cbio-10k_20211231.htm
002018 $480,800
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
For the year ended December 31, 2021
OR
For the transition period from to
Commission file number: 000-51173
Catalyst Biosciences, Inc.
(Exact Name of Registrant as Specified in its Charter)
611 Gateway Blvd. Suite 710 South San Francisco, California 94080
(Address of Chief Executive Offices) (Zip Code)
(650) 871-0761
(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 CBIO NASDAQ
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 Securities Exchange 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 (§ 232.405 of this chapter) 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 the 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 Securities Exchange Act). Yes ☐ No ☒
As of March 25, 2022, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 31,477,053. The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2021, was $135,045,079.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement for its 2022 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed with the U.S. Securities and Exchange Commission, no later than 120 days after the Registrant’s fiscal year ended December 31, 2021, are incorporated by reference to Part III of this Annual Report on Form 10-K.
CATALYST BIOSCIENCES, INC.
Annual Report on Form 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business 5
Item 1A. Risk Factors 28
Item 1B. Unresolved Staff Comments 61
Item 2. Properties 61
Item 3. Legal Proceedings 61
Item 4. Mine Safety Disclosures 61
PART II
Item 6. [Reserved] 63
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 76
Item 8. Financial Statements and Supplementary Data 77
Item 9A. Controls and Procedures 103
Item 9B. Other Information 105
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 105
PART III
Item 10. Directors, Executive Officers and Corporate Governance 106
Item 11. Executive Compensation 106
Item 14. Principal Accountant Fees and Services 106
PART IV
Item 15. Exhibit and Financial Statement Schedules 107
LIST OF EXHIBITS 108
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PART I
Forward-Looking Statements and Market Data
This Annual Report on Form 10-K and the documents incorporated by reference herein contain 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 (the “Exchange Act”). All statements, other than statements of historical facts, included or incorporated by reference in this Annual Report on Form 10-K regarding our strategy, future results of operations, future financial condition, future revenues, projected costs, prospects, plans, intentions and objectives of management, as well as the assumptions that underlie these statements, are forward-looking statements. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. Forward-looking statements are identified by words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology, although not all forward-looking statements contain these identifying words. Such forward-looking statements are based on our management’s assumptions and assessments in light of information currently available to our management, its experience and its perception of historical trends, current conditions, expected future developments and other factors our management believes to be appropriate.
You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding:
• our focus on specific product candidates;
• our ability to protect intellectual property rights;
• potential regulatory filings for or approval of any of our product candidates;
• conditions for obtaining regulatory approval of our product candidates;
• submission and timing of applications for regulatory approval;
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• the composition of future revenues;
• accounting policies and estimates, including revenue recognition policies; and
Any such forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or contemplated by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, the risks and uncertainties described in this Annual Report on Form 10-K, including those risks described in Part I, Item 1A, “Risk Factors,” as well as others that we may consider immaterial or do not anticipate at this time. The risks and uncertainties described in this report, including in Part I, Item 1A, “Risk Factors,” are not exclusive and further information concerning our company and our businesses, including factors that potentially could materially affect our operating results or financial condition, may emerge from time to time. All forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements considering future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties and they should carefully consider the factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.
Unless the context requires otherwise, in this Annual Report on Form 10-K the terms “Catalyst,” the “Company,” “we,” “us” and “our” refer to Catalyst Biosciences, Inc., together with our subsidiary, Catalyst Bio, Inc., which we refer to as “Catalyst Bio.” See “Item 1— Business— Business Organization.”
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Item 1. BUSINESS.
Overview
We are a research and clinical development biopharmaceutical company focused on developing protease therapeutics to address unmet medical needs in disorders of the complement system or where complement components are associated with progression of the disease state. Proteases are an important class of enzymes, which are key natural regulators of many biological processes, including the complement system. We use our protease engineering platform to create improved or novel molecules for treatment of diseases that result from dysregulation of the complement system. Our complement pipeline consists of a preclinical complement component 3 (“C3”) degrader program for geographic atrophy (“GA”) in dry age-related macular degeneration (“dAMD”), an improved Complement Factor I (“CFI”) protease, CB 4332, for subcutaneous (“SQ”) or intravitreal (“IVT”) therapy to restore complement homeostasis in diseases of overactive complement or CFI deficiencies, and proteases from our ProTUNETM C3b/C4b degrader and ImmunoTUNETM C3a/C5a degrader platforms designed to target specific disorders of the complement or inflammatory pathways. Historically, we also used our protein engineering platform to develop potential therapies for coagulation disorders, including marzeptacog alfa (activated) (“MarzAA”), a SQ administered next-generation engineered coagulation Factor VIIa (“FVIIa”) for the treatment of episodic bleeding and prophylaxis in subjects with rare bleeding disorders, and dalcinonacog alfa (“DalcA”), a next-generation SQ FIX, both of which has shown sustained efficacy and safety in mid-stage clinical trials.
The product candidates generated by our protease engineering platform are designed to have improved functional properties such as longer half-life, improved specificity and targeting, higher potency, and increased bioavailability. These characteristics potentially allow for improved safety and efficacy for SQ administration of recombinant complement regulators, or less frequently dosed intravitreal products than current therapeutics in development.
Our current complement portfolio consists of the development candidates CB 4332 and CB 2782-PEG. CB 4332 is a wholly owned, first-in-class improved albumin-fused CFI molecule intended for prophylactic SQ or IVT administration in individuals with an imbalance in complement homeostasis or a CFI deficiency. CB 2782-PEG is a potential best-in-class C3 degrader product candidate in preclinical development for the treatment of dry AMD that we had licensed to Biogen. In March 2022, we re-acquired the full rights to CB 2782-PEG adding to our promising portfolio, which includes CB 4332 our enhanced CFI development candidate. We have several engineered protease programs in discovery or early non-clinical development. These programs all target diseases caused by deficient regulation of the complement system and inflammation.
In July 2021 we commenced patient enrollment in the screening (“CFI-001”) and natural history of disease (“CFI-002”) studies to assess CFI blood levels in patients who have diseases related to CFI deficiency and identify those who would benefit from CB 4332 treatment (“ConFIrm” and “ConFIdence”, respectively). As of February 2022 we have completed enrollment of these studies.
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The following table summarizes our current development programs.
We continue to experience operational and other challenges as a result of the COVID-19 global pandemic, which could delay or impact our development programs. See Note 7, Commitments and Contingencies and Other Recent Developments and Item 1A – Risk Factors for further discussion of the current and expected impact on our business and development programs.
Complement
Our protease programs are designed to take advantage of nature’s natural complement regulators that restore complement homeostasis and potentially treat a variety of complement-mediated disorders. We have several protease programs currently in preclinical discovery or early non-clinical development. These programs target diseases caused by aberrant regulation of the complement system including both ocular programs, specifically for dry AMD, and systemic complement disorders, all of which are wholly owned by Catalyst.
The complement system is an enzyme-based innate immune defense system with the primary role of protecting the body from pathogens. The system is naturally regulated by proteases which is the basis for our approach to addressing complement-driven diseases. Similar to the coagulation system, the complement system employs several triggering pathways, known as the classical pathway (“CP”), lectin pathway (“LP”) and alternativepathway (“AP”), which are followed by a cascading system of enzymatic reactions driven by proteases and their cofactors that, when functioning properly, ultimately leads to the destruction and removal of the pathogen or unwanted cells and proteins.
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*Figure adapted from Mastellosetal., Clinical promise of next-generation complement therapeutics. Nature Reviews. 2019
Deficient or excessive activation of the complement system leads to severe disorders, including micro-thrombotic, autoimmune and/or immune-complex diseases, severe infectious diseases, and degenerative ophthalmic or neurologic diseases affecting a variety of tissues and organ systems. Disorders of the complement system are typically manifested by the absence or imbalance of complement regulator activity, or an overactivation of one or more pathways. The absence of regulation can cause the complement system to become self-destructive or not provide the necessary protection when needed. The protease therapeutic candidates generated by our platforms are designed to correct or restore the missing balance in the complement system that drives several diseases.
Proteases are uniquely poised to regulate key biological functions such as the complement system, either by promoting or limiting the cascade of events that leads to eventual clearing of foreign and damaged proteins, inflammation and formation of the membrane attack complex, which is deposited on the surface of cells and drives their destruction. Compared with antibodies and small molecule inhibitors that generally require a sustained excess of therapeutic compound over that of the target, Catalyst’s protease therapeutic candidates are based on natural regulatory proteins that are capable of rapidly engaging and modulating large quantities of target molecules, as each protease molecule can degrade many target molecules over their effective lifetime. This means that our proteases are ideal for regulating high abundancy targets such as complement proteins in a way antibodies and small molecule
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inhibitors cannot. A protease therapeutic is not consumed in the process of cleaving or degrading its target, therefore, smaller amounts of protease-based drug molecules can have a profound impact on biological pathways.
CB 2782-PEG: C3 Degrading Protease
CB 2782-PEG is an engineered pegylated C3 degrader previously licensed to Biogen that we designed with a best-in-class anti-C3 profile for geographic atrophy (“GA”) in dry AMD.Dry AMD is an ocular disease that leads to vision loss and blindness for which there is currently no approved therapy. CB 2782-PEG degrades C3 in the eye reducing the steady state level of C3 activity. It is expected that maintaining low C3 levels in the eye can significantly slow disease progression and vision loss in patients with dry AMD. We have demonstrated in preclinical non-human primate models that we have the potential to reduce C3 levels in humans based on modeling studies for up to 3 months with a single intravitreal injection. In September 2021, Apellis released the results of the DERBY and OAKS phase 3 trials for GA secondary to dry AMD, showing that once-monthly pegcetacoplan, a pegylated C3 targeted inhibitor, was safe and efficacious, meeting its primary endpoint in one trial and narrowly missing the primary endpoint in a second trial for reducing GA lesion growth over a 12-month period. Further subpopulation analyses demonstrated a greater effect of reducing GA lesion growth in those subjects with extrafoveal lesions at baseline. CB 2782-PEG provides a differentiated mechanism of action by degrading both C3 and one of its byproducts, C3a potentially offering not only less frequent dosing but a more efficacious mechanism than pegcetacoplan or other complement inhibitors in development for GA.
The global market potential in dry AMD has been estimated to be $8.6 billion which could grow to over $18.0 billion by 2028. In December 2019, we entered into a License and Collaboration Agreement with Biogen for the development and commercialization of CB2782-PEG. In March 2022, Biogen terminated the license agreement and returned full rights to CB 2782-PEG.
CB 4332: Engineered Complement Factor I
CB 4332 is an engineered albumin-fused version of the CFI protease with an extended half-life that can be dosed subcutaneously or intravitreally in individuals who would benefit from enhanced regulation of complement. CFI is the central regulator of the complement system and CB 4332 has the potential to address several mechanistically related diseases driven by complement imbalance such as: Lupus Nephritis (“LN”), Systemic Lupus Erythematosus (“SLE”), warm Autoimmune Hemolytic Anemia (“wAIHA”), atypical Hemolytic Uremic Syndrome (“aHUS”), C3 Glomerulonephritis (“C3G”), and Immune Complex Membranoproliferative Glomerulonephritis (“IC-MPGN”), dry AMD and complete CFI deficiency (“CFID”), a rare immunodeficiency primarily affecting children. These are severe, chronic, life-threatening diseases that result in a significantly decreased quality of life for the afflicted individual.
CB 4332 can be dosed subcutaneously for systemic diseases or by IVT injection for ophthalmic indications. As a key complement regulator, CFI has the potential to be used in several complement dysregulated diseases (e.g., those associated with hyperactive complement) in which additional upstream regulation may prove more effective than inhibiting specific downstream targets such as C3 or C5, where many of current molecules in development are targeted.
Individuals with complete or significant absence of endogenous CFI may present with a variety of disease manifestations, such as recurrent invasive infections with encapsulated bacteria, but are also at risk of developing autoimmune and/or immune-complex diseases such as chronic inflammation of the blood vessels of the brain, spinal cord, heart, or kidneys. No CFI replacement therapy, including for prophylactic use, has been approved, and patients often receive supportive care with lifelong antibiotic treatment, which may cause a range of additional problems. We have received pre-IND guidance from the FDA as well as Rare Pediatric Disease Designation of CB 4332 for treatment of CFI deficiency in January 2022.
Low circulating serum CFI levels have been shown to be associated with rare CFI genetic variants and all forms of AMD ranging from early to late-stage manifestations. Studies have estimated the prevalence rates of CFI deficiency in GA to be approximately 20%, suggesting that CFI is a prognostic biomarker for progression of GA. Approximately 1 million individuals globally are predicted to have low serum CFI levels and may potentially benefit from targeted CFI therapy. Gyroscope released interim results from its FOCUS phase 1/2a trial for patients with GA and having rare CFI variants, showing that gene therapy with GT005, an AAV-delivered CFI rebalanced
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the overactivation of complement observed in the vitreous with sustained expression of CFI. The FOCUS data also showed that AAV-delivered CFI reduced complement biomarkers in the broader GA population who do not have a rare CFI genetic variant.
We have additional early-stage complement discovery programs that target different proteins of the complement system including proteases from our ProTUNETM C3b/C4b degrader and ImmunoTUNETM C3a/C5a degrader platforms. These proteases are designed to target specific disorders of the complement or inflammatory pathways. The ProTUNETM platform generates optimized, next-generation engineered CFI molecules that are selectively enhanced for potency and target engagement. We expect to nominate a development candidate and target indication from this platform in 2022.
Complement intellectual property
The United States Patent and Trademark Offices issued a patent covering Catalyst’s portfolio of engineered proteases that selectively cleave and degrade complement Factor 3 (C3), including the lead candidate CB 2782-PEG, a potential best-in-class treatment for dry AMD. These modified proteases inhibit complement activation and have the potential to treat multiple diseases in which complement activation plays a role. The patent provides protection until at least 2038. Our portfolio further encompasses additional issued patents on complement protein degrading proteases and pending applications in the complement space across a range of targets and protease scaffolds, including multiple pending applications covering CB 4332 and next generation engineered CFI molecules.
Coagulation Programs for Licensing
Hemophilia is a rare and serious bleeding disorder that results from a genetic or an acquired deficiency of a factor required for normal blood coagulation. There are two major types of hemophilia: Hemophilia A and Hemophilia B, caused by abnormalities in coagulation Factor VIII or Factor IX, respectively. Deficiencies in these factors reduce the ability of the affected individuals to form clots and stop bleeding. Hemophilia A occurs in approximately 1 in 5,000 male births, and Hemophilia B in approximately 1 in 20,000 male births. Patients with hemophilia suffer from spontaneous and traumatic bleeding episodes that can become limb- or life-threatening. In cases of severe hemophilia, spontaneous bleeding into muscles or joints is frequent and often results in disabling irreversible joint damage. Currently there is no cure for hemophilia.Hemophilia treatments involve on-demand management of acute bleeding episodes or prophylactic treatment using factor replacement or bypassing therapy. Replacement therapy involves frequent IV administration of the missing factors to prevent or stop bleeding. IV infusion is invasive, painful, time consuming and particularly challenging to administer to children. Often times, patients must seek assistance of a health professional for the IV infusion.
We believe that SQ dosing will be an important improvement for the treatment of hemophilia and other rare benign hematology indications. Our nonclinical and clinical studies have shown that MarzAA is nine-fold more potent than NovoSeven RT and that DalcA is 22-fold more potent than BeneFIX. The enhanced potency of MarzAA and DalcA allows for SQ dosing using a small volume injection, which we believe will provide for more effective, durable and convenient treatments of spontaneous bleeds with MarzAA and prophylactic protection with MarzAA and DalcA, especially for children and adults with difficult IV access. In late 2018 Hemlibra®, a bispecific antibody mimicking FVIIIa, was approved for SQ prophylaxis in Hemophilia A with or without inhibitors but Hemlibra cannot treat breakthrough spontaneous bleeding.
MarzAA and DalcA Clinical Development
MarzAA is a potent, subcutaneously administered, next-generation Factor VIIa variant. The development program began with a Phase 1 clinical trial evaluating the pharmacokinetics and pharmacodynamics of MarzAA administered IV in patients with severe Hemophilia A and B with and without inhibitors. In 2019, we successfully completed a Phase 2 open-label SQ prophylaxis trial that met all primary and secondary end points. The Phase 2 trial was designed to evaluate the efficacy of MarzAA in preventing bleeding episodes. We completed a Phase 1/2 PK/PD study in 2020, to evaluate the pharmacokinetics and pharmacodynamics of ascending single dose levels of MarzAA and twice and thrice dosing at 3-hourly intervals in individuals with Hemophilia A or B with or without inhibitors. The purpose of the trial was to determine if the timing and peak levels achieved were sufficient to treat spontaneous, episodic or breakthrough bleeding with SQ dosing and determine if increasing dose levels resulted in dose proportional pharmacokinetics. We commenced enrollment of a Phase 3 registrational trial of MarzAA for episodic
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treatment of spontaneous or traumatic bleeding episodes in adolescents and adults with congenital hemophilia A or hemophilia B with inhibitors in May 2021.
On November 12, 2021, we announced the discontinuation of the Phase 3 trial based on a number of factors, including challenges in enrollment resulting from the limited number of potential patients eligible to enroll in this trial, competition from competing approved therapies, delays in enrollment resulting from COVID-19, the capital requirements to complete the trial, and other factors. Patients enrolled in the study returned to their standard of care and completed all required safety assessments. In the patients enrolled to date, we have successfully treated bleeds with SQ MarzAA and have not observed any adverse events. We plan to report these data at an appropriate medical conference in the future. We had also begun enrollment of a Phase 1/2 trial of MarzAA for treatment of bleeding in individuals with Factor VII Deficiency, Glanzmann Thrombasthenia, and hemophilia A with inhibitors on emicizumab prophylaxis. We have discontinued this trial as well, in light of the difficulties in identifying and enrolling eligible patients, the capital requirements to complete the trial, and other factors. We believe that a SQ recombinant Factor VIIa therapy, like MarzAA, has the potential to be an important treatment option for patients with various bleeding disorders and are exploring opportunities to license or sell MarzAA to another party for further development.
DalcA is a next-generation SQ Factor IX product candidate for the prophylactic treatment of individuals with Hemophilia B. We completed a Phase 1/2 SQ dosing trial that evaluated the safety and efficacy of DalcA in patients with severe Hemophilia B in a collaboration with ISU Abxis. In 2020, we completed an open-label Phase 2b study to evaluate the ability of DalcA to maintain steady state protective Factor IX levels above 12% in six individuals with severe hemophilia B. Each subject received a single intravenous dose, followed by daily SQ doses of DalcA for 28 days during which FIX activity levels, clotting parameters, half-life, safety, tolerability and anti-drug antibody formation were monitored. We are actively seeking a partner for this program. We have received guidance from the FDA on the design of the registrational Phase 3 clinical trial, have the necessary data to support its initiation, and are exploring opportunities to license or sell DalcA to another party for further development.
Preclinical Factor IX Gene Therapy
Our Factor IX gene therapy construct CB 2679d-GT has demonstrated a 2-fold to 3-fold higher activity resulting in improved clotting time and blood loss in a preclinical Hemophilia B mouse model compared with the Padua variant of Factor IX. By its increased activity, CB 2679d-GT has the potential to reach higher Factor IX activity levels at lower vector doses which could improve tolerability of the vector as well as efficacy of the transgene, and ultimately lower manufacturing costs. We have licensed AAV technology from The Board of Trustees of The Leland Stanford Junior University (“Stanford”) and have evaluated optimized vector constructs in a non-human primate study under a sponsored research agreement with Stanford.
Our Strategy
We are leveraging a unique protease engineering platform that builds on nature’s way of regulating key processes to generate a portfolio of novel and differentiated biopharmaceutical drug candidates. Our portfolio of engineered protease therapies is designed for individuals with disorders of the complement system across a range of potential indications where new or better treatment options are in need. The scientific basis of our strategy is based on the use of proteases, nature’s key regulatory proteins that can be engineered to circumvent the limitations of small molecule and antibody-based therapies.
In late 2021 we announced a strategic change in corporate strategy, pivoting from hemophilia to a highly promising complement therapeutics and protease medicines platform. In February of 2022 we announced that we would explore strategic alternatives for the company. In March of 2022, we re-acquired the full rights to CB 2782-PEG, adding to our promising portfolio, including CB 4332 our enhanced CFI development candidate. Having the full rights to these two potentially best-in-class candidates in dry AMD provides another opportunity in our exploration of strategic alternatives. We also implemented additional expense reduction measures, including headcount reductions, while we continue this exploration.
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Collaborations
MarzAA. In 2009, we licensed MarzAA to Wyeth Pharmaceuticals, Inc. (“Wyeth”). Wyeth was subsequently acquired by Pfizer, Inc. (“Pfizer”) who terminated the license and collaboration agreement after completing a Phase 1 IV trial. Pursuant to the collaboration termination agreement, in exchange for the rights to certain Pfizer technology, we agreed to make payments to Pfizer in an aggregate amount equal to up to $17.5 million, payable upon the achievement of clinical, regulatory and commercial milestones. Following commercialization of any covered product, Pfizer would also receive a single-digit royalty on net product sales on a country-by-country basis for a predefined royalty term. In February 2018, we paid Pfizer a $1.0 million milestone payment based on the dosing of the first patient in a Phase 2 study.
DalcA. We collaborated with ISU Abxis (“ISU”), in the early development of DalcA. Under the collaboration agreement, ISU conducted the Phase I clinical trial of DalcA and was responsible for all manufacturing activities for the Phase 1 clinical trial. Pursuant to the agreement, as amended in December 2018, ISU is entitled to a low single-digit royalty payment, on a country-by-country basis, for net product sales of DalcA by the Company or its affiliates in each country other than South Korea. ISU is also entitled up to $19.5 million in milestone payments, of which $2.5 million are regulatory and development milestone payments and up to $17.0 million in commercial milestone payments.
CB2782-PEG. In 2019, we agreed to collaborate with Biogen to develop and commercialize CB 2782-PEG and our other anti-C3 proteases for the potential treatment of dry AMD and other disorders. In March 2022, Biogen terminated the license and collaboration agreement. As a result of the termination, Biogen will no longer have the rights to develop and commercialize CB 2782-PEG. We were responsible for certain preclinical and manufacturing activities, and Biogen was solely responsible for funding the preclinical and manufacturing activities and performing investigational new drug (“IND”) enabling activities, worldwide clinical development, and commercialization. We received a $15.0 million upfront payment from Biogen in January 2020 and were eligible to receive up to $340.0 million in milestone payments, along with tiered royalties for worldwide net sales of this product candidate up to low double-digits.
We also collaborated with Mosaic Biosciences (“Mosaic”) in the development of our complement product candidates including CB 2782-PEG and CB 4332. Under the collaboration agreement, as amended in December 2019, Mosaic will perform all future services for an FTE-based fee. Pursuant to a subsequent amendment in May 2020, Mosaic received a one-time cash payment of $0.8 million and is eligible to receive up to $4.0 million in potential future milestone payments for regulatory and clinical development milestones resulting from the development of CB 2782-PEG and CB 4332 payable in cash or common stock at the Company’s election. As a result, we now own one hundred percent of all future payment streams related to these product candidates.
Competition
Our product candidates will face competition from approved therapeutics. Competition for our product candidate pipeline comes primarily from large, well-established pharmaceutical companies, who have greater financial resources and expertise in research and development, manufacturing, conducting clinical trials, and marketing approved products. Mergers and acquisitions within the pharmaceutical and biotechnology industries may further concentrate competitors’ resources. We are not only competing with these companies in terms of technology, but also in recruiting and retaining qualified scientists and management personnel, in establishing partnerships with clinical trial sites, and in enrolling individuals into clinical trials.
In addition to current Standard of Care for individuals, clinical trials are being pursued by several parties in the field of biologics and in our lead indications. These products in development may provide efficacy, safety, convenience, and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain marketing approval. Based on publicly available information, the following are some of the products currently on market or being developed by competitors in indications overlapping with those of our programs.
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Ocular Complement Competition
Systemic Complement Competition
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Factor VIIa Competition
Factor IX Competition
Factor IX Gene Therapy Competition
Our commercial opportunity in different indications could be reduced or eliminated if our competitors develop and market products that are safer, more effective, more convenient to use, or less expensive to use than our products. Furthermore, if competitors gain FDA approval faster than we do, we may be unable to establish a strong market presence or to gain market share. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors.
Intellectual Property
We have established a broad intellectual property portfolio including patents and patent applications covering the identification, selection, optimization, and manufacture of human proteases, the composition of matter and methods of use of our product candidates and related technology, and other inventions that are important to our business.
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We also rely on trade secrets relating to our proprietary technology platform and know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of human protease engineering.Our patent portfolio as of December 31, 2021 is more fully described below.
Our success will depend significantly on our ability to:
• Defend and enforce our patents;
• Maintain our licenses to use intellectual property owned by third parties; and
Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able to meaningfully protect our trade secrets.
In addition, a third-party may hold intellectual property, including patent rights that are important or necessary to the development of our products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially.
There may be third party patents or patent applications with claims to compositions of matter, materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe.There is a patent family pending in the U.S. in which claims that may read on MarzAA have been filed. We, however, do not believe such claims are patentable. If they were to issue, we would take appropriate action to challenge their enforceability and/or validity. We are also aware of additional patents that have issued in the United States and Europe that have claims related to Factor VII. We do not believe that MarzAA does or will infringe any valid claims in such patents.
The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific, and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Consequently, we do not know whether any of our product candidates will be protectable or remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented, or invalidated by third parties.
Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months, and since publication of discoveries in the scientific or patent literature often lags actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office, or USPTO, or a foreign patent office to determine priority of invention or in post-grant challenge proceedings, such as oppositions, that challenge priority of invention or other features of patentability. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.
All our patents and applications were internally developed and assigned to us, except for two granted South Korean patents that are co-owned. Members of the family directed to screening methods (4 patents, including 2 of the issued U.S. patents) are jointly owned with the Torrey Pines Institute for Molecular Studies, which licensed its interest to us. As of December 31, 2021, our current patents and patent applications include:
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The term for individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is 20 years from the earliest claimed filing date of a non-provisional patent application in that country or the international filing date. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date.
The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory review while the patent is in force. The regulatory review period that occurs after the patent to be extended was issued is eligible to be counted for extension. The extension is calculated as one-half of the time of the testing phase added to time in the approval phase. The testing phase is the period between the effective date of an investigational product exemption (Investigational New Drug Application) and the initial submission of the marketing application (New Drug Application or Biologic License Application). The approval phase is the period between the submission and approval of the marketing application. Extensions can be reduced by any time that the applicant did act not with due diligence as determined by the FDA. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent applicable to each regulatory review period may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. Similar provisions are available in the European Union and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug.
In the future, to the extent our product candidates including MarzAA, DalcA, Anti-C3 and systemic complement proteases receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term
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extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
Manufacturing
Our team has in-depth knowledge on biologics development, manufacturing and CMC regulatory requirements. We do not have any manufacturing facilities and we currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for clinical or commercial uses. We own or have rights to all intellectual property developed in such manufacturing development activities that are specifically related to our product candidates and have a royalty-free and perpetual license to use the intellectual property to the extent reasonably necessary to make our product candidates, including commercial manufacturing.
Drug Substance manufacturing
We have a long-term development and manufacturing services agreement with AGC Biologics, Inc. (“AGC”). AGC has global manufacturing sites and we use their facilities in the U.S. and Europe for drug substance manufacturing of MarzAA, DalcA, and CB 2782-PEG. In November 2021, we provided notice of intent to terminate our agreements with AGC related to the manufacturing of MarzAA and incurred charges of $3.8 million to write-off prepaid manufacturing costs that will no longer be used for the development of MarzAA. Additionally we have development and manufacturing services agreements with Abzena (“Abzena”) at their San Diego facility for drug substance manufacturing of CB 4332.
Drug Product manufacturing
We have a long-term clinical supply services agreement with Catalent Indiana, LLC (“Catalent”). Catalent has facilities in the U.S. and Europe and conducts drug product development and manufacturing for MarzAA and DalcA. We also work with Symbiosis Pharmaceutical Services Limited on drug product manufacturing for MarzAA on a fee-for-services basis. Symbiosis has a facility in the United Kingdom. For drug product finish and fill services supporting the CB 4332 program, we are working with Integrity Bio (now part of Curia).
Commercialization
We have yet to establish a sales, marketing, or product distribution infrastructure for our product candidates, which are still in pre-clinical or clinical development. We may retain commercial rights for our product candidates in the United States. We have also granted ISU rights to commercialize DalcA in South Korea.
Government Regulation
As a clinical-stage biopharmaceutical company that operates in the United States, we are subject to extensive regulation. Our engineered human protease products will be regulated as biological products. Biological products, including engineered human proteases, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act, and other federal, state, local, and foreign statutes and regulations. The FD&C Act and the PHS Act and their implementing regulations govern, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biological products.
FDA approval must be obtained before clinical testing of a biological product begins and before the marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development, the approval process, or after product approval, may subject an applicant to administrative or judicial sanctions. FDA sanctions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning or untitled letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
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US Biological Products Development Process
The process required by the FDA before a biological product may be marketed in the United States generally involves the following:
• FDA review and approval, or licensure, of the BLA.
Before testing any biological product candidate, including an engineered human protease, in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs.
The clinical trial sponsor must submit the results of the preclinical tests, together with the manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after an IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trials.
Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research patients provide informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be
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signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Clinical trials also may be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in instances where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible such as in rare or orphan diseases like hemophilia. In the case of hemophilia, almost all clinical trials are conducted as open-label single arm trials, in which both the researchers and participants know which treatment is being administered and there is no placebo or blinded portion of the trial because there are too few subjects available in these orphan populations to perform statistically powered placebo or active comparator trials. Endpoints for on-demand therapies are the number of treatments required to control bleeding episodes and for prophylaxis therapies are the calculated annualized bleeding rates. Bleeding rates during the trial are compared to historic bleeding rates for participating individuals. Patients are often studied for at least 50 treatment days to see if neutralizing anti-drug antibodies (inhibitors) develop.
Pursuant to the 21st Century Cures Act, which was enacted on December 13, 2016, the manufacturer of an investigational drug for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of the law or the initiation of a Phase 2 or Phase 3 trial of the investigational drug.
Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.
Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with GMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
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US Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual product fee for biological products and an annual establishment fee on facilities used to manufacture prescription biological products. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. No user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. MarzAA has been granted orphan drug designation for routine prophylaxis to prevent bleeding episodes in individuals with Hemophilia A and B with inhibitors and DalcA has received orphan designation for routine prophylaxis to prevent bleeding episodes for Hemophilia B patients.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with GMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.
Before approving a BLA, the FDA will generally inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure GMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data 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. The FDA may grant deferrals for submission of data or full or partial waivers.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than how we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a
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condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
The FDA has agreed to certain review goals under PDUFA and aims to complete its review of 90% of standard BLAs within ten months from filing and 90% of priority BLAs within six months from filing. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests, or the BLA sponsor otherwise provides, additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.
Fast Track Designation, Accelerated Approval, Priority Review, Orphan Drug Designation, and Breakthrough Therapy Programs
Fast Track
There are several FDA programs intended to help facilitate the development of new drugs and biologics that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life- threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biological product may request the FDA to designate the drug or biological product as a Fast Track product at any time during the clinical development of the product. Under a Fast Track designation, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application. FDA has granted Fast Track Designation for MarzAA for the treatment of episodic bleeding in subjects with Hemophilia A or B with inhibitors and for the treatment of subjects with Factor FVII deficiency (“FVIID”).
Priority Review
A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review to facilitate the review.
Accelerated Approval
A product that is being studied for safety and effectiveness in treating serious or life-threatening illnesses and provides meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means that it may be approved on the basis of adequate and well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.
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Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, for seven years. These circumstances are an inability to supply the drug in sufficient quantities or a situation in which a new formulation of the drug has shown superior safety or efficacy or a major contribution to patient care. This exclusivity, however, could also block the approval of our product for seven years if a competitor obtains earlier approval of the same drug for the same indication.
MarzAA has been granted orphan drug designation in the U.S. for routine prophylaxis to prevent bleeding episodes in individuals with Hemophilia A and B with inhibitors and for routine prophylaxis to prevent bleeding episodes in individuals with Hemophilia B with inhibitors in the E.U. DalcA has been granted orphan drug designation in the U.S. and the E.U. for routine prophylaxis to prevent bleeding episodes for Hemophilia B patients. MarzAA has also been granted orphan drug designation for the treatment of subjects with Factor FVII deficiency (“FVIID”).
Rare Pediatric Drug Designation
There are FDA programs intended to help facilitate the development of new drugs and biologics that meet certain criteria. Specifically, new drugs and biological products are eligible for rare pediatric disease designation if they treat a serious or life-threatening condition that affects less than 200,000 individuals in the U.S. per year and who are primarily less than 18 years of age. Under the FDA's rare pediatric disease designation program, the FDA may grant a priority review voucher to a sponsor who receives a product approval for a rare pediatric disease. In January 2022, CB 4332 was granted rare pediatric disease designation for Complement Factor I (“CFI”) deficiency (“CFID”).
Break Through Designation
A product may also be eligible for receipt of a Breakthrough Therapy designation. The Breakthrough Therapy designation is intended to expedite the FDA’s review of a potential new drug for serious or life-threatening diseases where “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a drug as a Breakthrough Therapy provides the same benefits as are available under the Fast Track program, as well as intensive FDA guidance on the product’s development program. Fast Track designation, priority review, accelerated approval and Breakthrough Therapy designation do not change the standards for approval, but they may expedite the development or approval process.
Post-approval Requirements
Maintaining substantial compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to GMP. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the GMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological products include reporting of GMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and
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the results of all the manufacturer’s tests performed on the lot. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency and effectiveness of biological products.
We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in-patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Biological product manufacturers and other entities involved in the manufacturing and distribution of approved biological products 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 GMPs and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain GMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Marketing Exclusivity and U.S. Patent Term Restoration
The Biologics Price Competition and Innovation Act, or BPCIA, amended the PHS Act to authorize the FDA to approve similar versions of innovative biologics, commonly known as biosimilars. A competitor seeking approval of a biosimilar must file an application to establish its molecule as highly similar to an approved innovator biologic, among other requirements. The BPCIA, however, bars the FDA from accepting biosimilar applications for four years after an innovator biological product receives initial marketing approval and from approving biosimilar applications for 12 years after an innovator biological product receives initial marketing approval. As innovative biological products, we believe that our products would receive this data protection if the FDA approves them for marketing.
Pediatric exclusivity is another type of regulatory market exclusivity that may apply to biological products approved in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods, include the 4- and 12-year periods discussed. This six-month exclusivity, which runs from the end of other exclusivity protection, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.
Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents, if granted, may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years, as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. 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. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend to apply for restoration of patent term for one of
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our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.
Disclosure of clinical trial information
Sponsors of clinical trials of FDA-regulated products, including biological products, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice, or DOJ, and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy provisions of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Our practices may not in all cases meet all the criteria for protection under a statutory exception or regulatory safe harbor.
Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act (“ACA” to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses.
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HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of, or payment for healthcare benefits, items or services.
Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.
To distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All our activities are potentially subject to federal and state consumer protection and unfair competition laws.
If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, privately managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. This is also true of Medicare reimbursement, where different vendors process payments, so that coverage by one vendor does not assure that all other vendors will provide coverage. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, the United States federal government position on matters related to drug pricing is evolving and uncertain, and any changes could have a material impact on drug pricing generally in the United States, including for our product candidates if approved.
Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The National Institute for Health and Care Excellence (NICE) in the United Kingdom also requires consideration of cost-benefit analysis. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third- party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
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Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern the use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on its business. We cannot predict, however, how changes in these laws may affect its future operations.
Government Regulation Outside of the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. Whether or not we obtain FDA approval of a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the EU, for example, a clinical trial application must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the clinical trial application is approved in accordance with a country’s requirements, clinical trial development may proceed. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.
The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug or biological product under EU regulatory systems, we must submit a marketing authorization application. The application used to file the BLA in the United States is similar to that required in the EU, with the exception of, among other things, country-specific document requirements.
For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we or our potential collaborators fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Employees
We consider our ability to recruit, retain and motivate our employees to be critical to our success. We are an equal opportunity employer and we are fundamentally committed to creating and maintaining a work environment in which employees are treated with respect and dignity. All human resources policies, practices and actions related to hiring, promotion, compensation, benefits and termination are administered in accordance with the principal of equal employment opportunity, meaning that they are made on the basis of individual skills, knowledge, abilities, job performance and other legitimate criteria and without regard to race, color, religion, sex, sexual orientation, gender expression or identity, ethnicity, national origin, ancestry, age, mental or physical disability, genetic information, any veteran status, any military status or application for military service, or membership in any other category protected under applicable law.
As of December 31, 2021, we had 45 full-time employees. Of the full-time employees, as of such date, 25 employees were engaged in manufacturing and clinical development activities and 20 employees were engaged in finance, business development, facilities and general management. Of our employees as of December 31, 2021, 49%
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were male and 51% were female.We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages. We consider our relations with our employees to be good.
In the quarter ended March 31, 2022, we had voluntary employee resignations and implemented a reduction-in-force of 19 full-time employees, which we expect to be completed by April 30, 2022. Following these reductions, we expect to have 8 full-time employees.
We aim to provide our employees with competitive salary and benefits that enable them to achieve a good quality of life and plan for the future. Our benefits are based on local norms and market preferences, but include all salary and social benefits required by local law (including paid time off for vacation and sick leave) and many additional benefits that go beyond legal requirements.
To maintain and enhance the safety of our employees, we promote a culture of continuous improvement and individual accountability to provide safe workplaces. The safety of our employees has been a priority throughout our response to the COVID-19 pandemic. Our management team guided our operations in the processes and procedures to comply with applicable government-imposed health and safety-related operating restrictions, and to enhance the safety of our facilities to protect the health of our employees. The management team continues to operate, updating guidance as the pandemic has continued and the medical science and government guidance and orders have evolved. We continue to enforce COVID-19 health and safety protocols and have implemented protocols to address actual and suspected cases of COVID-19 and resulting contact tracing and quarantine requirements. Throughout the pandemic, we have been communicating regularly with our employees and monitoring their views on issues related to COVID-19 and the workplace as well as general levels of engagement. In addition, management has regularly updated our Board of Directors on our COVID-19 status and response, including with respect to employee safety.
Business Organization
We commenced operations in 2002 and are a Delaware corporation. On August 20, 2015, we merged with Targacept, Inc. Our corporate headquarters are in South San Francisco, California. We conduct our research and development activities and general and administrative functions primarily from our South San Francisco, California location.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available for free at www.catalystbiosciences.com as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. They are also available for free on the SEC’s website at www.sec.gov. The information in or accessible through the SEC and our website are not incorporated into, and are not considered part of, this filing.
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Item 1A.RISK FACTORS
The following section includes the most significant factors that may adversely affect our business and operations. You should carefully consider the risks and uncertainties described below and all information contained in this Annual Report on Form 10-K before deciding to invest in our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects may be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
Summary of Risk Factors
Investing in our securities involves a high degree of risk. Below please find a summary of the principal risks we face. These risks are discussed more fully below.
• We may not be able to identify or execute on any strategic alternatives.
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• We may be involved in lawsuits to protect or enforce our patents.
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• Our product candidates are years away from regulatory approval.
• The market price of our common stock has historically been highly volatile.
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Risks related to our financial condition and capital requirements
We have incurred significant losses since our inception and are expected to continue to incur significant losses for the foreseeable future.
We are a preclinical-stage biotechnology company, and we have not yet generated significant revenues. We have incurred net losses in each year since our inception in August 2002, including net losses of $87.9 million and $56.2 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $402.7 million.
We are still in the early stages of development of our product candidates, and have no products approved for commercial sale. To date, we have financed our operations primarily through issuances of shares of common stock, from private placements of convertible preferred stock, and from payments under collaboration agreements.
We have devoted most of our financial resources to research and development, including our preclinical and clinical development activities. We expect to continue to incur significant expenses and operating losses over the next several years as we continue the development of our complement product candidates. Our operating losses may fluctuate significantly from quarter to quarter and year to year. We are expected to continue to incur significant expenses and operating losses for at least the next several years as we:
• further develop the manufacturing process for our product candidates;
• attract, hire and retain skilled personnel;
• acquire or in-license other product candidates and technologies;
• maintain, protect and expand our intellectual property portfolio;
• experience any delays or other issues with any of the above.
To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which regulatory approval is obtained. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable would depress the value of our common stock and could impair our ability to raise capital, expand our business, maintain research and development efforts, diversify product offerings or even continue operations. A decline in the value of our common stock could also cause you to lose all or part of your investment.
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We may not be able to identify or execute any strategic alternatives.
In February 2022 we announced that we were exploring strategic alternatives. There can be no assurance that this strategic review process will result in us pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all.
We will need additional capital to continue product development and may not be able to do so. If we are unable to raise sufficient capital, we will be forced to delay, reduce or eliminate product development programs.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. If we continue with preclinical and clinical development activities, we will continue to incur expenses related to the preclinical and clinical development of our complement product candidates. We believe that our available cash, cash equivalents and investments will be sufficient to fund our operations for at least the next 12 months. However, we expect to need to raise substantial additional capital to begin the clinical development of CB 2782-PEG, CB 4332 or any of our other complement product candidates, and depending on the availability of capital, may need to delay or cease development of some or all of our product candidates. Even if we raise additional capital, we may elect to focus our efforts on one or more development programs and delay or cease other development programs.
Until we can generate sufficient revenue from our product candidates, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings, corporate collaborations and/or licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate some or all of our research or development programs.
Because successful development of our product candidates is uncertain, we are unable to estimate the actual funds required to complete research and development and commercialize our products under development. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
• the number and characteristics of product candidates that we pursue;
• the costs we incur to purchase CB 2782-PEG inventory from Biogen;
• our headcount and costs associated with hiring or retaining personnel;
• the outcome, timing and cost of regulatory approvals;
• the effect of competing technological and market developments;
• the cost and timing of completing outsourced manufacturing activities;
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We will require additional capital to achieve our business objectives. Additional funds may not be available on a timely basis, on favorable terms or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Further, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or the conflict between Russia and Ukraine. If we are unable to raise sufficient additional capital, we could be forced to curtail our planned operations and the pursuit of our strategy.
Raising additional funds by issuing securities or through licensing arrangements may cause dilution to stockholders, restrict our operations or require us to relinquish proprietary rights.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of common stockholders. We currently have in place an Equity Distribution Agreement with Piper Sandler & Co. that permits us, subject to applicable SEC regulations, up to $50.0 million worth of shares of our common stock in “at the market” transactions at prevailing market prices.
Debt financing, if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, product candidates or future revenue streams or grant licenses on terms that are not favorable to us. We may also seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. There can be no assurance that we will be able to obtain additional funding if, and when necessary. If we are unable to obtain adequate financing on a timely basis, we could be required to delay, curtail or eliminate one or more, or all, of our development programs or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We currently have an effective registration statement on Form S-3 that allows us to offer up to $150.0 million of securities in one or more offerings, subject to limitations under applicable SEC rules, including up to $50.0 million of common stock issuable under our Equity Distribution Agreement with Piper Sandler & Co. Any additional sales in the public market of our common stock or other securities under these shelf registration statements could adversely affect prevailing market prices for our common stock.
We have no history of obtaining regulatory approval or commercialization of pharmaceutical products, which may make it difficult to evaluate the Company’s prospects.
We began operations in August 2002. Our operations to date have been limited to financing and staffing the Company, developing our technology and product candidates, establishing collaborations and conducting Phase 2 clinical trials on small numbers of patients. We have not yet demonstrated an ability to successfully conduct a Phase 3 clinical trial, obtain marketing approvals, manufacture a product at commercial scale repeatedly, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about the Company’s future product development timelines, clinical trial plans, expenses, success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.
Risks related to our business operations and product candidates
The outbreak of the novel coronavirus disease, COVID-19, could adversely impact our business, including our preclinical studies.
The global coronavirus pandemic has resulted in widespread requirements for individuals to work from their homes, strained medical facilities worldwide and is causing disruptions to certain pharmaceutical manufacturing and product supply chains. We are experiencing operational and other challenges as a result of the COVID-19 global
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pandemic across our programs. The impact of COVID-19 on the enrollment of the MAA-304 and MAA-202 studies contributed to their being halted in November 2021, and may delay or halt our development in other programs. In particular, as a result of the COVID-19 pandemic, we may experience disruptions that could severely impact our business, preclinical studies, drug manufacturing and clinical trials including:
In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. Furthermore, a recession or market correction resulting from the spread of COVID-19 could materially affect our operations and the value of our common stock.
CB 2782-PEG and CB 4332 are in the early stages of development and their commercial viability remains subject to current and future preclinical studies, clinical trials, regulatory approvals and the risks generally inherent in the development of a pharmaceutical product candidate. If we are unable to successfully advance or develop our complement product candidates, our business may be materially harmed.
We currently have no products approved for commercial sale, and all of our product candidates are currently in clinical and preclinical development. To date, we have not successfully commercially marketed, distributed or sold any product candidate. The success of our business depends primarily upon our ability to successfully advance the development of our product candidates through preclinical studies and clinical trials, have the product candidates approved for sale by the FDA or regulatory authorities in other countries, and ultimately have the product candidates successfully commercialized by us or a strategic partner. We cannot assure you that the results of our ongoing preclinical studies or future clinical trials will support or justify the continued development of CB 2782-PEG or CB 4332, or that we will receive approval from the FDA, or similar regulatory authorities in other countries, to advance the development of CB 2782-PEG or CB 4332.
Our ability to generate revenue from our product candidates, which may not occur for several years, if ever, will depend heavily on the successful development, regulatory approval, obtaining of manufacturing supply, capacity and expertise, and eventual commercialization of our product candidates. The success of CB 2782-PEG, CB 4332 or any other product candidates that we develop or otherwise may acquire will depend on several factors, including:
• the timing and progress of preclinical and clinical development activities;
• the number and scope of preclinical and clinical programs we decide to pursue;
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• receipt of timely marketing approvals from applicable regulatory authorities;
If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize the product candidates we develop, which would materially harm our business. Failure to successfully advance the development of our complement product candidates, including CB 2782-PEG and CB 4332, may have a material adverse effect on us.
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CB 2782-PEG, CB 4332 and all of our other product candidates will require additional clinical testing before they can be sold.
Our product candidates must satisfy rigorous regulatory standards of safety and efficacy before we can advance or complete their clinical development or they can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy preclinical studies and clinical trials, develop acceptable manufacturing processes, and obtain regulatory approval of our complement product candidates. Despite these efforts, our complement product candidates may not:
• have the desired effects;
• be free from undesirable or unexpected effects;
• meet applicable regulatory standards;
• be successfully commercialized by us or by collaborators.
Even if we demonstrate favorable results in preclinical studies and early-stage clinical trials, we cannot assure you that the results of late-stage clinical trials will be favorable enough to support the continued development of our product candidates. A number of companies in the pharmaceutical and biopharmaceutical industries have experienced significant delays, setbacks and failures in all stages of development, including late-stage clinical trials, even after achieving promising results in preclinical testing or early-stage clinical trials. Accordingly, results from completed preclinical studies of our complement product candidates may not be predictive of the results we may obtain in human clinical trials. Furthermore, even if the data collected from preclinical studies and clinical trials involving our complement product candidates demonstrate a favorable safety and efficacy profile, such results may not be sufficient to support the submission of a biologics license application to obtain regulatory approval from the FDA in the United States or other similar regulatory agencies in other jurisdictions, which is required to market and sell the products.
Our product candidates will require significant additional research and development efforts, the commitment of substantial financial resources, and regulatory approvals prior to advancing into clinical development or being commercialized by us or collaborators. We cannot assure you that CB 4332 or CB 2782-PEG will successfully progress into clinical development or through the drug development process or will result in commercially viable products. We do not expect any of our other complement product candidates to be commercialized by us or collaborators for at least several years.
If we experience delays or difficulties in the commencement of clinical trials or patient enrollment in clinical trials, our regulatory approvals could be delayed or prevented.
We or our collaborators may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate, enroll and maintain enrollment of a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In particular, there is a relatively small number of individuals with CFI deficiency or dry AMD for whom CB 2782-PEG or CB 4332 can be used in clinical trials. The availability of other approved products and other products in clinical trials have and may limit the number of patients willing to participate in our clinical trials.
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Patient enrollment is affected by other factors including:
• the severity of the disease under investigation;
• the eligibility criteria for the study in question;
• the perceived risks and benefits of the product candidate under study;
• the efforts to facilitate timely enrollment in clinical trials;
• clinical trials of other product candidates in the same indication;
• the patient referral practices of physicians;
• the ability to monitor patients adequately during and after treatment; and
Our inability to enroll a sufficient number of patients for our clinical trials will result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in clinical trials conducted by us may also result in increased development costs for our product candidates, which would cause the value of the Company to decline and limit our ability to obtain additional financing.
The operations of our third-party manufacturers may be requisitioned, diverted or allocated by U.S. or foreign government orders such as under emergency, disaster and civil defense declarations in connection with the COVID-19 pandemic or otherwise.
The third-party manufacturers of our complement product candidates have advised us that they could be required under orders of the U.S. government to allocate manufacturing capacity to the manufacture or distribution of COVID-19 vaccines. If any of our third-party manufacturers become subject to acts or orders of U.S. or foreign government entities to allocate manufacturing capacity to the manufacture or distribution of COVID-19 vaccines or medical supplies needed to treat COVID-19 patients, this could delay or interrupt, perhaps substantially, our supply of clinical trial material for MarzAA which could materially and adversely affect our business. Refer to the risk factor entitled “The outbreak of the novel coronavirus disease, COVID-19, could adversely impact our business, including our preclinical studies and clinical trials.”
The coronavirus disease, COVID-19, and the conflict between Russia and Ukraine, may impact our third-party supply of the raw materials and components needed for our product candidates, which increases the risk that we will not have sufficient quantities of such product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development efforts.
If supplies of the raw materials for our product candidates are significantly delayed, or if the third parties that we engage to supply any materials or to manufacture any products for our preclinical tests and clinical trials should cease to continue to do so for any reason, including due to the effects of the COVID-19 pandemic or the conflict between Russia and Ukraine, we likely would experience delays in advancing these tests and trials while we identify and qualify replacement suppliers or manufacturers and we may be unable to obtain replacement supplies on terms that are favorable to us. In addition, if we are not able to obtain adequate supplies of our product candidates or the substances used to manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.
Our current and anticipated dependence upon third-party suppliers may adversely affect our ability to develop product candidates and could delay our clinical trials and development programs, and otherwise harm our operations and financial condition and increase our costs and expenses.
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Risks related to the discovery, development and commercialization of our product candidates
Our complement product candidates may cause the generation of neutralizing antibodies, which could prevent their further development.
CB 2782-PEG, CB 4332 and our other complement product candidates are protein molecules which may cause the generation of antibodies in individuals who receive them. If clinical trials demonstrate a treatment-related neutralizing immunological response in individuals that causes safety concerns or would limit the efficacy of either product candidate, development of the product candidate could be halted.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and management resources, we must focus on development programs and product candidates that we identify for specific indications. As such, we are currently primarily focused on the development of CB 2782-PEG, CB 4332 and our other complement product candidates. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications for these product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
We may not be successful in our efforts to build a pipeline of additional product candidates.
We may not be able to continue to identify and develop new product candidates in addition to our current pipeline. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development. For example, product candidates may be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be successfully developed, much less receive marketing approval and achieve market acceptance. If we do not successfully develop and commercialize product candidates based upon our approach, we will not be able to obtain product revenue in future periods, which likely would result in significant harm to our financial position and adversely affect our stock price. Clinical drug development involves a lengthy and expensive process with an uncertain outcome.
Results from preclinical or early stage clinical trials may not be confirmed in later trials, and if serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.
Clinical testing is expensive, time consuming and uncertain as to outcome. We cannot guarantee that any preclinical studies and clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our product candidates is susceptible to the risk of failure at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a suitable population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a drug product is not approvable. It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.
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In addition, the outcome of preclinical studies and early clinical trials may not be predictive of the success of late-stage clinical trials. Trials of our product candidates in larger numbers of patients may not have similar efficacy results and could result in adverse effects that were not observed in the earlier trials with smaller numbers of patients.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we may face similar setbacks. The design of a clinical trial can determine whether our results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our product candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. Any Phase 2, Phase 3 or other clinical trials that we may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates.
If our product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may need to abandon development or limit development of the product candidate to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Any such limitations could adversely affect the value of our product candidates or common stock.
Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.
The FDA grants Fast Track designation to therapies that are considered capable of addressing unmet medical needs and possess the potential to treat serious or life-threatening disease conditions in order to facilitate its development and expedite the review procedure. The FDA has broad discretion in granting Fast Track designation, so even if we believe that a particular product candidate is eligible for such designation, the FDA could decide not to grant it. Even though Marzeptacog alfa (activated)—or MarzAA—has received Fast Track designation in certain indications, we may not experience a faster development process, review or approval, or receive FDA approval at all, in any of those indications compared to conventional FDA procedures. A Fast Track designation does not change the standards for approval. The FDA may also withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.
Breakthrough therapy designation by the FDA for any product candidate may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that the product candidate will receive marketing approval.
We may, in the future, apply for breakthrough therapy designation, or the equivalent thereof in foreign jurisdictions (where available), for our product candidates. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the BLA.
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Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidate no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
Risks related to our reliance on third parties
We expect to seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. We have previously relied on collaborators, such as Biogen, Pfizer and ISU, to contribute to the development of our product candidates. We may seek one or more additional collaborators for the development and commercialization of one or more of our product candidates. For example, we are seeking a new collaborator to develop MarzAA or DalcA, and we are also seeking collaborators for our complement programs.
We face significant competition in seeking appropriate collaborators. Whether we can reach a definitive agreement with a collaborator will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of preclinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us. There can also be no assurance that we will enter into any collaboration agreements, or that any such agreements will be on favorable terms.
Collaborations are complex and time consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay our development program or one or more of our other development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, and increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
We contract with third parties for the manufacture of our product candidates for preclinical testing and expect to continue to do so for clinical testing and commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities or quality of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We currently have no internal capabilities to manufacture our product candidates for clinical use or for preclinical trials following good manufacturing practices (“GMP”), or good laboratory practices (“GLP”). We expect to rely on one or more third-party contractors to manufacture, package, label and distribute clinical supplies and commercial quantities of any product candidate that we commercialize following approval for marketing by applicable regulatory authorities. We also expect to rely on one or more third-party contractors to manufacture our product candidates for use in our clinical trials. Reliance on such third-party contractors entails risks, including:
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Although we do not currently rely on third parties with operations in Russia or Ukraine, some of our vendors may do so, and disruptions in supply of materials or components to our vendors as a result of the conflict between Russia and Ukraine could adversely affect us. We may incur delays in product development resulting from the need to identify or qualify manufacturers for our product candidates. Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.
We are subject to many manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates and any future products.
To date, our product candidates have been manufactured by third-party manufacturers solely for preclinical studies and relatively small clinical trials. The process of manufacturing our complement associated therapeutic product candidates is complex, highly regulated and subject to several risks, including:
Specifically, we have entered into various development, manufacturing and clinical supply services agreements with third-party manufacturers for drug substance and drug product manufacturing of our product candidates CB 2782-PEG, CB 4332, MarzAA, and DalcA. If our third-party manufacturers are not able to provide us with sufficient quantities or quality of our of product candidates on a timely basis, or at all, whether due to production shortages or other supply delays or interruptions resulting from the ongoing COVID-19 pandemic or otherwise, our preclinical
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trials, clinical trials or regulatory approvals, as applicable, may be delayed. Significant portions of our research and development resources are focused on manufacturing. If any of our third-party manufacturers experiences difficulties in scaling production or experiences product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error or improper storage conditions, the potential trials of the affected product candidate would be delayed, perhaps substantially, which could materially and adversely affect our business.
We have minimal process development capabilities and have access only to external manufacturing capabilities. We do not have, and we do not currently plan to acquire or develop, the facilities or capabilities to manufacture bulk drug substance or filled drug product for use in clinical trials or commercialization. Any delay or interruption in the supply of clinical trial material or preclinical trial material could delay the completion of clinical trials or preclinical trials, increase the costs associated with maintaining such trial programs and, depending upon the period of delay, require us to commence new clinical trials or preclinical trials at additional expense or terminate the trials completely.
We and our contract manufacturers will be subject to significant regulation with respect to manufacturing our products. The manufacturing facilities on which we will rely may not continue to meet regulatory requirements and have limited capacity.
All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including any contract manufacturers for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical studies must be manufactured in accordance with GMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s GLP and GMP regulations enforced by the FDA through its facilities inspection program. Our facilities and quality systems and the facilities and quality systems of some or all our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection or do not have a GMP compliance status acceptable for the FDA, FDA approval of the products will not be granted.
The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third-party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, or revocation of a pre-existing approval. As a result, our business, financial condition and results of operations may be materially harmed.
Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. An alternative manufacturer would need to be qualified through a BLA supplement which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.
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These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed, or we could lose potential revenue.
We rely on third parties to conduct certain aspects of our preclinical studies and any clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such tasks or trials.
We rely on third parties such as contract research organizations (“CROs”), medical institutions and clinical investigators to conduct certain aspects of preclinical development, including assay development and testing, and to enroll qualified patients and conduct, supervise and monitor clinical trials. Our reliance on these third parties for preclinical and clinical development activities reduces our control over these activities. Our reliance on these third parties, however, will not relieve us of our regulatory responsibilities, including ensuring that our clinical studies are conducted in accordance with good clinical practices, and the investigational plan and protocols contained in the relevant regulatory application, such as an investigational new drug application, or IND. In addition, the CROs with whom we contract may not complete activities on schedule or may not conduct our preclinical studies or clinical studies in accordance with regulatory requirements or our clinical study design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, our efforts to complete development and obtain regulatory approvals for, and to commercialize, our product candidates may be delayed or prevented.
Risks related to employee matters, managing growth and our business operations
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our executive management and scientific personnel. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. In addition, we will need to add personnel to achieve our business objectives. The loss of the services of any of our executive officers, other key employees, and our inability to find suitable replacements, or our inability to hire new clinical development and manufacturing personnel, could result in delays in product development and harm our business.
We conduct operations at our facility in the San Francisco Bay Area. This region is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.
To induce valuable employees to remain at Catalyst, in addition to salary and cash incentives, we have provided stock options that vest over time. The value to employees of stock options that vest over time may be significantly affected by movements in the Company’s stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of management and scientific and development teams may terminate their employment with the Company on short notice. Our employees are under at-will employment arrangements, which means that any of our employees can leave employment with Catalyst at any time, with or without notice. Failure to retain, replace or recruit personnel could harm our business.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and collaborators. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-US regulators, to provide accurate information to the FDA and non-US regulators, to comply with healthcare fraud and abuse laws and regulations in the United States and abroad, to report financial information or
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data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained during clinical studies that could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
We will continue to incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
As a public company, we have and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements, in order to comply with the rules and regulations imposed by the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection (the “Dodd-Frank Act”), as well as rules implemented by the SEC and Nasdaq. Stockholder activism, the political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways that are not currently anticipated. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. In addition, these rules and regulations make it difficult and expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain our current levels of such coverage. We expect that we will annually incur significant expenses to comply with the requirements imposed on us as a public company.
We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Our offices are located in the San Francisco Bay Area, which is prone to earthquakes. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans that, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.
Risks related to our intellectual property
If we are unable to obtain, protect or enforce intellectual property rights related to our product candidates, we may not be able to compete effectively in our markets.