CUE US Equity☆

10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal Year Ended December 31, 2021

For the transition period from __________________ to __________________

Commission file number: 001-38327

Cue Biopharma, Inc.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

(617) 949-2680

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 per share CUE Nasdaq Capital Market

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $362.6 million (based on the closing price of the registrant’s common stock on June 30, 2021 of $11.65 per share).

As of March 7, 2022, the registrant had 33,010,702 shares of Common Stock, $0.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days after the end of the fiscal year ended December 31, 2021. Portions of such proxy statement are incorporated by reference into Part III of this Form 10-K.

CUE BIOPHARMA, INC.

TABLE OF CONTENTS

PART I

Item 1. Business 3

Item 1A. Risk Factors 39

Item 1B. Unresolved Staff Comments 71

Item 2. Properties 72

Item 3. Legal Proceedings 72

Item 4. Mine Safety Disclosures 72

PART II

Item 6. [Reserved.] 73

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 87

Item 8. Financial Statements and Supplementary Data. 87

Item 9A. Controls and Procedures. 87

Item 9B. Other Information. 87

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 87

PART III

Item 10. Directors, Executive Officers and Corporate Governance. 88

Item 11. Executive Compensation 88

Item 14. Principal Accountant Fees and Services 88

PART IV

Item 15. Exhibits, Financial Statements and Schedules 89

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy”, “future”, “likely” or other comparable terms. All statements, other than statements of historical fact, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements.

The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:

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the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

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our estimates regarding expenses, future revenue, capital requirements and need for additional financing

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our expectations regarding our ability to fund our projected operating requirements with our existing cash resources and the period in which we expect that such cash resources will enable us to fund such operating requirements;

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our plans to develop our drug product candidates;

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the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for our drug product candidates;

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the potential advantages of our drug product candidates;

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the rate and degree of market acceptance and clinical utility of our drug product candidates, if approved;

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our estimates regarding the potential market opportunity for our drug product candidates;

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our commercialization, marketing and manufacturing capabilities and strategy;

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our intellectual property position;

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our ability to identify additional products, drug product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

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the impact of government laws and regulations;

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our competitive position;

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developments relating to our competitors and our industry;

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our ability to maintain and establish collaborations or obtain additional funding; and

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the impacts of the COVID-19 pandemic.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A., “Risk Factors” of Part I of this Annual Report on Form 10-K.

This report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our drug product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

Any forward-looking statement made by us in this Annual Report on Form 10-K is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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Risk Factor Summary

Investment in our securities involves risk. You should carefully consider the following summary of what we believe to be the principal risks facing our business, in addition to the risks described more fully in Item 1A, “Risk Factors” of Part I of this Annual Report on Form 10-K and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occurs, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

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We are a clinical-stage biopharmaceutical company, have no history of generating commercial revenue, have a history of operating losses, and we may never achieve or maintain profitability.

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We currently do not have, and may never develop, any FDA-approved or commercialized products.

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We are substantially dependent on the success of our drug product candidates, only one of which is currently being tested in a clinical trial, and significant additional research and development and clinical testing will be required before we can potentially seek regulatory approval for or commercialize any of our drug product candidates.

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We have limited experience in conducting clinical trials and no history of commercializing biologic products, which may make it difficult to evaluate the prospects for our future viability.

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The continuing COVID-19 pandemic has, and may continue to, adversely impact our business, including our clinical trials and preclinical studies.

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We plan to seek collaborations or strategic alliances. However, we may not be able to establish such relationships, and relationships we have established may not provide the expected benefits.

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Our collaboration agreements with Merck and LG Chem contain exclusivity provisions that restrict our research and development activities.

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We may not be successful in our efforts to identify additional drug product candidates. Due to our limited resources and access to capital, we must prioritize development of certain drug product candidates; these decisions may prove to be wrong and may adversely affect our business.

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We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

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We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

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We rely completely on third parties to manufacture our preclinical and clinical drug supplies for our drug product candidates.

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If we or our licensor is unable to protect our or its intellectual property, then our financial condition, results of operations and the value of our technology and potential products could be adversely affected.

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We will be subject to stringent domestic and foreign regulation in respect of any potential products. The regulatory approval processes of the FDA and other comparable regulatory authorities outside the United States are lengthy, time-consuming and inherently unpredictable. Any unfavorable regulatory action may materially and adversely affect our future financial condition and business operations.

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Even if a potential therapeutic is ultimately approved by the various regulatory authorities, it may be approved only for narrow indications which may render it commercially less viable.

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Even if we receive regulatory approval of our drug product candidates, 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 drug product candidates.

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We have a loan agreement that requires us to meet certain operating covenants and place restrictions on our operating and financial flexibility.

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PART I

Item 1. Business

Overview

We are a clinical-stage biopharmaceutical company engineering a novel class of injectable biologics to selectively engage and modulate targeted T cells directly within the patient’s body. We believe our proprietary Immuno-STATTM (Selective Targeting and Alteration of T Cells) platform, as described below, will allow us to harness the potential of the patient’s intrinsic immune repertoire to fully exploit its potential to fight cancer and restore health while avoiding the deleterious side effects of broad immune activation. In addition to the highly selective modulation of T cell activity, we believe the core features of Immuno-STATs offer competitive differentiation, including modularity, manufacturability, and convenient administration that allows for versatility to treat a broad range of disease.

While we have demonstrated the potential application of our protein designed Immuno-STAT platform in preclinical studies in cancer, chronic infectious disease, and autoimmune disease, we are currently prioritizing and strategically focusing on drug product candidates for treating cancer in our CUE-100 series, which exploits rationally engineered interleukin 2, or IL-2, in context of the core Immuno-STAT framework for selective activation of targeted tumor-specific T cells. We are actively seeking third party support through partnerships and collaborations, or alternative funding structures, to further develop our programs outside of oncology, including our CUE-200, CUE-300 and CUE-400 series.

Our drug product candidates are in various stages of clinical and preclinical development, and while we believe that these candidates hold significant potential value, our activities are also subject to significant risks and uncertainties. We have not yet commenced any commercial revenue-generating operations, have limited cash flows from operations, and will need to access additional capital to fund our growth and ongoing business operations.

Our Immuno-STAT Platform Pipeline

The pipeline chart below details our current portfolio assets and their stages of development. We have determined to prioritize and strategically focus on our oncology programs in our IL-2 based CUE-100 series, and we are actively seeking third party support through partnerships and collaborations, or alternative funding structures, to further develop our programs outside of oncology, including our CUE-200, CUE-300 and CUE-400 series.

We have made significant progress advancing the IL-2-based CUE-100 series for oncology. CUE-101, representative of the CUE-100 series, is our most advanced clinical stage asset, currently being dosed in a second line and beyond Phase 1b monotherapy trial for human papilloma virus, or HPV, driven recurrent/metastatic head and neck cancer, or R/M HNSCC, as

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well as in a first line Phase 1 combination trial with KEYTRUDA® (pembrolizumab), the current standard of care, for R/M HNSCC. In June 2021, we completed the dose escalation phase of our monotherapy Phase 1 clinical trial of CUE-101 for the treatment of HPV16-driven R/M HNSCC in late-stage treatment-refractory patients, and subsequently commenced the enrollment expansion stage at the 4mg/kg recommended Phase 2 dose, or RP2D. These patients have received and failed several prior lines of systemic therapy, including checkpoint inhibitors, or CPIs, such as KEYTRUDA, already approved for first-line HPV+R/M HNSCC. To date, CUE-101 has demonstrated a favorable tolerability profile in the monotherapy trial as well as encouraging preliminary anti-tumor clinical activity. In January 2022, we reported that of the 14 evaluable patients dosed at the RP2D of 4 mg/kg, we observed a confirmed partial response, or PR, lasting greater than 36 weeks, and an additional six patients with confirmed stable disease, or SD, lasting greater than or equal to 12 weeks. We have also observed promising preliminary data with respect to CUE-101’s pharmacokinetic, or PK, and pharmacodynamic, or PD, profile, as well as biomarker data with respect to circulating HPV DNA as a potential proxy of immune stimulation that may result in anti-tumor effects. At the Society for Immunotherapy of Cancer, or SITC, in November 2021, we reported that we have observed preliminary, robust PK with dose proportional exposure that was sustained across repeat dosing with no evidence of drug clearing antibodies.

During the first quarter of 2021, we dosed the first patient in our first-line Phase 1 combination trial of CUE-101 with KEYTRUDA. We believe the potential synergy of CUE-101 with KEYTRUDA is due to their complementary mechanisms of action, specifically, CUE-101’s protein engineered design to selectively engage, activate and expand targeted tumor-specific T cells directly in the patient’s body and KEYTRUDA’s mechanism of checkpoint signaling blockade that prevents the tumor from using PD-1/PDL-1 to shut down attacking T cells.

We believe that CUE-101 has the potential to synergize with and enhance the clinical activity of KEYTRUDA and potentially other CPIs since the presence of expanded tumor-specific T cells is a pre-requisite for and an obligatory target of anti-PD-1 therapy.

As the most advanced candidate from our IL-2 based CUE-100 series, CUE-101 is exemplary of the Immuno-STAT platform and underscores the key immunological targets, or immune activity nodes, required to selectively enhance anti-tumor immunity. Importantly, we believe that the CUE-101 clinical data we have generated to date reduces the risk profile of the entire IL-2 based CUE-100 series because the core framework of the CUE-100 series remains essentially the same for each drug product candidate, except for the targeting peptide epitope within the major histocompatibility complex, or MHC, pocket or the human leukocyte antigen, or HLA. Therefore, with the exception of some protein engineering modifications to ensure stability and manufacturability, the core IL-2 scaffold is a shared molecular feature of all molecules generated within this series (including CUE-102, and the next-generation platform, Neo-STATTM, as described below).

We are also advancing additional development candidates within the CUE-100 series that we believe have the potential to treat multiple cancers. CUE-102, targets Wilm’s tumor protein, or WT1, an oncofetal antigen known to be over-expressed in more than 20 different cancers, including both solid tumors (such as colorectal, ovarian, pancreatic and lung) and hematologic malignancies (such as acute myeloid leukemia, multiple myeloma and myelodysplastic syndromes). Preclinical data from CUE-102 were recently presented at the New York Academy of Science Frontiers in Cancer Immunotherapy meeting in May 2021 and at the SITC meeting in November 2021. We believe these data support the premise of selective WT1 specific T cell activation and expansion, along with polyfunctional effector function including killing of target cells. We anticipate filing an investigational new drug application, or IND, for CUE-102 by the end of the first quarter of 2022.

We have also generated foundational preclinical data with Immuno-STATs targeting the mutated G12V KRAS T cell epitope including demonstration of activation and expansion of T cells expressing G12V-specific T cell receptors, or TCRs, and we are developing CUE-103, also in the CUE-100 series, for targeting the KRAS G12V mutation. Preclinical data from CUE-103 were presented at the Immuno-Oncology conference in February 2021 and at the SITC meeting in November 2021.

Importantly, we have expanded the potential reach of the Immuno-STAT platform to address tumor heterogeneity and diversity of many cancers by developing a derivative scaffold from the CUE-100 series containing stable “peptide-less” or “empty” MHC pockets or HLA molecules, to which defined peptides of interest may be covalently attached. We refer to this derivative scaffold as Neo-STATTM. Neo-STAT is designed to provide greater flexibility for targeting multiple tumor epitopes, enhancing production efficiencies, decreasing time and cost to manufacture and potentially lending itself to personalized neo-antigen strategies in cancer immunotherapy as an off-the-shelf approach. Furthermore, we have attempted to address the resistance mechanism found in a subset of solid tumors which escape immune surveillance by a down-regulation of HLA, thereby making the tumor “invisible” to T cells. Our approach entails a derivative of the CUE-100 series referred to as RDI-STAT taking advantage of the clinical validation of the CUE-100 series from our Immuno-STAT platform, by deploying a targeting moiety on the FC fragment to bind to a surface protein found on the tumor. Through this approach, we believe we

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may be able to “paint” the tumor with a viral epitope placed within the HLA pocket of the CUE-100 series Immuno-STAT with the potential of invoking an immune attack.

We have also developed three additional biologic series within the Immuno-STAT platform outside of oncology: CUE-200, CUE-300, and CUE-400, each specifically designed through rational engineering to possess distinct signaling modules for desired biological mechanisms that may be applied across many diseases. The CUE-200 series is focused on cell surface receptors including CD80 and/or 4-1BBL to address T cell exhaustion associated with chronic infections. The CUE-300 series, for autoimmune diseases, incorporates the inhibitory PD-L1 co-modulator for selective inhibition of the autoreactive T cell repertoire. The CUE-400 series, for autoimmune diseases with diverse or unknown autoantigens, represents a novel class of bispecific molecules designed to selectively and effectively expand induced regulatory T cells, or iTregs. We are actively seeking third party support through partnerships and collaborations, or alternative funding structures, to further develop the CUE-200, CUE-300 and CUE-400 series.

Our Business Strategy

Our primary objective is to become a leading biopharmaceutical company developing breakthrough, highly selective and differentiated biologics for safe and effective therapeutic immune modulation directly in patients having high unmet medical need. In order to achieve this objective, we are focused on the following strategies:

Advance our IL-2-based CUE-100 series for oncology

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Through CUE-101, as representative and exemplary of our IL-2 based CUE-100 series, we intend to demonstrate that IL-2 can be selectively and tolerably delivered to the specific cellular immune compartment relevant for anti-tumor immunity. These data would be in contrast to other approaches, focused on systemic delivery of IL-2 variants, with little or no specificity for the activation of the anti-tumor T cell repertoire.

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We plan to continue to execute clinical trials that are designed using a translational approach to demonstrate CUE-101’s ability to selectively engage, activate and expand the patients’ own endogenous HPV16-specific T cell repertoire to target, attack and kill tumor cells.

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We plan to expand patient access and potentially enhance clinical outcomes by addressing the significant unmet patient need, which we are currently seeking to do by establishing foundational mechanistic evidence in our second line and beyond monotherapy Phase 1 clinical trial for HPV16-driven R/M HNSCC and in our first-line Phase 1 combination trial with KEYTRUDA in the first-line R/M HNSCC setting.

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Through our ongoing and planned clinical trials, we are working to build a clinical data set that demonstrates the PK/PD, tolerability and anti-tumor effect of CUE-101 as a monotherapy and the potential clinical synergy in combination with anti-PD-1 therapy in patients with HPV16-driven HNSCC.

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We are also leveraging our modular and versatile Immuno-STAT platform to generate and advance a pipeline of Immuno-STATs and Neo-STATs with strategic partnering to enable global patient reach, including, within the CUE-100 series, through our collaboration and strategic territory partnership with LG Chem, Ltd., or LG Chem, for CUE-101 and CUE-102 for Asian markets.

Seek strategic partnerships and collaborations for our programs outside of oncology

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Beyond the IL-2-based CUE-100 series for addressing a broad range of cancers, we also have a pipeline of drug product candidates and programs designed to address the significant, unmet medical need for treating serious, life threatening indications, such as autoimmune disease and infectious disease. As a result of our prioritization and strategic focus on oncology, we are actively seeking third party support through partnerships and collaborations, or alternative funding structures to further develop our programs outside of oncology, including our CUE-200, CUE-300 and CUE-400 series.

Our Approach

The human immune system is comprised of a number of specialized cell types that collectively function to defend the body against foreign threats as well as the development of cancers. One such specialized cell type, the human T cell, is a subtype of a white blood cell that plays a central role in the immune system. During an immune response, T cells are activated via close encounters with a specialized cell type known as the antigen presenting cell, or APC. Prominent APC types include

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dendritic cells, macrophages, and B cells. The primary function of an APC is to uptake antigens, primarily proteins, catabolize (i.e., break them down into peptides) and display them on their cell-surface in complex with specialized molecules known as MHC molecules or HLA. This critical function of an APC, also referred to as “antigen processing and presentation”, ultimately results in generation of the key molecular substrate – the peptide MHC complex, or pMHC (pMHC will also be used to designate pHLA in humans) – that is recognized by the T cell via its TCR.

The source of antigens for APC processing and presentation is expansive: antigens from pathogens such as viruses, bacteria, mutated proteins from cancers, and others, activate T cells for protective immunity; importantly, antigens from tumor cells are key for robust anti-tumor T cell responses; and antigens from self-tissue are aberrantly recognized by autoreactive T cells that ultimately induce damage to the host. Hence, the nature of the pMHC complex on the APC establishes the specificity of the T cell response. The intimate interactions between the T cells and APCs occur within a molecular interface known as the immunological or immune synapse wherein the TCR-pMHC engagement as well as additional accessary signals are sensed by T cells resulting in T cell activation or regulation. In essence, the immune synapse allows controlled engagement and selective activation of T cells through the presentation of two distinct signals: Signal 1, TCR engagement of the pMHC; and Signal 2, activating co-stimulatory (or co-inhibitory) signals.

The core protein framework for the Immuno-STAT platform builds upon our ability to combine the key activation signals for T cell modulation (i.e., Signal 1 and Signal 2) into a singular molecular scaffold. The “activation” of a T cell requires the presence of a distinct co-stimulatory, or co-regulatory signal, including cytokines, such as IL-2. It is important to note that the presence of a “co-stimulatory” signal is essential for effective activation and proliferation.

As shown below, the core framework of an Immuno-STAT molecule has a stabilized pHLA component that selectively engages those T cells harboring TCRs for tumor-specific peptides, representing Signal 1. In addition, Immuno-STATs contain activating signals, including modified IL-2 in the case of the CUE-100 series, that can be selectively delivered to tumor-specific T cells, representing Signal 2. The core protein framework is built upon an Fc backbone that provides significant structural stability. Modularity is a major strength of the Immuno-STAT framework that allows us to target diverse tumor antigens along with safely delivering a breadth of activating signals. The specific and selective modulation of cancer-relevant T cells while circumventing global immune activation allows us to achieve therapeutic dosing of highly immune-activating signals such as IL-2. Furthermore, Immuno-STAT molecules are manufactured using established and well-defined processes currently used for antibody and Fc-fusion molecules.

Immuno-STAT Platform Framework

Peptide Epitope & MHC: A stabilized peptide-major histocompatibility complex (pMHC), Class I or II, to selectively engage disease-relevant T cells by incorporating diverse antigenic peptides of interest and choosing different MHC (or HLA) alleles to provide broad coverage for global patient populations.

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Activation: Distinct co-stimulatory or co-regulatory signals, including cytokines, cell-surface receptors, and other targeting modalities, to control the activity of disease-relevant T cells.

Fc Backbone: Well-characterized protein construct from human antibodies to provide stability and ease of manufacturability that can be engineered to dial in or out biological and effector functions.

We believe this dual requirement of a specific pMHC interacting with its corresponding TCR, along with a co-stimulatory signal, such as IL-2, is addressed with our CUE-100 series, which drug product candidates are designed to engage the T cells directly with no dependency on the APCs. This is the core focus of the Immuno-STAT platform and its core strategic advantage and differentiation.

The Immuno-STAT: “Immune Responses, on Cue”

We are developing a proprietary class of biologic drug product candidates designed to selectively modulate the activity of antigen-specific T cells directly in a patient’s body. Through our Immuno-STAT platform, we aim to emulate or “mimic” the signals presented naturally within the immune synapse when the body is mounting an immune response. We seek to accomplish this signaling through the fusion of a TCR targeting pMHC complex (i.e., Signal 1) with co-stimulatory signaling molecules (i.e., Signal 2). This co-engagement of signals through the TCR and co-stimulatory receptor mimics and recapitulates the signals encountered in nature by T cells upon successful interactions with APCs. By design, the Immuno-STATs harness “nature’s cues” for antigen specificity, along with appropriate secondary activating or inhibitory signals, to result in targeted T cell modulation.

In May 2020, we entered into a strategic research collaboration with Dr. Michael Dustin and the University of Oxford to determine the molecular mechanisms underlying the activity of our IL-2 based CUE-100 series biologics. Data from this strategic research collaboration were presented in February 2022 at the Biophysical Society Annual Meeting supporting the hypothesis that Immuno-STAT’s concurrent delivery of antigen and IL-2 signals results in robust synapse formation, providing for selective T cell activation. We believe that the cumulative, preliminary clinical data generated to date in our ongoing Phase 1 trial for CUE-101 supports this underlying hypothesis of selective T cell activation with corresponding antitumor activity and clinical benefit.

During the last decade, there have been substantial efforts made to therapeutically modify the function of immune cells, such as T cells, to either enhance tumor killing in the context of oncology or protect tissue in the context of autoimmune disease. Much of the focus has centered on approaches, including cytokines, cytokine inhibitors, CPIs, and bi-specifics, that rely on systemic, non-specific immune activation for treating cancer or suppression for treating autoimmune disease. Significant challenges for such approaches remain to be addressed, however, regarding specificity, efficacy, and patient safety.

More recently in oncology, adoptive cell therapies (e.g., CAR-Ts, TCR-Ts or ACTs) have shown promise in a process requiring the extraction and modification of T cells from patients, activating, stimulating, and expanding them outside the body (i.e., ex vivo) and then infusing large numbers of cells back into the patients for potential therapeutic benefit. While these approaches have demonstrated some encouraging and impressive clinical responses in several hematologic malignancies, and some solid cancers, they are also associated with significant toxicities, including life threatening cytokine release syndrome and induction of self-reactivity, i.e., autoimmune disease. Moreover, labor-intensive technical requirements and expense associated with individualized T cell extraction, ex vivo amplification or modification, and patient infusion represent significant scaling and cost challenges. This is in addition to the immunodepleting chemotherapy required to condition the patient prior to infusion that may limit the usage of these therapeutic modalities.

Enhancing the Body’s Capacity to Fight Cancer

Realizing the potential promise of cancer immunotherapy requires effective and well-tolerated activation and enhancement of the body’s intrinsic cancer-fighting capacity. Because an extremely small fraction of a patient’s entire T cell repertoire, estimated to be less than 0.1%, is specific to that patient’s cancer, non-specific modulation of all T cells, we believe that without a bias towards the tumor-specific T cells, via modalities like rIL-2, CPIs or bispecific T cell engagers, will continue to provide sub-optimal outcomes for most patients.

We believe that our IL-2-based CUE-100 series could solve the problem as to how to activate and amplifying only those cancer-relevant immune cells without broadly activating the vast majority of tumor-irrelevant cells, by selectively

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targeting, activating and proliferating cancer-specific immune cells directly in the patient’s body, achieving well tolerated and therapeutically effective dose levels.

We believe that our Immuno-STAT and derivative drug product candidates, such as Neo-STAT, may offer important clinical advantages over competing immunotherapy approaches, including:

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“Off-the-Shelf” and ready to use biologics that specifically target and selectively modulate disease relevant T cells;

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Administration directly into the patient’s body without involving extraction and ex-vivo manipulation of T cells (e.g., cell therapy) or rigorous pre- and post- therapy conditioning of the patient;

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Ability to target disease specific T cells with specificity, and selectively control the quantity and properties of the co-stimulatory signal – in contrast to global activation through systemic, non-selective signaling that is common to therapies such as rIL-2 and bi-specifics;

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Access to a broad set of disease targets and patient populations;

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Standard delivery format (intravenous or subcutaneous) with a convenient dosing schedule (weekly or monthly) for the patient that can be administered by specialists and community-based physicians; and

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Utilization of industry standard development and production process to support a cost-of-goods and supply chain similar to monoclonal antibodies providing for timely and efficient drug supply.

IL-2 Therapy Challenges

The challenges of current IL-2 therapies have centered around a lack of selectivity and indiscriminate immune activation, resulting in poor tolerability and limited therapeutic dosing ranges. The primary challenge with wild-type IL-2, and the different IL-2 variants in development, is that these molecules will indiscriminately engage the vast majority of the patient’s CD8+ T cells, most of which have no relevance to or effect on the patient’s tumor.

To maximize the fullest potential of IL-2 for cancer therapy, we engineered the CUE-100 series Immuno-STATs to selectively deliver modified IL-2 to tumor-specific T cells while avoiding the systemic activation of all other non-target T cells. Our IL-2 variant is affinity attenuated such that it is designed to selectively act only on tumor-specific T cells whose TCR is engaged to pHLA component of the Immuno-STAT. If the TCR is not engaged, as would be the case with the majority of non-tumor-specific T cells, then the signal from the reduced-affinity IL-2 variant by itself is insufficient to activate the non-tumor-specific T cells. Through the concurrent signaling from the HLA-epitope/TCR complex (signal 1) and IL-2 co-stimulatory signaling (signal 2), we believe we are able to enable the selective and specific activation and amplification of cancer-relevant T cells. In addition, we believe the modularity of the CUE-100 series will allow us to generate diverse therapeutic molecules containing different tumor antigens to target many cancers.

CUE-101

Our lead product candidate from the CUE-100 series, CUE-101, is a fusion protein biologic designed to target and activate antigen-specific T cells to fight HPV-driven cancers. As shown in the figure below, CUE-101 contains an IL-2 variant and a pMHC composed of HLA-A*02:01 complexed with a dominant peptide derived from the human papilloma virus-16 E7 protein, or HPV-16 E7. HPV-16 E7 protein is a primary driver of tumorigenesis and a highly conserved cancer-associated epitope, making it an attractive target for T cell immunotherapy development.

CUE-101 Immuno-STAT Design

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We have performed extensive in vitro and in vivo preclinical studies with CUE-101, which have been published in Clinical Cancer Research (Quayle et. al. CUE-101, a Novel HPV16 E7-pHLA-IL-2-Fc Fusion Protein, Enhances Tumor Antigen Specific T Cell Activation for the Treatment of HPV16-Driven Malignancies).

CUE-101 Clinical Development

We are currently conducting a Phase 1 monotherapy trial of CUE-101 in second line and beyond patients with HPV+R/M HNSCC and a Phase 1 combination trial of CUE-101 with KEYTRUDA in first line patients with HPV+R/M HNSCC. We also initiated an investigator sponsored Phase 1b neoadjuvant trial with Washington University in St. Louis in locally advanced HPV+ HNSCC patients in the second half of 2021.

Treatments for patients with HPV+ cancers represent an important unmet medical need of approximately 24,600 cases of head and neck, cervical, and genitoanal cancers in the United States every year, leading to approximately 9,000 deaths annually.

Phase 1 Monotherapy Trial of CUE-101

We completed the dose escalation portion of our Phase 1 monotherapy trial in June 2021 and have continued to enroll patients in an expansion stage Phase 1b at the RP2D of 4 mg/kg. Over the course of the dose-escalation portion of the Phase 1 monotherapy trial, 38 patients were treated across seven dose-escalation cohorts, ranging from 0.06mg/kg to 8mg/kg, without a maximum tolerated dose having been identified. We believe this demonstrates the specificity and selective activity of CUE-101 and supports our belief that through protein engineering, we have designed a biologic for selective engagement and activation of targeted, cancer-relevant T cell populations, potentially sparing patients of the deleterious side effects resulting from indiscriminate activation though systemic IL-2 approaches. As a result of the cumulative data from the dose escalation portion of the Phase 1 trial, we selected 4 mg/kg as the RP2D due to our analysis of PD effect, clinical activity and patient tolerability. In January 2022, we reported that of the 14 evaluable patients dosed at the RP2D of 4 mg/kg, we observed a confirmed partial response, or PR, lasting greater than 36 weeks, and an additional six patients with confirmed stable disease, or SD, lasting greater than or equal to 12 weeks. In January 2022, we also reported our observation of an ongoing trend of enhanced overall survival (OS) in these patients receiving CUE-101 monotherapy as a third line or greater treatment. At SITC, we reported that we have observed preliminary, robust PK with dose proportional exposure that was sustained across repeat dosing with no evidence of drug clearing antibodies. We have also reported the expansion of targeted, HPV E7 specific disease relevant T cells in the blood of patients and evidence of tumor T cell infiltration on biopsies of tumors.

The table below illustrates the safety and tolerability of CUE-101 in the 45 patients treated across all monotherapy doses as of January 25, 2022. As of January 25, 2022, CUE-101 at the RP2D of 4 mg/kg appears to be well tolerated in the target population. The most common adverse events observed are fatigue, anemia, and decreased lymphocyte counts. All of the serious adverse events and adverse events observed to date are consistent with those that are observed with IL-2 administration or are typical of those observed with CPIs in the treatment of cancer patients. Of note, no events of capillary leak syndrome or severe cytokine storm have been observed to date.

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Preliminary Safety and Tolerability Data from Phase 1 Monotherapy Trial

Based on preliminary survival data for the 47 patients treated as of March 13, 2022 with CUE-101 as a monotherapy in both the dose escalation and dose expansion portions of the trial, we estimate median overall survival to be approximately eight months, which approximates the anticipated median overall survival for HPV + HNSCC patients treated with CPIs in the second line setting based on published retrospective analyses. Although preliminary, we are encouraged that as of March 13, 2022, 22 patients remain on treatment or are in follow-up, and we believe this could demonstrate the potential for enhancement of survival in patients treated with CUE-101 as a monotherapy.

Phase 1 Trial of CUE-101 in Combination with KEYTRUDA

During the fourth quarter of 2020, we initiated a Phase 1 clinical trial of CUE-101 in combination with KEYTRUDA in the first-line R/M HNSCC treatment setting. The first patient in this combination study was dosed in the first quarter of 2021. In the third quarter of 2021, we completed the enrollment of the second cohort, at 2 mg/kg, and initiated the enrollment of patients in the third cohort at 4 mg/kg. To date, no dose-limiting toxicities have been observed in the three cohorts. Early signs of activity in the combination study are encouraging, with three of three patients from cohort two, 2 mg/kg, demonstrating reductions in their target tumor lesions on their first scan after two cycles of therapy. To date, of the four patients treated in dose escalation in the second cohort (2mg/kg) and the third cohort (4mg/kg), two patients have ongoing, confirmed partial responses.

As shown in the graphic and charts below, in the patient with a confirmed partial response from cohort 2, reductions were observed in four out of four target lesions.

CUE-101 in Combination Trial Patient Scan Cohort 2

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Other Applications of Immuno-STATs to Oncology

We plan to leverage our Immuno-STAT platform’s modularity and versatility to design and develop additional Immuno-STATs, including CUE-102 and CUE-103, to further address the various therapeutic challenges of cancer, i.e., addressing tumor heterogeneity and escape mechanisms. We have approached this through the flexibility of design of the various Immuno-STAT components, including specific targeting peptides associated with various indications; and targeting distinct global patient populations via diverse HLA alleles. Furthermore, we have designed Immuno-STAT derivatives to address tumor complexity and heterogeneity through the Neo-STAT platform whereby the MHC or HLA complex of an Immuno-STAT is stabilized and produced with an empty HLA-pocket, allowing for the chemical attachment of defined epitopes post manufacturing. This design affords the opportunity to address tumor heterogeneity by using a mixture of epitopes and potentially provides production scale/efficiencies, flexibility and may have the potential to be “personalized” through sequencing a patient’s tumor and defining targeted mutations and cancer-specific epitopes. The modularity of this unique platform provides us the opportunity to generate therapeutic molecules across many different cancers to and allows the design of novel constructs incorporating structures having desired combined properties.

CUE-102

CUE-102 leverages substantially the same CUE-101 framework except the peptide has been changed with a pMHC derived from WT1, an oncofetal antigen known to be over-expressed in more than 20 different cancers, including both solid tumors (such as colorectal, ovarian, pancreatic and lung) and hematologic malignancies (such as acute myeloid leukemia, multiple myeloma and myelodysplastic syndromes). Patients with WT1 associated cancers represent an important unmet clinical need and underscore the opportunity for promising new therapeutics. We anticipate the filing of an IND for CUE-102 by the end of the first quarter of 2022.

We have generated a comprehensive preclinical data set with CUE-102 to support our planned IND filing. We have observed ex-vivo expansion of WT1-specific T cells from primary human donors (as shown in the top left figure below), and in vivo expansion of T cells in HLA-A02 transgenic mice treated with CUE-102 (as shown in the bottom figure before). Importantly, we observed T cells expanded with CUE-102 activating polyfunctionality and cytotoxic killing of target cells (as shown in the top right figure below), both of which are key attributes of a desirable anti-tumor T cell response. Similar to CUE-101, CUE-102 is a fusion protein biologic built on the IL-2 based CUE-100 series designed to target and activate antigen-specific T cells to fight cancers—in the case of CUE-102, those overexpressing WT1.

CUE-102: Expansion and Polyfunctionality of WT1-Specific T Cells

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CUE-103

We are also developing CUE-103, a CUE-100 series Immuno-STAT targeting the KRAS G12V mutation. This mutation is associated with many solid tumor types including colorectal carcinoma, lung cancer and pancreatic cancer. We believe the KRAS G12V T cell epitope provides a novel opportunity for immuno-therapeutic targeting of a primary tumor driver mutation, such as KRAS. We disclosed data suggesting the feasibility of production of HLA-A11 Immuno-STATs with functional engagement and activity on targeted T cells possessing T cell receptors specific for the G12V mutation at the SITC meeting in November 2020. These data further underscore the modularity of the Immuno-STAT platform by extending the application to include additional HLA alleles, in this case HLA-A11, as well as modifying the targeting epitope. We are also exploring other HLA alleles, such as A03, to develop additional Immuno-STAT molecules that target KRAS G12V.

Neo-STAT Platform

In addition to the Immuno-STAT biologics described above, engineered as fusion protein biologics, each requiring a dedicated stable cell line for production of good manufacturing practice, or GMP, material, we have engineered a next generation derivative approach, referred to as Neo-STATTM, that we expect could significantly enhance productivity and increase our flexibility, including targeting multiple tumor antigens, neo-antigens and post-translationally modified antigens (e.g., targeting of phospho-peptides from tumor cells). A key focus of the Neo-STAT platform is to generate a “peptide-less” or “empty” MHC pocket within the Immuno-STAT scaffold of the CUE-100 series. We would then deploy peptide-conjugation chemistry to covalently attach peptides to the Neo-STAT scaffold. We believe Neo-STAT has the potential to provide enhanced productivities and greater flexibility enabling the ability to generate therapeutic molecules targeting multiple tumor antigens, and to develop future strategies to deploy the Neo-STAT platform for personalized tumor neo-antigens. Importantly, the Neo-STAT framework has the potential to provide scale which would enable us to optimize production efficiencies from a cost, timing, and yield perspective.

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We have made significant progress with our Neo-STAT platform, including feasibility proof of concept, creation of a master cell line and generation of experimental data demonstrating expansion and activation of primary human T cells with HLA-A02 Neo-STAT molecules deploying different T cell epitopes including tumor antigens (MART-1) or infectious antigens (CMV, SARS-Cov-2), as examples (see below). We presented a detailed description on the protein engineering of the Neo-STAT platform at the Protein Engineering and Cell Therapy Summit meeting in August 2020. We plan to continue to progress the Neo-STAT platform with efforts designed to demonstrate the versatility of our platform approach and the potential for broad therapeutic applications to address the pressing need for more effective cancer immunotherapies. The graphic below illustrates Neo-STATs and Immuno-STATs with the same antigenic peptide activating peptide specific CD8+ T cells.

Neo-STATs and Immuno-STATs with the Same Antigenic Peptide Activate Peptide Specific CD8+ T Cells

We believe that our current and planned applications of our Immuno-STAT and Neo-STAT platforms potentially address therapeutic challenges seen with current treatments and may benefit from the ongoing risk-reducing data generated through our ongoing clinical trials of CUE-101, especially as it relates to the tolerability profile of our reduced-affinity IL-2 and novel biologics platform. This is due to the fact that the core framework of the CUE-100 series remains largely the same for each drug product candidate, except for the targeting peptide epitope within the MHC pocket.

In summary, we have focused and deployed our efforts and resources in oncology and have made significant progress demonstrating the potential for our IL-2 based CUE-100 series to selectively stimulate a patient’s immune system against cancer with our ongoing trials of CUE-101 addressing HPV+ R/M HNSCC and preclinical studies of CUE-102 targeting T cells recognizing WT1 to address multiple solid and hematological cancers. We have also implemented a strategy of exploiting the potential applications of the CUE-100 series framework into multiple derivative constructs possessing specific properties and mechanistic activities to address multiple cancer types and diverse clinical conditions. We believe through our strategic initiatives of first establishing the proof of concept, risk reduction and clinical validation through the clinical development of CUE-101, targeting HPV+ HNSCC in a second line treatment and beyond monotherapy trial, as well as demonstrating potential mechanistic synergy with CPIs in first line patients, we have established a foundation from which we believe can expand market access and therapeutic reach to patients suffering from a wide range of cancers.

Application of Immuno-STATs Outside of Oncology: CUE-200, CUE-300 and CUE-400

In addition to oncology, we have made recent advances for autoimmune diseases where our core strategy has centered on two major themes: (i) modulating antigen-specific T cells with Immuno-STATs in diseases with restricted or known autoantigens (e.g., type 1 diabetes), and (ii) exploiting a pathway-specific approach via modalities focused on regulatory T cells and other mechanisms that could be broadly applied to autoimmune diseases with unknown or diverse autoantigens. In the first instance we have generated data through our collaboration with Merck demonstrating the possibility of a potential clinical candidate with our CUE-300 series for targeting autoreactive T cells in type 1 diabetes.

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Additionally, we expanded our reach into chronic autoimmune diseases having diverse and/or uncharacterized antigens by focusing on activating and increasing regulatory T cells for re-setting immune balance. Our first candidate from this effort, CUE-401, incorporates two key signals, namely IL-2 and TGF-beta, for differentiation and expansion of iTregs.

Furthermore, we have assessed the potential of developing programs from the Immuno-STAT platform for treating infectious diseases with the CUE-200 series through research being conducted by Dr. Steven Almo, a co-founder of the company and Chair of Biochemistry at The Albert Einstein College of Medicine.

As a result of our prioritization and strategic focus on oncology, we are actively seeking third party support through partnerships and collaborations, or alternative funding structures to further develop our programs outside of oncology, including our CUE-200, CUE-300 and CUE-400 series.

Our License Agreement with Einstein

On January 14, 2015, or the Effective Date, we entered into a license agreement, as amended and restated on July 31, 2017 and as amended on October 30, 2018, or the Einstein License, with Albert Einstein College of Medicine, or Einstein, for certain patent rights, or the Patents, relating to our core technology platform for the engineering of biologics to control T cell activity, precision, immune-modulatory drug product candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides. We hold an exclusive worldwide license, with the right to sublicense, import, make, have made, use, provide, offer to sell, and sell all products, processes and services that use the Patents, including certain technology received from Einstein related thereto, which we refer to as the Licensed Products.

The Einstein License is a royalty-bearing license obligating us to pay a percentage of proceeds received from sales of categories of Licensed Products at low single digit rates. We have also agreed to share a portion of our proceeds that we derive from other agreements, like sublicense agreements, relating to Licensed Products that we may enter into. The percentage of such proceeds that we are required to pay Einstein ranges from the low to mid-teens, depending on how far we have developed a Licensed Product before we enter into an agreement relating to the Licensed Product. These percentages are reduced for sales of Licensed Products in countries where a competing product exists and for products or services involving the use or incorporation of technology received from Einstein relating to synapse for targeted T cell activation molecules, receptor ligand identification or platforms for T cell monitoring. In addition to our obligation to pay royalties based upon a percentage of proceeds from sales of Licensed Products, we have also agreed to pay Einstein annual maintenance fees. The maintenance payments are creditable against any royalty payments we pay under the Einstein License. For the year ended December 31, 2021, we paid $75,000 to Einstein in license and license maintenance fees under the Einstein License.

Under the Einstein License, we are also obligated to make milestone payments corresponding to: (i) approval of the first IND by the FDA or foreign equivalent for a Licensed Product; (ii) approval of any subsequent IND application or foreign equivalent for a “new indication” for a Licensed Product; (iii) initiation of Phase 2 clinical trials or foreign equivalent on a Licensed Product; (iv) initiation of Phase 2 clinical trials or foreign equivalent for a “new indication” for a Licensed Product; (v) initiation of Phase 3 clinical trials or foreign equivalent on a Licensed Product; (vi) initiation of Phase 3 clinical trials or foreign equivalent for a “new indication” for a Licensed Product; (vii) the first commercial sale of a Licensed Product; (viii) the first commercial sale of each “new indication” for one of our previously approved Licensed Products; and (ix) cumulative sales of certain Licensed Products reaching certain threshold amounts. The aggregate amount of milestone payments made under the Einstein License may equal up to $1.85 million for each Licensed Product and up to $1.85 million for each new indication of a Licensed Product. Additionally, the aggregate amount of one-time milestone payments based on cumulative sales of all Licensed Products may equal up to $5.75 million. As of December 31, 2021, we have made one milestone payment of $150,000 for the approval by the FDA of the IND for CUE-101.

In addition to our obligations to make the cash payments to Einstein described above, under the Einstein License we issued Einstein 671,572 shares of our Common Stock immediately prior to completion of the initial public offering of our common stock completed on December 27, 2017.

The Einstein License expires upon the expiration of our last obligation to make royalty payments to Einstein, unless terminated earlier under the provisions thereof. Under the Einstein License, we will be obligated to make royalty payments to Einstein, with respect to certain Licensed Products, for the longer of 15 years from the first sale of such products in each country or for the duration of any market exclusivity period granted by a regulatory agency for such product and, with respect to certain Licensed Products sold by sublicensees, the longer of 10 years from the first sale of such products in each country or for so long as the sublicensee agrees to pay royalties on such products. We have the right to terminate the Einstein License at any time upon 60 days’ written notice to Einstein; provided, however, that we will lose intellectual property rights related to the Patents if we choose to terminate the Einstein License in this manner. Each party has the right to terminate the Einstein License if the other party is in default or breach of any condition of the Einstein License with a right to cure any such breach within 60 days from receipt of notice of such default or breach, unless the other party has disputed the alleged breach in good faith. Either party can also terminate the Einstein License if the other party voluntarily files for bankruptcy or other similar

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insolvency proceedings, makes a general assignment for the benefit of creditors, or is the subject of an involuntary bankruptcy petition that is not dismissed within 90 days. If we fail to pay any sum that is due and payable to Einstein within 30 days after receiving written notice of our default from Einstein, then Einstein has the option of terminating the Einstein License unless we pay within 45 days of such notice all delinquent sums with interest.

Einstein may also terminate the Einstein License in the event we are convicted of certain felonies relating to the manufacture or use of Licensed Products.

The Einstein License also obligates us to meet certain due diligence requirements, or the Diligence Milestones, as follows:

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update our research and development plan annually;

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initiate Phase 1 clinical trials on a Licensed Product within a number of years from the Effective Date;

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initiate Phase 2 clinical trials on a Licensed Product within a number of years from the Effective Date;

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initiate Phase 3 clinical trials on a Licensed Product within a number of years from the Effective Date;

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submit an application for FDA approval to market and sell a Licensed Product within a number of years from the Effective Date;

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have our first commercial sale of an FDA Licensed Product within a number of years from the Effective Date; and

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spend a minimum amount per year on product development until our first commercial sale of a Licensed Product.

If we fail to meet any of the Diligence Milestones, Einstein will have the right to terminate the Einstein License if such Diligence Milestone is not satisfied within thirty days from receiving a written notice of default from Einstein. Under certain circumstances and upon prior notice to Einstein, we may have the right to an additional extension of our Diligence Milestones if, despite our commercially reasonable efforts we are not able to satisfy the Phase 2 clinical trial Diligence Milestone or any subsequent Diligence Milestone. As of the date of this report, we have met all required Diligence Milestones.

Our Collaboration Agreement with Merck

On November 14, 2017, we entered into an Exclusive Patent License and Research Collaboration Agreement, or the Merck Collaboration Agreement, with Merck for a partnership to research and develop certain of the Company’s proprietary biologics that target certain autoimmune disease indications, or the Initial Indications. We view this Merck Collaboration Agreement as a component of our development strategy since it will allow us to advance our autoimmune programs in partnership with a world class pharmaceutical company, while also continuing our focus on our more advanced cancer programs. The research program outlined in the Merck Collaboration Agreement entails (1) our research, discovery and development of certain Immuno-STAT drug product candidates up to the point of demonstration of certain biologically relevant effects, or Proof of Mechanism, and (2) the further development by Merck of the Immuno-STAT drug product candidates that have demonstrated Proof of Mechanism, or the Proposed Drug Product Candidates, up to the point of demonstration of all or substantially all of the properties outlined in such Proposed Drug Product Candidates’ profiles as described in the Merck Collaboration Agreement.

For the purposes of this collaboration, we granted to Merck under the Merck Collaboration Agreement an exclusive license under certain of our patent rights, including a sublicense of patent rights licensed from Einstein, to the extent applicable to the specific Immuno-STAT drug product candidates that are elected to be developed by Merck. In addition, so long as Merck continues product development on a Proposed Drug Product Candidate, we are restricted from conducting any development activities within the Initial Indication covered by such Proposed Drug Product Candidate other than pursuant to the Merck Collaboration Agreement.

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In exchange for the licenses and other rights granted to Merck under the Merck Collaboration Agreement, we received a $2.5 million nonrefundable up-front payment and may be eligible to receive additional funding in developmental milestone payments, as well as tiered royalties if all research, development, regulatory and commercial milestones agreed upon by both parties are successfully achieved. Excluding the $2.5 million upfront payment described above, we are eligible to earn up to $101 million for the achievement of certain research and development milestones, $120 million for the achievement of certain regulatory milestones and $150 million for the achievement of certain commercial milestones, in addition to tiered royalties on sales, if all pre-specified milestones associated with multiple products across the primary disease indication areas are achieved. The Merck Collaboration Agreement requires us to use the first $2.5 million milestone payment we receive under the agreement to fund contract research. The amount of the royalty payments is a percentage of product sales ranging in the single digits based on the amount of such sales.

The term of the Merck Collaboration Agreement extends until the expiration of all royalty obligations following a product candidate’s receipt of marketing authorization, at which point Merck’s licenses and sublicenses granted under the agreement shall become fully paid-up, perpetual licenses and sublicenses, as applicable. Royalties on each product subject to the Merck Collaboration Agreement shall continue on a country-by-country basis until the expiration of the later of: (1) the last-to-expire patent claiming the compound on which such product is based and (2) a period of ten years after the first commercial sale of such product in such country.

In November 2020, we extended the research collaboration terms of this agreement through December 31, 2021 to support further development and identification of targeted biologics for the treatment of autoimmune disease. Under the terms of the Amendment, Merck reimbursed us for specified expenses and provided additional financial research support to further study and develop preclinical biologics with the objective of identifying clinical candidates subject, in each case, to specified maximum amounts, with any amounts in excess of such maximum amounts to be borne by us. On November 18, 2020, we earned a milestone payment related to this Amendment in the amount of $300,000. The $300,000 milestone payment was recorded as a contract liability upon receipt. We recognized revenue related to this milestone payment pursuant to our revenue recognition policy in relation to the performance of our obligations related to the development of Immuno-STAT drug product candidates under the arrangement. The research term and financial support of research conducted under the Merck Collaboration Agreement expired on December 31, 2021 and we are discussing with Merck a potential path forward in defining a clinical candidate.

Our Collaboration Agreement with LG Chem

Effective November 6, 2018, we entered into a Collaboration, License and Option Agreement, or the LG Chem Collaboration Agreement, with LG Chem, related to the development of Immuno-STATs focused in the field of oncology.

Pursuant to the LG Chem Collaboration Agreement, we granted LG Chem an exclusive license to develop, manufacture and commercialize our lead product, CUE-101, as well as Immuno-STATs that target T-cells against two additional cancer antigens, or Drug Product Candidates, in Australia, Japan, Republic of Korea, Singapore, Malaysia, Vietnam, Thailand, Philippines, Indonesia, China (including Macau and Hong Kong) and Taiwan, which we refer to collectively as the LG Chem Territory. We retain rights to develop and commercialize all assets included in the LG Chem Collaboration Agreement in the United States and in global markets outside of the LG Chem Territory. Under the LG Chem Collaboration Agreement, we will engineer the selected Immuno-STATs for up to three alleles, which are expected to include the predominant alleles in the LG Chem Territory, thereby enhancing our market reach by providing for greater patient coverage of populations in global markets, while LG Chem will establish a chemistry, manufacturing and controls, or CMC, process for the development and commercialization of selected Drug Product Candidates. In addition, LG Chem has the option to select one additional Immuno-STAT for an oncology target, or an Additional Immuno-STAT, for an exclusive worldwide development and commercialization license. On December 18, 2019, we and LG Chem entered into a global license and collaboration agreement, which was amended on November 5, 2020. We refer to such agreement, as amended, as the Global License and Collaboration Agreement. The Global License and Collaboration Agreement supersedes the provisions of the LG Chem Agreement related to LG Chem’s option for an Additional Immuno-STAT but generally does not become effective unless and until LG Chem exercises its option, other than certain select provisions including the length of the option period and representations, warranties and covenants of the parties. On April 30, 2021, LG Chem’s option pursuant to the Global License and Collaboration Agreement expired. We will retain an option to co-develop and co-commercialize the additional program worldwide.

Under the terms of the LG Chem Collaboration Agreement, LG Chem paid us a $5.0 million non-refundable, non-creditable upfront payment and purchased approximately $5.0 million of shares of our common stock at a price per share equal to a 20% premium to the volume weighted-average closing price per share over the 30 trading day period immediately prior to the effective date of the LG Chem Collaboration Agreement. We are also eligible to receive additional aggregate payments of approximately $400 million if certain research, development, regulatory and commercial milestones are successfully achieved. On May 16, 2019, we earned a $2.5 million milestone payment for the U.S. Food and Drug Administration’s, or FDA’s,

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acceptance of the IND for our lead drug product candidate, CUE-101, pursuant to the LG Chem Collaboration Agreement. On December 7, 2020, we earned a $1.25 million milestone payment on the selection of a preclinical candidate pursuant to the LG Chem Collaboration Agreement. On November 23, 2021, we earned a $3.0 million milestone payment on the confirmation of Collaboration Product Candidate. In addition, the LG Chem Collaboration Agreement also provides that LG Chem will pay us tiered single-digit royalties on net sales of commercialized Product Candidates, or Collaboration Products, in the LG Chem Territory on a product-by-product and country-by-country basis, until the later of expiration of patent rights in a country, the expiration of regulatory exclusivity in such country, or ten years after the first commercial sale of a Collaboration Product in such country, subject to certain royalty step-down provisions set forth in the LG Chem Collaboration Agreement. In addition, the LG Chem Collaboration Agreement also provides that LG Chem will pay us tiered single-digit royalties on net sales of commercialized Drug Product Candidates, or Collaboration Products, in the LG Chem Territory on a product-by-product and country-by-country basis, until the later of expiration of patent rights in a country, the expiration of regulatory exclusivity in such country, or ten years after the first commercial sale of a Collaboration Product in such country, subject to certain royalty step-down provisions set forth in the LG Chem Collaboration Agreement.

Pursuant to the LG Chem Collaboration Agreement, the parties will share research costs related to Collaboration Products, and LG Chem will provide CMC process development for selected Drug Product Candidates and potentially additional downstream manufacturing capabilities, including clinical and commercial supply for Collaboration Products. In return for performing CMC process development, LG Chem is eligible to receive low-single digit percentage royalty payments on the sales of Collaboration Products sold in all countries outside the LG Chem Territory. As of December 31, 2021, we recorded approximately $18.3 million in collaboration revenue related to this agreement.

The LG Chem Collaboration Agreement includes various representations, warranties, covenants, indemnities and other customary provisions. LG Chem may terminate the LG Chem Collaboration Agreement for convenience or change of control of us on a program-by-program, product-by-product or country-by-country basis, or in its entirety, at any time following the notice period set forth in the LG Chem Agreement. Either party may terminate the LG Chem Agreement, in its entirety or on a program-by-program, product-by-product or country-by-country basis, in the event of an uncured material breach. The LG Chem Collaboration Agreement is also terminable by either party (i) upon the bankruptcy, insolvency or liquidation of the other party or (ii) for certain activities involving the challenge of certain patents controlled by the other party. Unless earlier terminated, the LG Chem Collaboration Agreement will expire on a product-by-product and country-by-country basis upon the expiration of the applicable royalty term.

To date, LG Chem has selected one additional cancer antigen, WT1, which is the focus of the CUE-102 research program. We are currently developing two Collaboration Products with LG Chem pursuant to this agreement.

Our Intellectual Property

We believe that our current patents and patent applications and any future patents and other proprietary rights that we own, or control through licensing, are and will be essential to our business. We believe that these intellectual property rights will affect our ability to compete effectively with others. We also rely and will rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop, maintain and strengthen our competitive position. We seek to protect these, in part, through confidentiality agreements with certain employees, consultants, advisors and other parties. Our success will depend in part on our ability, and the ability of our licensors, to obtain, maintain (including making periodic filings and payments) and enforce patent protection for our/their intellectual property, including those patents and patent applications to which we have secured exclusive rights.

As of December 31, 2021, we owned or had licensed seventy-six issued patents, fifty-two pending patent applications in the United States (including eighteen pending U.S. provisional patent applications), twenty pending international PCT applications and 190 pending foreign patent applications intended to protect the intellectual property underlying our technology. Our patent applications describe certain features of our technologies, including our Immuno-STAT platform, our Neo-STAT platform, CAR-T and ex-vivo applications of our Immuno-STAT platform, our RDI-STAT platform, as well as specific biologic molecules, drug product candidates and methods of treatment using our Immuno-STATs. We plan to spend considerable resources and focus in the future on obtaining U.S. and foreign patents. We have and will continue to actively protect our intellectual property. No assurances can be given that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. In addition, any issued patents may be contested, circumvented, found unenforceable or invalid, and we may not be able to successfully enforce our patent rights against third parties. No assurance can be given that others will not independently develop a similar or competing technology or design around any patents that may be issued to us. We intend to expand our international operations in the future and our patent portfolio, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.

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Each of our patents, if and when granted, will generally have a term of 20 years from its respective U.S. non-provisional priority filing date, subject to available extensions. They are thus set to expire no earlier than dates ranging from 2033 to2042, although patents that specifically cover Cue products will expire no earlier than December 2037, subject to available extensions.

Competition

While we believe that our drug product candidates, technology, knowledge and experience provide us with significant competitive advantages, we face competition from established and emerging pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, among others.

Furthermore, immunotherapy technologies are advancing at a rapid pace and we anticipate competing with companies developing bi-specific antibodies attempting to deliver T cell activating cytokines, such as IL-2 (e.g., Amgen Inc., or Amgen, Immunocore Holdings plc, or Immunocore, and Roche Holding AG, or Roche), cell therapies for activating or creating cancer-relevant T cells outside the patient’s body, i.e., ex vivo, (e.g., Bristol-Myers Squibb Company, or Bristol-Myers Squibb, Gilead Sciences, Inc., or Gilead, and Novartis AG, or Novartis), antibody-drug conjugates (e.g., Gilead, Roche, Seagen Inc., or Seattle Genetics), immune checkpoint inhibitors (e.g., Bristol-Myers Squibb, Merck, and Pfizer Inc., or Pfizer), and modified cytokines, such as pegylated IL-2 for slower-release (e.g., Bristol-Myers Squibb/Nektar, who in 2020 announced a combination study of BEMPEG plus KEYTRUDA in a Phase 2/3 clinical trial in first-line squamous cell carcinoma of the head and neck), as a means of reducing the unwanted collateral adverse effects of wild type IL-2, genetically-modified IL-2 for ablating the alpha subunit activity to reduce CD4 activation in favor of CD8 (e.g. Neoleukin Therapeutics, Inc., or Neoleukin, Roche, and Sanofi), and antigen-specific targeting of cytokines through nanoparticles (e.g., Neximmune). We believe that our approach provides us with the competitive advantage of antigen-specific targeting of cytokines, such as IL-2 by engineering proteins with a targeting moiety, i.e, peptide-MHC, coupled to genetically modified cytokines, such as not-alpha IL2 for enhancing CD8 activation and attenuated Beta-subunit for biasing the peptide-MHC/TCR affinity, thereby providing cancer antigen specificity.

We expect our lead product candidate, CUE-101, will compete with other product candidates for the treatment of HPV+ cancers. While there is currently no FDA-approved therapy that specifically targets HPV for HPV+ cancers, there are multiple product candidates in clinical development, including cell therapies (e.g., Gilead and Rubius Therapeutics, Inc.), and cancer vaccines (e.g., BioNTech SE, Hookipa Pharma Inc., Inovio Pharmaceuticals, Inc., and ISA B.V.). Therapies not specific to HPV are also being developed to address HPV+ cancers, including immune checkpoint inhibitors as well as tumor infiltrating lymphocytes by Iovance Biotherapeutics, Inc.

Our corporate objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability, and safety. We expect any drug product candidate that we commercialize, either independently or with our strategic partners, will compete with existing, market-leading products.

There are many companies focused on the development of small molecules and antibodies for cancer treatment. Our core competitors include pharmaceutical and biotechnology organizations, as well as academic research institutions, clinical research laboratories and government agencies that are pursuing research activities in the same therapeutic area. Many of our competitors have greater financial, technical and human resources than we do. Additionally, many competitors have greater experience in product discovery and development, obtaining FDA and other regulatory approvals, and commercialization capabilities, which may provide them with a competitive advantage.

We believe that our ability to compete will depend on our ability to execute on the following objectives:

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design, develop and commercialize products that are superior to other products in the market in terms of, among other things, safety, efficacy, convenience, or price;

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obtain patent and/or other proprietary protection for our processes and drug product candidates;

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obtain required regulatory approvals;

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obtain favorable reimbursement, formulary and guideline status; and

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collaborate with others in the design, development and commercialization of our products.

Established competitors may invest heavily to discover and develop novel compounds that could make our drug product candidates obsolete. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and/or safety in order to obtain approval, to overcome price competition and to be commercially successful. If we are not able to compete effectively, our business will not grow and our financial condition and operations will suffer.

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Government Regulation and Licensure of Products

Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, pricing, reimbursement, sales, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post‐approval monitoring and reporting, and import and export of pharmaceutical products, including biological products. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

Licensure and Regulation of Biologics in the United States

In the United States, our product candidates are regulated as biological products, or biologics, under the Public Health Service Act, or the PHSA, and the Federal Food, Drug and Cosmetic Act, or the FDCA, and its implementing regulations and guidances. A company, institution, or organization which takes responsibility for the initiation and management of a clinical development program for such products, and for their regulatory approval, is typically referred to as a sponsor. The failure to comply with the applicable U.S. requirements at any time during the product development process, including non‐clinical testing, clinical testing, the approval process or post‐approval process, may subject a sponsor to delays in the conduct of the study, regulatory review and approval, and/or administrative or judicial sanctions. A sponsor seeking approval to market and distribute a new biologic in the United States generally must satisfactorily complete each of the following steps:

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preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations and standards and other applicable regulations;

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completion of the manufacture, under current Good Manufacturing Practices, or GMP, conditions, of the drug substance and drug product that the sponsor intends to use in human clinical trials along with required analytical and stability testing;

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design of a clinical protocol and submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin;

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approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;

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performance of adequate and well‐controlled human clinical trials to establish the safety, potency, and purity of the product candidate for each proposed indication, in accordance with current Good Clinical Practices, or GCP;

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preparation and submission to the FDA of a Biologic License Application, or BLA, for a biologic product requesting marketing for one or more proposed indications, including submission of detailed information on the manufacture and composition of the product in clinical development and proposed labelling;

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review of the product by an FDA advisory committee, where appropriate or if applicable;

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satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities, including those of third parties, at which the product, or components thereof, are produced to assess compliance with GMP requirements and to assure that the facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and purity, and, if applicable, the FDA’s current good tissue practice for the use of human cellular and tissue products;

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satisfactory completion of any FDA audits of the non‐clinical and clinical trial sites to assure compliance with GCPs and the integrity of clinical data in support of the BLA;

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payment of user Prescription Drug User Free Act, or PDUFA, securing FDA approval of the BLA and licensure of the new biologic product; and

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compliance with any post‐approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and any post‐approval studies required by the FDA.

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Preclinical Studies

Before testing any biologic product candidate in humans, a product candidate must undergo preclinical testing. Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate the potential for efficacy and toxicity in animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations and standards and the United States Department of Agriculture’s Animal Welfare Act, if applicable. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application.

The IND Process

An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. The IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the product or conduct of the proposed clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns before the clinical trials can begin or recommence.

As a result, submission of the IND may result in the FDA not allowing the trials to commence or allowing the trial to commence on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this initial 30‐day period, or at any time during the IND process, it may choose to impose a partial or complete clinical hold. Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, nonclinical, and/or chemistry, manufacturing, and controls. This order issued by the FDA would delay either a proposed clinical study or cause suspension of an ongoing study, until all outstanding concerns have been adequately addressed and the FDA has notified the company that investigations may proceed. This could cause significant delays or difficulties in completing planned clinical studies in a timely manner.

Expanded Access to an Investigational Drug for Treatment Use

Expanded access, sometimes called “compassionate use,” is the use of investigational products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access to investigational products for patients who may benefit from investigational therapies. FDA regulations allow access to investigational products under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the investigational product under a treatment protocol or treatment IND application.

When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.

There is no obligation for a sponsor to make its drug products available for expanded access; however, as required by the 21st Century Cures Act, or the Cures Act, passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests, it must make that policy publicly available. Although these requirements were rolled out over time, they have now come into full effect. Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the investigational drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.

In addition, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a manufacturer to make its investigational products available to eligible patients as a result of the Right to Try Act.

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Human Clinical Trials in Support of a BLA

Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator in accordance with GCP requirements. Clinical trials are conducted under study protocols detailing, among other things, the objectives of the study, inclusion and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.

A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. When a foreign clinical trial is conducted under an IND, all FDA IND requirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor must ensure that the trial complies with certain regulatory requirements of the FDA in order to use the trial as support for an IND or application for marketing approval. Specifically, the FDA requires that such trials be conducted in accordance with GCP, including review and approval by an independent ethics committee and informed consent from subjects. The GCP requirements encompass both ethical and data integrity standards for clinical trials. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical trials, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign trials are conducted in a manner comparable to that required for clinical trials in the United States.

Further, each clinical trial must be reviewed and approved by an IRB either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider, among other things, clinical trial design, patient informed consent, ethical factors, the safety of human subjects, and the possible liability of the institution. An IRB must operate in compliance with FDA regulations. The FDA, IRB, or the clinical trial sponsor may suspend or discontinue a clinical trial at any time for various reasons, including a finding that the clinical trial is not being conducted in accordance with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive GCP rules and the requirements for informed consent.

Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, or DSMB. This group may recommend continuation of the study as planned, changes in study conduct, or cessation of the study at designated check points based on certain available data from the study to which only the DSMB has access. Finally, research activities involving infectious agents, hazardous chemicals, recombinant DNA, and genetically altered organisms and agents may be subject to review and approval of an Institutional Biosafety Committee in accordance with U.S. National Institutes of Health, or NIH, Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules.

Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Additional studies may be required after approval.

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Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion, and pharmacodynamics in healthy humans or, on occasion, in patients, such as cancer patients.

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Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the efficacy of the product candidate for specific targeted indications and determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials.

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Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken within an expanded patient population to further evaluate dosage, provide substantial evidence of clinical efficacy, and further test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical trial sites. A well‐controlled, statistically robust Phase 3 trial may be designed to deliver the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to appropriately label a biologic; such Phase 3 studies are referred to as “pivotal.”

In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval. Such post‐approval trials are typically referred to as Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of biologics approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not

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necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement or to request a change in the product labeling. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.

A clinical trial may combine the elements of more than one phase and the FDA often requires more than one Phase 3 trial to support marketing approval of a product candidate. A company’s designation of a clinical trial as being of a particular phase is not necessarily indicative that the study will be sufficient to satisfy the FDA requirements of that phase because this determination cannot be made until the protocol and data have been submitted to and reviewed by the FDA. Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides a well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need.

In August 2018, the FDA released draft guidance entitled “Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how developers can utilize an adaptive trial design commonly referred to as a seamless trial design in early stages of oncology biological product development (i.e., the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial. Information to support the design of individual expansion cohorts are included in IND applications and assessed by the FDA. Expansion cohort trials can potentially bring efficiency to product development and reduce developmental costs and time.

Finally, sponsors of clinical trials are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the NIH. In particular, information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. The NIH’s Final Rule on registration and reporting requirements for clinical trials became effective in 2017, and both NIH and the FDA have recently signaled the government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors.

Pediatric Studies

Under the Pediatric Research Equity Act of 2003, a BLA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the sponsor plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The sponsor, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the sponsor may request an amendment to the plan at any time.

For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of a sponsor, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later than 90 days after FDA’s receipt of the study plan.

The FDA may, on its own initiative or at the request of the sponsor, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin. The law requires the FDA to send a Pediatric Research Equity Act, or PREA, Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although the FDA has recently taken steps to limit what it considers abuse of this statutory exemption in PREA.

Compliance with GMP Requirements

In connection with its review of a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in full compliance with GMP requirements and adequate to assure consistent production of the product within required specifications. The PHSA emphasizes the importance of manufacturing control for products like biologics whose attributes cannot be precisely defined.

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Manufacturers and others involved in the manufacture and distribution of products must also register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing process. Any product manufactured by or imported from a facility that has not registered, whether foreign or domestic, is deemed misbranded under the FDCA. Establishments may be subject to periodic unannounced inspections by government authorities to ensure compliance with GMPs and other laws. Inspections must follow a “risk‐based schedule” that may result in certain establishments being inspected more frequently. Manufacturers may also have to provide, on request, electronic or physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by the FDA may lead to a product being deemed to be adulterated. Changes to the manufacturing process, specifications or container closure system for an approved product are strictly regulated and often require prior FDA approval before being implemented. The FDA’s regulations also require, among other things, the investigation and correction of any deviations from GMP and the imposition of reporting and documentation requirements upon the sponsor and any third-party manufacturers involved in producing the approved product.

Submission and Filing for Review of a BLA

The results of product candidate development, preclinical testing, and clinical trials, including negative or ambiguous results as well as positive findings, are submitted to the FDA as part of a BLA requesting a license to market the product. The BLA must contain extensive manufacturing information and detailed information on the composition of the product and proposed labeling as well as payment of a user fee. Under federal law, the submission of most BLAs is subject to an application user fee, which for federal fiscal year 2022 is $3,117,218 for an application requiring clinical data. The sponsor of a licensed BLA is also subject to an annual program fee, which for federal fiscal year 2022 is $369,413. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses.

The FDA conducts a preliminary review of all applications within 60 days of receipt and must inform the sponsor at that time or before whether an application is sufficiently complete to permit substantive review. In the event that the FDA determines that an application does not satisfy this standard, it will issue a Refuse to File determination to the sponsor. The FDA may request additional information and studies, and the application must be resubmitted with the additional information. The resubmitted application is subject to review before the FDA accepts it for filing.

Once the submission has been accepted for filing, the FDA begins an in‐depth review of the application. Under the goals and policies agreed to by the FDA under the PDUFA, the FDA has ten months in which to complete its initial review of a standard application and respond to the sponsor, and six months for a priority review of the application. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs. The review process may often be significantly extended by FDA requests for additional information or clarification. The review process and the PDUFA goal date may be extended by three months if the FDA requests or if the sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as to whether the application should be approved. In particular, the FDA may refer applications for novel biologic products or biologic products that present difficult questions of safety or efficacy to an advisory committee. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates, and provides 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.

Decisions on BLAs

After evaluating the application and all related information, including the advisory committee recommendations, if any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will issue either a Complete Response Letter, or CRL, or an approval letter. To reach this determination, the FDA must determine whether there is substantial evidence that the product is effective and that expected benefits of the proposed product outweigh its potential risks to patients. This assessment is informed by the severity of the underlying condition and how well patients’ medical needs are addressed by currently available therapies; uncertainty about how the premarket clinical trial evidence will extrapolate to real-world use of the product in the post-market setting; and whether risk management tools are necessary to manage specific risks.

If the application is not approved, the FDA will issue a complete response letter, or CRL, which will contain the conditions that must be met in order to secure final approval of the application, and when possible will outline recommended actions the sponsor might take to obtain approval of the application. Sponsors that receive a CRL may submit to the FDA information that represents a complete response to the issues identified by the FDA. Such resubmissions are classified under PDUFA as either Class 1 or Class 2. The classification of a resubmission is based on the information submitted by a sponsor in response to an action letter. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has two months to

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review a Class 1 resubmission and six months to review a Class 2 resubmission. The FDA will not approve an application until issues identified in the complete response letter have been addressed.

Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure, and potent and the facility where the product will be manufactured meets standards designed to ensure that it continues to be safe, pure, and potent. On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturing facilities and any FDA audits of non‐clinical and clinical trial sites to assure compliance with GCPs, the FDA may issue an approval letter or a complete response letter.

An approval letter, on the other hand, authorizes commercial marketing of the product with specific prescribing information for specific indications.

The FDA may limit the approved indications for use of the product. It may also require that contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call for post‐approval studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency may also require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patent registries.

The FDA may prevent or limit further marketing of a product based on the results of post‐market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Expedited Review Programs

The FDA is authorized to expedite the review of applications in several ways. Under the Fast Track program, the sponsor of a product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND. Product candidates are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track application before the application is complete, a process known as rolling review.

Any product candidate submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as breakthrough therapy designation, priority review and accelerated approval.

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Breakthrough therapy designation. To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives intensive guidance on an efficient development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review and rolling review.

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Priority review. A product candidate is eligible for priority review if it treats a serious condition and, if approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention compared to marketed products. FDA aims to complete its review of priority review applications within six months as opposed to 10 months for standard review.

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Accelerated approval. Biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval. Accelerated approval means that a product candidate may be approved on the basis of adequate and well controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments. As a condition of

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approval, the FDA may require that a sponsor of a biologic product candidate receiving 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.

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Regenerative advanced therapy. With passage of the Cures Act in December 2016, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with the FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.

None of these expedited programs changes the standards for approval but each may help expedite the development or approval process governing product candidates.

Real-Time Oncology Review of Supplemental NDAs

Through its Oncology Center for Excellence, or OCE, the FDA has established two pilot programs allowing for real-time review of supplemental applications for previously approved oncology products. This approach will allow FDA to evaluate clinical data as soon as the results of a clinical trial become available with the objective of reviewing and approving a new indication soon after a sponsor files the application. The first of these pilot programs, Real-Time Oncology Review, or RTOR, focuses on early submission of data that are the most relevant to assessing the product’s safety and effectiveness. RTOR allows the FDA to review much of the data earlier, after the clinical trial results become available and the database is locked, but before the information is formally submitted to the agency.

The FDA has established several criteria to determine whether a supplemental application may be selected for RTOR. Those criteria include whether: the investigational product is likely to demonstrate substantial improvements over available therapy; the study design is straight forward, as determined by the review division and the OCE; the endpoints can be easily interpreted. Applications with chemistry, manufacturing and control formulation changes and supplements with pharmacology/toxicology data are excluded from RTOR. In addition, submissions with greater complexity, including those with companion diagnostics, may also be excluded for the purposes of the pilot program. On the basis of these criteria, the appropriate FDA review division and OCE management will jointly decide whether the application can be selected for the RTOR pilot program.

If the FDA determines that RTOR is an appropriate review pathway, the sponsor can send pre-submission data to the agency under the original application two to four weeks after all patient data have been entered and locked in the database, and the sponsor is ready to request FDA approval. The package should also include key raw and derived datasets, including safety/efficacy tables and figures, study protocol and amendments, and a draft of the package insert. The sponsor must also submit key results, analysis, and datasets for other disciplines, if applicable. The FDA will then evaluate these materials for sufficiency and integrity so that it can analyze the data to properly address key regulatory questions. By the time the sponsor submits the application to the FDA, the review team will have completed the analysis and be familiar with the data, and can conduct a more efficient, timely, and thorough review.

Post‐Approval Regulation

If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply with all regular post‐approval regulatory requirements as well as any post‐approval requirements that the FDA have imposed as part of the approval process. The sponsor will be required to report certain adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional labeling requirements. Manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including GMP regulations, which impose certain procedural and documentation requirements upon manufacturers. Accordingly, the sponsor and its third‐party manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with GMP regulations and other regulatory requirements.

A product may also be subject to official lot release, meaning that 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 lot release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot

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and the results of all of the manufacturer’s tests performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory research related to the safety, purity, potency, and effectiveness of pharmaceutical products.

Once an approval is granted, the FDA may withdraw the approval 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 a product, including adverse events of unanticipated severity or frequency, or with 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 trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

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fines, warning letters or holds on post‐approval clinical trials;

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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

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product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of the approved label. Although health care providers may prescribe products for off-label uses in their professional judgment, drug manufacturers are prohibited from soliciting, encouraging or promoting unapproved uses of a product. 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. In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a biologic.

The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities and promotional activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information.

In the United States, health care professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing scientific or medical journal information.

If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the DOJ, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

Orphan Drug Designation and Exclusivity

Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which

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there is no reasonable expectation that the cost of developing and making available the biologic for the disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the product’s marketing approval if granted by the FDA. An application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. A product becomes an orphan when it receives orphan drug designation from the Office of Orphan Products Development at the FDA based on acceptable confidential requests made under the regulatory provisions. The product must then go through the review and approval process like any other product.

A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the first drug. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete request for designation.

If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve another sponsor’s marketing application for the same product for the same indication for seven years, except in certain limited circumstances. If a product designated as an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.

The period of exclusivity begins on the date that the marketing application is approved by the FDA. Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if the company with orphan drug exclusivity is not able to meet market demand or the subsequent product is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care. Under Omnibus legislation signed by President Trump on December 27, 2020, the requirement for a product to show clinical superiority applies to drug products that received orphan drug designation before enactment of amendments to the FDCA in 2017 but have not yet been approved by FDA.

In September 2021, the Court of Appeals for the 11th Circuit held that, for the purpose of determining the scope of market exclusivity, the term “same disease or condition” in the statute means the designated “rare disease or condition” and could not be interpreted by the FDA to mean the “indication or use.” Thus, the court concluded, orphan drug exclusivity applies to the entire designated disease or condition rather than the “indication or use.” It is unclear how this court decision will be implemented by the FDA.

Pediatric Exclusivity

Pediatric exclusivity is another type of non‐patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of regulatory exclusivity to the term of any existing regulatory exclusivity, including orphan exclusivity. This six‐month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application.

Biosimilars and Exclusivity

The 2010 Patient Protection and Affordable Care Act, which was signed into law in March 2010, included a subtitle called the Biologics Price Competition and Innovation Act of 2009, or the BPCIA. The BPCIA established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. A biosimilar is a biological product that is highly similar to an existing FDA-licensed “reference product.” To date, the FDA has approved a number of biosimilars and the first interchangeable biosimilar product was approved on July 30, 2021 and a second product previously approved as a biosimilar was designated as interchangeable in October 2021.

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Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

An application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well‐controlled clinical trials to demonstrate the safety, purity, and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. There have been recent government proposals to reduce the 12-year reference product exclusivity period, but none has been enacted to date. At the same time, since passage of the BPCIA, many states have passed laws or amendments to laws, which address pharmacy practices involving biosimilar products.

Patent Term Restoration and Extension

A patent claiming a new biologic product, its method of use or its method of manufacture may be eligible for a limited patent term extension under the Hatch‐Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and FDA regulatory review. The restoration period granted on a patent covering a product is typically one‐half the time between the effective date of the IND clearing the clinical investigation involving human beings and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA.

FDA Approval of Companion Diagnostics

In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, for novel drugs, a companion diagnostic device and its corresponding therapeutic should be approved or cleared contemporaneously by the FDA for the use indicated in the therapeutic product’s labeling. Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population. In July 2016, the FDA issued a draft guidance intended to assist sponsors of the drug therapeutic and in vitro companion diagnostic device on issues related to co-development of the products.

The 2014 guidance also explains that a companion diagnostic device used to make treatment decisions in clinical trials of a biologic product candidate generally will be considered an investigational device, unless it is employed for an intended use for which the device is already approved or cleared. If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. Thus, the sponsor of the diagnostic device will be required to comply with the IDE regulations. According to the guidance, if a diagnostic device and a product are to be studied together to support their respective approvals, both products can be studied in the same investigational study, if the study meets both the requirements of the IDE regulations and the IND regulations. The guidance provides that depending on the details of the study plan and subjects, a sponsor may seek to submit an IND alone, or both an IND and an IDE.

In April 2020, the FDA issued additional guidance which describes considerations for the development and labeling of companion diagnostic devices to support the indicated uses of multiple biological oncology products, when appropriate. The 2020 guidance expands on the policy statement in the 2014 guidance by recommending that companion diagnostic developers consider a number of factors when determining whether their test could be developed, or the labeling for approved companion diagnostics could be revised through a supplement, to support a broader labeling claim such as use with a specific group of oncology therapeutic products (rather than listing an individual therapeutic product(s)).

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Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post‐market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution.

The FDA previously has required in vitro companion diagnostics intended to select the patients who will respond to the product candidate to obtain pre-market approval, or PMA, simultaneously with approval of the therapeutic product candidate. The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, can take several years or longer. It involves a rigorous premarket review during which the sponsor must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to an application fee. For federal fiscal year 2022, the standard fee is $374,858 and the small business fee is $93,714.

A clinical trial is typically required for a PMA application and, in a small percentage of cases, the FDA may require a clinical study in support of a 510(k) submission. A manufacturer that wishes to conduct a clinical study involving the device is subject to the FDA’s IDE regulation. The IDE regulation distinguishes between significant and non-significant risk device studies and the procedures for obtaining approval to begin the study differ accordingly. Also, some types of studies are exempt from the IDE regulations. A significant risk device presents a potential for serious risk to the health, safety, or welfare of a subject. Significant risk devices are devices that are substantially important in diagnosing, curing, mitigating, or treating disease or in preventing impairment to human health. Studies of devices that pose a significant risk require both FDA and an IRB approval prior to initiation of a clinical study. Non-significant risk devices are devices that do not pose a significant risk to the human subjects. A non-significant risk device study requires only IRB approval prior to initiation of a clinical study.

After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also establish registration and device listings with the FDA. A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the Quality System Regulation, which covers the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. The FDA also may inspect foreign facilities that export products to the United States.

Regulation and Procedures Governing Approval of Medicinal Products in the European Union

In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product, a sponsor will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. Specifically, the process governing approval of medicinal products in the European Union generally follows the same lines as in the United States. It entails satisfactory completion of preclinical studies and adequate and well‐controlled clinical trials to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be marketed and sold in the European Union.

Clinical Trial Approval

On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014 became effective in the European Union and replaced the prior Clinical Trials Directive 2001/20/EC. The new regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials in the European Union. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one Member State of the European Union, or EU Member State, will only be required to submit a single application for approval. The submission will be made through the Clinical Trials Information System, a new clinical trials portal overseen by the European Medicines Agency, or EMA, and available to clinical trial sponsors, competent authorities of the EU Member States and the public.

The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the “EU Portal and Database”; a single set of documents to be prepared and submitted for the application as well as simplified

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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 is assessed by the appointed reporting Member State, whose assessment report is submitted for review by the sponsor and all other competent authorities of all EU member states in which an application for authorization of a clinical trial has been submitted, or concerned member states. Part II is assessed separately by each concerned member state. 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 member state. However, overall related timelines will be defined by the Clinical Trials Regulation.

The new regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted. If the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the sponsor may only start a clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion.

As in the U.S., similar requirements for posting clinical trial information are present in the E.U. (EudraCT) website: https://eudract.ema.europa.eu/ and other countries.

PRIME Designation in the EU

In March 2016, the EMA, launched an initiative to facilitate development of drug product candidates in indications, often rare, for which few or no therapies currently exist. The PRIority Medicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products from small- and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of drug product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicated EMA contact and rapporteur from the Committee for Human Medicinal Products, or CHMP, or Committee for Advanced Therapies are appointed early in the PRIME scheme facilitating increased understanding of the product at the EMA’s Committee level. A kick-off meeting initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies.

Pediatric Studies

Sponsors developing a new medicinal product must agree upon a Pediatric Investigation Plan, or PIP, with the EMA’s pediatric committee, or PDCO, 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). The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The marketing authorization application 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 by the PDCO of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults, in which case the pediatric clinical trials must be completed at a later date.

Marketing Authorization

To obtain a marketing authorization for a product under the European Union regulatory system, a sponsor must submit an MAA, either under a centralized procedure administered by the EMA or one of the procedures administered by competent authorities in European Union Member States (decentralized procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to a sponsor established in the European Union. Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, a sponsor must demonstrate compliance with all measures included in an EMA‐approved Pediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted a product‐specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.

The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all EU member states. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of cancer. For products with a new active substance indicated for the treatment of

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other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. Manufacturers must demonstrate the quality, safety, and efficacy of their products to the EMA, which provides an opinion regarding the MAA. The European Commission grants or refuses marketing authorization in light of the opinion delivered by the EMA.

Under the centralized procedure, the CHMP established at the EMA is responsible for conducting an initial assessment of a product. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the sponsor in response to questions of the CHMP. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment.

Regulatory Data Protection in the European Union

In the European Union, new chemical entities approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Regulation (EC) No 726/2004, as amended, and Directive 2001/83/EC, as amended. Data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated) application for a period of eight years. During the additional two‐year period of market exclusivity, a generic marketing authorization application can be submitted, and the innovator’s data may be referenced, but no generic medicinal product can be marketed until the expiration of the market exclusivity. The overall ten‐year period will be extended to a maximum of eleven 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 authorization, is held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company may 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, preclinical tests and clinical trials.

Patent Term Extensions in the European Union and Other Jurisdictions

The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs. The rules and requirements for obtaining a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug. These periods can be extended for six additional months if pediatric exclusivity is obtained, which is described in detail below. Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union.

Periods of Authorization and Renewals