10-K
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 31, 2025
OR
Commission File Number 001-40603
TScan Therapeutics, Inc.
(Exact name of Registrant as specified in its Charter)
830 Winter StreetWaltham, Massachusetts 02451
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (857) 399-9500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class TradingSymbol(s) Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐No☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, based on the closing price of the shares of common stock on The Nasdaq Global Market, LLC on June 30, 2025, was $56,871,577.
The number of shares of Registrant’s Common Stock outstanding as of February 27, 2026 was 52,625,035 shares of voting common stock, $0.0001 par value per share, outstanding and 4,276,588 shares of non-voting common stock, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Table of Contents
Table of Contents
Page
PART I.
Item 1. Business 6
Item 1A. Risk Factors 38
Item 1B. Unresolved Staff Comments 97
Item 1C. Cybersecurity 97
Item 2. Properties 98
Item 3. Legal Proceedings 98
Item 4. Mine Safety Disclosures 98
PART II.
Item 6. [Reserved] 99
Item 7A. Quantitative and Qualitative Data About Market Risk 110
Item 8. Financial Statements and Supplementary Data 110
Item 9A. Controls and Procedures 110
Item 9B. Other Information 111
PART III.
Item 10. Directors, Executive Officers and Corporate Governance 112
Item 11. Executive Compensation 112
Item 14. Principal Accounting Fees and Services 112
PART IV.
Item 15. Exhibits, Financial Statement Schedules 113
i
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, or Annual Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Annual Report are forward-looking statements.
In some cases, you can identify forward-looking statements by words such as “may,” “can,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “seek,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “possible” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements contained in this Annual Report include, but are not limited to, statements about:
•
the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our T cell receptor (TCR)-engineered T cell, or TCR-T, therapy product candidates;
•
our expectations regarding our preclinical studies being predictive of clinical trial results;
•
the timing of the initiation, progress and expected results of our preclinical studies, clinical trials and our research and development programs;
•
the timing of and our ability to submit applications for, and obtain and, if approved, maintain regulatory approvals for our TCR-T therapy product candidates;
•
our expectations regarding clinical trial results being predictive of continued development and commercial success of our product candidates;
•
our plans relating to developing and commercializing our TCR-T therapy product candidates, if approved, including sales strategy;
•
estimates of the size of the addressable market for our TCR-T therapy product candidates;
•
our manufacturing capabilities and the scalable nature of our manufacturing process;
•
our estimates regarding expenses, future milestone payments and revenue, capital requirements and needs for additional financing;
•
our expectations regarding competition;
•
our anticipated growth strategies;
•
our ability to attract or retain key personnel;
•
our ability to establish and maintain development partnerships and collaborations;
•
our expectations regarding federal, state and foreign regulatory requirements;
•
regulatory developments in the U.S. and foreign countries;
•
our ability to obtain and maintain intellectual property protection for our proprietary platform technology and our product candidates;
•
the anticipated trends and challenges in our business and the market in which we operate;
•
the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;
•
the effects of any public health crises in regions where we, our partners, or other third parties on which we rely, on any of the foregoing or other aspects of our business or operations;
•
the effects of rising inflation rates and the impact on operating costs, liquidity and access to credit on any of the foregoing or other aspects of our business operations;
•
the effects of global economic uncertainty and financial market volatility caused by political instability, new or increased international tariffs and retaliatory tariffs, changes in U.S. policy, changes in governmental agencies, changes in international trade relationships and conflicts on any of the foregoing or other aspects of our business or operations including our ability to obtain additional financing; and
•
our anticipated use of our existing cash resources and our ability to obtain additional financing in the future.
1
Table of Contents
Any forward-looking statements in this Annual Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions included in this Annual Report, particularly those described in the “Risk Factors” section in Part I, Item 1A of this Annual Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements contained in this Annual Report are made as of the date of this Annual Report, and although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report to conform these statements to actual results or to changes in our expectations.
You should read this Annual Report and the documents that we have filed as an exhibit to this Annual Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
In addition, this Annual Report contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates, including data regarding the estimated size of such markets and the incidence of certain medical conditions. We obtained industry, market and similar data set forth in this Annual Report from our internal estimates and research, and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable. Our estimates of the potential market opportunities for our product candidates include key assumptions based on our industry knowledge, industry publications and third-party research, surveys and studies, which may be based on a small sample size and fail to accurately reflect market opportunities. Information based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by us and third parties, industry, medical and general publications, government data and similar sources. This Annual Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents.
Unless stated otherwise, references in this Annual Report to “us,” “we,” “our,” “our Company,” or “the Company” and similar terms refer to TScan Therapeutics, Inc.
2
Table of Contents
RISK FACTOR SUMMARY
Our business operations are subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations, and future growth prospects. These risks are discussed more fully in Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K. These risks include, but are not limited to, the following:
Risks Related to Our Business and Industry
•
We have incurred significant losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.
•
Our business depends upon the success of our proprietary platform.
•
Our limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
•
We have never generated any revenue from sales of our TCR-T therapy product candidates, and our ability to generate revenue from product sales and become profitable depends significantly on our success in a number of areas.
•
We will need to obtain substantial additional funding to complete the development and any commercialization of our product candidates, if approved. If we are unable to raise this necessary capital when needed, we could be forced to delay, reduce or eliminate our product development programs, commercialization efforts or other operations.
•
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our intellectual property or product candidates on unfavorable terms to us.
•
Global economic uncertainty and financial market volatility caused by political instability, changes in international trade relationships and conflicts could make it more difficult for us to access financing and could adversely affect our business and operations.
•
The U.S. Congress and the Trump administration have made and may make substantial changes to fiscal, tax, and other federal policies that may adversely affect our business.
•
Recent volatility in capital markets and lower market prices for many securities may affect our ability to access new capital through sales of shares of our common stock or issuance of indebtedness, which may impact our liquidity, limit our ability to grow our business, pursue acquisitions or improve our operating infrastructure and restrict our ability to compete in our markets.
•
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.
•
The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our operating and financial flexibility.
Risks Related to the Development of Our Product Candidates
•
Our approach to the discovery and development of product candidates based on our proprietary platform represents a novel approach to cancer treatment, which creates significant challenges for us.
•
We are early in our development efforts. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.
•
Although many of our personnel have extensive experience in clinical development and manufacturing at other companies, we have limited direct experience as a company in conducting clinical trials and managing a manufacturing facility for our product candidates.
•
Our preclinical studies and clinical trials may fail to demonstrate adequately the safety, potency and purity of any of our product candidates, which would prevent or delay development, regulatory approval and commercialization.
•
Our business could be adversely affected by the effects of health epidemics in regions where we, our partners or other third parties on which we rely have significant manufacturing facilities, concentrations of potential clinical trial sites or other business operations.
3
Table of Contents
•
We may rely on third parties to manufacture our clinical product supplies, and we may rely on third parties to produce and process our product candidates, if licensed.
•
We cannot guarantee that our product candidates will show any functionality in the solid tumor microenvironment.
•
Allogeneic hematopoietic cell transplantation (HCT) is a high-risk procedure that may result in complications or adverse events for patients in our clinical trials including those unrelated to the use of our product candidates.
•
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, require expansion of the trial size, limit their commercial potential, or result in other significant negative consequences.
•
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
•
The market opportunities for our product candidates may be relatively small. In addition, our estimates of the prevalence of our target patient populations may be inaccurate.
•
We face significant competition, and our operating results will suffer if we fail to compete effectively.
Risks Related to Manufacturing
•
Manufacturing and administering our product candidates is complex and we may encounter difficulties in production, particularly with respect to process development or scaling up of our manufacturing capabilities. If we encounter such difficulties, our ability to provide supply of our TCR-T therapy product candidates for clinical trials or, if approved, for commercial purposes, could be delayed or stopped.
•
Although many of our personnel have experience in clinical manufacturing at other companies, we have limited experience as a company managing manufacturing for our product candidates, which will be costly and time-consuming, and which may not be successful.
•
We may have difficulty validating our manufacturing process as we manufacture TCR-T therapy product candidates from an increasingly diverse patient population for our clinical trials.
Risks Related to Government Regulation
•
The regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates.
•
We may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our potential to generate revenue, our business and our results of operations.
•
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Risks Related to Our Intellectual Property
•
If we are unable to obtain and maintain patent protection for any product candidates we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products, product candidates and technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop and our technology may be adversely affected.
•
We are currently, and expect in the future to be, party to material license or collaboration agreements, which may impose numerous obligations and restrictions on us.
•
Third-party claims of intellectual property infringement, misappropriation or other violations may prevent or delay our product candidate discovery and development efforts.
4
Table of Contents
Risks Related to Our Reliance on Third Parties
•
We rely on third parties to help us conduct our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.
•
We have in the past and may in the future form or seek collaborations or strategic alliances or enter into additional licensing arrangements, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.
General Risk Factors
•
Rising inflation rates may result in increased operating costs and reduced liquidity and affect our ability to access credit.
5
Table of Contents
PART I
Item 1. Business
Overview
We are a fully integrated clinical-stage biotechnology company focused on developing a robust pipeline of T cell receptor (TCR)-engineered T cell, or TCR-T, therapies for the treatment of patients with cancer. Our lead product candidate, TSC-101, is in development for the treatment of patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS) who are undergoing allogeneic hematopoietic cell transplantation (HCT). The product is designed to eliminate residual disease and promote complete donor chimerism, thereby preventing relapse. TSC-101 targets HA-2, an antigen that is present on all blood cells, malignant or benign, in patients with the HLA type A*02:01. We are currently conducting a Phase 1 clinical study of TSC-101 (the ALLOHATM trial, NCT05473910) and during the fourth quarter of 2025, following a productive End-of-Phase meeting with the U.S. Food and Drug Administration (FDA), we reached agreement on a registrational path forward for the TSC-101 program as a potential treatment for patients with AML and MDS. The pivotal study will mirror our ongoing Phase 1 ALLOHA study, using a biologically-assigned (genetically randomized) control arm to support relapse-free survival as the primary endpoint.
We are further expanding our hematologic (heme) malignancies program with the addition of TCRs targeting other HLA types. TSC-102-A01 and TSC-102-A03 are allogeneic, donor-derived TCR-T therapy candidates targeting epitopes derived from CD45. Like TSC-101, these candidates are designed to eliminate residual cancer cells and prevent relapse in patients undergoing HCT. TSC-102-A01 and TSC-102-A03 are designed for patients with HLA types A*01:01 and A*03:01, respectively.
We are also developing multiple TCR-T therapy product candidates for the treatment of solid tumors. One of the challenges of treating solid tumors is that they are heterogeneous – not every tumor cell expresses a given target. To address this challenge, we are developing what we refer to as multiplex TCR-T therapy, in which we treat a patient with more than one TCR-T therapy product candidate at a time. We are designing these multiplex therapies to be a simultaneous administration of up to three highly active TCR-Ts that are customized for each patient based on which targets are expressed in their tumors. On November 3, 2025, following our alignment with the U.S. Food and Drug Administration (FDA) on the registrational path forward for the TSC-101 program, we made the strategic decision to prioritize clinical development of our heme program and pause further enrollment in our solid tumor Phase 1 trial (PLEXI-TTM), while focusing our preclinical efforts on in vivo engineering for solid tumors.We believe an in vivo approach represents a promising and more cost-efficient way to deliver off-the-shelf, multiplexed TCR-T therapy for solid tumors.
While primarily focused on oncology, we believe our target discovery platform is well suited to identify targets that cause T cell-driven autoimmune disorders. We have identified a set of indications in which T cells play a key role and are currently identifying targets and developing potential treatment options for these disorders. Initial indications include ankylosing spondylitis, ulcerative colitis and scleroderma. In addition, the Company is continuing to discover targets for Crohn's disease in partnership with Amgen.
We have an internal good manufacturing practices, or GMP, facility to manufacture clinical supply for our TCR-T therapy product candidates. To provide an operationally flexible and cost-effective approach for our heme program, we have developed a manufacturing platform to genetically engineer T cells using a transposon/transposase system. This non-viral platform can be rapidly applied to new TCR-T therapy product candidates without the need for extensive process development. Our non-viral vector delivery system allows us to include additional T cell enhancements in our product candidates. In our heme program, we are introducing the gene for CD8α/β along with the TCR gene, which enables us to engineer both cytotoxic and helper T cells. We believe this enhancement has the potential to improve responses to TCR-T therapy in the clinic compared to engineering cytotoxic T cells alone. To further increase our existing clinical manufacturing capacity and prepare for potential commercialization, we have engaged a global contract development and manufacturing organization, or CDMO, with worldwide commercial capabilities.
Our Pipeline
Our lead product candidate, TSC-101, is a T cell receptor (TCR)-engineered T cell (TCR-T) therapy candidate in development for the treatment of patients with heme malignancies to eliminate residual disease and prevent relapse following allogeneic bone marrow transplantation (hematopoietic cell transplantation or HCT) (the ALLOHATM trial, NCT05473910). We are further expanding this program with TCRs targeting additional antigens across different HLA types, such as TSC-102-A01 and TSC-102-A03.
We are also developing multiplex TCR-T therapy candidates for the treatment of various solid tumors. We have built a diverse collection of therapeutic TCRs that recognize cancer-specific targets and are associated with multiple human leukocyte antigen (HLA) types, to provide customized multiplex TCR-T treatments for patients with a variety of solid tumors. We are currently engaged in preclinical development of an in vivo engineering platform to deliver off-the-shelf TCR-T therapy.
6
Table of Contents
In addition, we are using our target discovery platform to identify targets that cause T cell-driven autoimmune disorders. We have identified a set of indications in which T cells play a key role and are currently identifying targets and developing potential treatment options for these disorders. Initial indications include ankylosing spondylitis, ulcerative colitis, and scleroderma. Our current proprietary pipeline is summarized in the figure below.
In addition to our proprietary pipeline programs noted above, we have also entered into collaborations with strategic partners for applications of our platform technologies. We have a collaboration with Amgen Inc., or Amgen, to identify the antigens recognized by T cells in patients with Crohn's disease. Amgen will evaluate a variety of modalities to create therapeutic candidates based on targets discovered by us and will retain all global development and commercial rights.
Our Strategy
Our mission is to create life-changing T cell therapies for patients with cancer and autoimmune disorders. Our strategy includes the following key elements:
•
Advance our lead product candidate, TSC-101, through clinical development.Our lead program,TSC-101, is designed to target HA-2 and we are currently enrolling patients in a Phase 1 clinical study of TSC-101 with over 20 clinical sites activated. In addition, through our heme program, we have established a foundation of manufacturing, clinical and regulatory capabilities to support the development of our broad portfolio of TCR-T therapy product candidates.
•
Advance our in vivo solid tumor program through pre-clinical development.We are initially developing our solid tumor TCR-T therapy product candidates against three selected target antigens, HPV16, MAGE-A4, and PRAME, frequently expressed across multiple solid tumor types. We believe that the treatment of solid tumors will require a combination of therapeutic TCRs, which we refer to as 'multiplex therapy'. We have built a diverse collection of therapeutic TCRs that recognize cancer-specific targets, and are associated with multiple HLA types, to provide customized multiplex treatments for patients with solid tumor malignancies.
•
Advance our autoimmune program through pre-clinical development. We are leveraging our target discovery platform to identify targets that cause T cell-driven autoimmune disorders. We have identified a set of indications in which T cells play a key role and are currently identifying targets and developing potential treatment options for these disorders. Initial indications include ankylosing spondylitis, ulcerative colitis, and scleroderma.
•
Maintain manufacturing capabilities.We believe that in-house manufacturing capabilities substantially facilitate the successful early development of cell therapies. For our heme program, we have developed a non-viral gene delivery system based on transposons that are designed to enable cost-effective and consistent cell manufacturing with short development times. We have built an internal, fully operational GMP manufacturing facility that we believe provides sufficient capacity
7
Table of Contents
to support our clinical program. Additionally, we have engaged a global CDMO with commercial capabilities to further increase manufacturing capacity for the heme program and prepare for potential commercial manufacturing.
•
Develop next generation T cell engineering capabilities. We are developing off-the-shelf product candidates through in vivo engineering with the goal of providing customized multiplex TCR-T therapy to patients with a wide range of malignancies. We are in early stages of developing T cell engineering technologies and in-house manufacturing capabilities.
•
Opportunistically pursue strategic partnerships and collaborations to maximize the full potential of our platform. Our platform representsa powerful tool to identify targets in therapeutic areas outside of oncology, such as autoimmune disorders. We intend to seek strategic partners with proven clinical development and commercialization capabilities for certain targets and/or assets that do not overlap with our internal programs or our core focus. To date, we have a research collaboration and license agreement with Amgen to identify the antigens recognized by T cells in patients with Crohn’s disease. Under the terms of the agreement, we received a $30.0 million upfront payment and is eligible to earn success-based milestone payments of over $500 million, based upon the achievement of certain development and commercial milestones as well as tiered single-digit royalty payments on net sales of products developed from the collaboration. Amgen will evaluate a variety of modalities to create therapeutics based on targets discovered by us and will retain all global development and commercial rights to such therapeutics. We have also expanded our target discovery capabilities to include both CD8+ and CD4+ T-cells by engineering our platform to include class II antigen presentation. This capability allows for us to expand discovery efforts into T cell-mediated autoimmune disorders that have a strong Major Histocompatibility Complexes, or MHC, class II linkage. We intend to leverage this new capability to identify the pathogenic autoantigens driving T-cell mediated autoimmune disorders.
Background on T Cell Therapies
The human immune system constantly provides a natural and highly effective defense against cancer, which only forms when tumor cells find a way to evade the immune system. The treatment of cancer was revolutionized over a decade ago with the advent of immunotherapy – therapeutic approaches designed to re-enable or re-direct immune cells to recognize and fight cancer. Over the past 10 years, a suite of immuno-oncology drugs has been approved and adopted as part of routine clinical practice. Successes in immuno-oncology came initially from the approval of immune checkpoint inhibitors and more recently from the development of cellular therapies, such as CAR-T and TIL therapies. These therapies all harness the power of cytotoxic T cells in fighting both heme malignancies and solid tumors. Although these therapies have demonstrated compelling efficacy, they are only effective in a subset of patients. To address a broader patient population, we believe additional T cell-based approaches are needed that more closely mimic the way the immune system recognizes and fights cancer in patients who are responding to immunotherapy.
Overview of T Cell Biology
T cells are an essential component of the adaptive immune system and provide protection against cancer, infection, and autoimmune disorders. T cells are classically divided into two primary types of activating cells: helper T cells and cytotoxic T cells. Helper T cells, which express the CD4 co-receptor, function by providing signals to other immune cells for activation and recruitment. Cytotoxic T cells, which express the CD8 co-receptor, function by killing any cells in the human body that are expressing unnatural proteins, including proteins that are not expressed in normal tissue, proteins that arise from mutated genes, or proteins derived from pathogens. By definition, tumor cells are abnormal and make a wide variety of unnatural proteins. T cells are activated and exert their helper or cytotoxic function when their TCRs recognize antigens displayed on the surface of malignant or infected cells.
Virtually every cell in the body has a mechanism for displaying on its surface a sampling of every protein that is being made by the cell. This includes all normal proteins as well as aberrant proteins if the cell is cancerous or proteins from pathogens if the cell has been infected. Cellular proteins are broken down into short fragments, or peptides, by the proteasome, and these peptides are loaded into MHCs to be displayed on the outside of the cell. These peptide/MHC complexes are recognized by TCRs on cytotoxic CD8+ T cells, as shown in the graphic below. Because the TCR recognizes both the peptide and the MHC, a TCR only functions correctly when both the peptide and the correct MHC are present.
8
Table of Contents
TCRs on Cytotoxic CD8+ T Cells Recognize the
Peptide/MHC Complexes of Tumor Cells
MHC proteins, which present different peptides to the human immune system, are highly variable among people. An individual’s MHC proteins are determined by their HLA type. Although there are many different HLA types, some are quite common. For example, 42% of individuals in the U.S. are positive for the HLA-A*02:01 allele, or variant. TCRs are often referred to as “HLA-restricted” because they are only able to interact with specific HLA types. For this reason, TCR-Ts harness the specificity of the TCR-peptide-MHC interaction to selectively target tumor cells.
Current Approaches to T Cell Therapy
Multiple approaches are being explored to develop effective T cell-based therapies for the treatment of cancer. One approach is to isolate naturally occurring T cells from a patient’s tumor, referred to as TILs, expand and activate those cells ex vivo, and then return them to the patient via intravenous infusion. Although the targets of these T cells are not known, it is presumed that T cells isolated from a tumor are enriched in T cells directed against cancer cells. This approach, however, depends on the anti-cancer T cells present in the patient. If the patient’s TILs do not have appropriate anti-cancer specificities or if their anti-cancer TILs cannot be adequately expanded ex vivo, the therapy is unlikely to be effective.
A different approach that has proven effective in certain heme malignancies is to identify targets that are highly expressed on the surface of tumor cells, such as CD19. Antibody fragments that recognize these targets are used to create an artificial construct that links the antibody to key signaling elements required for T cell activation. The resulting CAR is incorporated genetically into a patient’s T cells, thereby redirecting those cells to recognize and fight the patient’s cancer. Although CAR-T therapies have been highly effective in certain tumor types, leading to multiple approved products, the benefit of these therapies and the addressable cancer indications have been limited by several factors. First, it is likely that there is a relatively limited set of truly tumor-specific cell surface antigens. In general, most antigens expressed on the surface of tumor cells are also expressed on normal cells, resulting in therapies that, even if effective, have a narrow therapeutic window and are vulnerable to potentially life-threatening toxicities. Second, CAR-T cells rely on antibody fragments that recognize cell-surface proteins, precluding intracellular proteins as potential targets. Third, CAR-T therapies generally do not efficiently penetrate solid tumors, which to date has limited their applicability to heme malignancies.
In contrast to CAR-T therapies, naturally occurring TCRs offer two important benefits compared to antibody-containing artificial receptors. First, TCRs are the natural receptors used by the T cell to recognize foreign antigens. As such, they are optimized to stimulate the T cell appropriately when they engage their targets on a tumor cell. An appropriately stimulated T cell will not only kill the tumor
9
Table of Contents
cell, but also produce cytokines that stimulate other immune cells and make copies of itself, or proliferate, to further augment the immune response. Balancing all the cellular responses of a T cell is something that has been finely tuned over millions of years of evolution and is best mediated by naturally occurring TCRs, rather than by artificial constructs. Second, TCRs can recognize a much broader set of antigens, including peptides derived from both cell surface and intracellular proteins, whereas CARs are restricted to recognizing only cell surface proteins. MHC-I peptides are predominantly derived from intracellular proteins rather than extracellular proteins, which dramatically increases the universe of potential cancer-specific antigens that can be recognized by TCRs compared to CARs. We believe TCR-T therapy combines the benefits of TIL and CAR-T therapies while uniquely addressing their key limitations, as shown below.
Building on the Remarkable Success of Immunotherapy
Our Heme Malignancies Program
We are developing our heme program for patients with hematologic malignancies undergoing allogeneic HCT. In the first phase of our clinical development strategy, we are initially focusing on HA-2, an antigen found on the blood cells of patients who are HLA-A*02:01 positive. Our program is based on the well-established observation that patients who are mismatched with their donors for patient-specific antigens, such as HA-2, and mount a T cell response against those antigens, show significantly lower relapse rates following HCT. By developing TSC-101, we aim to recreate this natural graft versus leukemia response to prevent relapse in patients undergoing HCT.
We are further expanding this program with the addition of TCRs targeting additional antigens across different HLA types. For example, TSC-102-A01 and TSC-102-A03, TCR-T therapy product candidates targeting CD45 in patients who are HLA-A*01:01- and HLA-A*03:01-positive, respectively.
Antigens like HA-2 and CD45 are distinct from other cancer-associated antigens such as WT1 previously targeted by TCR-Ts in heme malignancies. As shown below, cancer-associated antigens like WT1 have low and heterogenous expression and were previously selected so that normal blood cells in the patient would be spared. WT1-targeted TCR-Ts proved to have relatively poor efficacy in patients with ALL and AML, potentially due to the rapid emergence of resistant tumor cells that lacked WT1 expression and thus escaped killing by engineered T cells. HA-2 and CD45, in contrast, have high and homogenous expression, making it less likely for tumors cells to escape due to low antigen expression. Although HA-2 and CD45 are also expressed in normal blood cells, treating patients who are positive for the HLA types that present these antigens with HCT donors who are negative for those HLA types ensures that the engineered T cells selectively eliminate the patient’s blood cells – malignant, pre-malignant, or normal – while sparing the healthy donor-derived normal blood cells. This strategy enables high levels of anti-cancer efficacy with potentially less risk of life-threatening toxicities to other cells in the body.
10
Table of Contents
We are conducting a Phase 1 clinical trial of our lead TCR-T therapy product candidate, TSC-101, with patients enrolled in the treatment arm based on their genotype, as shown below. Patients who are positive for the target antigen, HA-2, as well as the HLA-A*02:01 allele (the HLA type required to display HA-2 on the cell surface for recognition by a T cell) are eligible for enrollment, provided they are paired with a donor who is negative for the HLA-A*02:01 allele.
ALLOHATM, a Phase 1 Trial Evaluating TSC-101 in Patients Undergoing Allo-HCT
Background on Heme Malignancies
HCT has become the standard of care for many heme malignancies. When a patient with leukemia undergoes HCT, they start by receiving a conditioning regimen of high dose chemotherapy with or without radiation. This regimen is intended to kill both the patient’s leukemia cells as well as their native blood cells and blood cell precursors, including hematopoietic stem cells in their bone marrow. The patient then receives hematopoietic stem cells from an appropriately-matched donor. The stem cells engraft in their bone marrow and start to repopulate their body with new blood cells, which are now genetically identical to the donor. HCT has demonstrated the rare opportunity in cancer treatment to generate long-term remissions or cures. For example, patients with AML who receive HCT have a five-year post-transplant survival rate of up to 50%.
11
Table of Contents
Approximately 5,600 allogeneic HCT procedures are performed yearly in the U.S. in patients with AML and MDS. As a curative therapy for many heme malignancies, use of HCT has been steadily increasing over the last two decades, with increased use driven largely by increasing donor qualification, an increase in disease prevalence due to aging populations, and alternative conditioning regimens permitting broader use in patients, including older and frailer patient segments. In addition, newer, more effective leukemia therapies continue to drive an increasing use of HCT in patients who previously failed to achieve proper remission prior to transplant.
However, despite the increasing use of HCT, there are limited treatment options for patients who relapse post-HCT, and the prognosis is very poor. Clinical observations have shown that if the T cells of the donor recognize certain antigens in the patient’s leukemia cells, but not the donor's blood cells, the T cells of the donor drive a specific graft vs. leukemia, or GvL, effect, whereby the engrafted donor T cells detect remaining leukemia as foreign and eliminate the remaining disease. As a result, the patient often experiences a long-term remission from their cancer, or even a complete cure. If the antigens are also expressed in non-hematopoietic tissues, the patient may develop graft vs. host disease, or GvHD, but if the antigens are only expressed in blood cells, a specific GvL effect is observed without an increase in GvHD. Our heme malignancies program is focused on targeting patient-specific antigens that are exclusively expressed in hematopoietic cells in order to induce the GvL effect while potentially mitigating the risk of GvHD.
TSC-101
TSC-101 is an allogeneic, donor derived TCR-T therapy product candidate directed at eliminating residual cancer cells in HA-2-positive and HLA-A*02:01-positive patients with heme malignancies who undergo HCT. The treatment includes selecting a donor who is HLA-A*02:01-negative. TSC-101 targets HA-2, which is an antigen derived from the protein MYO1G, and was selected as a product candidate based on its superior affinity, cytotoxic activity, and specificity compared to other potential TCR-T cell candidates we discovered.
The HA-2 antigen is highly prevalent, with approximately 95% of individuals in the U.S. being HA-2-positive. However, a specific HLA type, HLA-A*02:01, which is present in approximately 42% of individuals in the U.S., is required to display the HA-2 antigen on the cell surface for recognition by a T cell. As a result, approximately 40% of HCT patients would be positive for both HA-2 and HLA-A*02:01 and therefore be eligible for treatment with TSC-101 using a donor who is negative for HLA-A*02:01. Such donors are straightforward to identify and should be available to most patients who undergo half-matched (haploidentical) from a family member or mismatched unrelated donors (MMUD) identified through donor registries such as the National Marrow Donor Program (NMDP). A summary of the treatment paradigm for TSC-101 is shown below.
Patient Journey for TSC-101
TSC-102-A01 and TSC-102-A03
12
Table of Contents
Like TSC-101, TSC-102-A01 and TSC-102-A03 are allogeneic, donor derived TCR-T therapy product candidates directed at eliminating residual cancer cells in patients with heme malignancies who are HLA-A*01:01- and HLA-A*03:01-positive, respectively, undergoing HCT using a donor who is negative for the HLA type. CD45, which is derived from the protein PTPRC, is an antigen that has been identified to be clinically relevant. For example, radiolabeled CD45 is in clinical trials for relapsed AML, and a CAR-T product candidate targeting CD45 with epitope-edited HSCs is in pre-clinical development. We are developing TSC-102-A01 and TSC-102-A03 based on highly active TCRs we discovered that recognize a CD45 antigen presented on HLA-A*01:01 and HLA-A*03:01, respectively. The FDA has cleared our IND applications for both TSC-102-A01 and TSC-102-A03, allowing us to initiate study start-up activities.
The CD45 antigen is expressed on all nucleated cells of hematopoietic origin. As with TSC-101, a specific HLA type is required to display the CD45 antigen on the cell surface. Donors who are negative for the HLA type are straightforward to identify and should be available to most patients who undergo HCT with haploidentical family members or MMUD identified through donor registries such as the NMDP.
Clinical Development Plan for Our Heme Malignancies Program
Background on Types of HCT
Patients with acute leukemias who undergo allogeneic HCT have heterogeneous outcomes that are primarily related to two main variables: (i) the intensity or doses of the conditioning regimen they receive prior to the stem cell infusion and (ii) the type of donor who provides the stem cells.
High-intensity conditioning regimens are called myeloablative conditioning and are associated with higher mortality rates. They are therefore reserved for young and relatively fit patients. Lower-intensity regimens are called reduced-intensity conditioning, or RIC, and are better tolerated, but are associated with higher relapse rates. Our heme malignancies TCR-T therapy product candidates are designed to substantially reduce relapse rates, and we are enrolling patients into our ongoing Phase 1 clinical trial who are eligible for RIC-based HCT with the goal of improving clinical outcomes for these patients.
There are different types of donors who are eligible for allogeneic HCT procedures. Donors who are siblings of the patient and are perfectly matched for eight out of eight HLA alleles are considered the highest priority donor type for patients undergoing allogeneic HCT, but these types of donors are available for less than a third of patients. For most patients, the choice is between an unrelated donor who is perfectly matched for eight out of eight HLA alleles, referred to as a matched unrelated donor, or MUD, or a family member such as a sibling or child who has a half-match with the patient, referred to as a haploidentical donor, or haplo. Historically, haplo donor transplantation was associated with much higher GvHD than MUD transplants, but a recent treatment regimen that uses chemotherapy given three days after stem cell infusion called post-transplantation cyclophosphamide, or PTCy, specifically kills immune cells that cause GvHD. As a result, haplo transplants with PTCy have recently achieved equivalent outcomes as MUD transplants and are rapidly increasing in usage in the U.S. and worldwide. Another recent advance is the recognition that transplants from 1-2 HLA mismatched unrelated donors (MMUD) have equivalent outcomes as fully HLA-matched MUD transplants when PTCy is used to prevent GvHD. The increasing use of alternative donors, such as MMUD and haplo donors for allo-transplants has not only greatly expanded donor availability, thereby enabling more patients to undergo transplant, but also makes it straightforward to identify donors negative for the HLA-A*02:01, HLA-A*01:01, or HLA-A*03:01 so that patients with those HLA-types could be treated with TSC-101, TSC-102-A01, or TSC-102-A03, respectively.
Phase 1 Clinical Trial
The clinical study for TSC-101 is well underway, within a Phase 1 clinical trial to investigate the safety and efficacy of TSC-101 in patients with AML, MDS, and ALL that are undergoing HCT following RIC. We are currently treating patients using a fixed dosing regimen (as compared to weight-based dosing) manufactured using our commercial-ready manufacturing process.
Our Phase 1 clinical trial is designed to include measurements of early surrogate markers of efficacy, such as donor chimerism, or the percentage of blood cells that are donor-derived, and whether patients continue to have detectable residual leukemia, referred to as minimal residual disease, or MRD, in their post-transplant bone marrow biopsy, both of which are predictors of relapse. We also included a genetically randomized control arm, comprising patients who do not meet the HLA or HA-2 genetic criteria and are treated with standard RIC-HCT alone. Comparisons of both safety and efficacy outcomes with this control arm will support transitioning the program to include a registrational trial required for a potential future biologics license application, or BLA, filing.
Clinical data
13
Table of Contents
In December 2025, we reported updated results, dated as of September 19, 2025, from the ongoing ALLOHATM Phase 1 trial, which we presented at the 67th American Society of Hematology (ASH) Annual Meeting and Exposition. In that presentation, we reported that 42 patients had been enrolled in the trial and undergone HCT, with 23 in the TSC-101 treatment arm and 19 in the control arm. The key endpoints in the trial are safety and efficacy, with exploratory endpoints of donor chimerism and MRD.
As of the September 19, 2025 data cut, we have observed durable responses with 3 of 3 (100%) of patients 2-years post-HCT showing no evidence of disease, versus 1 of 4 (25%) in the control arm. In the treatment arm, 4 of 19 (21%) evaluable patients relapsed compared to 6 of 18 (33%) evaluable control-arm patients. Eight of 37 (22%) patients had TP53 mutations, with 6 cases in the treatment arm and 2 cases in the control arm. Of the 6 patients in the treatment arm, only 1 has relapsed. Both patients with TP53 mutations in the control arm have relapsed and subsequently succumbed to their disease. The first patient with a TP53 mutation to receive TSC-101 has now reached two years of follow-up and remains relapse-free. Relapse-free survival (HR=0.50; p=0.23) and overall survival (HR=0.61; p=0.52) favored the treatment arm.
TSC-101 infusions were generally well-tolerated at all three dose levels with no dose-limiting toxicities. Observed adverse events were similar across the treatment and control arms and were generally consistent with post-HCT adverse events.
Mixed chimerism or relapses following TSC-101 infusions were found to be significantly associated with greater ex vivo expansion of TCR-T cells during the manufacturing process. A new commercial-ready process reduces the manufacturing time from 17 days to 12 days and has shown promising significant reduction in ex vivo expansion.
14
Table of Contents
Anticipated timeline
In our Phase 1 clinical trial, we have now completed enrollment in Cohort C, where at least 10 patients will be treated with our commercial-ready manufacturing process at the highest dose level. We intend to share early data on these patients and subsequently initiate a registrational trial for TSC-101 using the commercial-ready manufacturing process, pending further feedback from regulatory authorities, in the second quarter of 2026. To expand our heme program, we recently filed investigational new drug (IND) applications with the U.S. Food and Drug Administration (FDA) for TSC-102-A01 and TSC-102-A03, TCR-T therapy product candidates targeting CD45 in patients who are HLA-A*01:01- and HLA-A*03:01-positive, respectively. The FDA has cleared our IND applications for TSC-102-A01 and TSC-102-A03, allowing us to initiate study start-up activities. We plan to initiate a Phase 1 study for both TSC-102 candidates in the second half of 2026.
Future market expansion opportunities
If TSC-101 demonstrates the ability to significantly reduce relapse rates after HCT, there could potentially be new opportunities to expand the curative potential of HCT combined with TSC products to greater numbers of patients. Currently, only about 5,600 patients with AML and MDS undergo allogeneic HCT per year in the U.S. out of approximately 35,000 patients diagnosed each year. There are two reasons for this relatively modest rate of transplant use. First, only patients who achieve a clinical complete remission (CR) are referred for HCT since the relapse rates of patients not in CR are considered too high to effectively use HCT. If HCT, combined with TSC-101, markedly reduces relapse rates, patients who do not achieve CR could possibly undergo HCT and benefit from its curative potential. This market expansion would require a separate clinical trial. Second, while RIC has enabled many more elderly and frail patients to undergo transplantation, the chemotherapy and radiation doses used for conditioning are still high and considered too toxic for most patients over the age of 65 or those with underlying comorbidities. This is because the conditioning regimen of HCT is considered the primary modality for eliminating residual leukemia cells and reducing doses further would result in greater relapse rates. If the relapse rates could be reduced by treatment with TSC-101 post HCT, however, a clinical trial could test the use of minimal intensity conditioning prior to HCT. If successful, this would further expand the curative potential of HCT combined with TSC-101 therapy to older, frailer patients. We could also expand the addressable market through the addition of TCRs for other HLA types, of which TSC-102-A01 and TSC-102-A03 are examples of this approach.
A final market expansion opportunity could occur from the use of TSC-101 as a chemotherapy and radiation-free conditioning regimen for non-malignant diseases such as sickle cell anemia which are currently treated with HCT. Since chemotherapy and radiation are associated with the risk of long-term toxicities such as cancer, heart damage, lung damage and infertility, cellular therapies such as TSC-101 could reduce those risks and increase the numbers of patients willing to undergo HCT for non-malignant diseases.
15
Table of Contents
Our Solid Tumor Program
We are developing a portfolio of TCR-T therapy product candidates designed to be used in combination with each other to treat and eliminate solid tumors. Our solid tumor product candidates are designed to elicit an anti-tumor response in patients by targeting cancer-specific antigens in their tumor cells. Our TCR-T therapy product candidates include: (i) well-recognized cancer targets that have demonstrated anti-tumor activity in clinical trials as well as novel targets that were identified by our target discovery platform from the T cells of patients responding to immunotherapy and (ii) naturally occurring TCRs specific to a patient’s HLA type that recognize these cancer-specific targets. Such targets are not only commonly shared among patients with the same cancer type, but also frequently expressed in multiple solid tumor types, enabling clinical development across multiple indications. Initial targets of interest include HPV16, MAGE-A4, and PRAME.
We have built a diverse collection of therapeutic TCRs that recognize cancer-specific targets to enable multiplex TCR-T therapy for patients with various types of solid tumors. We are currently engaged in preclinical development of an in vivo engineering platform to deliver off-the-shelf TCR-T therapy.
TCR-T Therapy Product Candidates for the Treatment of Solid Tumors
Immunotherapy has reshaped the treatment of solid tumors by demonstrating that tumor shrinkage, eradication, and long-term durable responses can be obtained by stimulating the patient’s own immune system to attack their cancer cells. Immune checkpoint inhibitors, such as nivolumab or pembrolizumab, work by unleashing anti-cancer T cells that are already present in a patient’s tumor, enabling those T cells to recognize and eliminate their cancer. For patients who respond to checkpoint inhibitors, these agents have been shown to be very effective. However, only a subset of patients responds to checkpoint inhibitors, highlighting the need for T cell-based therapies that can treat those patients who do not respond. Despite their efficacy in only a subset of patients, checkpoint inhibitors have annual sales of about $34 billion in the U.S.
One reason why patients may not respond to current immunotherapy treatment options is that they lack T cells with highly active TCRs that recognize the cancer-specific antigens in their tumors. By reprogramming the patient’s own T cells to recognize these target antigens, we believe that we can expand the dramatic responses observed with checkpoint inhibitor therapy to the patients for whom these therapies have historically been ineffective. In addition, solid tumors are notoriously heterogeneous: not every cancer cell in a tumor expresses a given antigen. We believe that by targeting multiple antigens in a patient's tumor, we will be able to drive deep and durable responses. We have built a diverse collection of therapeutic TCRs to enable customized multiplex TCR-T therapy. We are currently engaged in preclinical development of an in vivo engineering platform to deliver off-the-shelf TCR-T therapy.
Development Plan for Our Solid Tumor Program
On November 3, 2025, following our alignment with the U.S. Food and Drug Administration (FDA) on the registrational path forward for the TSC-101 program, we made the strategic decision to prioritize clinical development of our heme program and pause further enrollment in our solid tumor Phase 1 trial (PLEXI-TTM), while focusing our preclinical efforts on in vivo engineering for solid tumors. We treated seven patients at dose level 3 or higher with singleplex therapy and two patients with multiplex therapy in the PLEXI-T study. No dose-limiting toxicities were observed in these cohorts. Six of the seven patients treated with singleplex therapy received at least 6 billion cells over two infusions, administered 28 days apart. Of these patients, one (treated with the PRAME TCR) achieved a confirmed partial response, three achieved stable disease with varying degrees of tumor shrinkage (two with the PRAME TCR and one with the HPV-16 TCR), and the remaining two had progressive disease. Additionally, of the two patients that were treated with multiplexed therapy (HPV/PRAME and HPV/MAGE-A4), neither patient received the target dose of 4 billion cells of each TCR-T over two infusions, and both patients had evidence of disease progression. The inability to provide the target dose, coupled with the challenges associated with lymphodepletion and extended vein-to-vein times in the late-line disease setting, further reinforce our decision to focus on an in vivo engineering approach. We have now partnered with a third party specializing in the development of a lentiviral-based platform for in vivo engineering of T cells and believe this approach represents a promising, cost-efficient, and clinically tractable way to deliver off-the-shelf, multiplexed TCR-T therapies for solid tumors.
16
Table of Contents
Our Autoimmune Program
Our primary focus is on the development of T cell therapies to treat cancer. However, T cells play a fundamental role in other disease areas. Many autoimmune disorders such as ankylosing spondylitis, ulcerative colitis and scleroderma are largely T cell-mediated, but with poorly defined instigating self-antigens. We believe our target discovery platform is well suited to identify self-antigens that cause T cell-driven autoimmune disorders. We are currently in early stages of identifying targets and developing potential treatment options for these disorders. We intend to build additional corporate value by opportunistically pursuing collaborations with strategic partners for applications of our platform outside our core focus areas.
License and Collaboration Agreements
Collaboration Agreement with Amgen
On May 8, 2023, we entered into a Research Collaboration and License Agreement with Amgen Inc. (Amgen), or the Amgen Agreement, to identify antigens recognized by T cells in patients with Crohn’s disease utilizing our proprietary target discovery platform. Under the terms of the Amgen Agreement, Amgen will then evaluate a variety of modalities to create therapeutics based on targets discovered by us and will retain all global development and commercialization rights. Amgen made an upfront payment of $30.0 million to us, and we are eligible to earn success-based milestone payments of over $500 million based upon the achievement of certain development and commercial milestones, as well as tiered single-digit royalty payments on net sales of products developed from the collaboration, subject to reductions set forth in the Amgen Agreement.
Exclusive Patent License Agreement with BWH
On December 5, 2018, we entered into an Exclusive Patent License Agreement with The Brigham and Women’s Hospital, Inc., or BWH, as amended on July 26, 2019 and further amended and restated on April 20, 2021, or, collectively, the BWH Agreement, pursuant to which we obtained an exclusive, sublicensable, worldwide license to practice under certain of BWH’s patent rights for identifying T cell epitopes, which are relevant to our target discovery platform for identifying potential therapeutic products. The original 2018 BWH Agreement granted us the right to practice BWH’s patent rights in a certain field of use, MHC Class I License Field. In connection with the amendment and restatement of the BWH Agreement in 2021, we expanded the field of use in which we are authorized to practice BWH’s patent rights to include MHC Class II uses and applications in exchange for certain additional payments to BWH. We are obligated to use commercially reasonable efforts to develop and commercialize at least one product or process that practices the licensed patent rights and at least one therapeutic or diagnostic product or process directed to an epitope identified through practicing the licensed patent rights.
Upon execution of the amendment of the BWH Agreement dated April 20, 2021, we paid an additional one-time fee of $466,500. We are required to pay BWH up to an aggregate of $12.72 million upon the achievement of certain clinical, regulatory and sales milestones for therapeutic products and processes. We are obligated to pay a low double-digit percentage of all non-royalty income we receive under sublicenses of BWH’s patent rights. We are also obligated to pay a low single-digit percentage of all non-royalty income we receive under agreements with third parties, or Collaborators, where we practice under BWH’s patent rights in connection with the research or development of one or more therapeutic products or processes with or for such third party, or Collaboration Agreements. We are also obligated to pay tiered royalties in the high single-digit percentage range on annual net sales of products and processes that practice the licensed patent rights and in the low single-digit percentage range on annual net sales of therapeutic and diagnostic products and processes directed to an epitope identified through practicing the licensed patent rights (other than those sold by Collaborators), with the royalty percentage for such products and processes decreasing to lower than one-percent royalties if directed to epitopes identified through practicing the licensed patent rights after December 31, 2019. For therapeutic and diagnostic products and processes directed to an epitope identified through practicing the licensed patent rights and sold by a Collaborator, we are obligated to pay lower than one-percent royalties of the Collaborator’s annual net sales of such products and processes. For products and processes sold by us, our affiliates or sublicensees, such royalties only apply to products and processes directed to epitopes in a defined field of use MHC Class I field identified prior to December 31, 2022, and products and processes based on epitopes in the MHC Class II field identified prior to September 30, 2023. For products or processes directed to epitopes identified under a Collaboration Agreement, such royalties apply regardless of when the epitopes were identified. For each applicable product or process, the royalty term continues until the tenth (10th) anniversary of the first commercial sale of such product or process. The royalty rates are also subject to reduction upon certain other events. Within 60 days of each anniversary of December 5th, we are obligated to pay BWH a non-refundable, mid-five-figure minimum annual royalty, which amount is creditable against royalties subsequently due on net sales of products and processes in such calendar year.
The BWH Agreement will terminate upon the later of (a) the last to expire or abandoned valid claim within the licensed patents, and (b) one year after the last sale for which a royalty is due. The current expected expiration date for the last-to-expire licensed patent right is June 8, 2038 (absent any adjustments or extensions of term). We also have the right to terminate the BWH Agreement in its entirety or on a country-by-country basis, for any reason upon 90 days’ prior written notice to BWH. BWH may terminate the BWH
17
Table of Contents
Agreement: (i) without notice if we fail to maintain insurance required by the BWH Agreement; (ii) upon notice within 60 days of our bankruptcy; (iii) upon notice within 60 days after notice by BWH of our default in the performance of any obligation under the BWH Agreement that is not cured within such 60-day period; (iv) if we fail to make any payments due under the BWH Agreement and do not cure such failure within 10 days after receiving BWH notice thereof; or (v) if we or any of our affiliates challenge the validity, enforceability or scope of any of the patent rights licensed to us under the BWH Agreement.
Non-Exclusive License Agreement with Provincial Health Services Authority
On October 15, 2020, we entered into a Non-Exclusive License Agreement with the Provincial Health Services Authority of British Columbia, or PHSA, and such agreement, the PHSA Agreement. Pursuant to the PHSA Agreement, we obtained a non-exclusive, perpetual, non-transferable, sublicensable, worldwide license to practice certain of PHSA’s patent rights for identifying T cell epitopes, which epitopes are relevant to our platform for identifying potential TCR-T therapy product candidates. Any sublicenses we grant to PHSA’s patent rights must also include a license of our own intellectual property; we are not permitted to sublicense PHSA’s rights on a standalone basis.
Pursuant to the PHSA Agreement, we paid PHSA a one-time, non-refundable upfront fee of $500,000 as well as reimbursement for previously incurred patent prosecution costs of approximately $50,000. Starting on the first anniversary of the effective date of the PHSA Agreement and continuing for five years thereafter, we are required to pay PHSA a mid-five-figure annual license fee, of which the first installment has been paid. In addition, we are obligated to pay a mid-six-figure fee for each sublicense and each further sublicense granted by one of our sublicensees or a sublicensee of our sublicensee (through multiple tiers) of the rights granted to us under the PHSA Agreement.
The PHSA Agreement will terminate upon the last to expire patent licensed under the PHSA Agreement. We also have the right to terminate the PHSA Agreement at any time, but such termination will not be effective until the later of (a) October 16, 2023, and (b) the date we have paid PHSA total aggregate fees equal to the upfront fee plus five years of annual license fees totaling $750,000. PHSA may terminate the PHSA Agreement upon giving us two separate written notices at least 30 days apart if: (i) we or any of our affiliates challenge the validity, enforceability or scope of any of the patents licensed to us under the PHSA Agreement; (ii) we owe unpaid fees due under the PHSA Agreement in excess of $100,000; or (iii) we breach material terms of the PHSA Agreement regarding sublicense restrictions (such as failing to pay the sublicense fee or sublicensing PHSA technology on a standalone basis) or our obligation to indemnify PHSA for damages resulting from our research or commercialization of PHSA’s patent rights and, in each case described above, such termination will be effective only if we fail to cure such breach after receiving PHSA’s two separate notices.
Royalty Agreement
In connection with our incorporation in April 2018, we entered into a royalty agreement with one of our founders. We amended and restated this royalty agreement in June 2018, and our founder assigned his rights and obligations under the royalty agreement to one of his affiliated entities in January 2021. Pursuant to the royalty agreement, we are required to pay him a royalty of 1% of net sales (as defined in the royalty agreement) of any product sold by us or by any of our direct or indirect licensees for use in the treatment of any disease or disorder covered by a pending patent application or issued patent held or controlled by us as of the last date that the founder was providing services to us as a director or consultant under a written agreement. Royalties are payable with respect to each applicable product on a country-by-country and product-by-product basis, beginning on the first commercial sale of the first royalty-bearing product and ending on the later of (i) the date on which the exploitation of such royalty-bearing product is no longer covered by such patent in such country or (ii) the 15th anniversary of the first commercial sale of the first royalty-bearing product in such country. We may not assign our rights and obligations under the royalty agreement except in the event of a change in control relating to our company. The term of the royalty agreement continues until expiration of the last applicable royalty term.
Manufacturing
We have built in-house cell therapy manufacturing capabilities as one of the key components of our platform. The manufacturing of cell therapies requires the integration of several distinct components. Primary human blood cells are the source of T cells, along with a vector that delivers the desired genetic elements into these T cells. To provide an operationally flexible and cost-effective approach for our heme program, we have developed a manufacturing platform to genetically engineer T cells using a transposon/transposase system.
We have designed our heme program to use a transposon vector and corresponding transposase enzyme, which is derived from sfR fall armyworm, to deliver our TCRs into the genome of T cells. Our transposon/transposase system effectively inserts our TCRs and exogenous genes, such as CD8, at random locations in the genome. The transposon is delivered as a NanoplasmidTM and has no antibiotic selection element, reducing the risk of inadvertent transmission of antibiotic resistance into T cells. The transposase is
18
Table of Contents
delivered as mRNA. mRNA is transiently expressed in the cell, reducing exposure of cells to prolonged transposase activity, which could result in multiple transposition events where the transposon would be moved around the genome.
We have developed a manufacturing process currently producing product for our clinical program, using industry standard equipment and instrumentation. The equipment and instrumentation used in our manufacturing facility allows for functionally closed processes in a small footprint. For clinical product manufacturing, we use single-use consumables as well as process reagents that are available from well-established vendors who specialize in supplying clinical grade reagents for the cell and gene therapy industry. Our TCR-T therapy product candidates are released and characterized using well-developed analytical methods. The final product used in clinical studies is cryopreserved, simplifying logistics to support patient dosing. We have controls and safeguards throughout the entire process to ensure product identity, integrity, sterility, and chain of custody. A clearly defined and documented manufacturing process, performed by trained operators in an appropriately designed, commissioned, and operated manufacturing facility is critical for the manufacturing of safe, effective, and well-characterized cell therapies.
Our cell product manufacturing facility in Waltham, MA has been designed and built to support multiple programs through Phase 1 and Phase 2 clinical development. We believe internalizing our manufacturing process and product testing enables us to better control this key aspect of clinical development and reduces the risk of program delay due to third-party reliance. We continue to refine our manufacturing process to ensure it is commercially viable with focus on cost, consistency, and manufacturing success rate. We have engaged a CDMO with global capabilities to support increased capacity and potential commercial manufacturing.
Competition
We believe our diverse collection of therapeutic TCRs and our in-house cell therapy expertise constitute a meaningful competitive advantage in successfully developing novel and highly safe and effective treatments for cancer. However, the biopharmaceutical industry in general, and the cell therapy field in particular, is characterized by rapidly advancing and changing technologies, intense competition, and a strong emphasis on intellectual property. We face substantial and increasing competition from many different sources, including large and specialty biopharmaceutical companies, academic research institutions, governmental agencies, and public and private research institutions. Competitors may compete with us in hiring scientific and management personnel, establishing clinical study sites, recruiting patients to participate in clinical trials, and acquiring technologies complementary to, or necessary for, our programs.
We face competition from segments of the pharmaceutical, biotechnology and other related markets that pursue the development of TCR-based or cell-based therapies for the treatment of cancer. We expect to compete with a number of other TCR-based companies, utilizing both cell therapy and other therapeutic modalities, such as Immatics N.V., Adaptimmune Therapeutics, Plc. (who sold their cell therapy assets to US WorldMeds, LLC in July 2025), Affini-T Therapeutics, Inc., Medigene AG (who initiated insolvency proceedings in April 2025), T-Knife GmbH, Immunocore Holdings, Plc., and 3T Biosciences Inc. We may also face competition from companies focused on other T cell therapies (e.g., TIL, CAR-T, gammadelta T cells) such as Iovance Biotherapeutics, Inc., Instil Bio, Inc., Kite Pharma, Inc., a subsidiary of Gilead, Inc. (including Yescarta, which is approved for the treatment for large B cell lymphoma or follicular lymphoma, two types of non-Hodgkin lymphoma), Juno Therapeutics, Inc., a subsidiary of Bristol-Myers Squibb, Inc., Regeneron Pharmaceuticals, Inc., through their acquisition of 2seventy Bio, Inc.’s research pipeline, AstraZeneca plc, through their acquisition of Gracell Biotechnologies, Inc., Legend Biotech Corporation, Autolus Therapeutics plc, Sana Biotechnology, Inc., Lyell Immunopharma, Inc., Allogene Therapeutics, Inc., Century Therapeutics, Inc., Arcellx, Inc., and Adicet Bio, Inc. There are also companies utilizing other cell-based approaches that may be competitive to our product candidates. For example, companies such as Takeda Pharmaceutical Company, Ltd. (who announced the discontinuation of all cell therapy initiatives in October 2025), Celyad, S.A., ImmunityBio, Inc., Celularity, Inc., Fate Therapeutics, Inc., and Nkarta, Inc. are developing therapies that target and/or engineer natural killer, or NK, cells. In addition, for our lead program, TSC-101, we may face competition from BlueSphere Bio, IN8bio, Inc., Orca Biosystems, Inc., Fred Hutchinson Cancer Center partnered with Promicell Therapeutics Inc., and Marker Therapeutics, Inc., who are also developing cell therapies in the post-HCT setting. The named companies are not fully inclusive of all possible competitive threats.
Furthermore, we also face competition more broadly across the oncology market for cost-effective and reimbursable cancer treatments. The most common methods of treating patients with cancer are surgery, radiation, and drug therapy, including chemotherapy, hormone therapy, biologic therapy, such as monoclonal and bispecific antibodies, immunotherapy, cell-based therapy, and targeted therapy, or a combination of any such treatments. There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. While our TCR-T therapy product candidates, if any are approved, may compete with these existing drugs and other therapies, to the extent they are ultimately used in combination with or as an adjunct to these therapies, our TCR-T therapy product candidates may not be competitive with them. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis. As a result, obtaining market acceptance of, and gaining a significant share of the market for, and commanding a certain price for any of our TCR-T therapy product candidates that we successfully introduce to the market may pose challenges. In addition, many companies are developing new oncology therapeutics, and we cannot predict what the standard of care will be as our product candidates progress through preclinical and clinical development.
19
Table of Contents
We could see a reduction or elimination in our commercial opportunity if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient to administer, are less expensive, are more accessible, or receive a more favorable label than our TCR-T therapy product candidates. Our competitors also may obtain FDA or other regulatory approval for their drugs more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. The key competitive factors affecting the success of all of our TCR-T therapy product candidates, if approved, are likely to be their efficacy, safety, convenience, accessibility, price, and the availability of reimbursement from government and other third-party payors.
Intellectual Property
Our success depends in part on our ability to obtain, maintain and protect our proprietary technology and intellectual property and proprietary rights and to operate our business without infringing, misappropriating and otherwise violating the intellectual property and proprietary rights of third parties. We rely on a combination of patent applications, trademarks, trade secrets, and other intellectual property rights and measures to protect the intellectual property rights that we consider important to our business. We also rely on know-how and continuing technological innovation to develop and maintain our competitive position. We also seek to protect our proprietary rights by entering into confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to our proprietary information. The steps we have taken to protect our trade secrets, trademarks, patent applications and other intellectual property and proprietary rights may not be adequate, and third parties could infringe, misappropriate or misuse our intellectual property. If this were to occur, it could harm our reputation and adversely affect our business, competitive position, financial condition or results of operations.
As of the date hereof, our patent portfolio includes a patent family exclusively licensed from BWH, including 2 granted U.S. patents, a pending U.S. non-provisional patent application, and multiple foreign granted patents and non-provisional patent applications, relating to methods and compositions for identifying target antigens specific to T cells. In addition, we have filed applications in multiple patent families including multiple pending U.S. provisional patent applications, multiple granted foreign patents, and more than 200 pending international and foreign patent applications. The claims of these patent applications are directed toward various aspects of our therapy candidates and research programs, including compositions of matter and uses thereof directed to SARS-CoV-2 immunodominant antigens, anti-SARS-CoV-2 TCRs, anti-SARS-CoV-2 vaccines, anti-HA-2 TCRs (including the TSC-101 TCR-T therapy product candidate), anti-CD45 TCRs (including the TSC-102 TCR-T therapy product candidate), anti-HPV TCRs (including the TSC-200 TCR-T therapy product candidate), anti-MAGE-C2 TCRs (including the TSC-201 TCR-T therapy product candidate), anti-MAGE-A4 TCRs (including the TSC-202 TCR-T therapy product candidate), anti-PRAME TCRs (including the TSC-203 TCR-T therapy product candidate), and anti-MAGE-A1 TCRs (including the TSC-204 TCR-T therapy product candidate), as well as platform technologies including a phospholipid scrambling reporter-based T cell antigen screening platform and certain screening methods thereof, and a TCR multiplexing platform and certain therapeutic methods thereof. These patent applications, if issued, are expected to expire on various dates from 2038 through 2046, in each case without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid.
Heme Malignancies Program Product Patent Families
We have filed multiple patent families encompassing pending U.S. and foreign patent applications covering aspects of our heme malignancies programs including claims to the composition-of-matter and uses thereof of TSC-101, and other anti-HA-2 TCRs, anti-CD45 TCRs, and related T cell therapies. We expect the issued Australian and Singaporean patents, as well as any additional patents within these families, if issued, to expire no earlier than 2041 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid).
Solid Tumor Program Product Patent Families
We have filed multiple patent families encompassing pending U.S. and foreign patent applications covering aspects of our solid tumor programs including claims to the composition-of-matter of anti-HPV, anti-MAGE-C2, anti-MAGE-A4, anti-PRAME, anti-MAGE-A1 TCRs, and related T cell therapies. We expect the issued Australian patents, as well as any additional patents within these families, if issued, to expire no earlier than 2042 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid).
20
Table of Contents
Infectious Disease Product Patent Families
We have filed multiple patent families encompassing pending U.S. and foreign patent applications covering aspects of our infectious disease programs including claims to the composition-of-matter of SARS-CoV-2 immunodominant antigens, anti-SARS-CoV-2 TCRs, and the composition-of-matter of certain SARS-CoV-2 vaccines. We expect the issued Australian and Democratic Republic of the Congo patents, as well as any additional patents within these families, if issued, to expire no earlier than 2041 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid). Certain of these pending patent applications are jointly owned by us and AHS Hospital Corporation, or AHS. AHS has exclusively licensed their interest in such patent applications to us.
Platform Technology
We have filed a patent family encompassing pending U.S. and foreign patent applications covering aspects of our reporter-based T cell antigen screening platform. We expect any claims within this family, if issued, to expire no earlier than 2041 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid).
In addition, we have filed several patent families encompassing pending U.S. and foreign patent applications covering certain multiplexed TCR compositions and certain therapeutic methods thereof. We expect any claims within these families, if issued, to expire no earlier than 2043 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid).
Our pending patent applications may not result in issued patents and we can give no assurance that any patents that might issue in the future will protect our products or provide us with any competitive advantage. Moreover, U.S. provisional patent applications are not eligible to become issued patents until, among other things, we file a non-provisional patent application within 12 months of filing of one or more of our related provisional patent applications. With regard to such U.S. provisional patent applications, if we do not timely file any non-provisional patent applications, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in our provisional patent applications. While we generally intend to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage. For more information regarding the risks related to our intellectual property, please see “Item 1A. Risk Factors—Risks Related to Our Intellectual Property” in this Annual Report.
Third-Party Intellectual Property Rights
For certain aspects of our business, we rely on certain technology and intellectual property rights that we in-license from third parties. We have an exclusive patent license from BWH to a patent family directed to aspects of a granzyme B (GzB)-based antigen screening technology platform, as well as compositions-of-matter and certain screening methods thereof (consisting of two granted U.S. patents, one pending U.S. patent application, a granted patent in each of Australia, France, Germany, Great Britain, Netherlands, Switzerland, two granted patents in Japan, and six foreign patent applications pending in Australia, Canada, China, Europe, Hong Kong, and Japan). Any patents issuing from the U.S. and foreign patent applications are expected to expire no earlier than 2038 (without taking into account any possible patent term adjustments or extensions and assuming that appropriate maintenance and governmental fees are paid). We also have a non-exclusive, perpetual, non-transferable patent license from PHSA to a patent family directed to granzyme-based antigen screening methods consisting of an issued U.S. patent that is expected to expire on August 4, 2035 (assuming that appropriate maintenance and governmental fees are paid) and issued Canadian patent that is expected to expire March 25, 2035 (assuming that appropriate maintenance and governmental fees are paid).
As of the date hereof, we own or have rights to U.S. and foreign trademark registrations and applications that cover certain aspects of our business.
Government Regulation
FDA Regulation and Marketing Approval
In the U.S., the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and biologics under the Public Health Service Act, the regulations promulgated under both laws and other federal, state, and local statutes and regulations. Failure to comply with the applicable U.S. regulatory requirements at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial sanctions and non-approval of product candidates. These sanctions could include, among other things, the imposition by the FDA of a clinical hold on trials, the FDA’s refusal to approve pending applications or related supplements, withdrawal of an approval, untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, restitution, disgorgement, civil penalties, or criminal prosecution. Such
21
Table of Contents
actions by government agencies could also require us to expend a large amount of resources to respond to the actions. Any agency or judicial enforcement action could have a material adverse effect on us.
The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, approval, manufacture, distribution and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, post-approval monitoring, advertising, promotion, sampling and import and export of our products. Our drugs must be approved by the FDA as biologics through the BLA approval process applicable to gene therapy product candidates before they may be legally marketed in the U.S.
Within the FDA, the FDA’s Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products and has published guidance documents with respect to the development of these types of products. The FDA also has published guidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observing subjects involved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturing and control information in gene therapy INDs.
The process required by the FDA before a biologic may be marketed in the U.S. generally involves the following:
•
completion of non-clinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practice, or GLP, or other applicable regulations;
•
submission of an IND application, which allows clinical trials to begin unless the FDA objects within 30 days;
•
performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologic for its intended use or uses conducted in accordance with FDA regulations and Good Clinical Practices, or GCP, which are international ethical and scientific quality standards meant to ensure that the rights, safety and well-being of trial participants are protected, and that the integrity of the data is maintained;
•
preparation and submission to the FDA of a BLA;
•
submission of a user fee for FDA review of the BLA;
•
review of the product by an FDA advisory committee, where appropriate or if applicable;
•
satisfactory completion of pre-approval inspection of manufacturing facilities and clinical trial sites at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practice, or cGMP, requirements, and if applicable, the FDA’s current Good Tissue Practice, or cGTP, requirements, and of selected clinical trial sites to assess compliance with GCP requirements; and
•
FDA approval of a BLA which must occur before a biologic can be marketed or sold.
Preclinical Studies
Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, are submitted to the FDA as part of an IND application.
Companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with, or cGMP, requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
22
Table of Contents
IND Application and Clinical Trials
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements. Clinical trials are conducted under written study 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. Prior to commencing the first clinical trial, an initial IND application, which contains the results of preclinical testing along with other information, such as information about product chemistry, manufacturing and controls and a proposed protocol, must be submitted to the FDA. The IND application automatically becomes effective 30 days after receipt by the FDA unless the FDA, within the 30-day time period, raises concerns or questions about the drug product or the conduct of the clinical trial and imposes a clinical hold. A clinical hold may also be imposed at any time while the IND application is in effect. In such a case, the IND application sponsor must resolve any outstanding concerns with the FDA before the clinical trial may begin or re-commence. Accordingly, submission of an IND application may or may not result in the FDA allowing clinical trials to commence or continue.
In addition to the submission of an IND application to the FDA before initiation of a clinical trial in the U.S., certain human clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of institutional biosafety committees, or IBCs, as set forth in the National Institutes for Health, or NIH, Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. Under the NIH Guidelines, recombinant and synthetic nucleic acids are defined as: (i) molecules that are constructed by joining nucleic acid molecules and that can replicate in a living cell (i.e., recombinant nucleic acids); (ii) nucleic acid molecules that are chemically or by other means synthesized or amplified, including those that are chemically or otherwise modified but can base pair with naturally occurring nucleic acid molecules (i.e., synthetic nucleic acids); or (iii) molecules that result from the replication of those described in (i) or (ii). Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an Institutional Biosafety Committee (IBC), a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them.
A sponsor who wishes to conduct a clinical trial outside the U.S. may, but need not, obtain FDA authorization to conduct the clinical trial under an IND application. If a foreign clinical trial is not conducted under an IND application, the sponsor may submit data from the clinical trial to the FDA in support of a BLA or IND application so long as the clinical trial is conducted in compliance with GCP, and the FDA is able to validate the data from the study through an onsite inspection if the agency deems it necessary.
A separate submission to the existing IND application must be made for each successive clinical trial to be conducted during product development. Further, an independent Institutional Review Board, or IRB, for each site at which the clinical trial will be conducted must review and approve the clinical trial before it commences at that site. Informed written consent must also be obtained from each trial subject. Regulatory authorities including the FDA, or IRB, or the sponsor, may suspend or terminate a clinical trial at any time on various grounds, including a finding that the participants are being exposed to an unacceptable health risk or that the clinical trial is not being conducted in accordance with FDA requirements. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization as to whether or not a trial may move forward at designated check points based on access to certain data from the trial and may recommend halting the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.
Human clinical trials for BLA approval typically involve a three-phase process, although some phases may overlap, be combined, or in some cases, be deemed unnecessary to establish safety and efficacy. Phase 1, the initial clinical evaluation, generally involves of administering the drug and testing for safety and tolerated dosages, and in some indications, such as rare disease, generates preliminary evidence of efficacy in humans. Phase 2 generally involves a study to evaluate the effectiveness of the drug for a particular indication and to determine optimal dosage and dose interval and to identify possible adverse side effects and risks in a larger patient group. Phase 3 clinical trials generally consist of expanded multi-location testing for efficacy and safety to evaluate the overall benefit-to-risk index of the investigational drug in relationship to the disease treated. In March 2022, the FDA released a final guidance, “Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how drug developers can utilize an adaptive trial design in early stages of oncology drug development (i.e., the first-in-human clinical trial) to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial. Expansion cohort trials can potentially bring efficiency to drug development and reduce developmental costs and time.
All clinical trials must be conducted in accordance with FDA regulations, GCP requirements and their protocols in order for the data to be considered reliable for regulatory purposes. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. The results of preclinical and human clinical testing are submitted to the FDA in the form of a BLA for approval to commence commercial sales. Our clinical trials may not be completed
23
Table of Contents
successfully within any specified period, or at all. Government regulation may delay or prevent marketing of product candidates or new drugs for a considerable period of time and impose costly procedures upon our activities.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved up to a maximum of two years. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
The Biologics License Application Approval Process
In order to obtain approval to market a drug in the U.S., a marketing application must be submitted to the FDA that provides data establishing to the FDA’s satisfaction the safety and effectiveness of the investigational drug for the proposed indication. The application includes all relevant data available from pertinent non-clinical or 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 trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators that meet GCP requirements.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND application, at the End-of-Phase 1 or 2, and before a Biologics License Application, or BLA, is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach agreement on the next phase of development.
The results of product development, non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of a BLA requesting approval to market the product for its intended indication. The FDA reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. It may request additional information rather than accept a BLA for filing. In this event, the BLA must be resubmitted with the additional requested information. The resubmitted application also is subject to review before the FDA accepts it for filing. The FDA has 60 days from its receipt of a BLA to conduct an initial review to determine whether the application will be accepted for filing based on the agency’s threshold determination that the application is sufficiently complete to permit substantive review. The FDA reviews a BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA has agreed to specific performance goals on the review of BLA’s. Specifically, under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, as amended, the FDA has ten months, from the filing date, in which to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The review process may be extended by the FDA for three additional months to consider certain late-submitted information or information intended to clarify information already provided in the submission. After the FDA completes its substantive review of a BLA, it will communicate to the sponsor that the drug will either be approved, or it will issue a complete response letter to communicate that the BLA will not be approved in its current form and inform the sponsor of changes that must be made or additional clinical, non-clinical or manufacturing data that must be received before the application can be approved, with no implication regarding the ultimate approvability of the application or the timing of any such approval, if ever. If or when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA may issue an approval letter. The FDA has committed to reviewing such resubmissions in two to six months depending on the type of information included. The FDA may refer applications for novel drug products or drug products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and, if so, under what conditions. 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 typically will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA may inspect one or more clinical sites to assure compliance with GCP. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance with current Good Tissue Practice, or cGTP. These are FDA regulations that govern
24
Table of Contents
the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and cellular and tissue-based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human recipient. The primary intent of the cGTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through appropriate screening and testing. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it typically will outline the deficiencies and often will request additional testing or information. This may significantly delay further review of the application. If the FDA finds that a clinical site did not conduct the clinical trial in accordance with GCP, the FDA may determine the data generated by the clinical site should be excluded from the primary efficacy analyses provided in the BLA. Additionally, notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 or post-approval trials may be made a condition to be satisfied for continuing drug approval. The results of Phase 4 trials can confirm the effectiveness of a product candidate and can provide important safety information. In addition, the FDA has authority to require sponsors to conduct post-marketing trials to specifically address safety issues identified by the agency. See “Post-Marketing Requirements” below.
The FDA also has authority to require a Risk Evaluation and Mitigation Strategy, or REMS, from manufacturers to ensure that the benefits of a drug outweigh its risks. A sponsor may also voluntarily propose a REMS as part of the BLA submission. The need for a REMS is determined as part of the review of the BLA. Based on statutory standards, elements of a REMS may include “Dear Doctor letters,” a medication guide, more elaborate targeted educational programs, and in some cases distribution and use restrictions, referred to as elements to assure safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. These elements are negotiated as part of the BLA approval, and in some cases the approval date may be delayed. Once adopted, REMS are subject to periodic assessment and modification.
Changes to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes or facilities, require submission and FDA approval of a new BLA or BLA supplement before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing BLAs.
Even if a product candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages, or might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictions on distribution or use, or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product, including safety labeling or imposition of a REMS, the requirement to conduct post-market studies or clinical trials or even complete withdrawal of the product from the market. Delay in obtaining, or failure to obtain, regulatory approval for our products, or obtaining approval but for significantly limited use, would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.
The Hatch-Waxman Amendments
Under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, a portion of a product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored by returning up to five years of patent life for a patent that covers a new product or its use. This period is generally one-half the time between the effective date of an IND application (falling after issuance of the patent) and the submission date of a BLA, plus the time between the submission date of a BLA and the approval of that application, provided that the sponsor acted with diligence. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended and the extension must be applied for prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
25
Table of Contents
Market Exclusivity
The Biologics Price Competition and Innovation Act of 2009, or the BPCIA, which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-approved reference biological product. Bio-similarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that a product be 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 and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
A reference biological product is granted four- and 12-year exclusivity periods from the time of first licensure of the product. FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product, and FDA will not approve an application for a biosimilar or interchangeable product based on the reference biological product until 12 years after the date of first licensure of the reference product. The FDA may approve multiple “first” interchangeable products so long as they are all approved on the same first day of marketing. “First licensure” typically means the initial date the particular product at issue was approved in the U.S. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity, or potency. Therefore, one must determine whether a new product includes a modification to the structure of a previously approved product that results in a change in safety, purity, or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.
In addition, under the Orphan Drug Act, the FDA may designate a biological product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the U.S., or more in cases in which there is no reasonable expectation that the cost of developing and making a biologic product available in the U.S. for treatment of the disease or condition will be recovered from sales of the product). Orphan product designation must be requested before submitting a BLA. After FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by FDA. Orphan product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, meaning that the FDA may not approve any other applications to market the same drug or biologic product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or if the party holding the exclusivity fails to assure the availability of sufficient quantities of the drug to meet the needs of patients with the disease or condition for which the drug was designated. Competitors, however, may receive approval of different products for the same indication than that for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan medicinal product status in the EU has similar, but not identical, benefits.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the U.S. and, if granted, provides for the attachment of an additional six months to existing exclusivity periods for all formulations, dosage forms, and indications of the biologic. This six-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data.
Rare Pediatric Disease Designation and Priority Review Vouchers
Under the FDCA, the FDA incentivizes the development of drugs and biological products that meet the definition of a “rare pediatric disease,” defined to mean a serious or life-threatening disease in which the serious of life-threatening manifestations primarily affect individuals aged from birth to 18 years and the disease affects fewer than 200,000 individuals in the U.S. or affects more than 200,000 in the U.S. and for which there is no reasonable expectation that the cost of developing and making in the U.S. a drug or biological product for such disease or condition will be received from sales in the U.S. of such drug or biological product. The sponsor of a product candidate for a rare pediatric disease may be eligible for a voucher that can be used to obtain a priority review for a subsequent human drug or biological product application after the date of approval of the rare pediatric disease drug or biological product, referred to as a priority review voucher, or PRV. A sponsor may request rare pediatric disease designation from the FDA prior to the submission of its BLA. A rare pediatric disease designation does not guarantee that a sponsor will receive a PRV upon approval of its BLA. Moreover, a sponsor who chooses not to submit a rare pediatric disease designation request may nonetheless receive a PRV
26
Table of Contents
upon approval of their marketing application if they request such a voucher in their original marketing application and meet all of the eligibility criteria. If a PRV is received, it may be sold or transferred an unlimited number of times.
Under current statutory provisions, the FDA may not award a PRV for an approved rare pediatric disease product application after September 30, 2029, although the FDA’s authority to do so could be extended by Congress in the future.
Expedited Development and Review Programs
The FDA is authorized to expedite the review of BLAs in several ways. Under the Fast Track program, the sponsor of a biologic product candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrent with or after the filing of the IND application. Biologic products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track BLA before the application is complete, a process known as rolling review.
Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as regenerative medicine advanced therapy, or RMAT, designation, priority review and accelerated approval. To qualify for RMAT designation, the product candidate must be a regenerative medicine therapy,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, except for those regulated solely under Section 361 of the Public Health Service Act and part 1271 of Title 21 of the Code of Federal Regulations; is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and preliminary clinical evidence indicates that the product has the potential to address unmet medical needs for such disease or condition. A gene therapy product may meet the definition of a regenerative medicine therapy for purposes of RMAT designation. A BLA for a product candidate that has received RMAT designation may be eligible for priority review or accelerated approval through use of surrogate or intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites. Benefits of RMAT designation also include early interactions with the FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated approval. A product candidate with RMAT designation that is granted accelerated approval and is subject to post-approval requirements may fulfill such requirements through the submission of clinical evidence from clinical studies, patient registries, or other sources of real-world evidence, such as electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its approval.
A product candidate including one that received Fast Track or RMAT designation is eligible for priority review if it treats a seriouscondition and, if approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention of a serious condition compared to available therapies. The FDA aims to complete its review of priority review applications within six months of the filing date, compared to 10 months for standard review.
Additionally, a biologic product may be eligible for accelerated approval if it is designed to treat a serious or life-threatening disease or condition and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biologic product candidate receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials and, under the Food and Drug Omnibus Reform Act of 2022, or FDORA, the FDA is now permitted to require that such trials be underway prior to approval or within a specific time period after the date of approval for a product granted accelerated approval. Under FDORA, the FDA has increased authority for expedited procedures to withdraw approval of a drug or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, the FDA currently requires, unless otherwise informed by the agency, pre-approval of promotional materials intended for dissemination or publication.
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 the time period for FDA review or approval may not be shortened. Fast Track designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Additionally, under FDORA, a platform technology incorporated within or utilized by a biological product is eligible for designation as a designated platform technology if (1) the platform technology is incorporated in, or utilized by, a biological product approved under a BLA; (2) preliminary evidence submitted by the sponsor of the licensed biological product, or a sponsor that has been granted a right of reference to data submitted in the application for such biological product, demonstrates that the platform technology has the potential to be incorporated in, or utilized by, more than one biological product without an adverse effect on quality,
27
Table of Contents
manufacturing, or safety; and (3) data or information submitted by the applicable person indicates that incorporation or utilization of the platform technology has a reasonable likelihood to bring significant efficiencies to the biological product development or manufacturing process and to the review process. A sponsor may request the FDA to designate a platform technology as a designated platform technology concurrently with, or at any time after, submission of an IND application for a biological product that incorporates or utilizes the platform technology that is the subject of the request. If so designated, the FDA may expedite the development and review of any subsequent original BLA for a biological product that uses or incorporates the platform technology. Designated platform technology status does not ensure that a biological product will be developed more quickly or receive FDA approval. In addition, the FDA may revoke a designation if the FDA determines that a designated platform technology no longer meets the criteria for such designation.
Post-Marketing Requirements
Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling, or off-label use, limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet. Although physicians may, in their independent professional medical judgment, prescribe legally available drugs for off-label uses, manufacturers typically may not market or promote such off-label uses. Modifications or enhancements to the product or its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, who may or may not grant approval or may include a lengthy review process.
Prescription drug advertising is subject to federal, state, and foreign regulations. In the U.S., the FDA regulates prescription drug promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act, a part of the FDCA. Additionally, under FDORA, sponsors of approved biologics must provide 6 months’ notice to the FDA of any changes in marketing status, such as the withdrawal of a drug, and failure to do so could result in the FDA placing the product on a list of discontinued products, which would revoke the product’s ability to be marketed.
In the U.S., once a product is approved, its manufacturing is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Additionally, manufacturers and other parties involved in the supply chain for prescription drug products must also comply with product tracking and racing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the U.S. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. BLA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such product or may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, the manufacturer and/or holder of an approved BLA are subject to annual product and establishment fees. These fees are typically increased annually.
The FDA also may require post-marketing testing, also known as Phase 4 testing, to monitor the effects of an approved product or place conditions on an approval via a REMS that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning letters from the FDA, mandated corrective advertising or communications with doctors, withdrawal of approval, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.
28
Table of Contents
Coverage and Reimbursement
Sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third-party payors, including government healthcare program administrative authorities, managed care organizations, private health insurers, and other entities. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products. Therefore, our products, once approved, may not obtain market acceptance unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products.
In the U.S., no uniform policy of coverage and reimbursement for drug or biological products exists. The process for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of our products once approved. Moreover, a third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the medical product or service or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming process.
The containment of healthcare costs has become a priority of federal, state, and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are increasingly challenging the prices charged for drug products and medical services, examining the medical necessity, and reviewing the cost effectiveness of drug products and medical services, in addition to questioning safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after FDA approval or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit.
The American Recovery and Reinvestment Act of 2009 provided funding for the federal government to compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012 by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress. Although the results of the comparative effectiveness studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of our product candidates, if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates, once approved. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the EU do not follow price structures of the U.S. and generally tend to be significantly lower.
Anti-Kickback and False Claims Laws and Other Regulatory Matters
In the U.S., among other things, the research, manufacturing, distribution, sale and promotion of drug products and medical devices are potentially subject to regulation and enforcement by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the U.S. Department of Health and Human Services (HHS) (e.g., the Office of Inspector General), the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, state Attorneys General and other state and local government agencies. Our current and future business activities, including for example, sales, marketing, and scientific/educational grant programs must comply with healthcare regulatory laws, as applicable, which may include the Federal
29
Table of Contents
Anti-Kickback Statute, the Federal False Claims Act, as amended, the privacy and security regulations promulgated under the Health Insurance Portability and Accountability Act, or HIPAA, as amended, physician payment transparency laws, and similar state laws. Pricing and rebate programs must comply with the Medicaid Drug Rebate Program requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, and the Veterans Health Care Act of 1992, as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage, and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The Federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully, directly or indirectly, in cash or in kind, solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of, any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. The Federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, the intent standard under the Federal Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the Federal False Claims Act. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties, and exclusion from participation in federal healthcare programs. In addition, many states have adopted laws similar to the Federal Anti-Kickback Statute. Some of these state prohibitions apply to the referral of patients for healthcare services reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid. Due to the breadth of these federal and state anti-kickback laws, and the potential for additional legal or regulatory change in this area, it is possible that our future business activities, including our sales and marketing practices and/or our future relationships with physicians and the medical community might be challenged under anti-kickback laws, which could harm us.
Federal false claims and false statement laws, including the civil False Claims Act, prohibits any person or entity from, among other things, knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. The federal False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the federal False Claims Act and to share in any monetary recovery. For example, pharmaceutical companies have been found liable under the Federal Civil False Claims Act in connection with their off-label promotion of drugs. Penalties for a civil False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the Federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bring actions under the Federal Civil False Claims Act and certain states have enacted laws modeled after the Federal False Claims Act.
Additionally, HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing, or covering up a material fact or making any material false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
30
Table of Contents
There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. For example, federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs. In addition, as discussed below, a similar federal requirement under the Physician Payments Sunshine Act, requires certain manufacturers to track and report to the federal government certain payments provided to physicians, certain other licensed health care practitioners and teaching hospitals made in the previous calendar year, as well as certain ownership and investment interests held by physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain other licensed healthcare practitioners, and their immediate family members. These laws may affect our sales, marketing, and other promotional activities by imposing administrative and compliance burdens on us. In addition, given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state and federal authorities.
Further, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, imposes specified requirements relating to the privacy, security, and transmission of individually identifiable health information on certain types of individuals and organizations. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be other federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other and from HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.