sttk-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

For the transition period from to

Commission File Number: 001-39593

Shattuck Labs, Inc.

(Exact name of registrant as specified in its charter)

1018 W. 11th Street, Suite 100

Austin, TX78703

(919) 864-2700

(Address of principal executive offices including zip code)

Former name, former address and former fiscal year, if changed since last report: N/A

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

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

Common Stock, par value $0.0001 per share STTK The Nasdaq Global Select Market

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 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, 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 Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of October 14, 2020, the closing date of the registrant’s initial public offering, was approximately $553,524,346, based on the closing price on The Nasdaq Global Select Market reported for such date. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The registrant has elected to use October 14, 2020 as the calculation date, as on the last business day of the registrant’s most recently completed second fiscal quarter there was no public market for the registrant’s common stock.

As of March 1, 2021, the registrant had 41,775,765 shares of common stock, $0.0001 par value per share, outstanding.

SHATTUCK LABS, INC.

TABLE OF CONTENTS

Page

Part I. 1

Item 1. Business 1

Item 1A. Risk Factors 46

Item 1B. Unresolved Staff Comments 61

Item 2. Properties 61

Item 3. Legal Proceedings 61

Item 4. Mine Safety Disclosures 61

Part II. 62

Item 6. Selected Financial Data 62

Item 7A. Quantitative and Qualitative Disclosures 72

Item 8. Audited Financial Statements 73

Item 9A. Controls and Procedures 92

Item 9B. Other Information 92

Part III.

Item 10. Directors, Executive Officers and Corporate Governance 93

Item 11. Executive Compensation 96

Item 14. Principal Accounting Fees 106

Item 15. Exhibits and Financial Statement Schedules 107

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties and are based on estimates and assumptions. All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to products and markets, and business trends and other information referred to under the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. Forward-looking statements are not historical facts, and reflect our current views with respect to future events. Given the significant uncertainties, you should not place undue reliance on these forward-looking statements.

There are a number of risks, uncertainties and other factors that could cause our actual results to differ materially from the forward-looking statements expressed or implied in this Annual Report on Form 10-K. Such risks, uncertainties and other factors include, among others, the following risks, uncertainties and factors:

•the recent and ongoing COVID-19 pandemic and associated public health guidance measures;

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

•our ability to retain the continued service of our key executives and to identify, hire, and retain additional qualified professionals;

•our ability to advance product candidates into, and successfully complete, preclinical studies and clinical trials;

•the timing or likelihood of regulatory filings and approvals;

•the commercialization of our product candidates, if approved;

•our ability and the potential to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved;

•the pricing, coverage, and reimbursement of our product candidates, if approved;

•the implementation of our business model, strategic plans for our business, and product candidates;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our technology platforms, including our ARC and GADLEN product candidates and other product candidates, including the defense of such intellectual property rights;

•our potential need to obtain additional licenses of third-party technology that may not be available to us or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated;

•our ability to enter into strategic arrangements and/or collaborations and to realize the potential benefits of such arrangements;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•our estimates regarding the market opportunity for our product candidates, if approved;

•our estimates regarding expenses, capital requirements, and needs for additional financing and our ability to obtain additional capital;

•our financial performance; and

•developments relating to our competitors and our industry, including competing product candidates and therapies.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements expressed or implied in this Annual Report on Form 10-K, including factors disclosed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties.

We caution you that the risks, uncertainties, and other factors referred to above and elsewhere in this Annual Report on Form 10-K may not contain all of the risks, uncertainties and other factors that may affect our future results and operations. Moreover, new risks will emerge from time to time. It is not possible for our management to predict all risks. In addition, we

cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected.

Any forward-looking statements contained in this Annual Report on Form 10-K speak only as of the date hereof and not of any future date, and we expressly disclaim any intent to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Part I.

In this Annual Report on Form 10-K, unless the context requires otherwise, references to “we,” “us,” “our,” “Shattuck Labs,” “Shattuck,” or the “company” refer to Shattuck Labs, Inc. Additionally, references to our “Board” refer to the board of directors of Shattuck Labs, Inc.

Item 1. Business

Overview

We are an innovative clinical-stage biotechnology company pioneering the development of dual-sided fusion proteins as an entirely new class of biologic medicine. We believe our approach has the potential to fundamentally transform the therapeutic modulation of the immune system. We have created a novel approach to immune-modulation by designing biologics with structural characteristics that are not achievable by existing therapeutic modalities. Compounds derived from our proprietary Agonist Redirected Checkpoint, or ARC, platform simultaneously inhibit checkpoint molecules and activate costimulatory molecules within a single therapeutic. Our initial product candidates are designed to be differentiated therapeutics addressing molecular targets that are well characterized and scientifically validated in immuno-oncology but are underexploited by current treatment modalities.

Our lead, wholly owned product candidate, SL-172154, has been rationally designed to simultaneously inhibit the CD47/SIRPα checkpoint interaction to restore an anti-tumor immune response and to activate the CD40 costimulatory receptor to bolster an immune response. We are currently conducting a Phase 1 clinical trial evaluating SL-172154 in patients with ovarian cancer and we expect to announce initial data from the dose-escalation portion of this trial in the second half of 2021. Additionally, we have initiated a second Phase 1 trial evaluating SL-172154 in patients with cutaneous squamous cell carcinoma, or CSCC, or head and neck squamous cell carcinoma, or HNSCC, and we expect to announce initial data from the dose-escalation portion of this trial in the first half of 2022. Our second product candidate, SL-279252, which is being developed in collaboration with Takeda Pharmaceuticals, or Takeda, has been rationally designed to simultaneously inhibit the PD-1/PD-L1 interaction and activate the OX40 receptor. We are evaluating SL-279252 in a Phase 1 clinical trial in patients with advanced solid tumors and lymphoma, and we expect to announce data from the dose-escalation portion of the trial in the second half of 2021. In addition to our clinical-stage ARC product candidates, we possess a deep pipeline of preclinical immuno-oncology product candidates. Longer-term, we are pursuing additional disease areas, including autoimmune diseases, where our dual-sided fusion protein platforms may provide advantages over current treatment modalities.

Cancer is characterized by the uncontrolled proliferation of abnormal cells. The immune system typically recognizes and eliminates abnormal cells. However, cancer cells have the ability to evade the immune system through the expression of checkpoint molecules, which ward off an anti-tumor immune response that would otherwise lead to elimination of cancer cells. In an effort to leverage the immune system to promote an anti-tumor response, researchers have developed checkpoint inhibitor therapies, including anti-CTLA-4, anti-PD-1, and anti-PD-L1 antibodies, which have represented a revolutionary milestone in the treatment of cancer. These therapies generate deep and durable responses, translating into meaningful clinical benefit and have become the cornerstone of treatment paradigms for many cancers. However, the clinical benefit is limited to a minority of patients. This limitation highlights the need for novel modalities that may benefit a greater number of patients, such as a compound that simultaneously inhibits checkpoint molecules while activating costimulatory molecules to generate a beneficial immune response.

Driven by an increasing understanding of tumor biology, it is now well-established that the activation of costimulatory molecules can generate a more effective immune response where current checkpoint inhibitors have failed. To date, there has been limited clinical success in combining the inhibition of checkpoints with the activation of trimeric costimulatory molecules. We believe these efforts have had limited success due to the structural mismatch between existing bivalent antibodies and the trimeric costimulatory receptors of the tumor necrosis factor, or TNF, receptor superfamily, such as CD40 and OX40. TNF activation and downstream signaling require the assembly of three receptor molecules, or trimerization. Existing bivalent antibodies can only bind to two TNF receptors and are thus unable to trimerize TNF receptors, leading to weak signaling. Additionally, administration of two separate antibodies, which distribute in the body independent of one another, does not guarantee colocalization of their mechanisms of activity.

Our proprietary ARC platform is designed to overcome the limitations of existing bivalent antibodies. ARC compounds consolidate checkpoint blockade and immune costimulation within a single therapeutic. Additionally, ARC compounds possess a structure that matches the native structure of the target receptors and colocalizes both mechanisms of activity within the immune synapse to promote a coordinated immune response. As shown in Figure 1 below, one end of the ARC compound consists of a checkpoint receptor domain and the opposite end consists of a TNF ligand domain, connected by an optimized, proprietary scaffold such as an Fc domain. We design ARC compounds to self-assemble into a hexameric structure, as shown in Figure 1 below, comprising six distinct checkpoint receptor domains and six distinct TNF ligand domains, which form two trimerized costimulatory ligand domains. The hexameric structure of an ARC compound facilitates clusters of binding domains

thus leveraging the strength of multiple individual binding interactions, known as affinity, into a greater collective strength of all binding interactions, known as avidity.

Figure 1—Structural Properties of ARC Compounds

The unique dual-sided structure of our ARC compounds allows us to simultaneously and effectively target a wide array of pathways for the creation of a deep and differentiated product pipeline. We utilize our understanding of disease pathology and immune dysfunction to identify pairings of optimal domains. Initially, our efforts are concentrated on three broad target families:

•Immune Checkpoints.Immune checkpoints include a variety of receptor/ligand pairs that inhibit immune responses and are utilized by many cancers as a defense against anti-tumor immune responses. The blockade of immune checkpoints, such as CD47/SIRPα, PD-1/PD-L1, and TIGIT/PVR, has the potential to restore anti-tumor immune responses and improve survival in cancer patients.

•TNF Superfamily. The TNF superfamily consists of multiple structurally related receptors, such as CD40, OX40, 4-1BB, DR5, CD30, LTßR, and HVEM, as well as ligands that orchestrate the induction, magnitude, quality, and duration of immune responses. Individual TNF receptor/ligand pairs exhibit distinct expression patterns on immune cell subsets and can fine-tune both myeloid cell- and lymphocyte-mediated immunity.

•Cytokines. Cytokines, chemokines, and interleukins include a broad range of soluble molecules that control a wide array of biological responses, including inflammation and immunity. We believe our platform’s ability to block or activate these pathways, including CSF1R/CSF1/IL-34 and TGFBR2/ TGF-ß and specific cytokines, expands our addressable target universe and potential therapeutic indications.

While therapeutic inhibition of immune checkpoints has been shown to improve overall survival in a minority of cancer patients, combining immune checkpoint blockade with activation of TNF superfamily receptors, or modulation of cytokines may deepen responses and increase the number of cancer patients that benefit from immunotherapy.

We believe that the following features represent the key advantages offered by compounds developed with the ARC platform:

•Matching Native Structure of TNF Receptors. TNF receptors and ligands require trimerization, or assembly into groups of three, for efficient signaling. A hexameric ARC compound contains two trimerized TNF ligand domains, which directly activate trimeric TNF receptors, thus overcoming the structural limitations of bivalent antibodies.

•Target Specificity, High Affinity, and High Avidity. ARC compounds incorporate twelve distinct binding domains, six for each of the two targets, enabling high-avidity and durable binding to specific cell surface targets.

•Replacing Tumor Immune Evasion with Potent Immune Stimulation. ARC compounds are designed to simultaneously reverse a tumor’s immune evasion and amplify anti-tumor immune responses locally within the tumor microenvironment. In preclinical models, the ability of our ARC compounds to colocalize checkpoint inhibition and costimulation demonstrated superior anti-tumor response as compared to the administration of separate antibody therapies.

•Versatility. Modularity of the ARC platform enables production of thousands of potential therapeutic candidates across oncology, autoimmune diseases, and other disease areas.

•Speed from Concept to Compound to Clinic. The ARC platform allows for a significantly compressed development timeline from “Concept to Compound to Clinic,” which has enabled us to generate over 300 unique, dual-sided fusion proteins and two clinical-stage assets in less than four years.

•Accelerated Lead Selection Process. We are able to identify and select optimal therapeutic constructs during the design and discovery phase of product candidate development through the rational pairing of optimized domains, enabling the efficient transition from discovery to the clinic. The rapid development path of ARC compounds permits systematic and simultaneous comparison of multiple ARC compound variants prior to lead selection.

We believe these collective advantages create the potential for the capital-efficient identification and pursuit of differentiated product candidates.

We are also leveraging our expertise and intellectual property to build novel platforms beyond our ARC platform, where dual-sided fusion proteins may provide advantages over existing therapeutic antibodies. One such platform is our Gamma Delta T Cell Engager platform, known as GADLEN. A majority of T cells in the human body bear an alpha beta T cell receptor, which recognizes tumor antigens via major histocompatibility complex, or MHC, molecules. Some cancer cells reduce the expression of MHC molecules, rendering those cancer cells invisible to most alpha beta T cells. Gamma delta T cells represent approximately 2% to 5% of the total T cell population and, unlike alpha beta T cells, are not dependent on MHC molecules to recognize and kill tumor cells. The therapeutic utilization of gamma delta T cells represents a novel approach for the treatment of cancer. This approach may be particularly beneficial in targeting tumors that are not addressable by alpha beta T cells. Additionally, as immunotherapies that stimulate alpha beta T cell-dependent immune responses are increasingly utilized across cancer treatment paradigms, the proportion of patients who may become refractory to alpha beta T cell-mediated therapies will also increase over time, creating an absence of effective treatment options that may be addressed by the utilization of gamma delta T cells.

While we believe compounds developed with our ARC and GADLEN platforms may provide significant key advantages, we are in an early stage of development using novel technologies and cannot assure you that our approach will lead to the development of marketable products. For example, SL-279252 is in Phase 1 development and although data as of February 3, 2021 has shown it has been well tolerated, with no dose-limiting toxicities observed, additional data from any of our dual-sided fusion protein product candidates may result in unanticipated safety and efficacy outcomes or unexpected biological interactions that could delay or prevent their development. Moreover, we are aware that others have experienced limited clinical success when attempting to combine the inhibition of checkpoint molecules with the activation of trimeric costimulatory molecules. We believe this limited success is attributable to a structural mismatch between the bivalent antibodies and trimeric costimulatory receptors, which we have attempted to address in the design of our ARC platform compounds.

Our Pipeline

We are leveraging our proprietary ARC and GADLEN platforms to discover and develop dual-sided, bi-functional fusion protein product candidates. We own or have exclusively licensed the intellectual property rights to our product candidates.

The following table highlights our two clinical-stage assets that have been derived from our ARC platform:

Our lead product candidate, SL-172154, simultaneously inhibits CD47 and activates the CD40 receptor. We believe SL-172154 has the potential to offer a differentiated approach to targeting CD47. Other approaches solely focus on activating the innate immune system by blocking the CD47 macrophage “don’t eat me” signal. In addition to inhibiting CD47, SL-172154 is designed to bridge the innate and adaptive immune response by subsequently activating CD40 signaling to upregulate antigen presentation machinery. In preclinical studies of SL-172154, we observed superior tumor rejection as compared to CD47 and CD40 antibodies, a durable receptor occupancy, a dose-dependent lymphocyte migration into lymphoid tissues and no occurrence of anemia. We are conducting a Phase 1 clinical trial of SL-172154 administered by intravenous injection in patients with ovarian, fallopian tube, and peritoneal cancers, referred to collectively as ovarian cancer, and we expect to announce initial data from the dose-escalation portion of this trial in the second half of 2021. We are also conducting a second Phase 1 clinical trial of SL-172154 administered by intratumoral injection in patients with CSCC or HNSCC and we expect to announce initial data from the dose-escalation portion of this trial in the first half of 2022. These tumors were selected due to their particularly high expression of CD47, a high presence of macrophages in the tumor microenvironment, a lack of effective treatment options for these indications, and rational combination strategies.

Our second product candidate, SL-279252, being developed in collaboration with Takeda, simultaneously inhibits PD-1 and activates the OX40 receptor. We believe SL-279252 has the potential to offer a differentiated approach to targeting PD-1 and OX40, as compared to existing antibody therapies, either as individual monotherapies or in combination. To date, antibodies targeting OX40 have not demonstrated sufficient efficacy in clinical trials, a result that we believe is due to a structural mismatch between bivalent antibodies and trimeric OX40 receptors. The unique hexameric structure of SL-279252 is designed to more effectively bind to and activate OX40 receptors, leading to optimized signaling and resulting in T cell activation and proliferation. Together, these properties are intended to replace PD-L1-mediated immune inhibition with OX40 costimulation to synergistically enhance anti-tumor response. In preclinical models, compared to the combination of anti-PD-1 and OX40-agonist antibodies, SL-279252 demonstrated superior tumor reduction and lymphocyte proliferation and migration to tissues. Our ongoing Phase 1 trial is evaluating SL-279252 in patients with advanced solid tumors and lymphoma. We expect to announce data from the dose-escalation portion of this trial in the second half of 2021. Takeda has an exclusive option to license SL-279252 prior to initiation of a Phase 2 clinical trial.

In addition to our lead product candidates, we have an extensive discovery pipeline consisting of over 300 unique fusion proteins that we have manufactured and characterized in both in vitro and in vivo studies. We intend to nominate additional lead candidates in oncology, as well as autoimmune disease, to further broaden our pipeline. In accordance with our prioritization strategy, we intend to develop these compounds as data emerge that clinically validate the targets. Our long-term plan also includes the development of product candidates for novel targets. We plan to nominate clinical product candidates from our ARC or GADLEN platforms. We anticipate submitting an additional Investigational New Drug Application, or IND, in both 2021 and 2022.

The following table highlights the preclinical programs from which we may select our next clinical candidates to be developed independently or in collaboration with a partner:

Our Team

Our management team and Board possess decades of experience in cancer immunotherapy, autoimmune disease, targeted therapeutics, protein engineering, biologics manufacturing, clinical development, regulatory strategy, and commercialization. Members of our team were involved with, or led, drug development programs leading to the approval of drugs including Votrient, Tafinlar, Mekinist, Enbrel, Nucala, Valtrex, Arranon, Tykerb, Avastin, Revlimid, Pomalyst, and others. Our team members have held senior leadership positions at leading companies including GlaxoSmithKline, Celgene, Pfizer, Novartis, Takeda, Alexion, Medarex, Amgen, Merck KGaA, OSI Pharmaceuticals, and Reata Pharmaceuticals.

Our Strategy

Our goal is to become the world leader in the discovery, development, and commercialization of dual-sided, bi-functional fusion proteins for the treatment of cancer and autoimmune diseases. We plan to achieve this by utilizing our proprietary ARC and GADLEN platforms to create novel therapeutics to treat patients who lack effective treatment options. Key elements of our strategy include:

•Rapidly advancingour clinical-stage ARC product candidates, SL-172154 and SL-279252, through clinical development and marketing approval. SL-172154, our lead wholly owned program, is currently in a Phase 1 trial for the treatment of ovarian cancer. We are also conducting a second Phase 1 trial for the treatment of CSCC and HNSCC. We expect to announce initial data from the dose-escalation portion of the SL-172154 trial in patients with ovarian cancer in the second half of 2021 and initial data from the dose-escalation portion of the SL-172154 trial in patients with CSCC or HNSCC in the first half of 2022. We intend to study SL-172154 in hematologic malignancies and further development may include other solid tumors. SL-279252, which we are developing in collaboration with Takeda, is also in a Phase 1 trial for the treatment of advanced solid tumors and lymphoma. We expect to announce data from the dose-escalation portion of the SL-279252 trial in the second half of 2021. If the data obtained in these trials are highly compelling, accelerated registration paths and other regulatory designations will be discussed with regulatory agencies. However, any such determination will be made in the sole discretion of such regulatory agencies and there can be no guarantee that any of our product candidates will be granted a differentiated regulatory path or designation.

•Leveraging our ARC and GADLEN platforms to rapidly advance additional product candidates into clinical development. Our platforms allow us to rapidly identify and develop pipeline product candidates. Since our inception in 2016, we have generated more than 300 unique, dual-sided fusion proteins. Our initial focus is on targets that are well characterized and scientifically validated in immuno-oncology but are underexploited by current treatment modalities. Longer-term, we plan to pursue novel targets in immuno-oncology and also pursue additional diseases areas, including autoimmune diseases, where our dual-sided fusion proteins may provide advantages as compared to current treatment modalities.

•Continuing to augment our fusion protein manufacturing capabilities. We are pioneers in the field of therapeutic bi-functional fusion proteins. Manufacturing these biologic drugs involves substantial internally-developed know-how and trade secrets. To date, we have invested major resources in the development and optimization of our purification process, as well as other aspects of the manufacturing process. We intend to continue investing in our internal

manufacturing capabilities so as to provide sufficient supply for our clinical trials and eventually scale production up to meet commercial requirements. The continual improvement of our manufacturing capabilities will be important to driving efficiency, maintaining high standards of quality control, and ensuring that investigators, physicians, and patients have adequate access to our products, once approved.

•Collaborating with leading biopharmaceutical companies. Similar to our collaboration agreement with Takeda, we intend to broaden the global reach of our bi-functional fusion protein platforms by selectively collaborating with leading biopharmaceutical companies. We intend to retain significant economic and commercial rights to our programs in key geographic areas that are core to our long-term strategy.

•Deepening our intellectual property portfolio to continue to protect our platform technologies and product candidates. We have built a global intellectual property portfolio consisting of patents and patent applications, trade secrets, trademarks, and know-how to protect the product candidates developed from our bi-functional fusion protein platforms. We plan to expand our intellectual property portfolio as we continue to advance and develop existing product candidates and platforms, as well as create novel platform technologies.

•Building on our culture of R&D excellence and continuing to out-innovate ourselves. Our people, and the culture that we foster, have been instrumental to our success. We have assembled a world-class team of professionals whose track records include the successful development of several commercial products at major biopharmaceutical companies. The expertise that we have assembled has enabled us to develop two novel platforms to date and will allow us to maintain our leadership position in the field of bi-functional fusion proteins.

Overview of Immuno-oncology Therapeutics

Over the past decade, a growing understanding of the molecular mechanisms that allow cancer cells to evade detection by the immune system has led to the advent of immuno-oncology, a treatment paradigm that seeks to stimulate or supplement a person’s own immune system to selectively attack cancer cells. Immune responses are initiated through antigen presentation by innate immune cells, including macrophages, and dendritic cells. The ensuing adaptive immune response is mediated by T cells. Both innate and adaptive immune responses are governed by the balance of signals that inhibit the immune response, or checkpoint pathways, and signals that accelerate the immune response, or costimulatory pathways. Checkpoint inhibition is focused on releasing the “brakes” on the immune system to allow T cells to recognize and eradicate tumors. In certain types of tumors, checkpoint inhibitors have demonstrated higher response rates, improved overall survival, and a better safety profile as compared to other available treatments. One subset of checkpoint inhibitors, PD-1 inhibitors, achieved $19.4 billion in global sales in 2019 and are expected to garner over $36.0 billion in global annual sales by 2024.

Checkpoint inhibitors have demonstrated clinical benefit for a subset of cancer patients, but there remains room for improvement. It is estimated that less than 13% of all cancer patients in the United States respond to checkpoint inhibitors. Approximately 44% of U.S. patients with cancer are eligible for checkpoint inhibitor therapies and only 28% of these patients respond to therapy, underscoring the lack of effective treatment options. Multiple mechanisms contribute to preventing anti-tumor activity and, consequently, it is critical to simultaneously modulate several immune processes in order to circumvent the various adaptations tumors employ to evade the immune system. One such approach has been to activate costimulatory molecules in combination with checkpoint inhibition. One prominent class of costimulatory molecules is the TNF superfamily, which includes many receptors such as CD40 and OX40. The diversity of receptors within the TNF superfamily allows the immune system to fine-tune the magnitude, quality and duration of specific immune responses. This diversity can be leveraged to purposefully build therapeutics to modulate the specific TNF pathways which are most relevant for the underlying disease biology.

While many TNF receptor agonist antibodies have been developed and tested in human clinical trials, most have been discontinued after Phase 1 testing and only in a rare instance have they advanced to pivotal studies. As shown in Panel A of Figure 2 below, activation of TNF receptors, such as OX40, and downstream signaling requires the assembly of three receptor molecules, or trimerization. As shown in Panel B of Figure 2 below, there is a structural mismatch between bivalent antibody therapeutics and trimeric TNF receptors. Traditional bivalent antibodies can only bind to two TNF receptors and are thus unable to individually trimerize a TNF receptor, leading to weak signaling of TNF pathways. In order for TNF receptor agonist antibodies to trimerize a TNF receptor, multiple antibodies must be cross-linked through Fc receptors located on accessory cells. This mechanism becomes less effective at increasing antibody doses due to saturation of TNF receptors and Fc receptors independently of each other. Consequently, there is no free Fc receptor available to cross-link the TNF receptor bound antibody. This effect manifests in clinical trials as an atypical dose-response relationship. As shown in Panel C of Figure 2, ARCs are designed to self-assemble two sets of TNF trimers which induces trimerization of TNF receptor targets and drive a costimulatory signal.

Figure 2—Antibody Therapies Lead to Inefficient TNF Pathway Activation

Additionally, expression levels of TNF superfamily receptors fluctuate throughout the course of a patient’s immune response and vary from patient to patient. For example, OX40 could be expressed in 2% of a patient’s T cells prior to inducing an immune response, but could rise to 25% of T cells shortly following induction of an immune response. Effective trimerization of a TNF receptor such as OX40 requires a sub-saturating dose of an existing TNF receptor antibody in order to avoid ineffective signaling. However, an optimal sub-saturating dose cannot be accurately determined given the fluctuation of TNF receptor expression throughout the course of a patient’s immune response and the variation in TNF receptor expression from patient to patient. The need remains for a molecule that does not require exogenous Fc receptor-mediated cross-linking in order to induce trimerization of TNF receptor targets and drive a costimulatory signal.

Our ARC Platform

Our proprietary Agonist Redirected Checkpoint, or ARC, platform has the potential to create therapeutics that can dramatically change the way we treat cancer and other diseases. We developed the ARC platform to address the need for a single therapeutic that consolidates multiple immune functions. Compounds developed from our ARC platform simultaneously block immune checkpoint receptors and activate costimulatory molecules.

Structure of an ARC Compound

We designed the ARC platform as a modular scaffold wherein three principal components are fused together, comprising a human Type 1 extracellular domain protein, an optimized, proprietary Fc domain, and a human Type 2 extracellular domain protein. A vector carrying a sequence of the dual-sided construct is then transfected into mammalian cells, which are used as the ARC production cell line. Once purified, the proteins secreted by the cell then self-assemble via a step-wise process, first dimerizing via disulfide bonds in the Fc domain, followed by trimerization on the costimulatory factor ligand domains, as shown in Figure 3 below.

Figure 3—Assembly Process for ARC Compounds

As shown on the left in Figure 4 below, these components form a compound with a unique hexameric structure, incorporating six distinct binding domains for each of two targets, for a total of twelve binding sites. This property endows each ARC compound with the ability to bind multiple targets with higher affinity and avidity than is achievable by antibody-based therapeutics. The image on the right in Figure 4 below provides a high-resolution electron micrograph representing a birds-eye view of SL-279252, with the six white spots representing each of the six OX40L binding domains of the compound.

Figure 4—Structure of the ARC Compound SL-279252

The functional domains of ARC compounds are derived from native human proteins, rather than antibody binding domains. This enables the rapid generation of new constructs, given that the starting template for distinct ARC compounds is the human genome. Therefore, an ARC compound can be taken from the conception stage to a manufactured purified protein in approximately six weeks, whereas it can take approximately six months to reach the same stage for an antibody therapeutic candidate. This rapid reduction in discovery processing time, has allowed us to generate more than 300 unique, dual-sided fusion proteins.

Despite the strong scientific rationale for activating the TNF receptor superfamily for the treatment of cancer, clinical trials evaluating existing bivalent antibodies have failed to demonstrate meaningful clinical benefit, which we believe is due to the structural mismatch between bivalent antibodies and the native trimeric structure of TNF receptors. As shown in Figure 5 below, the hexameric structure of our ARC compounds uniquely allows for effective binding and activation of trimeric receptors without the need for Fc receptor-mediated cross-linking.

Figure 5—ARC Compounds Uniquely Facilitate Trimerization

Beyond its unique ability to effectively activate the TNF receptor superfamily, we believe the ARC compound possesses several additional advantages over existing antibody therapeutics. Unlike IgG and IgM antibodies, which can only bind to a single target, an ARC compound can bind to two distinct targets. While bispecific antibodies can also bind to two unique targets, they do so in a monovalent fashion, whereas ARC compounds can do so in a multivalent fashion. The hexameric structure of an ARC compound represents a differentiated approach, including two sets of six binding domains, allowing for high-avidity binding to two distinct targets. The ARC platform thus enables the synergistic colocalization of checkpoint blockade and costimulatory molecule activation, which has been shown in vitro and in vivo to be superior on several measures to co-administration of two separate bivalent antibodies or single-sided fusion proteins.

Figure 6 below compares our ARC compound with several antibody formats, including IgG antibodies, bispecific antibodies, and IgM antibodies:

Figure 6—Comparative Attributes of Antibodies and ARC Compounds

Hexameric Structure and Checkpoint/Costimulatory Colocalization of ARC Compounds Provide Enhanced Anti-Tumor Activity Compared to Existing Antibodies

We employ a rigorous preclinical framework designed to help us select only the most promising product candidates for clinical development. Before advancing an ARC product candidate into clinical development, both human and mouse variants for each product candidate are generated and systematically evaluated in parallel through a battery of analytical assays, comparing the anti-tumor activity of an ARC product candidate to antibodies targeting the same pathways in head-to-head in vitro and in vivo animal studies. For example, as shown in Figure 7 below, we evaluated the anti-tumor activity of murine SIRPα-Fc-CD40L in the left panel, and murine PD-1-Fc-OX40L in the right panel, against antibodies targeting the same pathways. Individual mice with rapidly growing tumors were treated with checkpoint blocking antibodies and costimulatory agonist antibodies, either alone or in combination, in comparison with the corresponding ARC compounds. The dosing regimen was fixed in these studies across all groups to facilitate a controlled comparison of the efficacy of each treatment. These results demonstrate that ARC compounds were able to control tumor growth in mice to a greater degree than the corresponding existing antibodies, either alone or in combination. The primary columns in Figure 7 below represents the number of mice that rejected the primary tumor. The re-challenge columns in Figure 7 below represents the number of mice that rejected the primary tumor and were also capable of rejecting a second tumor challenge without repeat treatment. For example, of the five mice that rejected their primary tumors after treatment with murine SIRPα-Fc-CD40L, three had demonstrated a durable, adaptive immune response by rejecting a second tumor challenge without the administration of an additional dose. We believe the superior tumor control in mice treated with ARC compounds is due to the colocalization of a trimerized TNF ligand to the site of checkpoint blockade and is a distinguishing characteristic that we expect will be observed across the platform.

Figure 7—ARC Compounds Show Significantly Enhanced Anti-Tumor Activity as Compared to Antibody Controls

Once we have established the anti-tumor activity of an ARC product candidate, the next phase of preclinical development consists of additional in vitro studies further comparing the ARC product candidate against benchmark antibodies targeting the same pathways. For example, we used a standard potency assay previously used to support the approval of anti-PD-1 antibodies. This assay compared the amount of interleukin-2, or IL-2, secreted by lymphocytes following treatment with staphylococcal enterotoxin B, or SEB, a bacterial toxin, in the presence of SL-279252 and other anti-PD-1 or OX40 agonist antibodies. Secretion of IL-2 by human lymphocytes is an indicator of adaptive immune activation. As shown in Figure 8 below, when primary human lymphocytes were exposed to the anti-PD-1 antibodies nivolumab and pembrolizumab in the presence of SEB, both anti-PD-1 antibodies stimulated a dose-dependent increase in the concentration of IL-2 in the cell cultures. In contrast, tavolixizumab, an OX40 agonist antibody, did not stimulate an increase in the concentration of measured IL-2 in the cell cultures, and did not increase the quantity of IL-2 secretion stimulated by nivolumab or pembrolizumab alone. We believe the lack of activity of tavolixizumab in this assay is due to the dependence of the antibody on Fc receptor mediated cross-linking for activity. SL-279252 also stimulated dose-dependent increases in the concentration of IL-2 secreted by human lymphocytes in the cultures, and a higher concentration of IL-2 was observed in cultures treated with SL-279252 than with nivolumab or pembrolizumab. These data indicate that SL-279252 is a more potent stimulator of IL-2 secretion by human lymphocytes as compared to nivolumab or pembrolizumab. In addition to the two assay systems described above, we utilize a multitude of other criteria to further assess preclinical safety and efficacy.

Figure 8—In VitroPotency Assay for PD-1 Biologics

Primary human peripheral blood mononuclear cells, or PBMC, were harvested and treated with SEB and SL-279252 and benchmark antibody controls. Because antibodies contain two target binding domains, molar comparisons to ARC compounds were made on the basis of a matched number of ARC binding sites, using the molecular weight of a dimeric ARC.

Once ARC product candidates demonstrate superior performance as compared to the relevant antibody comparators in both mouse tumor models and human in vitro assays, we may advance our ARC product candidates to studies in non-human primates, or NHP. To date, we have evaluated eight different ARC compounds in NHP and have observed unique on-target activity between ARC compounds. As an example, NHP treated with SL-172154 were observed to have dose-dependent migration of CD40+ lymphocytes from the peripheral blood into secondary lymphoid organs including the lymph nodes and spleen. We observed extensive expansion of lymphoid-rich cells in the spleen from a NHP treated with SL-172154 as compared to a control from the same study. In contrast to SL-172154, NHP treated with SL-279252 were observed to have dose-dependent migration of lymphocytes to the liver, gastrointestinal tract, and lungs. In addition, we observed infiltration of both local lymph nodes and the areas surrounding blood vessels in the lung of a NHP treated with SL-279252, as compared to a control animal from the same study. To our knowledge, similar observations have not been reported in NHP studies utilizing TNF-agonist antibodies. We believe these observations, which were accompanied by serum cytokine changes, provide evidence of on-target biology driven by ARC compound-mediated stimulation of CD40 or OX40.

We believe that by systematically evaluating ARC compounds targeting clinically validated checkpoints through a series of preclinical studies comparing ARC compounds to the relevant benchmark antibodies, we are able to prioritize ARC product candidates that are best positioned to provide a clinical benefit.

Versatility of the Platform

The modularity of our dual-sided fusion protein platforms, including our ARC platform, facilitates a vast repertoire of potential dual-sided fusion proteins that can be synthesized and developed. In the human genome, there are more than 1,400 Type 1 membrane proteins, which are characterized by an extracellular amino terminal domain, and more than 450 Type 2 membrane proteins, which are characterized by an extracellular carboxy terminal domain. ARC compounds are assembled from any combination of Type 1 and Type 2 membrane proteins and, therefore, have significant diversity, with more than 630,000 possible combinations. Within this vast set of possible combinations, we have chosen to focus initially on three classes of targets that have already shown significant clinical relevance for the treatment of cancer comprising immune checkpoints, the TNF superfamily, and cytokines. We utilize our understanding of disease pathology and immune dysfunction to identify pairings of optimal targets within a single therapeutic.

Examples of notable targets that we are currently utilizing, or may in future elect to utilize, our ARC compounds are described in the table below.

Potential Targets for ARC Compounds

In addition to targeting immune checkpoints and TNF superfamily receptors, we are also targeting cytokines, which are largely responsible for promoting and regulating an immune response. Cytokines are proteins synthesized and secreted by immune cells and which mediate immune stimulation or suppression, thereby driving autoimmune diseases and participating in immune evasion and progression of cancers. In cancer, cytokines such as IL-2 and interferons have been shown to stimulate antitumor immune response, whereas cytokines such as TGF-ß, CSF1, and IL-34 have been shown to promote tumor progression. In autoimmune diseases, IL-6 and TNFa are highly implicated in disease development and progression. We have leveraged the versatility of our ARC platform to construct ARC compounds that target cytokines implicated in cancer as well as cytokines implicated in autoimmune diseases. For example, SL-115154 binds soluble CSF1 and IL-34 and simultaneously activates CD40 receptors. Some of our early-stage product candidates bind TGF-ß and simultaneously activate a variety of costimulatory receptors. Similar to our cancer product candidates, our autoimmune product candidates are designed to influence disease pathways by simultaneously trapping inflammatory signals and promoting immunosuppressive functions.

Our GADLEN Platform

Our expertise in engineering dual-sided, bi-functional fusion proteins has enabled the development of our Gamma Delta T Cell Engager, or GADLEN, platform to leverage gamma delta T cells for the treatment of cancer. We expect to nominate a lead product candidate from our GADLEN platform in 2021 to support our clinical-stage pipeline in 2022 and beyond.

The therapeutic utilization of gamma delta T cells represents a novel approach for the treatment of cancer. This approach may be particularly beneficial in targeting tumors that are not addressable by alpha beta T cells. Additionally, as immunotherapies that stimulate alpha beta T cell-dependent immune response are increasingly utilized across cancer treatment paradigms, we expect the proportion of patients who will become refractory to alpha beta T cell-mediated therapies will also increase over time, creating an absence of effective treatment options that may be addressed by the utilization of gamma delta T cells.

A majority of T cells in the human body bear an alpha beta T cell receptor, which recognizes tumor antigens presented on major histocompatibility complex, or MHC, molecules. Some cancer cells reduce the expression of MHC molecules or tumor antigens, rendering those cancer cells invisible to most alpha beta T cells. The predominant gamma delta T cell population in the peripheral blood expresses the V gamma 9 / V delta 2 T cell receptor, and is activated by a heterodimer consisting of butyrophilin 2A1 and butyrophilin 3A1. In other tissues and tumors, however, the most abundant gamma delta T cells express other V gamma and V delta T cell receptor chains, and are activated by distinct butyrophilin heterodimers. For example, where traditional T cell engager therapeutics targeting CD3 may indiscriminately activate T cells systemically, we believe that gamma delta T cell engagers may allow for the specific activation of tissue-resident gamma delta T cell subsets with a potentially improved safety profile in comparison to CD3-directed T cell engagers. Our GADLEN platform has the potential to expand the range of addressable indications for cancer immunotherapy and treat historically difficult to treat patients. We have leveraged our expertise in engineering dual sided bi-functional fusion proteins to develop a suite of heterodimerized butyrophilin proteins connected to antigen-targeted single chain antibody fragments.

GADLEN compounds are comprised of two distinct fusion protein chains, and an engineered Fc linker domain that facilitates heterodimerization between the two chains. As shown in the left panel of Figure 9 below, the assembled GADLEN compound contains the extracellular domains of heterodimerized butyrophilin proteins on one side and is linked to tumor antigen specific single chain antibody fragments on the opposite side. The gamma delta T cell receptors recognize and are activated by specific butyrophilin protein heterodimers. Thus, the GADLEN construct is designed to facilitate targeting of specific gamma delta T cells to tumor cells expressing a defined antigen, as shown in the right panel of Figure 9 below.

Figure 9—GADLEN Platform Overview

To demonstrate the feasibility of the GADLEN approach, a murine GADLEN construct was developed incorporating a butyrophilin 1, or BTNL1, and butyrophilin 6, or BTNL 6, heterodimer and an scFv domain targeting the CD19 antigen. In both mice and humans, gamma delta T cells represent approximately 2% to 5% of the total T cell population, as shown in Figure 10 in a murine model. We treated mice on Days 0, 3, and 6 with the murine GADLEN, mBTNL1/6-Fc-CD19scFv. We observed dose-dependent expansion of the endogenous gamma delta T cell compartment to approximately 12% of all T cells 24 hours after the second treatment. Concurrent with expansion, mBTNL1/6-Fc-CD19scFv also caused activation of murine gamma delta T cells, as demonstrated by upregulation of the CD69 activation marker, shown in Figure 10. Murine B cells express CD19, and therefore were a potential target of gamma delta T cells following treatment with mBTNL1/6-Fc-CD19scFv. Accordingly, we observed depletion of the endogenous B cell compartment concurrent with gamma delta T cell expansion and activation following treatment with mBTNL1/6-Fc-CD19scFv, as shown in Figure 10. Importantly, when mice with established CD19+ tumors were treated with mBTNL1/6-Fc-CD19scFv, dose-dependent reduction in tumor growth and rejection was observed. We believe these studies indicate that GADLEN compounds enable therapeutic modulation of gamma delta T cells in vivo, and that GADLEN compounds may be designed to activate tissue-restricted populations of endogenous gamma delta T cells to target specific tumor antigens in both solid and liquid tumors.

Figure 10—Dose Dependent Gamma T Cell Expansion, Activation, and Killing Activity Following Administration of the GADLEN Compound mBTNL1/6-Fc-CD19scFv

Our ARC Product Candidates

We believe the collective advantages of our ARC platform, and our internal capabilities and scientific expertise allow for the capital-efficient identification and pursuit of differentiated product candidates. Our lead product candidates, SL-172154 and SL-279252, are designed to address molecular targets that are well-characterized and clinically validated in immuno-oncology, but are under-exploited by current treatment modalities.

SL-172154: A Dual CD47/SIRPα Blocking and CD40-Activating ARC Compound

Our lead product candidate, SL-172154, simultaneously inhibits CD47 and activates the CD40 receptor. In preclinical studies of SL-172154, we have observed no occurrence of anemias, a durable receptor occupancy, and dose-dependent lymphocyte migration into lymphoid tissues. We are conducting a Phase 1 clinical trial of SL-172154 administered by intravenous injection in patients with ovarian, fallopian tube, and peritoneal cancers, collectively referred to as ovarian cancer. We are also conducting a second Phase 1 clinical trial of SL-172154 administered by intratumoral injection in patients with CSCC or HNSCC. These tumors were selected due to their particularly high expression of CD47, a high presence of macrophages in the tumor microenvironment, a lack of effective treatment options for these indications, and rational combination strategies. For the ongoing Phase 1 clinical trial evaluating SL-172154 in ovarian cancer patients, we expect to announce initial data from the dose-escalation portion of the trial in the second half of 2021. For the ongoing Phase 1 clinical trial evaluating SL-172154 in CSCC and HNSCC patients, we expect to announce initial data from the dose-escalation portion of the trial in the first half of 2022.

Improving upon Existing Therapeutics Targeting CD47/SIRPα

In order for CD47/SIRPα blockade to effectively inhibit tumor growth, the CD47/SIRPα “don’t eat me” signal must be blocked and an “eat me” signal must be present to stimulate macrophage-mediated phagocytosis. While CD47 and SIRPα therapeutics have demonstrated anti-tumor activity in a range of tumor types including diffuse large B-cell lymphoma, or DLBCL, myelodysplastic syndrome, acute myeloid leukemia, gastric cancer, and ovarian cancer, we believe there are a number of factors that limit the potential of existing antibody therapeutics. For example, antibodies that block the CD47 “don’t eat me” signal and provide an “eat me” signal via the Fc domain, can result in toxicities including anemia and other cytopenias, which have been observed clinically with magrolimab, TTI-621, and SRF231. In preclinical studies in NHP, administration of the CD47 blocking antibody known as magrolimab, or 5F9-G4, caused blood hemoglobin concentrations to drop into the transfusion range for most animals that received a dose of 1 mg/kg or greater. We believe these observations were due to residual effector function in the Fc domain of magrolimab, which caused red blood cell destruction following binding of CD47 on red blood cells. This has limited development of these antibodies in the absence of the low-dose priming regimen developed for magrolimab. Other CD47 blocking agents, including the SIRPα-Fc fusion protein known as ALX-148, contain an Fc domain that does not bind Fc receptors, and therefore blocks CD47 without providing an “eat me” signal that leads to anemia or other cytopenias. While the avoidance of cytopenias is a major benefit of CD47 targeted therapies that do not engage Fc receptors, in order for those agents to provide anti-tumor benefit they must be paired with a strategy that directs macrophages to specifically “eat” tumor cells. These tumor-targeted “eat me” signals can be provided by ADCP-competent antibodies, such as rituximab, cetuximab, or trastuzumab, that bind to tumor antigens. Antibody-dependent cellular phagocytosis, or ADCP, is a highly regulated process in which an antibody binds to and marks a target, in this case a tumor cell, for phagocytosis. In addition, natural “eat me” signals can be induced by certain chemotherapies that increase expression of calreticulin, a well-established “eat me” signal expressed on the surface of cells marked for phagocytosis, on the surface of tumor cells. Preclinical studies have shown that the anti-tumor response to CD47/SIRPα blockade is completely dependent upon macrophage engagement of an adaptive immune response following tumor cell phagocytosis, specifically following engagement and activation of CD8+ T cells. Thus, strategies that not only enhance innate immunity via CD47/SIRPα blockade, but also enhance an adaptive immune response may be synergistic. To our knowledge, there are no other CD47/SIRPα targeted agents in clinical development that include a second functional domain to enhance antigen presentation to an adaptive immune response.

Our Approach to Bridging Innate and Adaptive Immunity by Simultaneously Targeting CD47 and CD40

While most competing CD47 and SIRPα programs solely focus on activating the innate immune system by inhibiting CD47, SL-172154 is designed to bridge the innate and adaptive immune response by simultaneously blocking the CD47 macrophage “don’t eat me” signal and activating CD40 signaling. We believe that incorporating a CD40 agonist domain into a CD47 blocking therapeutic will stimulate macrophages not to just “eat” tumor cells, but will also drive those macrophages to more effectively present the tumor antigens that they have consumed to T cells.

As shown in Figure 11 below, when macrophages consume tumor cells in the setting of CD47/SIRPα blockade, they must then digest and display tumor antigens on their surface to catalyze an adaptive, T cell-mediated immune response. Macrophage consumption of tumor cells is critical to the mechanism of CD47/SIRPα blockade, but T cells are responsible for tumor shrinkage. Thus, strategies that enhance the processing and display of tumor antigens on the surface of macrophages and other antigen presenting cells are likely to enhance the effectiveness of CD47/SIRPα blockade. CD40 is a TNF receptor expressed by antigen-presenting cells, including macrophages. Stimulation of CD40 substantially enhances antigen presentation and subsequent T cell-activation by antigen-presenting cells. Accordingly, we have demonstrated in preclinical studies that the stimulation of CD40 in coordination with CD47/SIRPα blockade using murine SIRPα-Fc-CD40L controls tumor growth and improves survival to a greater degree than either CD47- or CD40-targeted antibodies either alone or in combination, and these effects were attributed to enhanced tumor cell killing by T cells.

Figure 11—Mechanism of Action of SL-172154

Clinical Development Strategy

We are currently conducting a Phase 1 clinical trial evaluating the intravenous administration of SL-172154 in patients with ovarian cancer and a second Phase 1 trial evaluating the intratumoral administration of SL-172154 in patients with CSCC or HNSCC. The primary objective of each Phase 1 trial is to assess the safety and tolerability of SL-172154. The secondary objectives include evaluation of the pharmacokinetic and pharmacodynamic profiles as well as the anti-tumor activity of SL-172154. We expect to identify the recommended Phase 2 dose for SL-172154 as a monotherapy. We expect to provide initial data from the monotherapy dose-escalation portion of our intravenous and intratumoral Phase 1 trials in the second half of 2021 and the first half of 2022, respectively.

A Phase 1 clinical trial of SL-172154 administered intravenously is being conducted in patients with advanced ovarian, fallopian tube, and primary peritoneal cancers, collectively referred to as ovarian cancer. Patients have relapsed and are ineligible for further platinum-based therapies. We believe that ovarian cancer represents an indication that lacks effective treatment options. Ovarian cancer expresses the highest levels of CD47 of any solid tumor and is a tumor type with a high presence of macrophages, which express CD40.

In the Phase 1A dose-escalation portion of the trial, three or more patients will be enrolled through each of five dose levels. Following the identification of a recommended Phase 2 dose, or RP2D, for monotherapy, we plan to evaluate SL-172154 in two Phase 1B expansion cohorts in ovarian cancer, including in combination with cetuximab, an ADCP-competent antibody targeting EGFR, and in combination with doxorubicin. We conducted a study with an academic collaborator to investigate the expression of EGFR on tumor biopsies from ovarian cancer patients. From a total of 594 biopsies analyzed, the majority were greater than 50% positive for EGFR. Doxorubicin is a standard of care chemotherapy that stimulates upregulation of calreticulin on tumor cells. We anticipate enrolling a total of approximately 70 patients across the dose-escalation and expansion portions of the trial. As of March 16, 2021, SL-172154 has been well tolerated. Treatment-related adverse events have been reported in some patients, but there have been no reported dose-limiting toxicities, or Grade 3 or higher treatment-related adverse events. A maximum tolerated dose has not been reached. An overview of the initial clinical development strategy for evaluating SL-172154 administered intravenously in patients with advanced ovarian cancer is below:

Figure 12 —Initial Clinical Development Strategy of SL-172154 in Ovarian Cancer

We are also conducting a Phase 1 trial of SL-172154 administered intratumorally in patients with locally advanced or metastatic CSCC and HNSCC not amenable to further treatment with surgery, radiation, or standard systemic therapies. In the Phase 1A dose-escalation portion of the study, three or more patients will be enrolled through each of four dose levels. Following the identification of a monotherapy RP2D, we plan to evaluate SL-172154 in one or more Phase 1B expansion cohorts in combination with cetuximab or one or more other combinations. As of March 16, 2021, the drug has been well tolerated. A maximum tolerated dose has not been reached. We anticipate enrolling a total of approximately 45 patients across the dose-escalation and expansion portions of the trial. An overview of the initial clinical development strategy for evaluating SL-172154 administered intratumorally in patients with locally advanced or metastatic CSCC and HNSCC is below:

Figure 13—Initial Clinical Development Strategy of SL-172154 in CSCC and HNSCC

Following the completion of Phase 1 development, we plan to select one or more combination regimens, routes of administration and tumor types to advance into Phase 2 development. Beyond the two combinations in ovarian cancer described above, we believe there are other rational combination partners for both the treatment of ovarian cancer and other solid tumors, as well as in hematologic malignancies. We intend to study SL-172154 in hematologic malignancies and further development may include other solid tumors.

Preclinical Experience

To date, we have conducted extensive preclinical studies of SL-172154 that have demonstrated the following:

•A significant increase in macrophage-mediated phagocytosis of tumor cells

•The activation of antigen presenting cells by a CD40-induced type I interferon response

•Dose-dependent increases in IL-2 by human lymphocytes

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

Taken together, these data demonstrate the potential ability of SL-172154 to activate and bridge the adaptive and innate immune responses.

In in vitro studies, murine SIRPα-Fc-CD40L was shown to bind CD47 and CD40 with high, picomolar affinity. As predicted from the hexameric structure of the compound, the CD40L domain stimulated CD40 signaling in the absence of Fc receptor cross-linking. In in vivo studies, administration of murine SIRPα-Fc-CD40L resulted in dose-dependent activation of antigen presenting cells.

We performed standard in vitro tumor cell phagocytosis assays to demonstrate whether SL-172154 enhanced macrophage-mediated phagocytosis of various tumor cell lines both alone and in combination with tumor-targeted ADCP-competent antibodies. As shown in Figure 14 below, consistent with the mechanism of action of CD47 blocking agents, SL-172154 significantly enhanced the ability of macrophages to phagocytose tumor cells in the presence of tumor-targeted ADCP-competent antibodies. Additionally, SL-172154 potentiated macrophage-mediated phagocytosis of tumor cells that expressed calreticulin, a well-established “eat me” signal expressed on the surface of cells marked for phagocytosis.

Figure 14—Tumor Phagocytosis Activity of SIRPα-Fc-CD40L with or without ADCP-competent Antibodies

Human monocyte derived macrophages were co-cultured with HCC1954, A431, HCC827, or Caov-3 cells in the presence of an IgG negative control, SL-172154, an ADCP-competent tumor-targeted antibody, including Trastuzumab or Cetuximab, or the combination of SL-172154 and the ADCP-competent tumor-targeted antibody. After two hours, the proportion of tumor cells phagocytosed by human macrophages was determined and reported as the phagocytosis index.

CD40 is known to stimulate proliferation of B cells and CD4+ T cells from human PBMC in the presence of cross-linked anti-CD40 antibodies or CD40L. To evaluate this effect, CD8+ T cell-depleted PBMC were isolated from a total of 50 different human blood donors and cultured in the presence of a dose-titration of SL-172154. As shown in Figure 15 below, as compared to both positive and negative controls, soluble SL-172154 stimulated dose-dependent proliferation of human PBMC over seven days. In addition, SL-172154 was observed to stimulate a dose-dependent increase in the number of IL-2 secreting PBMC on day eight, which is a downstream indicator of CD40 activation.

Figure 15 —In Vitro Human PBMC Proliferation and Activation Assay

CD8-depleted PBMC from 50 distinct human blood donors, each indicated as a single spot in each figure, were cultured with media only, the positive control KLH, the non-activating control Exenatide, or 0.3, 3, 30, or 300 nM of SL-172154. On Days 5, 6, and 7, proliferation was assessed via 3H-Thymidine incorporation as shown in the left panel, and on Day 8, IL-2 positive cells were assessed by ELISpot as shown in the right panel.

We conducted dose-range finding and repeat dose GLP toxicity studies in NHP to evaluate the safety and pharmacologic effects of SL-172154. In these studies, SL-172154 was administered as five once-weekly doses across a dose range of 0.1 mg/kg to 40 mg/kg, followed by a recovery period. Data from these studies indicated that SL-172154 induced a potent immune response in NHP. Figure 16 below shows dose-dependent saturation of CD47 positive red blood cells, which was durable for greater than seven days. In addition, SL-172154 bound CD40-expressing B cells in the peripheral blood and stimulated a dose-dependent migration of lymphocytes from the peripheral blood within 24 hours of treatment, as shown in Figure 17 below. We believe these data are supportive of either a once weekly or every other week dosing schedule. Histology samples demonstrated that the post-dose decreases in peripheral blood lymphocytes were accompanied by accumulation of proliferating lymphocytes in lymph nodes and spleen. Whereas other CD47-targeted agents are administered at super-saturating doses, which we believe is intended to establish a concentration gradient that facilitates passive diffusion into tissues, we believe these data suggest that SL-172154 may be actively transported into tissues via CD40 binding, which may lead to a unique dosing profile in humans. Administration of SL-172154 was also associated with dose-dependent post-treatment increases in multiple serum cytokines, such as CCL2, as shown in Figure 17 below. The observed toxicities were consistent with cytokine release syndrome. No evidence of anemia was observed.

Figure 16 —CD47 Receptor Occupancy following SL-172154 Infusion

Cynomolgus monkeys were treated on Day 1 and 8 with 0.1 mg/kg, 1 mg/kg, 10 mg/kg, and 40 mg/kg of SL-172154 or a vehicle control. Receptor occupancy was evaluated at the indicated time points by flow cytometry. SL-172154 occupancy on red blood cell CD47 is plotted as the proportion of total CD47 expression minus the proportion of CD47 detected using an antibody that is prevented from binding when CD47 is occupied by SL-172154.

Figure 17—Post-dose Cytokine Release and Rapid Post-dose Migration of Lymphocytes from the Blood

Cynomolgus monkeys were treated with SL-172154 on Day 1, 8, and 15 with 0.1 mg/kg, 1 mg/kg, 10 mg/kg, and 40 mg/kg of SL-172154 or a vehicle control. Serum cytokine concentrations were collected and the pre- and post-dose concentrations of CCL2, IL-8, and CXCL9 are indicated in the left panel. Pre- and post-dose lymphocyte counts were obtained on Day 15 prior to the third dose, and on Day 16 approximately 24 hours after the third dose. The number of peripheral blood lymphocytes was observed to decrease in a dose-dependent manner following the Day 15 dose, and is plotted in the right panel above as the percent decrease in peripheral blood lymphocytes on Day 16 as compared to Day 15. Each data point indicates an individual animal.

SL-279252: A Dual PD-1 Blocking and OX40-Activating ARC Compound

Our second product candidate, SL-279252, is a dual-sided, bi-functional fusion protein that both inhibits PD-1 and acts as an agonist for the OX40 costimulatory receptor. We are currently evaluating SL-279252 in a global Phase 1 dose-escalation and dose-expansion clinical trial in patients with advanced solid tumors and lymphoma. We expect to report data from the dose-escalation portion of this trial in the second half of 2021.

Shortcomings of Existing PD-1/PD-L1 Inhibition Strategies

Programmed cell death protein 1, or PD-1, is a cell surface protein present on T cells and other white blood cells. It binds to two ligands, PD-L1 and PD-L2, which can be expressed by tumor cells as well as other immune cells in the tumor microenvironment. When PD-L1 binds to PD-1, the resulting PD-1 signaling limits the capacity of T cells to kill tumor cells. Anti-PD-1 antibodies disrupt binding of PD-1 to PD-L1 to restore baseline tumor cell-killing activity of T cells. While anti-

PD-1/PD-L1 antibodies have achieved significant clinical and commercial success, a majority of patients with cancer do not benefit from this class of therapy, as evidenced by a response rate of 35% or less in patients with melanoma, NSCLC, bladder cancer, HNSCC, and other cancers. A limitation of anti-PD-1/PD-L1 antibodies is their inability to provide a signal that directly amplifies the ability of T cells to kill tumor cells. Achieving this enhanced tumor-killing effect necessitates the introduction of a distinct mechanism to complement checkpoint blockade. One such approach is the stimulation of costimulatory receptors. Most current approaches attempt to simultaneously exploit both pathways by co-administering anti-PD-1/PD-L1 antibodies with costimulatory receptor agonists. However, these attempts have not been successful in clinical trials, which we believe is due to the structural mismatch between existing bivalent antibodies and the trimeric TNF receptor superfamily.

Our Approach to Enhancing PD-1 Blockade by Simultaneously Targeting OX40

While other programs sought to block PD-1 and activate OX40 signaling by administering multiple therapeutics, SL-279252 seeks to do so colocalized within a single therapeutic and within the immune synapse. Importantly, unlike the bivalent structure of existing antibodies, the hexameric structure of SL-279252 is designed to effectively trimerize and directly activate OX40 receptors. In preclinical studies, SL-279252 was found to be a highly potent stimulator of an adaptive immune response, and also demonstrated greater anti-tumor activity than anti-PD-1 antibodies or OX40-agonist antibodies, either alone or in combination.

Figure 18— SL-279252 Enables Simultaneous Blockade of PD-1 and Activation of OX40 Signaling

Clinical Development Strategy

In collaboration with Takeda, we are currently conducting a Phase 1 dose-escalation and dose-expansion trial of SL-279252 in patients with advanced solid tumors and lymphoma. The primary objective of the Phase 1 trial is to assess the safety and tolerability of SL-279252. The secondary objectives include evaluation of the pharmacokinetic and pharmacodynamic profiles as well as the anti-tumor activity of SL-279252. We are evaluating anti-tumor response according to immune Response Evaluation Criteria in Solid Tumors or Response Evaluation Criteria in Lymphoma 2017. These are standard, widely accepted criteria to evaluate tumor response in oncology clinical trials. An RP2D and schedule will be identified for SL-279252 following the completion of the Phase 1 trial. We expect to provide data from the dose-escalation portion of this Phase 1 trial in the second half of 2021.

Patients with relapsed, advanced, or metastatic solid tumors or lymphoma who have received standard of care therapies, including anti-PD-1/PD-L1 antibodies, are eligible to enroll in the trial. In the dose-escalation portion of this trial, patients will be treated at each of ten dose levels ranging from 0.0001 mg/kg to 6 mg/kg. Patient samples will be evaluated to determine the pharmacokinetic profile, receptor occupancy on PD-L1 and OX40 peripheral blood immune phenotyping, changes in immune cell infiltration in tumor biopsies, and evidence for elevation in multiple serum cytokines.

Following completion of the dose-escalation portion of the trial, a dose and schedule will be selected for evaluation in up to two expansion cohorts. As of February 3, 2021, we have enrolled patients through the top dose level of 6 mg/kg in the dose-escalation portion of this trial. We are currently enrolling additional patients at the top three dose levels. We anticipate treating a total of approximately 80 patients in the dose-escalation and dose-expansion portions of this clinical trial. An overview of the Phase 1 trial design evaluating SL-279252 in patients with advanced solid tumors and lymphoma is below:

Figure 19—Phase 1 Trial Design of SL-279252

As of February 3, 2021, patients have received treatment with SL-279252 up to a dose of 6 mg/kg in the dose-escalation portion of the Phase 1 trial. Overall, SL-279252 has been observed to be well tolerated as of February 3, 2021. Treatment-related adverse events, including immune-related events, have been reported in some patients, but there have not been any dose-limiting toxicities. A maximum tolerated dose has not been reached. Preliminary pharmacokinetic activity has been evaluated across a dose range of 0.0001 to 6 mg/kg. Exposure of SL-279252 as determined by the maximum peak drug concentration, or Cmax, and the area under the curve, or AUC, increased with dose-escalation in a linear fashion. The pharmacokinetic profile consists of a distribution phase and an elimination phase. We believe this distribution phase indicated rapid binding to the target receptors. Following repeat dosing, a consistent Cmax and AUC was observed without evidence of accelerated drug clearance. The volume of distribution of drug indicated that SL-279252 distributed beyond the circulatory compartment into tissues.

Preliminary pharmacodynamic activity has also been evaluated in patients treated across a dose-range of 0.0001 to 3 mg/kg. Post-dose receptor occupancy on OX40-positive lymphocytes was observed in a dose-dependent fashion, and the total number of OX40-positive cells in the blood declined rapidly post-infusion of SL-279252. We believe the post-infusion decreases in OX40-positive lymphocytes provides evidence of on-target biology. In NHP, similar post-infusion decreases in lymphocytes were associated with migration of lymphocytes into tissues. We expect to select a dose and schedule (either weekly or bi-weekly) to advance into the expansion cohorts, and to report safety, pharmacokinetic and pharmacodynamic data from the dose-escalation portion of this clinical trial in the second half of 2021. We expect to begin enrolling patients in one or more dose-expansion cohorts in the second half of 2021.

Adverse events, or AEs, were classified according to National Cancer Institute Common Terminology Criteria for Adverse Events (NCI-CTCAE—version 5.0). As of February 3, 2021, treatment-related AEs have been reported in 16 patients. One patient experienced a Grade 3 treatment-related AE, 7 patients experienced Grade 2 treatment-related AEs, and 12 patients experienced Grade 1 treatment-related AEs. No treatment-related Grade 4 or 5 adverse events, treatment-related serious adverse events or dose limiting toxicities have been reported.

To date, we have experienced delays in our clinical trial of SL-279252 as a result of the ongoing COVID-19 pandemic, including delays with certain third-party vendors supporting this trial and difficulty procuring sufficient quantities of raw materials required for our manufacturing processes. We temporarily paused enrollment of patients for our clinical trial of SL-279252 between March and May 2020 and we resumed enrollment in June 2020. As a result of public health guidance measures in the locations of our clinical trial sites, some patients have chosen, and may choose to forego in the future one or more doses in our clinical trials, due to challenges faced by such patients in travelling to our clinical trial sites, which may negatively affect the study results.

Preclinical Experience

In our preclinical studies in mice with rapidly growing tumors, murine PD-1-Fc-OX40L achieved superior tumor growth inhibition and improved survival compared with an anti-PD-1 antibody and an OX40 agonist antibody, either alone or in combination, as shown in Figure 7 above.

We conducted dose-range finding and repeat dose GLP toxicity studies in NHP to evaluate the safety and pharmacologic effects of SL-279252. In these studies, SL-279252 was administered as five once-weekly doses, across a dose range of 0.1 mg/kg to 100 mg/kg. Data from these studies indicated that SL-279252 induced a potent immune response in NHP. Figure 20 below shows a dose-dependent expansion in the total number of lymphocytes in NHP and post-dose migration of lymphocytes into specific tissue sites, including the liver, the lung, and the GI tract. Figure 21 below shows increased serum cytokine concentrations, including IL-6 and IL-10, following repeated administration of SL-279252.

Figure 20—Lymphocyte Expansion Between Weekly SL-279252 Treatments and Rapid Post-dose Migration of Lymphocytes from the Blood

Cynomolgus monkeys were treated on Day 1, 8, and 15 with 10 mg/kg, 40 mg/kg, and 80 mg/kg of SL-279252. Pre- and post-dose lymphocyte counts were obtained on Day 1 prior to the first dose and on Day 15 prior to the third dose. The fold increase in total lymphocytes in the peripheral blood from Day 1 to Day 15 is plotted on the left panel for each dosing group. Within 24 hours of SL-279252 treatment on Day 15, the number of peripheral blood lymphocytes was observed to decrease in a dose-dependent manner. The percent decrease in peripheral blood lymphocytes from the third dose on Day 15 to Day 16 is shown on the right panel. Each data point indicates an individual animal.

Figure 21—Increased Serum Cytokine Concentrations Following Administration of SL-279252

Cynomolgus monkeys were treated on Day 1, 8, 15, 22 and 29 with 10 mg/kg, 40 mg/kg, and 80 mg/kg of SL-279252. Serum cytokine concentrations were collected and the pre- and post-dose concentrations of IL-6 and IL-10 are indicated in the panel above for the 40mg/kg dose group following repeated administration.

Collaboration and License Agreements

Collaboration Agreement with Takeda

On August 8, 2017, we entered into a Collaboration Agreement with Millennium Pharmaceuticals, Inc., or Takeda, a wholly owned subsidiary of Takeda Pharmaceutical Company, Ltd., or the Collaboration Agreement. The Collaboration Agreement was subsequently amended in April 2018, October 2018, and March 2020.

Pursuant to the Collaboration Agreement, we are required to use our commercially reasonable efforts to conduct preclinical and Phase 1 clinical trials for two molecules, PD-1-Fc-OX40L and CSF1R-Fc-CD40L, and Takeda has an exclusive option to license one or both of these clinical-stage ARC compounds for a specified amount of time up to and following the conclusion of each respective Phase 1 trial. While we are currently evaluating PD-1-Fc-OX40L in a Phase 1 clinical trial, we have not yet conducted a Phase 1 clinical trial for CSF1R-Fc-CD40L. During the development phase of the Collaboration Agreement, we may not, by ourselves or through a third party, develop or commercialize a compound, molecule, or product that targets both PD-1 and OX40L, or a compound, molecule, or product that targets both CSF1R and CD40L.

Further, pursuant to the Collaboration Agreement, we agreed to conduct certain preclinical studies on four additional preclinical ARC molecules, and Takeda had an option to license up to two of the four preclinical molecules. We completed our research and development activities related to the four preclinical molecules and delivered a final report to Takeda. Takeda elected to not exercise this option, and Takeda’s option period for such molecules has now lapsed. As a result, the Collaboration Agreement is terminated as to the four preclinical molecules and Takeda does not have any rights to participate in the development or commercialization of such molecules.

Under the Collaboration Agreement, Takeda is granted a right of first negotiation to enter into licenses for each molecule within a specified class of ARC molecules. To exercise its right of first negotiation, Takeda will be required to provide a notice within a specified time, and if the parties do not conclude a license agreement within a set timeframe, we will be entitled to enter into licenses with third parties, subject to certain conditions.

As of December 31, 2020, under the Collaboration Agreement, we have received approximately $78.4 million in option payments, milestone payments, and expense reimbursements from Takeda. If Takeda exercises its exclusive option to license one or both of the clinical-stage ARC compounds (PD-1-Fc-OX40L and CSF1R-Fc-CD40L), we will enter into a license agreement with Takeda with respect to such compound. Any such license agreement would, among other things, require Takeda to use its commercially reasonable efforts to develop the licensed compound and seek approval for the compound. In addition, Takeda would be solely responsible to use its commercially reasonable efforts, at its cost, to develop, manufacture, and commercialize the licensed ARC compounds. If both ARC compounds are licensed, we would be entitled to additional payments of up to an aggregate of $450 million in clinical, regulatory, and sales milestone payments. In addition, we would be eligible for tiered royalty payments on net sales of licensed products at percentages ranging from the high single digits to sub-teens, subject to specified reductions, during the royalty term.

If Takeda exercises its option to enter into a license agreement, the royalty term with respect to the licensed product would extend, on a country-by-country basis, from the period commencing on the first commercial sale of the product in such country and ending on the later of (i) the expiration of the last to expire of the valid claims on the applicable licensed patent rights covering the product in such country or (ii) the tenth anniversary of the first commercial sale of the product in such country.

Unless sooner terminated, the Collaboration Agreement will continue until the later of (a) the earlier of (i) the 90th day following delivery of a report detailing certain results of the SL-279252 Phase 1 clinical trial and (ii) the exercise by Takeda of its right to an exclusive license with respect to SL-279252, and (b) the earlier of (i) the 90th day following delivery of a report detailing certain results of the SL-115154 Phase 1 clinical trial and (ii) the exercise by Takeda of its right to an exclusive license with respect to SL-115154.

Heat License Agreement

In June 2016, we entered into an Exclusive License Agreement, or the Heat License Agreement, with Heat Biologics Inc., or Heat. The Heat License Agreement was subsequently amended in November 2016, December 2016, and March 2017. Pursuant to the Heat License Agreement, Heat granted to us (1) a worldwide, sublicensable exclusive license to research, develop, manufacture, and commercialize products under three provisional patent applications, including all patents issuing from such applications, or the Fusion Protein Patent Rights, and (2) a worldwide, sublicensable nonexclusive license to research, develop, manufacture, and commercialize certain know-how owned and controlled by Heat related to the Fusion Protein Patent Rights.

Under the Heat License Agreement, Heat was required to conduct certain research and development services under a mutually-agreed upon research and development plan and Heat was eligible to receive financial support from us for these efforts. Effective March 2017, Heat completed all research and development services under the Heat License Agreement and assigned to us three patent applications and all data derived from the research and development activities, referred to

collectively as the Research Services Inventions. Pursuant to the terms of the Heat License Agreement, we are obligated to use commercially reasonable efforts to diligently research and develop at least one product covered by the Fusion Protein Patent Rights, including the obligation to file an IND application for such product. Our development efforts to date, including the development of SL-279252 and certain other ARC compounds, satisfy these obligations. In addition, we are to provide annual reports to Heat on or before the anniversary of the effective date of the Heat License Agreement to inform Heat of our progress.

Unless sooner terminated or extended, the term of the Heat License Agreement continues until the later of (1) 20 years following the effective date, and (2) the expiration of the last-to-expire royalty term. Either party may terminate the agreement due to a material breach by the other party (subject to a 90-day cure period) or if the other party files for bankruptcy. In the event we terminate the Heat License Agreement due to a material breach by Heat, Heat must assign to us all right, title, and interest in the patent rights licensed under the Heat License Agreement.

In addition to an upfront payment of $50,000, which we made in 2016, the Heat License Agreement requires us to make further payments to Heat in the future of up to $20.6 million in the aggregate, for the achievement of specified development, regulatory, and commercial sale milestones for certain licensed products. We are also required to pay Heat a percentage of certain upfront fees or other non-royalty payments that are not tied to milestone events which we receive in connection with certain sublicenses of the Fusion Protein Patent Rights. We are also required to pay Heat a royalty on all worldwide net sales by us, our affiliates, and sublicenses of certain licensed products in the low single digits. Royalties are payable, on a product-by-product and country-by-country basis, commencing on the first commercial sale of such product and continuing until the last-to-expire valid patent claim to the licensed patent rights that cover such product in that country.

Manufacturing and Supply

By working with third-party vendors to conduct activities in compliance with current Good Manufacturing Practices, or cGMP, we have invested significant resources to identify and scale up a suitable manufacturing process for ARC compounds, including SL-172154 and SL-279252. Currently, ARC compounds are produced by mammalian cell lines commonly used in the manufacture of monoclonal antibodies, including Chinese hamster ovary, or CHO, cells. Both SL-172154 and SL-279252 have achieved cell culture titer greater than two grams per liter, and another ARC compound has achieved titers exceeding seven grams per liter. Purification of ARC compounds initially utilizes affinity chromatography directed to the Fc domain for capture, and subsequent chromatography steps are designed to remove process-related impurities including CHO derived DNA and proteins.

To date, we have obtained bulk drug substance, or BDS, for each of our product candidates from a single-source third-party contract manufacturer. We maintain a long-term master services agreement with KBI Biopharma, Inc., or KBI, pursuant to which we may purchase BDS and other products on a per project basis. We may terminate the master services agreement at any time for convenience in accordance with the terms of the agreement. Either KBI or we may also terminate the master services agreement with respect to an uncured breach by the other party in accordance with the terms of the agreement. The agreement includes confidentiality and intellectual property provisions to protect our proprietary rights related to our product candidates.

Given the complexity of manufacturing our dual-sided, bi-functional fusion proteins, our increased need for manufacturing driven by multiple clinical trial programs, and the challenges faced by biologics manufacturing facilities during the COVID-19 pandemic, we are actively working to make arrangements to procure redundant supply, including engaging with additional third-party manufacturers to identify suitable additional suppliers and building out a facility to support internal process development activities and cGMP manufacturing. We do not currently have arrangements in place for redundant supply.

We expect to continue to devote significant resources to process development and optimization of the manufacture of our product candidates. To our knowledge, no other company has successfully scaled up commercial manufacturing of dual-sided, bi-functional fusion proteins. Due to the novelty of our product candidates, we may face challenges in developing large-scale manufacturing processes. Moreover, the nature of biologic medicines could create challenges for the stability of the drug substance. While these and other challenges may result in timeline delays and higher costs, we believe that we will have sufficient BDS to support our current clinical trial programs.

All of our product candidates are manufactured from a master cell bank of that protein’s production cell line. We have or intend to have one master cell bank for each product candidate that was or will be produced and tested in accordance with cGMP and applicable regulations. Each master cell bank is or will be stored in two independent locations, and we intend to produce working cell banks for each product candidate later in product development. It is possible that we could lose multiple cell banks from multiple locations and have our manufacturing severely impacted by the need to replace the cell banks. However, we believe we have adequate backup should any particular cell bank be lost in a catastrophic event.

Competition

The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including large pharmaceutical and biotechnology companies, academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for the research, development, manufacturing, and commercialization of cancer therapies. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

We compete in the segments of the pharmaceutical, biotechnology, and other related markets that develop cancer therapies. There are many other companies that have commercialized or are developing cancer therapies, including large pharmaceutical and biotechnology companies, such as AstraZeneca/MedImmune, Bristol Myers Squibb, Merck, Novartis, Pfizer, Roche/Genentech and Gilead.

We face significant competition from pharmaceutical and biotechnology companies that target specific tumor-associated antigens using immune cells or other cytotoxic modalities. These generally include immune cell redirecting therapeutics (e.g., T cell engagers), adoptive cellular therapies (e.g., CAR-Ts), antibody drug conjugates, targeted radiopharmaceuticals, targeted immunotoxin, and targeted cancer vaccines.

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

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

Many of the companies against which we are competing or against which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical, biotechnology, and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and manufacturing capacity and enrolling subjects for our clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

We could see a reduction or elimination of our commercial opportunity if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we or our collaborators may develop. Our competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we or our collaborators are able to enter the market. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics, if required, the level of biosimilar or generic competition, and the availability of reimbursement from government and other third-party payors.

Intellectual Property

We strive to protect and enhance our proprietary technology, inventions, and improvements that we consider commercially important to the development of our business, including by seeking, maintaining, and defending U.S. and foreign patent rights, including patents covering our platform technologies, product candidates, and methods of using the same, whether developed internally or licensed from third parties. We also rely on trade secrets, know-how, and continuing technological innovation to develop, strengthen and maintain our proprietary position in our field. Additionally, we intend to rely on regulatory protection afforded through data exclusivity and market exclusivity, among others, as well as patent term extensions, where available.

Our future commercial success depends, in part, on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions, and know-how related to our business, including our platform technologies and product candidates, defend and enforce our intellectual property rights, in particular our patents rights, preserve the confidentiality of our trade secrets, and operate without infringing, misappropriating, or violating the valid and enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell, or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

The patent positions of biotechnology companies like ours are generally uncertain and can involve complex legal, scientific, and factual issues. We cannot predict whether the patent applications we are currently pursuing, or those we will file or license from others, will grant us patents in any particular jurisdiction or whether the claims of any granted patents will provide sufficient proprietary protection from competitors.

In addition, the coverage claimed in a patent application may be significantly reduced before a patent is granted, and its scope can be reinterpreted and even challenged after issuance. As a result, we cannot guarantee that any of our products will be protected or remain protectable by enforceable patents. Moreover, any patents that we hold may be challenged, circumvented, or invalidated by third parties. In addition, because of the extensive time required for clinical development and regulatory review of a product candidate we may develop, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby limiting the protection such patent would afford the respective product and any competitive advantage such patent may provide. See “Risk Factors—Risks Related to Our Intellectual Property and Information Technology” for a more comprehensive description of risks related to our intellectual property.

For any individual patent, the term depends on the applicable law in the country in which the patent is granted. In most countries where we have filed patent applications or in-licensed patents and patent applications, patents have a term of 20 years from the application filing date or earliest claimed nonprovisional priority date. In the United States, the patent term is 20 years from the application filing date or earliest claimed nonprovisional priority date, but may be shortened if a patent is terminally disclaimed over another patent that expires earlier. The term of a U.S. patent may also be lengthened by a Patent Term Adjustment in order to address administrative delays by the U.S. Patent and Trademark Office in granting a patent.

In the United States, the term of a patent that covers an FDA-approved drug or biologic may be eligible for Patent Term Extension in order to restore the period of a patent term lost during the premarket FDA regulatory review process. 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 natural expiration of the patent (but the total patent term, including the extension period, must not exceed 14 years following FDA approval). The term extension period granted on a patent covering a product is typically one-half the time between the effective date of a clinical investigation involving human beings is begun and the submission date of an application, plus the time between the submission date of an application and the ultimate approval date. Only one patent applicable to an approved product is eligible for the extension, and only those claims covering the approved product, a method for using it, or a method for manufacturing it may be extended. The application for the extension must be submitted prior to the expiration of the patent. The United States Patent and Trademark Office reviews and approves the application for any Patent Term Extension in consultation with the FDA. In the future, we may decide to apply for restoration of patent term for one of our currently owned or licensed patents to extend its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant biologics license application.

We generally file patent applications directed to our key technologies and programs in an effort to secure our intellectual property positions. As of February 1, 2021, we exclusively licensed ten U.S. patents and about 25 pending non-provisional patent applications (U.S. and foreign), and we owned two U.S. patents, about 60 pending non-provisional patent applications (U.S. and foreign), about ten pending Patent Cooperation Treaty, or PCT, applications, and various provisional patent applications covering our key programs and pipeline.

The intellectual property portfolio for our most advanced programs as of February 1, 2021, is summarized below. Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the U.S. Patent and Trademark Office and other patent offices may be significantly revised before issuance, if granted at all.

ARC Platform

The patent portfolio for our ARC platform is based upon our in-licensed patent portfolio, which includes patents and patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of treatment. The earliest provisional patent application relating to the ARC platform was filed in October 2015. Patent applications are pending in the United States and various foreign jurisdictions and regions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Ukraine, and Vietnam. Patent applications in this family, if granted, are expected to expire in 2036, without taking potential patent term extensions or patent term adjustment into account.

To date, the in-licensed ARC platform patent portfolio has been prosecuted in the United States to generate issued U.S. patents on various product candidates and preclinical product candidates as outlined below.

The Company also owns two PCT applications covering subgenera of ARC compounds relevant to different cellular types. Patent applications in this family, if granted, are expected to expire in 2040, without taking potential patent term extensions or patent term adjustment into account.

GADLEN Platform

The patent portfolio for our GADLEN platform is based upon our owned patent portfolio, which includes patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of treatment. We have one pending PCT application and two pending U.S. applications to date, with various foreign patent filings planned. Patent applications in this family, if granted, are expected to expire in 2040, without taking potential patent term extensions or patent term adjustment into account.

SL-279252 Product Candidate

The patent portfolio for our SL-279252 product candidate is based upon our owned and in-licensed patent portfolio, which includes patents and patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of treatment. We have two granted patents in the United States, from the in-licensed patent portfolio, covering compositions of matter of a genus of molecules, and the SL-279252 product candidate molecule specifically, pharmaceutical compositions, and methods of treating cancer. Patent applications are pending in the United States and various foreign jurisdictions and regions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Ukraine, and Vietnam. Patent applications in this family, if granted, are expected to expire in 2036, without taking potential patent term extensions or patent term adjustment into account.

Pending coverage, the Company-owned patent portfolio that relates to our SL-279252 product candidate also includes methods of treatment with various combination agents (one pending PCT application). Patent applications in this family, if granted, are expected to expire in 2039, without taking potential patent term extensions or patent term adjustment into account.

Takeda holds an exclusive option to these patent families in connection with the Collaboration Agreement discussed elsewhere herein.

SL-172154 Product Candidate

The patent portfolio for our SL-172154 product candidate is based upon our owned and in-licensed patent portfolio, which includes patents and patent applications directed generally to compositions of matter, pharmaceutical compositions, and methods of treatment. We have two granted patents in the United States, from the in-licensed patent portfolio, covering compositions of matter of a genus of molecules, and the SL-172154 product candidate specifically, pharmaceutical compositions, and methods of treating cancer. Patent applications are pending in the United States and various foreign jurisdictions and regions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Ukraine, and Vietnam. Patent applications in this family, if granted, are expected to expire in 2036, without taking potential patent term extensions or patent term adjustment into account.

Pending coverage, the Company-owned patent portfolio that relates to our SL-172154 product candidate also includes methods of treatment with various combination agents (one pending PCT application, and pending applications in the United States, Canada, China, Europe, and Japan). Patent applications in these families, if granted, are expected to expire in 2038 or 2039, without taking potential patent term extensions or patent term adjustment into account.

Preclinical Product Candidates

The Company also has taken steps to protect various preclinical product candidates. The Company owns or exclusively licenses various granted U.S. patents, and pending U.S., foreign and PCT applications covering ARC compounds that may develop into product candidates.

Six licensed U.S. granted patents and one Company-owned U.S. granted patent cover PD-1-, CSF1R-, TIM3-, SIRP1a-, FLT3L, and TIGIT-based ARC compounds, with OX40L, CD40L, and 4-1BBL, covering compositions of matter of a genus of compounds, and the preclinical product candidates specifically, pharmaceutical compositions, and methods of treating. Patent applications are pending in the United States and various foreign jurisdictions and regions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Ukraine, and Vietnam that could cover various product candidates. Patent applications in these families, if granted, are expected to expire in 2038 or 2039, without taking potential patent term extensions or patent term adjustment into account.

Trademark Protection

As of February 1, 2021, we owned a registered trademark for “ARC” and a pending trademark for “GADLEN” with the U.S. Patent and Trademark Office. We plan to register trademarks in connection with our biological products.

Licensed Intellectual Property from Heat Biologics, Inc.

In June 2016, we entered into an exclusive license agreement with Heat, pursuant to which we received an exclusive (as to the patent rights), non-transferable, sublicensable, worldwide, royalty-bearing, non-field restricted license to certain patent rights and know-how, including rights related to the ARC platform. We paid Heat an initial license fee of $50,000, and we are obligated to pay Heat fees upon receipt of certain sublicensing income, achievement of certain milestones, and royalties upon sales of commercial products. The Heat license provides us rights in the patent family that arose from PCT/US16/54598 and is the source of ten granted U.S. patents, and about 25 pending applications in the United States and various foreign jurisdictions and regions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Ukraine, and Vietnam. We control prosecution, maintenance, and enforcement of this family of patents and patent applications.

Government Regulation

The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.

U.S. Biologics Regulation

In the United States, biological products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, and other federal, state, local, and foreign statutes and regulations. The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:

•completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices, or GLP, regulation;

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

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

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

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

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

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

•a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

•satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMPs, and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with GCPs; and

•FDA review and approval of a BLA to permit commercial marketing of the product for particular indications for use in the United States.

Preclinical and Clinical Development

Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol or protocols for preclinical studies and clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product, chemistry, manufacturing and controls information, and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

In addition to the IND submission process, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment and such review may result in some delay before initiation of a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing preclinical studies and clinical trials and clinical study results to public registries.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

•Phase 1. The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

•Phase 2. The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

•Phase 3. The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of the product, or from a number of alternative sources, including studies initiated and sponsored by investigators. The submission of a BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.

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 biological product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and

effective. The Food and Drug Administration Safety and Innovation Act requires that a sponsor who is planning to submit a marketing application for a biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial pediatric study plan, or PSP, within sixty days after an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. Unless otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted.

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. Once a BLA has been accepted for filing, the FDA’s goal is to review standard applications within ten months after the filing date, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process may also be extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP 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 compliance with GCPs. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

Expedited Development and Review Programs

The FDA offers a number of expedited development and review programs for qualifying product candidates. The fast track program is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast track product has opportunities for more frequent interactions with the review team during product development and, once a BLA is submitted, the product may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides

a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A product intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product, including involvement of senior managers.

Any marketing application for a biologic submitted to the FDA for approval, including a product with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide a significant improvement in the treatment, diagnosis or prevention of a serious disease or condition. For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review).

Additionally, products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

In 2017, the FDA established a new regenerative medicine advanced therapy, or RMAT, designation as part of its implementation of the 21st Century Cures Act. The RMAT designation program is intended to fulfill the 21st Century Cures Act requirement that the FDA facilitate an efficient development program for, and expedite review of, any drug that meets the following criteria: (i) the drug qualifies as a RMAT, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions; (ii) the drug is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (iii) preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition. RMAT designation provides all the benefits of breakthrough therapy designation, including more frequent meetings with the FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. Once approved, when appropriate, the FDA can permit fulfillment of post-approval requirements under accelerated approval through: the submission of clinical evidence, preclinical studies, clinical trials, patient registries or other sources of real world evidence such as electronic health records; the collection of larger confirmatory datasets; or post-approval monitoring of all patients treated with the therapy prior to approval.

Fast track designation, breakthrough therapy designation, priority review and RMAT designation do not change the standards for approval but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. In May 2018, the Right to Try Act established a new regulatory pathway to increase access to unapproved, investigational treatments for patients diagnosed with life-threatening diseases or conditions who have exhausted approved treatment options and who are unable to participate in a clinical trial.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the

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

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Post-Approval Requirements

Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which the FDA assesses an annual program fee for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMPs and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMPs and other aspects of regulatory compliance.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

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

•fines, warning letters or holds on post-approval clinical studies;

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

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

•consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

•mandated modification of promotional materials and labeling and the issuance of corrective information;

•the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or

•injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available

products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

Regulation of Diagnostic Tests

Our drug candidates may require use of a diagnostic to identify appropriate patient populations for our product candidates. These diagnostics, often referred to as companion diagnostics, are medical devices, often in vitro devices, which provide information that is essential for the safe and effective use of a corresponding drug. In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket approval, or PMA approval. We expect that any companion diagnostic developed for our drug candidates will utilize the PMA pathway.

PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical, preclinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. For diagnostic tests, a PMA application typically includes data regarding analytical and clinical validation studies. As part of its review of the PMA, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the Quality System Regulation, or QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures. FDA review of an initial PMA may require several years to complete. If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure the final approval of the PMA. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA. Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards is not maintained or problems are identified following initial marketing.

On August 6, 2014, the FDA issued a final guidance document addressing the development and approval process for “In Vitro Companion Diagnostic Devices.” According to the guidance, for novel drugs such as our drug candidates, a companion diagnostic device and its corresponding drug should be approved or cleared contemporaneously by the FDA for the use indicated in the therapeutic product labeling. The guidance also explains that a companion diagnostic device used to make treatment decisions in clinical trials of a drug generally will be considered an investigational device, unless it is employed for an intended use for which the device is already approved or cleared. If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations. Thus, the sponsor of the diagnostic device will be required to comply with the IDE regulations. According to the guidance, if a diagnostic device and a drug are to be studied together to support their respective approvals, both products can be studied in the same investigational study, if the study meets both the requirements of the IDE regulations and the IND regulations. The guidance provides that depending on the details of the study plan and subjects, a sponsor may seek to submit an IND alone, or both an IND and an IDE.

Biosimilars and Reference Product Exclusivity

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

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, is generally shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. A product shown to be biosimilar or interchangeable with an FDA-approved reference biological product may rely in part on the FDA’s previous determination of safety and effectiveness for the reference product

for approval, which can potentially reduce the cost and time required to obtain approval to market the product. Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA. In July 2018, the FDA announced an action plan to encourage the development and efficient review of biosimilars, including the establishment of a new office within the agency that will focus on therapeutic biologics and biosimilars. On December 20, 2020, Congress amended the Public Health Services Act, or PHSA, as part of the COVID-19 relief bill to further simplify the biosimilar review process by making it optional to show that conditions of use proposed in labeling have been previously approved for the reference product, which used to be a requirement of the application. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Starting in March 2020, certain products currently approved as drugs under the FDCA, such as insulin and human growth hormone, will be deemed to be biologics under the PHSA, which means they may face competition through the biosimilars pathway and they will not be eligible for the twelve-year period of exclusivity granted to new BLAs. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.

Other Healthcare Laws and Compliance Requirements

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STTK · 10-K · period ended 2020-12-31

Item 1. Business

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STTK · 10-K · period ended 2020-12-31

Item 1. Business

STTK US Equity