and Tenant shall execute and deliver a written acknowledgment of the Commencement Date and the expiration date of the Term when such are established in the form of the “Acknowledgement of Commencement Date” attached to this Lease as Exhibit D; provided, however, either party’s failure to execute and deliver such acknowledgment shall not affect the other party’s rights hereunder. The “Term” of this Lease shall be the Base Term, as defined above on the first page of this Lease and any Extension Terms which Tenant may elect pursuant to Section 41 hereof.
Landlord and Tenant acknowledge and agree that (w) as of the date of this Lease there exist significant global supply chain delays and shortages of construction materials, supplies and equipment (collectively, “Supply Chain Delays”), (x) the availability of fixtures, equipment and/or materials required for the performance and/or Substantial Completion of Landlord’s Work (collectively, “Required Materials”), may be subject to longer lead times than normally anticipated due to such Supply Chain Delays, (y) the unavailability or delayed delivery of Required Materials may result in disruption to progress of the construction of Landlord’s Work in the ordinary course, and (z) the Target Commencement Date shall be delayed for a period equal to the delay in the Substantial Completion of Landlord’s Work resulting directly or indirectly from the unavailability or delayed delivery of Required Materials.
Tenant has requested the right to occupy that certain portion of the Premises (the “Phase 1 Space”) prior to the Commencement Date by the date set forth on the construction schedule attached to the Work Letter as Schedule 1, and Landlord has agreed, subject to the terms of the Work Letter, to use reasonable efforts to accelerate the work of the Tenant Improvements in the Phase 1 Space to accommodate Tenant’s request. The location of the Phase 1 Space shall be mutually agreed upon by Landlord and Tenant following completion of the Space Plans (as defined in the Work Letter) for the Tenant Improvements. Landlord shall deliver to Phase 1 Space to Tenant upon the Substantial Completion of the Tenant Improvements in the Phase 1 Space (the “Delivery Date”). Commencing on the Delivery Date, Tenant shall commence paying Base Rent at the rate of $73.50 per rentable square foot per year plus Operating Expenses with respect to the Phase 1 Space. Tenant acknowledges and agrees that Landlord will continue to perform Landlord’s Work in the balance of the Premises while Tenant is occupying Phase 1 Space, that Landlord’s completion of Landlord’s Work in the balance of the Premises may adversely affect Tenant’s use and occupancy of the Phase 1 Space, and that prior to the Substantial Completion of Landlord’s Work in the balance of the Premises, there will continue to be construction noise, vibrations and dust associated with Landlord’s construction of Landlord’s Work in the balance of the Premises; provided however, in the event Tenant reasonably believes that Landlord’s Work in the balance of the Premises while Tenant would be occupying Phase 1 Space, would materially and adversely affect Tenant’s intended use of the Phase 1 Space, Tenant shall have the right to delay the Delivery Date until such time as the Landlord’s Work in the balance of the Premises no longer materially and adversely affects Tenant’s intended use of the Phase 1 Space as reasonably determined by Tenant.
In addition to Tenant’s early occupancy of the Phase 1 Space pursuant to the immediately preceding paragraph and notwithstanding anything to the contrary contained herein, to the extent that Landlord’s Work is Substantially Completed in any portion of the Premises other than the Phase 1 Space (each, a “Completed Area”) and Tenant’s occupancy of such Completed Area will not materially interfere
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with Landlord’s construction of Landlord’s Work in the balance of the Premises, Tenant may elect, by delivery of written notice to Landlord, to occupy such Completed Area prior to the Commencement Date. Tenant shall commence paying Base Rent at the rate of $73.50 per rentable square foot per year plus Operating Expenses with respect to any such Completed Area that Tenant elects to occupy pursuant to the immediately preceding sentence on the date that Landlord delivers such Completed Area to Tenant for Tenant’s early occupancy. Tenant acknowledges and agrees that Landlord will continue to perform Landlord’s Work in the balance of the Premises while Tenant is occupying such Completed Area(s), that Landlord’s completion of Landlord’s Work in the balance of the Premises may adversely affect Tenant’s use and occupancy of the Completed Area(s), and that prior to the Substantial Completion of Landlord’s Work in the balance of the Premises, there will continue to be construction noise, vibrations and dust associated with Landlord’s construction of Landlord’s Work in the balance of the Premises.
Except as set forth in the Work Letter (including Landlord’s obligation thereunder to perform Landlord’s Work) or as otherwise expressly set forth in this Lease: (A) Tenant shall accept the Premises in their condition as of the Commencement Date; (B) Landlord shall have no obligation for any defects in the Premises; and (C) Tenant’s taking possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken. Any occupancy of the Premises by Tenant before the Commencement Date shall be subject to all of the terms and conditions of this Lease, excluding, so long as Tenant is not operating its business in any portion of the Premises, the obligation to pay Base Rent and Operating Expenses.
For the period of 365 consecutive days after the Commencement Date, Landlord shall, at its sole cost and expense (which shall not constitute an Operating Expense), be responsible for any repairs that are required to be made to the Building Systems (as defined in Section 13), unless Tenant or any Tenant Party was responsible for the cause of such repair, in which case Tenant shall pay the cost.
Tenant agrees and acknowledges that, except as expressly set forth in this Lease, neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use. This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof and supersedes any and all prior representations, inducements, promises, agreements, understandings and negotiations which are not contained herein. Landlord in executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments and agreements contained herein.
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The term “Operating Expenses” means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year by Landlord with respect to the Project including, without duplication, (i) Taxes (as defined in Section 9), (ii) Utilities (as defined in Section 11), (iii) insurance costs, (iv) the cost of upgrades to the Building or Project or enhanced services provided at the Building and/or Project which are intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of communicable diseases and/or viruses of any kind or nature (collectively, “Infectious Conditions”), (v) subject to Section 44(o), transportation services
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(including the Shuttle Service Costs (as defined in Section 44(o))), (vi) the cost of the Project Amenities (including, without limitation, reimbursement by Landlord to affiliates of Landlord for market rent paid by such affiliates to Landlord for Project Amenities space, commercially reasonable reduced rent, commercially reasonable subsidies or other commercially reasonable concessions which Landlord may provide in connection with the Project Amenities), (vii) Permitted Capital Expenditures (as defined below) amortized, to the extent applicable as determined by Landlord, over the useful life of such Permitted Capital Expenditures, as reasonably determined by Landlord taking into account all reasonable factors taking into account the 24/7 operation of the Building, (viii) the costs of landscaping and snow removal, and (ix) the costs of Landlord’s third party property manager or, if there is no third party property manager, administration rent in the amount of 3% of Base Rent, excluding only:
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In addition, notwithstanding anything to the contrary contained in this Lease, Operating Expenses incurred or accrued by Landlord with respect to any capital improvements which are reasonably expected by Landlord to reduce overall Operating Expenses (for example, without limitation, by reducing energy usage at the Project) (the “Energy Savings Costs”) shall be amortized over a period of years equal to the least of (A) 10 years, (B) the useful life of such capital items, or (C) the quotient of (i) the Energy Savings Costs, divided by (ii) the annual amount of Operating Expenses reasonably expected by Landlord to be saved as a result of such capital improvements.
Within 90 days after the end of each calendar year (or such longer period as may be reasonably required), Landlord shall furnish to Tenant a statement (an “Annual Statement”) showing in reasonable detail: (a) the total and Tenant’s Share of actual Operating Expenses for the previous calendar year, and (b) the total of Tenant’s payments in respect of Operating Expenses for such year. If Tenant’s Share of actual Operating Expenses for such year exceeds Tenant’s payments of Operating Expenses for such year, the excess shall be due and payable by Tenant as Rent within 30 days after delivery of such Annual Statement to Tenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’s Share of actual Operating Expenses for such year Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement, except that after the expiration, or earlier termination of the Term or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. Landlord’s and Tenant’s obligations to pay any overpayments or deficiencies due pursuant to this paragraph shall survive the expiration or earlier termination of this Lease.
The Annual Statement shall be final and binding upon Tenant unless Tenant, within 180 days after Tenant’s receipt thereof, shall contest any item therein or wishes to verify the accuracy of the Annual Statement by giving written notice to Landlord. If, during such 180 day period, Tenant reasonably and in good faith questions or wishes to verify the accuracy of Landlord’s statement of Tenant’s Share of Operating Expenses, Landlord will provide Tenant with access to Landlord’s books and records relating to the operation of the Project and such information as Landlord reasonably determines to be responsive to Tenant’s questions (the “Expense Information”). If after Tenant’s review of such Expense Information, Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Operating Expenses, then Tenant shall have the right to have a regionally or nationally recognized independent public accounting firm selected by Tenant and approved by Landlord (which approval shall not be unreasonably withheld or delayed), working pursuant to a fee arrangement other than a contingent fee (the “Independent Review”). The results of any such Independent Review shall be binding on Landlord and Tenant. If the Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceeded Tenant’s Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeeding installments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after delivery of such
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statement, except that after the expiration or earlier termination of this Lease or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. If the Independent Review shows that Tenant’s payments with respect to Operating Expenses for such calendar year were less than Tenant’s Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement. If the Independent Review shows that Tenant has overpaid with respect to Operating Expenses by more than 5% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in which Tenant’s obligation to share therein begins and ends shall be prorated. Notwithstanding anything set forth herein to the contrary, if the Project is not at least 95% occupied on average during any year of the Term, Tenant’s Share of Operating Expenses for such year shall be computed as though the Project had been 95% occupied on average during such year.
“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Share as reasonably adjusted by Landlord for changes in the physical size of the Premises or the Project occurring thereafter. The rentable square footage of the Premises and the Building shall be calculated by Dimella Schaefer or Stevenson Systems, as determined by Landlord, prior to the date that is within 90 days after the Commencement Date using the Office Buildings: Standard Methods of Measurement ANSI/BOMA Z65.1-2017 Method A as a guideline for a Multi-Occupant Building (the “Measurement Standard”). A copy of the letter or report from Dimella Schaefer or Stevenson Systems, as applicable, setting forth its calculation using the Measurement Standard, together with all documentary support therefor, shall be furnished to Landlord and Tenant and shall be binding upon Landlord and Tenant (the “Notice of Re-determination of RSF”). If the actual rentable square footage of the Premises and the Building as set forth in the Notice of Re-Determination of RSF deviate from the amount specified in the definitions of “Premises,” “Rentable Area of Premises,” and “Rentable Area of Building and Project” on page 1 of this Lease, then this Lease shall be amended to reflect the results as set forth in the Notice of Re-determination of RSF in the definitions of “Premises,” “Rentable Area of Premises,” “Rentable Area of Building and Project,” and “Tenant’s Share of Operating Expenses” shall be adjusted. Landlord may equitably increase Tenant’s Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project that includes the Premises or that varies with occupancy or use. Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder are collectively referred to herein as “Rent.”
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Within 10 business days after the mutual execution and delivery of this Lease by the parties, Tenant shall deliver a Letter of Credit for a portion of the Security Deposit in the amount of $2,572,206.00. On or before January 1, 2023, Tenant shall deliver to Landlord either an amended Letter of Credit increasing the Security Deposit to $6,001,814.00 or a replacement Letter of Credit in the amount of $6,001,814.00. If Tenant delivers a replacement letter of credit pursuant to the immediately preceding sentence, Landlord shall return the original Letter of Credit to Tenant within a reasonable period thereafter.
If, as of the expiration of the 36 months after the Commencement Date (x) Tenant is not then in Default under this Lease, and (y) Tenant has not been in Default under this Lease during the 6 month period immediately preceding Tenant’s request for reduction of the Security Deposit (collectively, the “Reduction Requirements” and each a “Reduction Requirement”), then the Security Deposit shall be reduced to an amount equal to $3,429,608.00 (the “Reduced Security Deposit”). If Tenant delivers a written request to Landlord for such reduction of the Security Deposit then, so long as the Reduction Requirements have been satisfied, Landlord shall cooperate with Tenant, at no cost, expense or liability to Landlord, to reduce the Letter of Credit then held by Landlord to the amount of the Reduced Security Deposit. If the Security Deposit is reduced as provided in this paragraph, then from and after the date of such reduction, the “Security Deposit” shall be deemed to be the Reduced Security Deposit, for all purposes of this Lease.
If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a) transfer any Security Deposit then held by Landlord to a person or entity assuming Landlord’s obligations under this Section 6, or (b) return to Tenant any Security Deposit then held by Landlord and remaining after the deductions permitted herein. Upon such transfer to such transferee or the return of the Security Deposit to Tenant, Landlord shall have no further obligation with respect to the Security Deposit, and Tenant’s right to the return of the Security Deposit shall apply solely against Landlord’s transferee. Landlord’s obligation respecting the Security Deposit is that of a debtor, not a trustee, and no interest shall accrue thereon.
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Landlord shall be responsible, (i) subject to the terms of the Work Letter, for the compliance of the Premises with Legal Requirements (including the ADA) as of the Commencement Date, and (ii) at Landlord’s cost, for the compliance of the Common Areas of the Project with Legal Requirements (including the ADA) as of the Commencement Date. Following the Commencement Date, Landlord shall, as an Operating Expense (to the extent such Legal Requirement is generally applicable to similar buildings in the area in which the Project is located) or at Tenant’s expense (to the extent such Legal Requirement is triggered by reason of Tenant’s, as compared to other tenants of the Project, particular use of the Premises or Tenant’s Alterations) make any alterations or modifications to the Common Areas or the exterior of the Building that are required by Legal Requirements. Except as otherwise expressly provided in the 2 immediately preceding sentences, Tenant, at its sole expense, shall make any alterations or modifications to the interior of the Premises that are required by Legal Requirements (including, without limitation, compliance of the Premises with the ADA) related to Tenant’s use or occupancy of the Premises. Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or judgments, and all reasonable expenses incurred in investigating or resisting the same (including, without limitation, reasonable attorneys’ fees, charges and disbursements and costs of suit) (collectively, “Claims”) arising out of or in connection with Legal Requirements related to Tenant’s use or occupancy of the Premises or Tenant’s Alterations, and Tenant shall indemnify, defend, hold and save Landlord harmless from and against any and all Claims arising out of or in connection with any failure of the Premises to comply with any Legal Requirement related to Tenant’s use or occupancy of the Premises or Tenant’s Alterations.
Tenant acknowledges that Landlord may, but shall not be obligated to, seek to obtain Leadership in Energy and Environmental Design (LEED), WELL Building Standard, or other similar “green” certification with respect to the Project and/or the Premises, and Tenant agrees to reasonably cooperate with Landlord, at no material cost to Tenant, and to provide such information and/or documentation as Landlord may reasonably request, in connection therewith. For the avoidance of doubt, in no event shall the costs incurred by Landlord to obtain any LEED, WELL Building Standard or similar “green” certification be included as part of Operating Expenses.
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Notwithstanding anything to the contrary set forth herein, if (i) a stoppage of an Essential Service (as defined below) to the Premises shall occur and such stoppage is due solely to the negligence or willful misconduct of Landlord and not due in any part to any act or omission on the part of Tenant or any Tenant Party or any matter beyond Landlord’s reasonable control (any such stoppage of an Essential Service being hereinafter referred to as a “Service Interruption”), and (ii) such Service Interruption continues for more than 5 consecutive business days after Landlord shall have received written notice thereof from Tenant, and (iii) as a result of such Service Interruption, the conduct of Tenant’s normal operations in the Premises are materially and adversely affected, then, there shall be an abatement of one day’s Base Rent for each day during which such Service Interruption continues after such 5 business day period; provided, however, that if any part of the Premises is reasonably useable for Tenant’s normal business operations or if Tenant conducts all or any part of its operations in any portion of the Premises notwithstanding such Service Interruption, then the amount of each daily abatement of Base Rent shall only be proportionate to the nature and extent of the interruption of Tenant’s normal operations or ability to use the Premises. The rights granted to Tenant under this paragraph shall be Tenant’s sole and exclusive remedy resulting from a failure of Landlord to provide services, and Landlord shall not otherwise be liable for any loss or damage suffered or sustained by Tenant resulting from any failure or cessation of services. For purposes hereof, the term “Essential Services” shall mean the following services: HVAC service, water, sewer and electricity, but in each case only to the extent that Landlord has an obligation to provide same to Tenant under this Lease.
Landlord’s sole obligation for either providing emergency generators or providing emergency back-up power to Tenant shall be: (i) to provide emergency generator with not less than the capacity of the emergency generator located in the Building as of the Commencement Date, and (ii) to contract with a third party to maintain the emergency generator as per the manufacturer’s standard maintenance guidelines. Except as otherwise provided in the immediately preceding sentence, Landlord shall have no obligation to provide Tenant with an operational emergency generator or back-up power or to supervise, oversee or confirm that the third party maintaining the emergency generator is maintaining the generators as per the manufacturer’s standard guidelines or otherwise. Notwithstanding anything to the contrary contained herein, Landlord shall, at least once per month as part of the maintenance of the Building, run the emergency generator for a period reasonably determined by Landlord for the purpose of determining whether it operates when started. Landlord shall, upon written request from Tenant (not more frequently than once per calendar year), make available for Tenant’s inspection the maintenance contract and maintenance records for the emergency generators for the 12 month period immediately preceding Landlord’s receipt of Tenant’s written request. During any period of replacement, repair or maintenance of the emergency generator when the emergency generator is not operational, including any delays thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no obligation to provide Tenant with an alternative back-up generator or alternative sources of back-up power. Tenant acknowledges and agrees that (x) in connection with the proper verification of loads and maintenance of the emergency generator, that power will need to be transferred during routine testing, and (y) Tenant is responsible for cooperating with Landlord or Landlord’s third party contractor with respect to scheduling such routine tests and checking its own equipment loads as it operates during load transfer periods. Tenant expressly acknowledges and agrees that Landlord does not guaranty that such emergency generator will be operational at all times or that emergency power will be available to the Premises when needed.
Notwithstanding anything to the contrary contained herein, Tenant shall have the right to install, at Tenant’s sole cost and expense, an emergency generator serving the Premises, relates fixtures, and related screening of a design and type reasonably acceptable to Landlord (collectively, the “Dedicated Generator”) in a portion of the Project reasonably acceptable to Landlord and Tenant (collectively the “Generator Area”). Commencing on the date that Tenant installs such Dedicated Generator, Tenant shall have all of the obligations under this Lease with respect to the Generator Area as though the Generator Area were part of the Premises. The number of parking spaces available to Tenant under this Lease may be reduced by the number of parking spaces impacted by the Generator Area, if any. Tenant shall remove Dedicated
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Generator from the Generator Area at the expiration or earlier termination of this Lease. At the expiration or earlier termination of this Lease, Tenant shall restore the Generator Area to substantially its condition prior to the installation of the Dedicated Generator and shall otherwise surrender the Generator Area free of any debris and trash and free of any Hazardous Materials. Landlord shall have no obligation to make any repairs or improvements to the Dedicated Generator or the Generator Area and Tenant shall maintain the Dedicated Generator and the Generator Area, at Tenant’s sole cost and expense, in good repair and condition during the Term.
Tenant agrees to provide Landlord with access to Tenant’s water and energy usage data on a monthly basis, either by providing Tenant’s applicable utility login credentials to Landlord’s designated online portal, or by another delivery method reasonably agreed to by Landlord and Tenant. The costs and expenses incurred by Landlord in connection with receiving and analyzing such water and energy usage data (including, without limitation, as may be required pursuant to applicable Legal Requirements) shall be included as part of Operating Expenses.
Tenant shall furnish security or make other arrangements reasonably satisfactory to Landlord to assure payment for the completion of all Alterations work free and clear of liens, and shall provide (and cause each contractor or subcontractor to provide) certificates of insurance for workers’ compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) “as built” plans for any such Alteration.
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Except for Removable Installations (as hereinafter defined), all Installations (as hereinafter defined) shall be and shall remain the property of Landlord during the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remain upon and be surrendered with the Premises as a part thereof. Notwithstanding the foregoing, Landlord shall, if requested in writing by Tenant at the time its approval of any such Installation is requested or at the time it receives notice of a Notice-Only Alteration, notify Tenant whether Landlord requires that Tenant remove such Installation upon the expiration or earlier termination of the Term. If removal of an installation is required, Tenant shall remove such Installation in accordance with the immediately succeeding sentence. Upon the expiration or earlier termination of the Term, Tenant shall remove (i) all wires, cables or similar equipment which Tenant has installed in the Premises or in the risers or plenums of the Building, (ii) any Installations for which Landlord has given Tenant notice of removal in accordance with the immediately preceding sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and Tenant shall restore and repair any damage caused by or occasioned as a result of such removal, including, without limitation, capping off all such connections behind the walls of the Premises and repairing any holes. During any restoration period beyond the expiration or earlier termination of the Term, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. If Landlord is requested by Tenant or any lender, lessor or other person or entity claiming an interest in any of Tenant’s Property to waive any lien Landlord may have against any of Tenant’s Property, and Landlord consents to such waiver, then Landlord shall be entitled to reimbursement from Tenant for its actual, reasonable out-of-pocket costs incurred in connection with the preparation and negotiation of each such waiver of lien.
For purposes of this Lease, (x) “Removable Installations” means any items listed on Exhibit F attached hereto and any items agreed by Landlord in writing to be included on Exhibit F in the future, (y) ”Tenant’s Property” means Removable Installations and, other than Installations, any personal property or equipment of Tenant that may be removed without material damage to the Premises, and (z) ”Installations” means all property of any kind paid for with the TI Fund, all Alterations, all fixtures, and all partitions, hardware, built-in machinery, built-in casework and cabinets and other similar additions, equipment, property and improvements built into the Premises so as to become an integral part of the Premises, including, without limitation, fume hoods which penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and systems, and any power generator and transfer switch.
Notwithstanding anything to the contrary contained herein, Landlord shall notify Tenant at the time the Space Plans for the Tenant Improvements are finalized whether Landlord will require Tenant to remove or restore the Tenant Improvements constructed pursuant to the Work Letter at the expiration or earlier termination of this Lease.
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Subject to all of the other provisions of this Lease including, without limitation, the waivers provided in Sections 17 and 36, Landlord hereby indemnifies and agrees to defend, save and hold Tenant harmless from and against any and all third party Claims for injury or death to persons or damage to property occurring at the Project (outside of the Premises) caused by Landlord’s willful misconduct or gross negligence, except to the extent caused by the willful misconduct or negligence of Tenant or its employees or agents.
Tenant, at its sole cost and expense, shall maintain during the Term: all risk property insurance with business interruption and extra expense coverage, covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; workers’ compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with employers liability limits of $1,000,000 bodily injury by accident – each accident, $1,000,000 bodily injury by disease – policy limit, and $1,000,000 bodily injury by disease – each employee; and commercial general liability insurance, with a minimum limit of not less than $5,000,000 per occurrence/$5,000,000 aggregate for bodily injury and property damage with respect to the Premises. Liability limits can be satisfied through a combination of primary and excess policies. The commercial general liability insurance maintained by Tenant shall name Alexandria Real Estate Equities, Inc., and Landlord, its officers, directors, employees, managers, agents, sub-agents, constituent entities, joint venture partners and lease signators (collectively, “Landlord Insured Parties”), as additional insureds; insure on an occurrence and not a claims-made basis; be issued by insurance companies which have a rating of not less than policyholder rating of A and financial category rating of at least Class X in “Best’s Insurance Guide”; not contain a hostile fire exclusion; contain a contractual liability endorsement; and provide primary coverage to Landlord Insured Parties (any policy issued to Landlord Insured Parties providing duplicate or similar coverage shall be deemed excess over Tenant’s policies, regardless of limits). Tenant shall provide Landlord with 30 days advance written notice of cancellation of such commercial general liability policy. Certificates of insurance showing the limits of coverage required hereunder and showing Landlord as an additional insured shall be delivered to Landlord by Tenant (i) concurrent with Tenant’s delivery to Landlord of a copy of this Lease executed by Tenant, and (ii) prior to each renewal of said insurance. Tenant’s policy may be a “blanket policy” with an aggregate per location endorsement which specifically provides that the amount of insurance shall not be prejudiced by other losses covered by the policy. Tenant shall, at least 5 days prior to the expiration of such policies, furnish Landlord with renewal certificates.
In each instance where insurance is to name Landlord as an additional insured, Tenant shall upon written request of Landlord also designate and furnish certificates so evidencing Landlord as additional insured to: (i) any lender of Landlord holding a security interest in the Project or any portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property on which the Project is located, if the interest of Landlord is or shall become that of a tenant under a ground or other underlying lease rather than that of a fee owner, and/or (iii) any management company retained by Landlord to manage the Project.
The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, and their
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respective officers, directors, employees, managers, agents, invitees and contractors (“Related Parties”), in connection with any loss or damage thereby insured against. Neither party nor its respective Related Parties shall be liable to the other for loss or damage caused by any risk insured against under property insurance required to be maintained hereunder, and each party waives any claims against the other party, and its respective Related Parties, for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever. If the foregoing waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed not released but shall be secondary to the other’s insurer.
Landlord may require insurance policy limits to be raised to conform with requirements of Landlord’s lender and/or to bring coverage limits to levels then being generally required of new tenants within the Project; provided, however, that the increased amount of coverage is consistent with coverage amounts then being required by institutional owners of similar projects with tenants occupying similar size premises in the geographical area in which the Project is located.
Tenant, at its expense, shall promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure events or to obtain Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, either Landlord or Tenant may terminate this Lease upon written notice to the other if the Premises are damaged during the last year of the Term and Landlord reasonably estimates that it will take more than 2 months to repair such damage; provided, however, that such notice is delivered within 10 business days after the date that Landlord provides Tenant with written notice of the estimated Restoration Period. Notwithstanding anything to the contrary contained herein, Landlord shall also have the right to terminate this Lease if insurance proceeds are not available for such restoration. Rent shall be abated from the date all required Hazardous Material Clearances are obtained until the Premises are repaired and restored, in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises, unless Landlord
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provides Tenant with other space during the period of repair that is suitable for the temporary conduct of Tenant’s business. In the event that no Hazardous Material Clearances are required to be obtained by Tenant with respect to the Premises, rent abatement shall commence on the date of discovery of the damage or destruction. Such abatement shall be the sole remedy of Tenant, and except as provided in this Section 18, Tenant waives any right to terminate this Lease by reason of damage or casualty loss.
The provisions of this Lease, including this Section 18, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, or any other portion of the Project, and any statute or regulation which is now or may hereafter be in effect shall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Project, the parties hereto expressly agreeing that this Section 18 sets forth their entire understanding and agreement with respect to such matters.
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Any notice given under Section 20(h) hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant’s default pursuant to Section 20(h) is such that it cannot be cured by the payment of money and reasonably requires more than 30 days to cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 30 day period and thereafter diligently prosecutes the same to completion; provided, however, that, upon request by Landlord from time to time, Tenant shall provide Landlord with detailed written status reports regarding the status of such cure and the actions being taken by Tenant. Notwithstanding the foregoing, if such cure affects any other tenant(s) of the Building or the Project, then such cure must be completed as soon as reasonably possible after the date of Landlord’s notice.
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Actions, proceedings or suits for the recovery of damages, whether liquidated or other damages, under this Lease, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the Term of this Lease would have expired if it had not been terminated hereunder.
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Landlord’s recovery under its Lump Sum Election shall be in addition to Tenant’s obligations to pay Base Rent and Additional Rent due and costs incurred prior to the date of Landlord’s Lump Sum Election, and in lieu of any Base Rent and Additional Rent which would otherwise have been due under this Section from and after the date of Landlord’s Lump Sum Election. The yield to maturity on United States Treasury Notes having a maturity date that is nearest the date that would have been the last day of the Term of this Lease, as reported in the Wall Street Journal or a comparable publication if it ceases to publish such yields, shall be used in calculating present values for purposes of Landlord’s Lump Sum Election. For the purposes of this Section, if Landlord makes the Lump Sum Election to recover liquidated damages in accordance with this Section, the total Additional Rent shall be computed based upon Landlord’s reasonable estimate of Tenant’s Share of Operating Expenses and other Additional Rent for each 12-month period in what would have been the remainder of the Term of this Lease and any part thereof at the end of such remainder of the Term, but in no event less than the amounts therefor payable for the twelve (12) calendar months (or if less than twelve (12) calendar months have elapsed since the date hereof, the partial year) immediately preceding the date of Landlord’s Lump Sum Election. Amounts of Tenant’s Share of Operating Expenses and any other Additional Rent for any partial year at the beginning of the Term or at the end of what would have been the remainder of the Term shall be prorated.
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Except as otherwise provided in this Section 21, no right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to any other legal or equitable right or remedy given hereunder, or now or hereafter existing. No waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressly so made in writing by Landlord expressly waiving such provision. Landlord shall be entitled, to the extent permitted by law, to seek injunctive relief in case of the violation, or attempted or threatened violation, of any provision of this Lease, or to seek a decree compelling observance or performance of any provision of this Lease, or to seek any other legal or equitable remedy.
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Upon written request from Tenant, Landlord agrees to use reasonable efforts to cause the Holder of any future Mortgage to enter into a subordination, non-disturbance and attornment agreement (“SNDA”) with Tenant with respect to this Lease. The SNDA shall be on the form proscribed by the Holder and Tenant shall pay the Holder’s fees and costs in connection with obtaining such SNDA; provided, however, that Landlord shall request that Holder make any reasonable changes to the SNDA requested by Tenant. Landlord’s failure to cause the Holder to enter into the SNDA with Tenant (or make any of the changes requested by Tenant) despite such efforts shall not be a default by Landlord under this Lease.
If Tenant shall fail to prepare or submit a Decommissioning and HazMat Closure Plan approved by Landlord, or if Tenant shall fail to complete the approved Decommissioning and HazMat Closure Plan, or if such Decommissioning and HazMat Closure Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or about the Premises, Landlord shall have the right to take such actions as Landlord may deem reasonable or appropriate to assure that the Premises and the Project are surrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the first paragraph of this Section 28.
At the expiration or earlier termination of the Term, Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by Tenant. If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord’s election, either the cost of replacing such lost access card or key or the cost of reprogramming the access security system in which such access card was used or changing the lock or locks opened by such lost key. Any Tenant’s Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at
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Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and/or disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises.
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Notwithstanding the foregoing, if any claimed Landlord default hereunder will immediately, materially and adversely affect Tenant’s ability to conduct its business in the Premises (a “Material Landlord Default”), Tenant shall, as soon as reasonably possible, but in any event within 2 business days of obtaining knowledge of such claimed Material Landlord Default, give Landlord written notice of such claim which notice shall specifically state that a Material Landlord Default exists and telephonic notice to Tenant’s principal contact with Landlord. Landlord shall then have 2 business days to commence cure of such claimed Material Landlord Default and shall diligently prosecute such cure to completion. If such claimed Material Landlord Default is not a default by Landlord hereunder, Landlord shall be entitled to recover from Tenant, as Additional Rent, any costs incurred by Landlord in connection with such cure in excess of the costs, if any, that Landlord would otherwise have been liable to pay hereunder. If Landlord fails to commence cure of any claimed Material Landlord Default or to diligently prosecute such cure as provided above, Tenant may commence and prosecute such cure to completion provided that it does not affect any Building Systems affecting other tenants, materially, adversely affect Building structure or Common Areas, and shall be entitled to recover the costs of such cure (but not any consequential or other damages) from Landlord by way of reimbursement from Landlord with no right to offset against Rent, to the extent of Landlord’s obligation to cure such claimed Material Landlord Default hereunder, subject to the limitations set forth in the immediately preceding sentence of this paragraph and the other provisions of this Lease.
All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter; provided, however, Landlord’s obligations with respect to the Security Deposit shall survive until Landlord has either returned same to Tenant or transferred such Security Deposit to Landlord’s successor in interest. The term “Landlord” in this Lease shall mean only the owner for the time being of the Premises. Upon the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Term upon each new owner for the duration of such owner’s ownership.
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Notwithstanding the foregoing, Tenant shall have the right to designate (on plans provided by Tenant to Landlord, which may be reasonably updated by Tenant from time to time upon notice to Landlord) certain areas of the Premises as limited access areas required to protect the health of persons or security of confidential and proprietary information (“Limited Access Areas”), which Limited Access Areas shall not be entered into by Landlord or Landlord’s representatives without a Tenant representative, except in the case of an emergency. Notwithstanding anything to the contrary contained in this Lease, Landlord shall only enter such Limited Access Areas to perform maintenance and repairs (i) for which Landlord is responsible under this Lease, or (ii) in response to specific requests by Tenant, which requests remain subject to Landlord’s approval.
Subject to the terms of this Lease including, without limitation, Section 12, Tenant, at Tenant’s sole cost and expense, shall have the right to install and maintain within the Premises such security and safety equipment, including, without limitation, electronic access gates, camera surveillance and other security devices (collectively, “Tenant’s Security System”), subject to the following conditions: (i) Tenant’s plans and specifications for the proposed Tenant’s Security System shall be subject to Landlord’s prior written approval, which approval will not be unreasonably withheld; provided, however, that Tenant shall coordinate the installation and operation of Tenant’s Security System with Landlord to assure that Tenant’s Security System may be compatible with the Building’s master systems and equipment; (ii) Landlord shall be provided with keys, codes and/or access cards, as applicable, and means of immediate access to fully exercise all of its entry rights under this Lease with respect to the Premises; and (iii) Tenant shall keep Tenant’s Security System in good operating condition and repair and Tenant shall be solely responsible, at Tenant’s sole cost and expense, for the monitoring, operation and removal of Tenant’s Security System. Notwithstanding anything to the contrary, neither Landlord nor any Landlord Indemnified Parties shall be directly or indirectly liable to Tenant, any Tenant Parties or any other person and Tenant hereby waives any and all claims against and releases Landlord and the Landlord Indemnified Parties from any and all claims arising as a consequence of or related to Tenant’s Security System, or the failure thereof.
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Tenant acknowledges and agrees that measures and/or services implemented at the Project, if any, intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of Infectious Conditions, may not prevent the spread of such Infectious Conditions. Neither Landlord nor any Landlord Indemnified Parties shall have any liability and Tenant waives any claims against Landlord and the Landlord Indemnified Parties with respect to any loss, damage or injury in connection with (x) the implementation, or failure of Landlord or any Landlord Indemnified Parties to implement, any measures and/or services at the Project intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of Infectious Conditions, or (y) the failure of any measures and/or services implemented at the Project, if any, to limit the spread of any Infectious Conditions.
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Tenant shall also have the non-exclusive right to display a sign bearing Tenant’s name and/or logo on the monument sign serving the Building in a location designated by Landlord (the “Monument Sign”). Tenant shall be entitled to its pro-rata share of available space on the Monument Sign, and so long as the Premises consists of the largest area within the Building leased by a single tenant, Tenant shall have the right to have its name and/or logo on the top of such Monument Sign (or such other location on such Monument Sign as Tenant wishes). Notwithstanding the foregoing, Tenant acknowledges and agrees that Tenant’s signage on the Monument Sign including, without limitation, the size, color and type, shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, and shall be consistent with Landlord’s signage program at the Project and applicable Legal Requirements. Tenant shall be responsible, at Tenant’s sole cost and expense, for the fabrication, installation and maintenance of Tenant’s signage on the Monument Sign, replacements during the Term (if required) of Tenant’s signage on the Monument Sign, the removal of the Tenant’s signage from Monument Sign at the expiration or earlier termination of the Term and for the repair of all damage resulting from such removal; provided, however, that a portion of the TI Allowance may be allocated toward the cost of the fabrication and installation of Tenant’s initial signage on the Monument Sign.
Tenant shall also have the non-exclusive right to display a sign bearing Tenant’s name and/or logo using Tenant’s standard colors and lettering on the exterior of the Building outside the Premises in the location specified on Exhibit G (the “Tenant’s Exterior Sign”), provided, however, if any time during the Term the Premises consists of the entire rentable area of the Building, such right to a sign on the exterior of the Building shall be exclusive to Tenant. Notwithstanding the foregoing, Tenant acknowledges and agrees that Tenant’s Exterior Sign including, without limitation, the size, color and type, shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, and shall be consistent with Landlord’s signage program at the Project and applicable Legal Requirements. Tenant shall be responsible, at Tenant’s sole cost and expense, for the fabrication, installation and maintenance of Tenant’s Exterior Sign, replacements during the Term (if required) of Tenant’s Exterior Sign, the removal of the Tenant’s Exterior Sign at the expiration or earlier termination of the Term and for the repair of all damage resulting from such removal; provided, however, that a portion of the TI Allowance may be allocated toward the cost of the fabrication and installation of the initial Tenant’s Exterior Sign.
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Upon the commencement of either Extension Term, Base Rent shall be payable at the Market Rate (as defined below). Base Rent shall thereafter be adjusted on each annual anniversary of the commencement of such Extension Term by a percentage as determined by Landlord and agreed to by Tenant at the time the Market Rate is determined. As used herein, “Market Rate” shall mean the rate that comparable landlords of comparable buildings have accepted in current transactions from non-equity (i.e., not being offered equity in the buildings) and nonaffiliated tenants of similar financial strength for space of comparable size, quality (including all Tenant Improvements, Alterations and other improvements) and floor height in Class A laboratory/office buildings in the Waltham and Lexington markets for a comparable term, with the determination of the Market Rate to take into account all relevant factors, including tenant inducements, views, available amenities (including, without limitation, the Project Amenities and the Reservoir Woods Amenities (as defined in Section 42 below)), age of the Building, age of mechanical systems serving the Premises, parking costs, leasing commissions, allowances or concessions, if any. Notwithstanding the foregoing, the Market Rate shall in no event be less than the Base Rent payable as of the date immediately preceding the commencement of such Extension Term.
If, by the date which is 270 days prior to the expiration of the Base Term of this Lease, Tenant has not agreed with Landlord’s determination of the Market Rate and the rent escalations during the Extension Term after negotiating in good faith, Tenant shall be deemed to have elected arbitration as described in Section 41(b). Tenant acknowledges and agrees that, if Tenant has elected to exercise the Extension Right by delivering notice to Landlord as required in this Section 41(a), Tenant shall have no right thereafter to rescind or elect not to extend the term of this Lease for the Extension Term.
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Tenant acknowledges and agrees that the Reservoir Woods Landlord shall have the right at any time and from time to time to reconfigure, relocate, modify or remove any of the Reservoir Woods Amenities at the Reservoir Woods Project and/or to revise, expand or discontinue any of the services (if any) provided in connection with the Reservoir Woods Amenities.
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[ Signatures on next page ]
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.
TENANT:
INTELLIA THERAPEUTICS, INC.,
a Delaware corporation
By:
Name:
Its:
□ I hereby certify that the signature, name, and title above are my signature, name and title
LANDLORD:
ARE-WINTER STREET PROPERTY, LLC,
a Delaware limited liability company
By: ARE-Winter Street Holdings, LLC,
a Delaware limited liability company,
managing member
By: ARE-MA Region No. 85 JV, LLC,
a Delaware limited liability company,
managing member
By: ARE-Special Services, LLC,
a Delaware limited liability company,
managing member
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership,
managing member
By: ARE-QRS Corp.,
a Maryland corporation,
general partner
By:
Name:
Its:
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EXHIBIT A TO LEASE
DESCRIPTION OF PREMISES
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EXHIBIT B TO LEASE
DESCRIPTION OF PROJECT
Parcels of registered and recorded land and with any buildings thereon situated 840 Winter Street, Waltham, Middlesex County (Southern District), Massachusetts, all more particularly described as follows:
PARCEL 1: (Registered)
Lot 5 as shown on Land Court Plan 30618-D.
PARCEL 2: (Registered)
Lot 6 as shown on Land Court Plan 30618-D.
PARCEL 3: (Recorded)
Lot A as shown on Plan entitled, "Plan of Land in Waltham, Massachusetts showing land owned by The City of Cambridge to be conveyed to Polaroid Corporation", prepared by Martinage Engineering Associates, Inc., dated July 17, 1995 and recorded with the Middlesex South District Registry of Deeds in Book 26678, Page 39, Plan No. 962 of 1996, said Lot A is further bounded and described as follows:
Beginning at the Northern most point of Lot A, on the Westerly sideline of Winter Street as shown on said plan; thence running
SOUTHERLY by the Westerly sideline of Winter Street, by a curved line to the left having a radius of two thousand forty and 00/100 feet (2040.00') a length of one hundred fifty-two and 35/100 (152.35') to a point; thence running Southerly by the Westerly sideline of Winter Street,
S 16° 54' 34" W. a distance of eighty and 40/100 feet (80.40') to a point at the remaining land of the City of Cambridge; thence running Northwesterly by the remaining land of said City of Cambridge,
N 66° 34' 05" W. a distance of thirty-seven and 82/100 feet (37.82') to a point at the land of Polaroid Corporation as shown on Land Court Plan 30618-B; thence running Northeasterly by the land of said Polaroid Corporation,
N 27° 38' 25" E. a distance of two hundred thirty-two and 38/100 feet (232.38') to a point on the Westerly sideline of Winter Street as shown on Land Court Plan 30618-B and the point of beginning
Said Lot A containing 4,010 square feet, more or less as shown on said plan.
TOGETHER WITH the easements set forth in that certain Reciprocal Access and Utility Easement dated March 31, 1998 recorded in Book 28405, Page 421 and filed as Document No. 1061070; as amended by that certain First Amendment to Reciprocal Access and Utility Easement and to Reciprocal Easement Agreement dated September 10, 1998 recorded in Book 29108, Page 346 and filed as Document No. 1079645; and as further affected by that certain Easement Modification Agreement dated November 25, 2014 recorded in Book 64649, Page 225.
TOGETHER WITH the easements set forth in that certain Reciprocal Easement Agreement dated March 31, 1998 recorded in Book 28405, Page 443 and filed as Document No. 1061071 on Plan No.352 of 1998; as amended by that certain First Amendment to Reciprocal Access and Utility Easement and to Reciprocal Easement Agreement dated September 10, 1998 recorded in Book 29108, Page 346 and filed as Document No. 1079645; as further affected by that certain (i) Easement Modification Agreement dated November 25, 2014 recorded in Book 64649, Page 225, (ii)Agreement RE: Reciprocal Easement Agreement recorded in Book 68618, Page 378; and (iii) Agreement RE: Reciprocal Easement Agreement recorded in Book 71378, Page 543.
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EXHIBIT C TO LEASE
WORK LETTER
THIS WORK LETTER dated February ___, 2022 (this “Work Letter”) is made and entered into by and between ARE-WINTER STREET PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and INTELLIA THERAPEUTICS, INC., a Delaware corporation (“Tenant”), and is attached to and made a part of the Lease Agreement dated February ___, 2022 (the “Lease”), by and between Landlord and Tenant. Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.
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With respect to the Responsibility Matrix, the column labelled as “Landlord” identifies the work to be performed by Landlord at Landlord’s cost and the column labelled as “Tenant” refers to the work being performed by Landlord and paid for out of the TI Fund.
Tenant shall be solely responsible for ensuring that the design and specifications for Landlord’s Work are consistent with Tenant’s requirements. Landlord shall be responsible for obtaining all permits, approvals and entitlements necessary for Landlord’s Work, but shall have no obligation to, and shall not, secure any permits, approvals or entitlements related to Tenant’s specific use of the Premises or Tenant’s business operations therein.
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Tenant shall be entitled to receive the benefit of all construction warranties and manufacturer’s equipment warranties relating to equipment installed in the Premises. If requested by Tenant, Landlord shall attempt to obtain extended warranties from manufacturers and suppliers of such equipment, but the cost of any such extended warranties shall be borne solely out of the TI Fund. Landlord shall promptly undertake and complete, or cause to be completed, all punch list items.
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If Delivery is delayed for any of the foregoing reasons, then Landlord shall cause the TI Architect to certify the date on which the Tenant Improvements would have been Substantially Completed but for such Tenant Delay and such certified date shall be the date of Delivery.
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1. a “Tenant Improvement Allowance” in the maximum amount of $250.00 per rentable square foot in the Premises, which is included in the Base Rent set forth in the Lease; and
2. an “Additional Tenant Improvement Allowance” in the maximum amount of $150.00 per rentable square foot in the Premises, which shall, to the extent used, result in TI Rent as set forth in Section 4(b) of the Lease.
Landlord and Tenant hereby acknowledge and agree that Tenant has agreed to use and apply a portion of the Additional Tenant Improvement Allowance equal to $50.00 per rentable square foot of the Premises toward TI Costs. Prior to the first monthly draw with respect to which Tenant would be responsible for the payment of Excess TI Costs pursuant to Section 5(d) below, Tenant shall notify Landlord if Tenant has elected to use any additional portion of the Additional Tenant Improvement Allowance over and above the $50.00 per rentable square foot referenced above. If Tenant does not initially elect to apply the full amount of the Additional Tenant Improvement Allowance, Tenant shall have the right to subsequently (but in no event later than the date that Tenant Improvements are Substantially Completed) elect, by delivery of written notice to Landlord, to apply any portion of the Additional Tenant Improvement Allowance then remaining available. The TI Allowance shall be disbursed in accordance with this Work Letter.
Tenant shall have no right to the use or benefit (including any reduction to or payment of Base Rent) of any portion of the TI Allowance not applied toward TI Costs. Notwithstanding the foregoing, to the extent that, if, upon the completion of the Tenant Improvements and the payment of all sums due in connection therewith there remains any undisbursed portion of the Additional Tenant Improvement Allowance, Landlord shall make available to Tenant for use during the first 36 calendar months after the Commencement Date (the “Alterations Allowance Outside Date”), an “Alterations Allowance” equal to the unexpended portion of the Additional Tenant Improvement Allowance for the reimbursement to Tenant of reasonable costs incurred by Tenant for fixed and permanent Alterations in the Premises performed by Tenant in accordance with Section 12 of the Lease (as evidenced by invoices delivered to Landlord along with Tenant’s written request for reimbursement of such amounts), which Alterations Allowance shall, to the extent used, result in Alterations Allowance Rent as set forth in Section 4(c) of the Lease. Any portion of the Alterations Allowance remaining undisbursed as of the Alterations Allowance Outside Date shall deemed to have been forfeited by Tenant and Tenant shall have no further right to any portion of such undisbursed Alterations Allowance.
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Schedule 1
Construction Schedule
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Schedule 2
Landlord/Tenant Matrix
Description
|
Landlord |
Tenant |
SITEWORK |
|
|
Telephone service to main demarcation room from local exchange carrier |
X |
|
Domestic sanitary sewer connection to street |
X |
|
Lab waste sewer connection to individual tenant pH neutralization system- Connected to Building Sanitary |
|
X |
Roof storm drainage |
X |
|
Eversource primary and secondary electrical service with Customer Switching Station |
X |
|
National Grid gas service |
X |
|
Domestic water service to Building |
X |
|
Approved Loading and site modification design for loading areas and generators |
X |
|
Approved site modification design for Tenant bulk tanks or exterior utilities |
X |
|
Site modifications for generators or tenant utilities. |
|
X |
Fire protection water service to Building |
X |
|
STRUCTURE |
|
|
Structural enhancements for specific Tenant load requirements (Super Structure) |
X |
|
Structural framing for dunnage above roof for Base Building equipment |
X |
|
Structural framing dunnage above roof for Tenant equipment (Intermediate structure, grating, Dunnage Stairs etc.- Subject to Landlord review and approval) Review |
|
X |
Structural framing for infills within the building for Added USF |
X |
|
Framed openings for Base Building utility risers |
X |
|
Framed openings for Tenant utility risers in addition to Base Building. |
|
X |
Miscellaneous metals items and/or concrete pads for Base Building equipment |
X |
|
Provide code compliant rated floor and structure |
X |
|
Miscellaneous metals items and/or concrete pads for Tenant equipment |
|
X |
ROOFING |
|
|
Single ply EPDM roofing system with rigid insulation |
X |
|
Roofing penetrations for Base Building equipment/systems |
X |
|
Roofing penetrations for Tenant equipment/systems (Subject to Landlord review and approval) |
|
X |
Walkway pads to Base Building equipment |
X |
|
Walkway pads to Tenant equipment |
|
X |
Roofing alterations due to Tenant changes (Subject to Landlord review and approval) |
|
X |
EXTERIOR |
|
|
Building exterior |
X |
|
Main Building entrances |
X |
|
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Shipping/Receiving Docks – [2 docks plus 3rd waste removal staging and doorway] |
X |
|
Visual screening of Base Building rooftop equipment as required and applicable |
X |
|
Visual screening of Tenant rooftop equipment on landlord provided dunnage super structure (space available within base building screening) – as required and applicable |
X |
|
COMMON AREAS |
|
|
Accessible main entrance |
X |
|
Finished building common main lobby |
X |
|
Finished Common zones on ancillary floors. (Elevator lobbies etc.) |
X |
|
Core area toilet rooms (feeding common areas) |
X |
|
Janitor’s closets in core areas |
X |
|
Primary demarcation room |
X |
|
Doors, frames, and hardware at common areas |
X |
|
ELEVATORS |
|
|
1 Building Common Passenger |
X |
|
1 Tenant Freight Elevator |
X |
|
WINDOW TREATMENT |
|
|
Furnish and install Building standard blinds for all windows - standard to be set by Landlord |
|
X |
Furnish and install standard blinds above and beyond existing window treatments – to be approved by landlord if visible from building exterior. |
|
X |
TENANT AREAS |
|
|
Insulation at perimeter walls where/if applicable |
|
X |
Finishes and framing at inside face of exterior walls |
|
X |
Finishes at inside face at Tenant side of core partitions |
|
X |
Toilet rooms within Tenant Premises in addition to those provided by base building |
|
X |
Electrical closets within Tenant Premises |
|
X |
Tel/data rooms for interconnection with Tenant tel/data |
|
X |
Tenant kitchen areas |
|
X |
Modifications to core areas to accommodate Tenant requirements |
|
X |
Partitions, ceilings, flooring, painting, finishes, doors, frames, hardware, millwork, casework, equipment, and buildout. |
|
X |
Fixed or movable casework. |
|
X |
Laboratory Equipment including but not limited to biosafety cabinets, autoclaves, glasswashers. |
|
X |
Chemical Fume Hoods, bench fume hood |
|
X |
Finishes at common corridors on floors with multiple Tenants within redeveloped space |
X |
|
Shaft enclosures for Base Building systems’ risers |
X |
|
Shaft enclosures for Tenant risers (in addition to risers put in place for tenant use) |
|
X |
Ability for Control Areas per building Capabilities |
X |
|
Tenant Fit out Upgrades or modifications to Base building Scope required by Tenant Insurer |
|
X |
FIRE PROTECTION |
|
|
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Fire service entrance including fire department connection, alarm valve, and flow protection |
X |
|
Core area distribution piping and sprinkler heads |
X |
|
Stair distribution piping and sprinkler heads |
X |
|
All run outs, drop heads, and related equipment within Tenant premises |
|
X |
Modification of sprinkler piping and head locations to suit Tenant layout and hazard index |
|
X |
Specialized extinguishing systems or containment for tenant program areas |
|
X |
Pre-action dry-pipe systems |
|
X |
Fire extinguisher cabinets at core areas |
X |
|
Fire extinguisher cabinets in Tenant Premises |
|
X |
PLUMBING |
|
|
Domestic water service with backflow prevention and Base Building risers |
X |
|
Domestic water distribution within Tenant Premises |
|
X |
Core restroom plumbing fixtures compliant with accessibility requirements and anticipated lab/office occupancy load. |
X |
|
Tenant restroom plumbing fixtures compliant with accessibility requirements (in addition to those provided by the Base Building) |
|
X |
Non-potable cold water backflow preventers for tenant use |
|
X |
Non-potable cold water distribution in Tenant Premises |
|
X |
Wall hydrants in core areas (where required by code) |
X |
|
Storm drainage system |
X |
|
Sanitary waste and vent service |
X |
|
Domestic Waste Connection in pH Pit- 4 Inch Connection |
|
X |
Dedicated two stage active pH neutralization system (For tenant lab and MFG) |
|
X |
MWRA permit for dedicated pH neutralization system |
|
X |
Domestic Cold water connection - 4 Inch Connection |
X |
|
Pits if applicable and designed inverts for waste treatment systems to be installed by Tenant |
|
X |
Lab waste and vent pipe distribution |
|
X |
Hot water generation for core restrooms |
X |
|
Non-potable Hot water generation and risers for Tenant use |
|
X |
Non-potable hot water distribution in Tenant Premises |
|
X |
Central lab air compressor and piping risers for PD lab use |
|
X |
Air compressor and piping risers for dedicated Tenant MFG use |
|
X |
Compressed air pipe distribution in Tenant Premises for specific points of use |
|
X |
Central lab vacuum system and pipe risers |
|
X |
Lab vacuum system and pipe risers for dedicated Tenant MFG use |
|
X |
Lab vacuum pipe distribution in Tenant Premises for specific points of use |
|
X |
Tepid water generator and pipe risers for full PD/MFG lab use |
|
X |
Tepid water pipe distribution in Tenant Premises |
|
X |
RO/DI water generator and pipe risers |
|
X |
RO/DI water pipe distribution in Tenant Premises for specific points of use |
|
X |
Manifolds, piping, and other requirements including cylinders, not specifically mentioned above |
|
X |
DOCVARIABLE #DNDocID \* MERGEFORMAT 14299047.7
840 Winter – Suite 100/Intellia - Page 12
NATURAL GAS |
|
|
Natural gas service to Building and piping to Base Building boilers and equipment |
X |
|
Natural gas service, pressure regulator and meter for Tenant equipment |
|
X |
Natural gas piping from Tenant meter to Tenant Premises or Tenant equipment area. |
|
X |
Pro Rata share of remaining Gas Capacity 2,100 CFH |
X |
|
Natural gas pipe distribution within Tenant Premises |
|
X |
Natural gas pressure regulator vent pipe riser from valve location through roof |
|
X |
HEATING, VENTILATION, AIR CONDITIONING |
|
|
Building Management System (BMS) for core area and Landlord infrastructure |
X |
|
BMS (compatible with Landlord’s system) within Tenant Premises and Tenant infrastructure |
|
X |
Once-through supply air handling units and recirculating units for Manufacturing area |
|
X |
Roof mounted exhaust fans and heat recovery system for manufacturing area |
|
X |
Office ventilation air |
|
X |
Fan coils for office cooling/heating and supplemental lab cooling |
|
X |
2,000 Ton chiller plant (4) Nominal 500 Ton Chillers, associated pumps, cooling towers, and controls. 20,000 MBH hot water plants – (6) 4,000MBH Condensing Boilers (N+1) , associated pumps, stacks, specialties and controls. |
X |
|
Hot water reheat distribution to reheat coils |
|
X |
Chilled water risers for tenant use |
|
x |
Chilled water distribution for tenant use |
|
X |
Vertical supply Office air duct distribution |
|
X |
Supply air duct distribution, VAV terminals, equipment connections, insulation, air terminals, dampers, hangers, etc. within Tenant Premises. |
|
X |
Supply air duct distribution, VAV terminals, equipment connections, insulation, air terminals, dampers, hangers, etc. within core areas. |
X |
|
Roof mounted laboratory exhaust fans and heat recovery system for general lab exhaust |
|
X |
Vertical exhaust air duct risers for general lab exhaust |
|
X |
Roof mounted laboratory exhaust fans for specialty exhaust systems. Subject to Landlord approval prior to installation. |
|
X |
Vertical exhaust air duct risers and shaft for dedicated fume hood or specialty exhaust systems |
|
X |
Exhaust air duct distribution, exhaust air valves, equipment connections, insulation, air terminals, dampers, hangers, etc. within Tenant Premises. |
|
X |
Exhaust air duct distribution, exhaust air valves, equipment connections, insulation, air terminals, dampers, hangers, etc. within core areas |
X |
|
General Exhaust for Tenant H2, H3 Rooms |
|
X |
Restroom exhaust for core area restrooms |
X |
|
Restroom exhaust for restrooms within Tenant Premises |
|
X |
Electric room ventilation system for Base Building electrical closets |
X |
|
DOCVARIABLE #DNDocID \* MERGEFORMAT 14299047.7
840 Winter – Suite 100/Intellia - Page 13
Electric room ventilation system for electrical closets within Tenant premises |
|
X |
Sound attenuation for Base Building infrastructure to comply with local Noise Ordinance |
X |
|
Sound attenuation for Tenant equipment to comply with local Noise Ordinance |
|
X |
ELECTRICAL |
|
|
Electrical utility service to switchgear in main electrical vault, including (2) 2500KVA transformers paired with (2) Switchboards |
X |
|
Approved pad configurations for tenant generator needs. |
X |
|
2,000 kW Diesel fired Standby generator to support 50% of Base Building Central Chiller Plant (incl. ATS and sound attenuation to comply with local noise ordinance) |
X |
|
Dedicated Standby Generator for Tenant lab and manufacturing needs |
|
X |
Sound attenuation for tenant generator to comply with local Noise Ordinance |
|
X |
Automatic transfer switch for Tenant generator connections to the heating and cooling plant |
|
X |
Standby power distribution within Tenant Premises |
|
X |
Switchboard capacity and circuiting to Chiller and Boiler Plants |
X |
|
Switchboard capacity to provide 2,164,593 watts for Tenant Fitout needs |
X |
|
Lighting and power distribution for Tenant Premises |
|
X |
Tenant power sub-metering with connection to BMS |
|
X |
•
Common area life safety emergency lighting/signage
|
X |
|
Tenant Premises life safety emergency lighting/signage |
|
X |
Tenant panels, transformers, etc. in addition to Base Building |
|
X |
Tenant UPS system, battery backup, and associated equipment/distribution |
|
X |
FIRE ALARM |
|
|
Base Building fire alarm system with devices in core areas |
X |
|
Fire alarm sub panels and devices for Tenant Premises with integration into Base Building system |
|
X |
Alteration to fire alarm system to facilitate Tenant program |
|
X |
TELEPHONE/DATA |
|
|
Underground local exchange carrier service to primary demarcation room in basement |
X |
|
Tel Data Riser Conduit from demark to each floor |
X |
|
Tenant tel/data rooms |
|
X |
Pathways from demarcation room directly into Tenant tel/data rooms |
|
X |
Tel/Data cabling from demarcation room Tenant tel/data room. |
|
X |
Fiber optic service for Tenant use |
|
X |
Tel/data infrastructure including but not limited to servers, computers, phone systems, switches, routers, MUX panels, equipment racks, ladder racks, etc. |
|
X |
Provisioning of circuits and service from service providers |
|
X |
Audio visual systems and support |
|
X |
Station cabling from Tenant tel/data room to all Tenant locations, within the suite and exterior to the suite, if needed |
|
X |
SECURITY |
|
|
Card access at Building entries |
X |
|
DOCVARIABLE #DNDocID \* MERGEFORMAT 14299047.7
840 Winter – Suite 100/Intellia - Page 14
Card access into or within Tenant Premises on separate Tenant installed and managed system |
|
X |
|
|
|
DOCVARIABLE #DNDocID \* MERGEFORMAT 14299047.7
Net Multi-Tenant Laboratory 840 Winter – Suite 100/Intellia - Page 15
EXHIBIT D TO LEASE
ACKNOWLEDGMENT OF COMMENCEMENT DATE
This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this _____ day of ______________, ____, between ARE-WINTER STREET PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and INTELLIA THERAPEUTICS, INC., a Delaware corporation (“Tenant”), and is attached to and made a part of the Lease dated ______________, _____ (the “Lease”), by and between Landlord and Tenant. Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.
Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the Commencement Date of the Base Term of the Lease is ______________, _____, and the termination date of the Base Term of the Lease shall be midnight on ______________, _____. In case of a conflict between the terms of the Lease and the terms of this Acknowledgment of Commencement Date, this Acknowledgment of Commencement Date shall control for all purposes.
IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE to be effective on the date first above written.
TENANT:
INTELLIA THERAPEUTICS, INC.,
a Delaware corporation
By:
Name:
Its:
□ I hereby certify that the signature, name, and title above are my signature, name and title
[Signature continued on following page]
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
Net Multi-Tenant Laboratory 840 Winter – Suite 100/Intellia - Page 16
LANDLORD:
ARE-WINTER STREET PROPERTY, LLC,
a Delaware limited liability company
By: ARE-Winter Street Holdings, LLC,
a Delaware limited liability company,
managing member
By: ARE-MA Region No. 85 JV, LLC,
a Delaware limited liability company,
managing member
By: ARE-Special Services, LLC,
a Delaware limited liability company,
managing member
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership,
managing member
By: ARE-QRS Corp.,
a Maryland corporation,
general partner
By:
Name:
Its:
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
Rules and Regulations 840 Winter – Suite 100/Intellia - Page 1
EXHIBIT E TO LEASE
Rules and Regulations
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
Rules and Regulations 840 Winter – Suite 100/Intellia - Page 2
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
Rules and Regulations 840 Winter – Suite 100/Intellia - Page 3
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
840 Winter – Suite 100/Intellia - Page 1
EXHIBIT F TO LEASE
TENANT’S PERSONAL PROPERTY
None.
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
840 Winter – Suite 100/Intellia - Page 1
EXHIBIT G TO LEASE
BUILDING SIGN LOCATION
DOCVARIABLE #DNDocID \* MERGEFORMAT 745146120.5
Exhibit 21.1
Subsidiaries of the Registrant
|
|
|
Entity |
|
State of Incorporation of Organization |
Intellia Securities Corp. |
|
Massachusetts |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-233448 and 333-251022 on Form S-3 and Registration Statement Nos. 333-211200, 333-218511, 333-229900, 333-236714 and 333-253562 on Form S-8 of our reports dated February 24, 2022, relating to the financial statements of Intellia Therapeutics, Inc., and the effectiveness of Intellia Therapeutics, Inc.’s internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended December 31, 2021.
|
|
|
/s/ Deloitte & Touche LLP
|
Boston, Massachusetts |
February 24, 2022 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
RULE 13a-14(a) / RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, John M. Leonard, M.D., certify that:
1. I have reviewed this Annual Report on Form 10-K of Intellia Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 24, 2022
/s/ John M. Leonard |
John M. Leonard, M.D. President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
RULE 13a-14(a) / RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Glenn Goddard, certify that:
1. I have reviewed this Annual Report on Form 10-K of Intellia Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 24, 2022
/s/Glenn Goddard |
Glenn Goddard Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report on Form 10-K of Intellia Therapeutics, Inc. (the “Company”) for the period ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, John M. Leonard, M.D., President and Chief Executive Officer (Principal Executive Officer) of the Company, and Glenn Goddard, Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 24, 2022
/s/ John M. Leonard |
|
John M. Leonard, M.D. President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
/s/ Glenn Goddard |
|
Glenn Goddard Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |
|