Provention Bio (PRVB) 10-K2021 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

OR

FOR THE TRANSITION PERIOD FROM        TO        .

Commission file number 001-38552

PROVENTION BIO, INC.

(Exact name of registrant as specified in its charter)

55 Broad Street, 2^nd floor, Red Bank, NJ 07701
(Address of registrant’s principal executive offices)

(908) 336-0360
(Registrant’s telephone number, including area code)

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

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

None

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒. No ☐.

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

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

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

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

The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 30, 2021, the last business day of the Registrant’s last completed second quarter, based upon the closing price of the common stock as reported by The Nasdaq Global Select Market on such date was approximately $489.7 million.

On February 21, 2022, there were 63,374,738 shares of the registrant’s common stock, $0.0001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of Provention Bio, Inc.’s definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year are incorporated by reference into Part III of this Form 10-K and certain documents are incorporated by reference into Part IV.

PROVENTION BIO, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including, among others, statements regarding the impact of the ongoing COVID-19 pandemic on our business; the timing progress and potential success of our ongoing and planned clinical trials; our ongoing and planned engagements with regulatory agencies relating to, and the expected timing of regulatory review of, or decisions relating to, our product candidates; execution of our business plans; and our current expectations regarding the ability of our cash, cash equivalents and marketable securities to fund our projected operating requirements for at least the next 12 months, are forward-looking statements. The words “believe,” “may,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. 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. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Some of the key factors that could cause actual results to differ from our expectations include the following risks related to our business:

The forward-looking statements included herein are made only as of the date hereof. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligations to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements to actual results or to changes in our expectations.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Annual Report. Unless otherwise expressly stated, we obtain industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

PART I

ITEM 1. Business

Our Company

We are a clinical-stage biopharmaceutical company dedicated to intercepting and preventing immune-mediated diseases. Since our inception, we have devoted substantially all our efforts to business planning, research and development, pre-commercial activities, recruiting management and technical staff, acquiring operating assets, partnering and raising capital. We have not yet commenced any commercial revenue-generating operations, do not have any positive cash flows from operations and we will need to raise additional capital to finance our operations.

We have not received regulatory approval for any of our product candidates and have not generated any revenue from commercial product sales to date, and, through December 31, 2021, we had an accumulated deficit of $292.1 million. Since our inception in October 2016, we have financed our operations primarily through equity offerings. Through these equity offerings, we have raised aggregate net proceeds of approximately $364.2 million, net of underwriting discounts, commissions and other offering expenses. This includes completed underwritten public offerings in June 2020, which raised net proceeds of $103.3 million and in January 2021, which when combined with the partial exercise by the underwriters to purchase additional shares in February 2021, raised net proceeds of $102.3 million.

We expect that over the next several years we will continue to incur losses from operations as we increase our expenditures in research and development in connection with our regulatory submissions, clinical trials and other development activities, as well as costs to support our commercialization efforts to launch teplizumab, if we receive regulatory approval in the United States. If adequate funds are not available to us on a timely basis, or at all, we may be required to terminate or delay certain development activities and certain pre-commercial efforts.

Strategy

Our mission is to intercept and/or prevent autoimmune disease and, when possible, durably reset the immune system ahead of disease progression, irreversible tissue damage, and organ failure. Our strategic priorities include:

We believe our interception and prevention conceptual platform, experience and expertise in translational medicine and immunology, and our ability to design and execute rapid go/no-go clinical trials makes us unique in the field of autoimmune-mediated disease.

We continue building on our access to relevant in-licensing opportunities from industry-leading pharmaceutical companies; innovative, development-stage biotechnology companies; and world-renowned academic centers. To date, we have obtained exclusive worldwide rights to two product candidates from MacroGenics, Inc. (“MacroGenics”), the asset acquisition of teplizumab (PRV-031), a Phase 3 clinical-stage candidate for T1D, and the in-license of PRV-3279, a Phase 2 candidate for the potential treatment of systemic lupus erythematosus (“SLE”). We also in-licensed an enterovirus vaccine platform, targeting the prevention of coxsackievirus B (“CVB”) infections and the potential onset of T1D and celiac disease that includes PRV-101 from Vactech Ltd. (“Vactech”), a Finnish biotechnology company. Additionally, we in-licensed PRV-015 (ordesekimab), a Phase 2 clinical-stage candidate targeting celiac disease, from Amgen, Inc. (“Amgen”).

Our Focus and Pipeline

Our goal is to pioneer substantial improvements in standards of care for autoimmune disease. Autoimmune disorders are a leading cause of death and disability around the world. Over 24 million patients in the United States live with autoimmune disease, with prevalence increasing significantly. There are over 100 types of autoimmune disorders which reduce patient quality-of-life, can result in complications such as cardiovascular risk and organ failures, and increase the risk of overall mortality.

Our portfolio aims to address autoimmune disease through modulating key upstream and nodal mechanisms of immune dysregulation. Our lead asset is focused initially on patients at-risk for clinical T1D, for which we have resubmitted a BLA in February 2022 and continue to prepare for a potential approval and commercialization, and newly diagnosed patients, for which we have an ongoing phase three clinical trial, the PROTECT study. Further, we intend to pursue the development of prosecute our other pipeline product candidates in SLE, celiac disease, and other debilitating and life-threatening autoimmune diseases.

While the etiology of autoimmune diseases is often complex, poorly characterized or unknown, infections are believed to play a key role in triggering disease. Inflammation is a natural consequence of most infections, as it is the immune system’s first response to invading pathogens in the event of injury or acute illness. Most of the time, this response is beneficial and well-controlled; helping to repair tissue damage and clear pathogens from the body. But when patients have the requisite genetic predisposition for autoimmunity, infections can also trigger chronic autoimmune responses that persist and progress long after the original insult has subsided. Our pipeline of investigational candidates under development, target upstream autoimmune pathways and viral triggers with the goal of intercepting and preventing life-threatening and debilitating immune-mediated diseases:

Recent Company Developments

PRV-031 (teplizumab, anti-CD3 mAb)

Type-B Pre-BLA Resubmission Meeting

On January 27, 2022, we announced our intent to resubmit the teplizumab BLA for the delay of clinical T1D in at-risk individuals following a Type B pre-BLA resubmission meeting with the FDA. The purpose of the Type B pre-BLA resubmission meeting was to discuss the FDA’s feedback and obtain agreement on our proposed clinical pharmacology data package, including data and analysis from the pharmacokinetic/pharmacodynamic (“PK/PD”) substudy completed by us to address the FDA’s PK comparability considerations contained in the CRL issued in July 2021. In preliminary meeting comments, the FDA noted that the data package presented does not adequately support PK comparability because predicted primary PK parameters are indicative of a lower exposure. To address this concern, the FDA proposed, and we agreed, to use PK modeling to adjust the 14-day dosing regimen for the planned commercial product to match the exposure of clinical material used in prior clinical trials by ensuring that the 90% confidence intervals for relevant PK parameters fall within the target 80-125% range. On this basis, the FDA agreed that we could proceed to resubmit the BLA.

Based on our and the FDA’s agreed upon PK modeling, and our experience with various doses and regimens tested in prior clinical trials, we announced that we planned to propose in the BLA resubmission a modified 14-day course of therapy to address the FDA’s comparability considerations and also include responses to address the CRL’s Chemical, Manufacturing, and Controls (“CMC”) and product quality considerations, as agreed with the FDA at a Type A meeting held in August of 2021.

Teplizumab BLA Resubmission

On February 22, 2022, we announced that we resubmitted the BLA for teplizumab for the delay of clinical T1D in at-risk individuals. The purpose of the resubmission is to address the FDA’s PK comparability considerations contained in the CRL issued in July 2021, as well as the CRL’s CMC and product quality considerations. The CRL did not cite any clinical deficiencies related to the efficacy and safety data packages submitted to the original BLA. The resubmission comes after last month’s Type B meeting at which the FDA proposed, and we agreed, to use PK modeling to adjust the 14-day dosing regimen for the planned commercial product to match the exposure of clinical material used in prior clinical trials by ensuring that the 90% confidence intervals for relevant PK parameters fall within the target 80-125% range. Under applicable FDA guidelines, the FDA has 30 days to review the resubmission, determine whether it is complete and acceptable for review, and provide a review goal date.

PRV-3279 (humanized anti-CD32B and CD79B bispecific)

PREVAIL Phase 2a Study

On January 20, 2022, we announced the initiation of the Phase 2a PREVAIL-2 study (PRV-3279 EVAluation In Lupus - Phase 2). PRV-3279 is an investigational humanized bispecific DART molecule targeting the B-cell surface proteins CD32B and CD79B, which has the potential to intercept the pathophysiology of SLE and other B cell-mediated autoimmune diseases, as well as to prevent the immunogenicity of biotherapeutic products such as gene therapy.

The PREVAIL-2 study is a Phase 2a proof-of-concept (“POC”) study in moderate-to-severe SLE patients induced into response with a short course of corticosteroids, and then monitored for relapse, after randomization to either PRV-3279 or placebo treatment. This design enables the withdrawal of most concomitant medications and clear POC evaluation. The study will be conducted in the United States and Hong Kong. Screening has commenced in the United States with the goal of identifying and enrolling approximately 100 patients to 6 monthly infusions of PRV-3279 or placebo, with primary efficacy readout at 24 weeks. PRV-3279 was well-tolerated in a prior single ascending dose Phase 1 study and a multiple ascending dose Phase 1b study, PREVAIL-1, establishing proof of mechanism with long-lasting inhibition of B cell function as shown by reduction in Immunoglobulin M (“IgM”) production 8 weeks post last dose of PRV-3279. These results, together with observations that CD32B genetic variants are associated with SLE, and that PRV-3279 inhibits B cells isolated from SLE patients, support evaluation in SLE.

Impact of COVID-19 on our Business

We are closely monitoring continued developments related to the COVID-19 pandemic and are making every effort to ensure we remain focused on the health and well-being of our patients and our employees while maintaining business continuity. At this time, we are unable to predict what the long-term impact of the pandemic, and the associated economic downturn, will have on our business, including planned clinical trial readouts, regulatory interactions and submissions, manufacturing and supply chain, regulatory review and related timelines for our BLA resubmission including any potential United States launch of teplizumab if approved by the FDA. We have experienced some level of disruption to three of our current or planned clinical trials. In March 2020, we announced a temporary pause in the randomization of patients with newly diagnosed T1D into our global Phase 3 PROTECT study of teplizumab. During the second quarter of 2020, we resumed enrolling patients in the PROTECT study on a country by country and site by site basis and by the end of the third quarter of 2020, all sites were activated, with a majority of the sites actively enrolling patients. We completed target enrollment in the PROTECT study in August 2021 and expect to report top-line results in the second half of 2023, subject to change for any potential interruptions related to COVID-19, regulatory decisions or issues or other interruptions. In addition, we, with our development partner Amgen, collectively decided that, to protect the integrity and quality of the PRV-015 Phase 2b trial in gluten free diet NRCD, we would stagger study startup throughout the third quarter of 2020 rather than initiating screening in the second quarter of 2020, as had originally been scheduled. We initiated the Phase 2b trial in August 2020 and the pandemic has caused difficulties and delays in recruitment. As a result of these delays, we now expect to report top-line results from the PROACTIVE study by the end of 2023. Additionally, our plans to initiate the Phase 2a portion of the PREVAIL study in lupus patients by the first half of 2021 were delayed, predominantly due to COVID-19 related impacts, and we recently initiated the study in January 2022.

Our Product Candidates

PRV-031 (teplizumab; anti-CD3 antibody) for T1D

Our lead product candidate, teplizumab, is a humanized mAb that binds with high specificity to a cell surface protein called CD3. The CD3 protein is a co-receptor that helps activate T cells and direct different kinds of immune responses. Preclinical data suggests that binding of teplizumab to CD3 triggers events that differentially inhibit the activation of self-reactive T cells without affecting regulatory T-cells (“Tregs”). This restores the important state of immune tolerance and may prevent self-reactive T cells from attacking beta cells in the pancreas. When administered to T1D Stage 2 subjects, teplizumab delayed progression and onset of clinical T1D, and when administered to Stage 3 subjects, teplizumab slowed down the loss of beta cell function in all studies conducted to date. Therefore, we believe teplizumab has the potential to intercept the T1D disease process along the entire continuum, potentially slowing or preventing the destruction of insulin-producing pancreatic beta cells.

Regulatory History and Key Developments

At-Risk Indication

Rolling BLA Submission and Publications

In June 2019, data from the At-Risk trial, sponsored by the National Institutes of Health and conducted by TrialNet, was presented at the 79th Annual American Diabetes Association meeting and published in the New England Journal of Medicine. Results of this study demonstrated that a single 14-day course of teplizumab significantly delayed the onset of clinical-stage T1D, as compared to placebo, by a median of at least 2 years in at-risk children and adults. In August 2019, the FDA granted breakthrough therapy designation (“BTD”) to teplizumab for the delay or prevention of clinical T1D in individuals at-risk of developing the disease. BTD is an FDA program designed to expedite the development and review of therapeutic candidates intended to treat serious or life-threatening diseases.

In April 2020, we announced the initiation of the rolling submission of our BLA to the FDA for teplizumab, an anti-CD3 monoclonal antibody for the delay or prevention of clinical T1D in at-risk individuals, as indicated by the presence of two or more T1D-related autoantibodies.

In September 2020, we announced submission of the clinical module and then completion of the rolling submission of the BLA in November 2020. In January 2021, we announced that the FDA had accepted the BLA for filing and granted Provention’s request for Priority Review and assigned a user fee goal date of July 2, 2021, under the Prescription Drug User-Fee Act (“PDUFA”).

On March 3, 2021, we announced the peer reviewed publication of the extended follow-up results from the “At-Risk” TN-10 study showing that a single teplizumab 14-day course delayed the onset of insulin dependence in T1D patients by approximately 32.5 months, compared to placebo. Prior to this publication, in June 2020, we announced that new data from the “At-Risk” TN-10 study, presented by TrialNet at the 2020 American Diabetes Association Scientific Sessions on June 15, 2020, which demonstrated that a single 14-day course of our lead drug candidate, teplizumab, delayed the median onset of clinical T1D, as compared to placebo, by approximately three years in at-risk individuals. These data from the “At-Risk” TN-10 study added approximately one year to the two-year median delay that was previously observed and included as part of the BLA submission.

During the FDA’s review of the BLA, the FDA suggested, and we agreed, to revise our proposed indication to remove the term “prevention,” as the term “delay” more accurately reflects the results of the TN-10 trial.

Advisory Committee Meeting

On May 27, 2021, the FDA held an advisory committee meeting where the Endocrinologic and Metabolic Drugs Advisory Committee (“EMDAC”) voted ten “yes” and seven “no” on the question, “Does the information provided in the background documents and presentations by the Applicant and FDA show that the benefits of teplizumab outweigh the risks in support of approval to delay clinical type 1 diabetes mellitus?”.

CRL to BLA

On July 2, 2021, the FDA issued a CRL for our BLA for teplizumab for the delay of clinical T1D in at-risk individuals. In the CRL, the FDA stated that a single, low-dose PK/PD bridging study in healthy volunteers to compare planned commercial product with the drug product evaluated in clinical trials had failed to show PK comparability. The FDA further noted that PK comparability remains the primary endpoint for demonstration of comparability between the two products and that we will need to establish PK comparability appropriately between the intended commercial product and the clinical trial product or provide other data that adequately justify why PK comparability is not necessary.

In the CRL, the FDA cited several additional considerations related to product quality, which we believe we have either addressed in amendments already submitted to the BLA or can be addressed in the near-term. The CRL acknowledged that the FDA had not reviewed several amendments already submitted by us in response to certain CMC information requests.

The FDA also stated in the CRL that certain deficiencies conveyed during a recent general inspection, not specific to teplizumab, at a fill/finish manufacturing facility used by us will need to be resolved before approval. These deficiencies have since been resolved and the FDA issued an inspection close out letter to the facility in August 2021.

The CRL did not cite any clinical deficiencies related to the efficacy and safety data packages submitted to the BLA and confirmed the acceptability of the proposed proprietary name for teplizumab. The FDA requested that we provide a safety update as part of our BLA resubmission. The CRL contained other comments and recommendations that do not impact approvability, as well as general guidance regarding the resubmission process.

Rare Pediatric Disease Designation Application Decision

In October 2021, the FDA sent a second deficiency letter for our application for Rare Pediatric Disease designation for teplizumab. In its letter, the FDA’s Office of Orphan Drug Development (“OOPD”), noted that they believe the At-Risk Stage 2 population is greater than 200,000 subjects in the United States and we have one year from the date of the deficiency letter (or any approved extension thereof) to provide arguments otherwise, or our request for Rare Pediatric Disease designation will be considered voluntarily withdrawn. We currently do not have plans to take any additional steps to address OOPD’s positions. We previously applied for orphan drug designation of teplizumab for the use in at-risk individuals which was denied by the OOPD in February 2021.

PK/PD Substudy & Type A Meeting with the FDA

On September 13, 2021, we announced that we completed the collection of data from a PK/PD substudy in the ongoing PROTECT Phase 3 trial in newly diagnosed T1D patients, to determine comparability between our planned commercial drug product and clinical trial drug product for teplizumab. On November 18, 2021, we had a Type A meeting with the FDA to discuss the popPK model to be used for the purpose of planned commercial and clinical drug product comparison. In preliminary meeting comments, the FDA approved us populating the popPK model with data collected from patients receiving therapeutic doses of teplizumab in the PK/PD substudy of the ongoing PROTECT Phase 3 trial in newly diagnosed T1D patients (Commercial Product N~30 patients, Clinical Drug Product N~130 patients). Our preliminary analysis from the popPK model produced the following top-line results:

Geometric mean of the ratio of commercial to clinical drug product [90% Confidence Interval (“CI”)]

These results were not final and are subject to ongoing review of both the data and the popPK model by the FDA and us. As anticipated, given teplizumab’s target mediated mechanism of clearance, the difference in exposure (AUC Day 13 and 0-infinity) between commercial product and clinical drug product observed in the prior single, fractional low dose PK/PD study in healthy volunteers is greatly reduced when the products are administered and compared in accordance with the higher therapeutic dosing regimen used in T1D patients. Along with previously reported physicochemical and PD data, as well as the immunogenicity and safety profiles, we reported our opinion in November 2021 that these preliminary results support comparability of the commercial product and clinical drug product, however, the FDA is the final decision maker on comparability, and we continue to support the FDA in its independent review and analysis of the data. Additionally, in November 2021, we disclosed preliminary PD marker information upon therapeutic dosing of teplizumab from the substudy data that we believe are supportive, although not determinative, of comparability between the two drug products. These PD markers included lymphocyte counts, CD3 receptor occupancy and T-cell activation.

FDA Feedback on BLA Resubmission Path

In January 2022, we announced our plans, based on feedback from the FDA at a pre-BLA Type B resubmission meeting, to resubmit the teplizumab BLA for the delay of clinical type 1 diabetes in at-risk individuals in the first quarter of 2022. See Recent Company Developments.

Teplizumab BLA Resubmission

On February 22, 2022, we announced that we have resubmitted the BLA for teplizumab for the delay of clinical T1D in at-risk individuals. Under applicable FDA guidelines, the FDA has 30 days to review the BLA resubmission, determine whether it is complete and acceptable for review, and provide the due date for action. The FDA’s guidance is to complete its review within 6 months of the BLA resubmission date. See Recent Company Developments.

European and UK Regulatory Interactions to Date

In October 2019, the EMA granted PRIME eligibility to teplizumab for the prevention or delay of clinical T1D in individuals at-risk of developing the disease. The PRIME initiative is designed to expedite the development and review of promising therapies that target an unmet need and show potential clinical benefit so the medicine can reach patients earlier. The designation offers the opportunity for enhanced interaction and dialogue with the EMA to optimize development, as well as the potential for accelerated assessment at the time of application for a marketing authorization.

In April 2021, we received initial non-binding scientific advice in a letter from the MHRA on a potential regulatory and market access path forward for teplizumab in the United Kingdom. The MHRA indicated its view that (i) there is an unmet medical need for a treatment that delays or prevents progression to T1D in at-risk patients, (ii) a Marketing Authorization Application (“MAA”) may benefit from additional supplementary information on patient preference, and (iii) reliance on one pivotal study to obtain a marketing authorization ought to meet the criteria described in the EMA/CPMP points to consider on application with (a) meta-analyses and (b) one pivotal study (CPMP/EWP/2330/99).

An Innovation Passport in the United Kingdom was granted on July 12, 2021 in recognition of the significant patient or public need of teplizumab. Grant of the Innovation Passport paves the way for enhanced engagement with the MHRA and health technology agencies such as the National Institute for Health and Care Excellence (“NICE”) in the Innovative Licensing and Access Pathway (“ILAP”). ILAP is a new pathway created in the United Kingdom to accelerate the time to market, thus facilitating patient access to innovative medicines. We are targeting a potential filing of a MAA in the first half of 2023, assuming favorable regulatory interactions. We plan to continue to evaluate the regulatory path forward in the United Kingdom and in the European Union based on our further engagement with the MHRA, EMA and other European stakeholders in 2022.

Newly Diagnosed Indication

We commenced a Phase 3 clinical trial (the PROTECT study) in approximately 300 pediatric and adolescent patients with newly diagnosed T1D. The first patient was dosed in the second quarter of 2019. In March 2020, in connection with the COVID-19 pandemic, we announced a temporary pause in the randomization of patients with newly diagnosed T1D into the PROTECT study. In June 2020, we resumed enrollment of the PROTECT study on a country by country, site by site basis. We reached the target enrollment of 300 patients during the third quarter of 2021. Given the challenges the COVID-19 pandemic has presented to clinical trials across the industry, we ultimately exceeded the enrollment target by approximately ten percent to ensure there were a sufficient number of evaluable patients. We expect to report top line data from the PROTECT Phase 3 study in the second half of 2023 and determine whether the results support filing a BLA in a newly diagnosed indication for the treatment to preserve beta cell function in individuals with newly diagnosed T1D.

Market Opportunity for teplizumab

Estimated Prevalence of T1D

According to the International Diabetes Federation, 8.8% of the adult population worldwide has diabetes, among whom 10-15% have T1D. According to the Juvenile Diabetes Research Foundation (“JDRF”), it is estimated that 1.6 million people in the United States have T1D and approximately five million are expected to have T1D by 2050, including nearly 600,000 under 15 years of age. The annual economic burden of T1D has been estimated by JDRF to be greater than $30.0 billion in the United States and greater than $90.0 billion globally.

Moreover, the incidence of T1D is increasing worldwide. In the period between 2005 and 2020, epidemiologists predict a 70% increase in the incidence of T1D in children in Europe, with the age of onset decreasing and the number of cases in children younger than five years old doubling.

Estimated Patient Prevalence of At-Risk Indications (all ages)

Based on our analysis of literature, we believe the following represent the approximate estimated prevalence of At-Risk individuals. Familial direct relatives have 10x greater incidence of T1D autoimmunity than the general population:

If the FDA approves our BLA resubmission for teplizumab for use in “At-Risk” individuals, our potential commercial launch of teplizumab would initially focus on familial direct relatives of T1D patients with two or more autoantibodies and dysglycemia, and then expand to other populations identified as At-Risk through potentially increased universal screening in the United States.

Since we began building our commercial infrastructure in 2020, we have enhanced our commercial capabilities and launch readiness in anticipation of a potential approval of teplizumab in the United States. To date, we have conducted primary market research and co-creation sessions with more than 1,300 participants, including pediatric endocrinologists, adult endocrinologists, certified diabetes educators, T1D patients, caregivers, at-risk individuals, T1D relatives, payers, advocacy groups, among others. These insights have been critical in the development of our go-to-market strategy.

Our commercial priorities going forward are as follows:

Near-Term Focus

Mid-Term Focus

Long-Term Focus

Estimated Patient Incidence of Newly Diagnosed Indications (all ages)

It is estimated that approximately 64,000 new cases of clinical T1D in the United States are diagnosed each year, approximately 26% of which are in patients aged eight through 17 years (i.e., the target population of our PROTECT study in Stage 3/newly diagnosed T1D; the Protégé study included subjects aged eight through 35 years).

Overall, more than 90,000 children are diagnosed each year in the United States and the largest five European countries combined.

Market Exclusivity

We intend to seek data exclusivity or market exclusivity for teplizumab provided under the Federal Food, Drug, and Cosmetic Act (“FDCA”), and similar laws in other countries. In the United States, we believe that teplizumab will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which was enacted as part of the Patient Protection and Affordable Care Act (“ACA”). Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product.

T1D Lifecycle Management and other potential indications

We are currently exploring and supporting research and lifecycle management programs for T1D beyond our current pipeline. Within T1D, we are exploring programs which include repeat dosing and age expansion for both at-risk individuals and newly diagnosed patients, as well as subcutaneous formulations and combination therapies potentially with antigens, regulatory T cells, metabolic drugs, immune modulators and islet or beta cell transplants. We are evaluating other potential indications for teplizumab including, gastrointestinal (“GI”) immunology disorders such as Crohn’s disease, celiac disease and autoimmune hepatitis or rheumatology disorders such as rheumatoid arthritis. These initiatives may result in or include new clinical studies sponsored by us or investigator-initiated studies, which are clinical studies initiated and sponsored by physicians or research institutions with funding from us.

T1D Background Information

T1D is the end result of immune-mediated destruction of the insulin-producing beta cells of the pancreas and is one of the most common and serious chronic conditions occurring in childhood. T1D patients require life-long dependence on insulin products delivered through multiple daily injections or continuous infusion pumps. While the disease presents in children and adults, the vast majority of T1D is diagnosed in children, with more than half of T1D patients diagnosed before the age of 14 years. The life-expectancy of individuals with younger-onset disease is on average 16 years shorter than non-diabetic individuals. Individuals diagnosed before the age of 10 years have a 30-times greater risk of serious cardiovascular outcomes than the general population resulting in decreased life expectancy, compared to healthy individuals. It is believed the loss of beta cells, which is more severe and rapid in younger individuals leading to increased glycemic load, is the cause of increased cardiovascular-related deaths. The disease is believed to occur in genetically susceptible individuals upon exposure to environmental triggers. In addition, because of a similar genetic predisposition, patients with T1D are at high risk of developing celiac disease. Celiac disease is characterized by autoimmunity in the gut and other organs triggered by consumption of gluten and can lead to malnutrition and other complications including a form of cancer called lymphoma. There is no approved therapy for celiac disease.

Lack of insulin secretory capacity has serious consequences, even when patients receive insulin replacement therapy. The complications of T1D include eye disease, nerve damage, kidney disease and heart disease. Diabetic retinopathy has a prevalence of approximately 80% among patients with T1D and is the leading cause of vision impairment and blindness among adults. Moreover, about 60% to 70% of people with diabetes present some form of neuropathy that can induce numbness, weakness and blood pressure dysregulation. In addition, diabetic nephropathy is the leading cause of chronic kidney disease and affects about 30% of T1D patients. Diabetes can also cause severe heart complications and adults with diabetes are two to four times more likely to die from heart disease than adults without diabetes.

In summary, people with T1D experience substantial morbidity and mortality owing to chronic complications.

Current T1D Treatment Options and Their Limitations

So far, no disease-modifying or curative treatment exists for T1D. Patients with T1D still need to use daily insulin injections to manage blood sugar to within a normal range. However, it is estimated that fewer than one-third of people with T1D in the United States achieve target blood glucose levels and insulin injections often cause hypoglycemia (low blood sugar). While insulin injections or infusion allow a person with T1D to stay alive, they do not cure the disease, nor do they necessarily reduce the risk of serious effects and long-term complications of T1D.

While pancreatic and islet cell transplantation offer the ability to normalize glucose levels and remove the dependence on insulin products, there are significant risks, resulting in a modest number of such transplants being conducted every year. There is risk associated with mandatory immunosuppression, which commonly results in the development of infections that may be life-threatening. Furthermore, pancreas transplantation may be associated with technical complications (vascular thrombosis, pancreatitis, infection, fistulas) as well as acute and chronic organ rejection. Islet cell transplantation can provide better glycemic control and protect patients from hypoglycemic episodes, but only approximately 50% of patients are insulin-free after three years of follow-up. In a small, published study, Bellin 2012, the addition of teplizumab to the conditioning regimen has improved those figures to approximately 70% insulin-free at 5 years, providing a rationale for the continued study of teplizumab in this context.

New approaches are still required and could significantly enhance patient care. In particular, there is a strong need for new preventive or curative treatments. Among the different possible strategies, primary prevention through vaccination, which we are investigating with PRV-101, and secondary prevention (interception) with a disease-modifying non-chronic immune modulator, which we are investigating with teplizumab.

Overview of T1D Biology and teplizumab Mechanism of Action

T1D is an autoimmune disease which occurs in genetically-predisposed individuals. Specialized white blood cells of our immune system, known as self-reactive T cells (also called auto-reactive), are triggered, presumably by CVB viral infection of the beta cells in at least 50% of cases, to attack and destroy beta cells of the pancreas, thus causing a decline in the natural production of insulin. Simultaneously, another type of T cell, Tregs, which normally suppress the activity of self-reactive T cells, fail to do so effectively.

The clinical progression of T1D is relatively well understood and predictable, as it is a continuum marked by clinically-relevant biomarkers which identify stages of the disease. In an individual with genetic risk (primarily driven by human leukocyte antigen (“HLA”) haplotypes), the natural evolution of T1D has been described in stages (see figure below).

Stages of Type 1 Diabetes

It is important to note that once subjects develop two or more T1D-related autoantibodies (Stage 1), the progression to clinical T1D (Stage 3) is not a matter of “if” but “when” as greater than 95 percent of the Stage 1 subjects and virtually all of the Stage 2 subjects will progress to Stage 3 necessitating insulin dependence. The progression of Stage 1 to Stage 3 is 44% in five years, and of Stage 2 to Stage 3 is 75% in four to five years.

Current Clinical Development Program

Newly-Diagnosed Patients (Stage 3)

Phase 3 Clinical Trial of teplizumab in Pediatric Patients Newly-Diagnosed T1D (PROTECT Study)

The PROTECT study (PROvention T1D trial Evaluating C-peptide with Teplizumab) is a randomized, double-blind, placebo-controlled, multicenter Phase 3 clinical trial in pediatric and adolescent patients (aged eight to 17 years) that are newly-diagnosed with clinical T1D. Patients with minimum beta-cell cell function (C-peptide >0.2 pmol/mL) and within six weeks of T1D diagnosis will receive two courses of teplizumab, six months apart. Each course will consist of 12 days of teplizumab administered intravenously, with a cumulative dose of ~9.0 mg/m2. The primary endpoint is the change in C-peptide at 18 months. Secondary endpoints including insulin use, HbA1C levels, hypoglycemic events and safety will also be evaluated. The study is expected to enroll approximately 300 patients with 2:1 randomization (200 active: 100 placebo) and enrollment commenced in the second quarter of 2019. We reached the target enrollment of 300 patients during the third quarter of 2021. Given the challenges the COVID-19 pandemic has presented to clinical trials across the industry, we ultimately exceeded the enrollment target by approximately ten percent to ensure there were a sufficient number of evaluable patients. We expect to report top line data from the PROTECT Phase 3 study in the second half of 2023.

In March 2020, we announced a temporary pause in the randomization of patients with newly diagnosed T1D into our global Phase 3 PROTECT study of teplizumab. This pause was taken to protect patients, caregivers, clinical site staff, company employees and contractors as part of the collective global efforts to combat the COVID-19 pandemic. Patients that were undergoing study therapy were allowed to complete their course, as recommended by the PROTECT study’s Data Safety Monitoring Board, which was expanded to include infectious disease expertise. In June 2020, we resumed enrollment on a country by country, site by site basis based upon review of local COVID-19 infection rates and the site’s ability to maintain the safety of participants.

We are also conducting an extension study of the PROTECT trial, PROTECT Extension. The purpose of this study is to evaluate the long-term safety profile of PROTECT study patients who received a 12-day course of teplizumab treatment upon T1D diagnosis and a second 12-day course of teplizumab treatment approximately six months later. The extension study will provide a total of 5-year safety data from the initiation of treatment for the participants in the PROTECT Study.

Prior Clinical Evaluation of teplizumab

To date, clinical development of teplizumab has included both academic and biopharmaceutical sponsors. Approximately 1,100 subjects have been enrolled in teplizumab clinical trials, with over 800 subjects receiving teplizumab. These studies represent various doses, formulations, and indications and includes earlier smaller investigator-sponsored studies. The majority of patients were enrolled in T1D studies (>1,000), and the rest in renal or renal-pancreatic allograft rejection, pancreatic islet transplant, psoriatic arthritis or plaque psoriasis trials.

In T1D patients, ten studies have been conducted, of which nine involved intravenous dosing (two Phase 1, three Phase 2, two Phase 3 and a Phase 3 extension study) and one subcutaneous dosing (Phase 1).

Among the T1D studies of teplizumab:

Stage 2 Programs

Phase 2 Clinical Trial of teplizumab in At-Risk Relatives who develop T1D (At-Risk TN-10 Study)

The “At-Risk” TN-10 Study, a pivotal Phase 2 clinical trial, conducted at TrialNet sites and sponsored by National Institute of Diabetes and Digestive and Kidney Diseases (“NIDDK”), part of the National Institute of Health (“NIH”), evaluated teplizumab for the delay of clinical T1D in at-risk individuals. At-risk was defined by the presence of two or more T1D-related autoantibodies and dysglycemia (abnormal glucose metabolism). 76 subjects were enrolled, ages eight to 49 years, with 72 percent under the age of 18, and randomized to receive a single 14-day course of either teplizumab (cumulative dose of ~9.0 mg/m2) or placebo. Subjects were followed in a blinded fashion until a minimum 40 subjects developed clinical T1D which triggered the analysis of the primary endpoint. Thereafter, subjects were followed indefinitely in other TrialNet studies. Those who developed clinical T1D after the primary analysis was completed are eligible to enroll in a Provention trial, PRV-031-002, which we initiated in March 2020, described below.

Participants over eight years of age with Stage 2 T1D (presence of at least two T1D autoantibodies and dysglycemia, who were non-diabetic relatives of T1D individuals) were randomized 1:1 to receive teplizumab or placebo. Dysglycemia was defined on oral glucose tolerance test (“OGTT”) as: (a) Fasting plasma glucose ≥ 110mg/dL, and <126mgdL, or (b) 2-hour plasma glucose ≥140mg/dL, and <200mg/dL, or (c) 30, 60, or 90-minute value on OGTT ≥200mg/dL.

The primary endpoint was the time from randomization to the clinical diagnosis of diabetes, using ADA criteria. Criteria for clinical T1D diagnosis are based on glucose testing, or the presence of unequivocal hyperglycemia with acute metabolic decompensation (diabetic ketoacidosis). One of the following criteria must be met on two occasions as soon as possible but no less than one day apart for diabetes to be defined:

Teplizumab was administered over a 14-day course: 51 μg/m2, 103 μg/m2, 207 μg/m2, and 413 μg/m2 on study days 0–3, respectively, and 826 μg/m2 on each of study days four through 13. A total of 112 participants were screened and 76 were randomized, 44 to teplizumab and 32 to placebo. The baseline characteristics were balanced for age (median ~13-14 years of age), relationship to the relative with T1D, type of T1D autoantibodies and HbA1c.

At-Risk TN-10 Study– Primary Data Readout in June 2019

Treatment with a single course of teplizumab delayed the time to T1D (see figure below): 19 of the 44 (43%) teplizumab-treated and 23 of the 32 (72%) placebo-treated participants were diagnosed with T1D. The annualized rates of T1D development were 14.9% and 35.9% per year, for the teplizumab and placebo groups, respectively. The median time to T1D was 24.4 months in the placebo and 48.4 months in the teplizumab groups (hazard ratio = 0.412 (95% CI: 0.216, 0.783) p=0.006 (2-sided)).

Time to T1D

In pre-specified analyses, the effects of teplizumab on the primary outcome based on baseline characteristics were evaluated. Although subgroup analyses had small sample sizes and need to be taken with caution, participants without anti-ZnT8 antibodies showed a greater effect size compared to those who did not have the antibody. The presence of HLA-DR4 and absence of HLA-DR3 were also associated with greater effect size, as was a below median C-peptide response to the OGTT at baseline (1.75 nmol/L). These larger effect sizes are attributed to more rapid progression of the disease in these subgroups, rather than clinically-actionable baseline characteristics able to predict response to teplizumab. We believe all patients with Stage 2 T1D can benefit from teplizumab as long as they have beta cells to be protected.

With regard to adverse events, similar to previous studies with teplizumab in newly-diagnosed T1D patients, the most common adverse events were transient lymphopenia and transient rash. Regarding lymphopenia, lymphocyte count declined to a nadir on day five by 72.3% (IQR 82.1, 68.4%) (p<0.0001) and then returned to baseline levels. This transient lymphopenia is believed to be the mechanistic consequence of margination (adhesion to the blood vessel wall) rather than depletion. Fifteen (34.1%) of the grade 3 events in the teplizumab group involved lymphopenia during the first 30 days after study drug administration. The lymphocyte counts recovered quickly: Lymphopenia resolved in all participants by day 45 except in one, whose counts returned on day 105. A spontaneously resolving rash, as previously noted, occurred in 36% of drug treated participants. The rates of clinical infection were similar in the two treatment arms.

Other anti-CD3 mAb experimental treatments, such as otelixizumab, have been associated with Epstein Barr virus (“EBV”), clinical reactivation in patients with latent infection. At entry, 30 participants (39%) (16 teplizumab and 14 placebo) had antibodies against EBV in TN-10. At weeks 3-6 after study drug treatment, there was quantifiable EBV DNA in whole blood in eight of the seropositive participants – all in the teplizumab group, one of whom had symptoms of pharyngitis, rhinorrhea, and cough on day 38. In these participants, the EBV DNA levels were below the level of quantification between day 43 and 134 (average 77 days). At entry, 17 participants (ten teplizumab and seven placebo) had antibodies against cytomegalovirus (“CMV”). One teplizumab participant, who was CMV seropositive, had detectable levels of CMV DNA at day 20 that was undetectable by day 42. These results show that, while viral reactivation may be observed during the first weeks post-teplizumab administration, these are typically asymptomatic and that immune competence is maintained that results in the resolution of viremia.

The TN-10 trial results demonstrate that a single course of teplizumab significantly delayed the progression to clinical T1D in high-risk Stage 2 relatives who had at least two autoantibodies and dysglycemia. The median delay in the diagnosis of diabetes was approximately two years, and at the conclusion of the trial, the frequency of diabetes-free subjects was double in the drug (57%) vs placebo-treated subjects (28%). The relatively rapid rate of progression to clinical diabetes in the placebo group, consistent with the previously reported natural history, reflects the very high risk of these individuals and reflects the inevitability of progression from Stage 2 to Stage 3 disease, consistent with observations of high rates of beta cell killing in these subjects. The rapid development of clinical T1D may also reflect the enrichment of pediatric participants (72.4%) in whom the rate of progression is rapid. The safety profile was consistent with previous experience and teplizumab was well-tolerated.

At-Risk TN-10 Study - Extended Data Readout in June 2020

After the primary readout in the TN-10 study, patients were followed indefinitely in other TrialNet observational studies. On June 15, 2020, we announced that new data from the TN-10 study was presented on that date by TrialNet at the 2020 American Diabetes Association Annual meeting. These follow-up data demonstrated that the single 14-day course of teplizumab had delayed the onset of clinical T1D, as compared to placebo, by a median of approximately three years in at-risk individuals. In other words, the follow-up data from the TN-10 added approximately one year to the two-year median delay that was previously observed and reported in the primary analysis. The median time to clinical diagnosis of T1D after one course of teplizumab was approximately five years (59.6 months) compared to approximately two years (27.1 months) for the placebo group (unchanged from previously published data). Nearly half of those treated with teplizumab are estimated to be free of clinical T1D at five years. The hazard ratio was 0.457 or a 54 percent reduction in risk of developing clinical T1D (p=0.01).

On March 3, 2021, we announced the peer reviewed publication of the extended follow-up results from the TN-10 study showing that a single teplizumab 14-day course delayed the onset of insulin dependence in T1D patients by approximately 32.5 months compared to placebo.

In addition, teplizumab treatment was associated with a greater on-study C-peptide (p=0.009), a measure of a persons’ own insulin production, compared to placebo. For both groups, C-peptide AUC mean slopes preceding study entry were similar and declining. In the placebo group, this decline continued over the six months after study entry. By contrast, the teplizumab-treated group showed an increased C-peptide AUC over this period (p=0.02 relative to study entry).

Note: Adapted from presentation 277-OR at ADA 2020 (Sims et al, June 15, 2020).

Mechanistically, the association between the expansion of partially exhausted CD8 T cells and the delay of clinical T1D conferred by teplizumab, previously described in newly diagnosed T1D patients, was also confirmed in subjects at-risk. C-peptide levels at three, six and 18 months post-teplizumab administration correlated with the levels of exhausted CD8+ T cells in the circulation (p=0.01 vs placebo). Subjects with the highest increase (top quartile) in exhausted CD8 T cells at 3 months post-teplizumab had no progression to clinical T1D in the period of observation of the study (p=0.005 vs placebo). Finally, inflammatory cytokines IFN-gamma and TNF-alpha were lower in the exhausted CD8 T cells in teplizumab vs placebo-treated subjects (p<0.0001).

In summary, the follow-up results showed that teplizumab’s effect on delaying the onset of clinical T1D was not only consistent from previous analyses, but was durable and now extended the median delay to approximately three years, without any additional safety signals noted.

Stage 3 Programs

Protégé Study

Protégé was a randomized, controlled Phase 3 clinical trial conducted in 83 centers in North America (United States, Canada, Mexico), India, Israel, and Europe (Czech Republic, Estonia, Germany, Latvia, Poland, Romania, Spain, Sweden, Ukraine) completed between 2007 and 2011. Patients aged eight to 35 years with recently diagnosed T1D (≤12 weeks) were followed for 12 months (Protégé) and continued to 24 months (Protégé Extension). Three dose regimens of teplizumab were administered to 417 patients as intravenous infusions for six to 14 days; 99 patients received placebo. At 12 months, the primary efficacy endpoint, the proportion of patients with insulin use <0.5 U/kg per day and HbA1c <6.5%, ranged from 13.7% to 20.8% patients in the teplizumab groups, depending on dosing regimen, and 20.4% in the placebo group. The difference between teplizumab-treated patients and placebo-treated patients was not significant. The change in HbA1c from baseline also did not show a significant difference between teplizumab and placebo. However, subgroup analyses indicated the following findings:

Protégé Encore Study

Protégé Encore was a randomized, controlled Phase 3 clinical trial conducted in 125 centers in 16 countries completed between 2009 and 2012. Patients aged eight to 35 years with recently diagnosed T1D were to be followed for 24 months. Three dose regimens of teplizumab, given as intravenous infusions for six to 14 days, were compared with placebo. The primary endpoint, the proportion of patients with insulin use <0.5 U/kg per day and HbA1c <6.5% at 12 months, was not met. Study enrollment was stopped at 254 patients (400 planned) when the Protégé study showed that the primary endpoint was not met. Efficacy analyses were not conducted in this study.

A summary of the C-peptide data in the completed Phase 2 clinical trials and Phase 3 Protégé study are shown in the table below. All these studies have shown consistent and significant C-peptide benefit. Furthermore, subgroup analysis of the Protégé data indicated that younger patients (aged eight to 17 years) with minimum baseline beta cell function (C-peptide >0.2 pmol/mL) along with even more robust data in T1D patients with diagnosis under six weeks (Study 1), informed the inclusion criteria applied in our Phase 3 study, PROTECT.

SUBCUE Study

SUBCUE was a randomized, controlled Phase 1 clinical trial to evaluate the safety and tolerability, PK, and PD of subcutaneously injected teplizumab conducted between 2010 and 2011. Patients aged 18 to 35 years who were diagnosed with T1D within 12 months were to be given three dosing regimens of teplizumab or placebo. Patients were to be followed for 91 days. However, the study was stopped after one subject was enrolled, upon the Protégé study results.

Safety Data

Teplizumab safety data in T1D subjects have been analyzed from five clinical studies with similar study characteristics including a randomized controlled design and testing the proposed cumulative dose of 9034 µg/m² (~9.0 mg/m²) per treatment course. Four of these studies enrolled subjects with newly diagnosed Stage 3 clinical T1D (two Phase 2 studies, AbATE and Delay, and two Phase 3 studies, Protégé and Encore). One of these trials enrolled Stage 2 subjects in the At-risk (TN-10) study. The safety summary provided below pools data from the four Stage 3 clinical studies and a separate summary for the Stage 2, At-risk study (TN-10).

In Stage 3 teplizumab and placebo subjects, there were no major differences in the overall adverse events (“AEs”) (99.6% and 99.1%), and serious adverse events (“SAEs”) (12.2% (91 of 729 subjects), and 8.9% (19 out of 213 subjects), although there were more severe AEs in teplizumab subjects (59% and 25%). In At-risk Stage 2 subjects, there was a higher incidence of AEs, SAEs, and severe AEs in the teplizumab subjects compared with placebo (AEs: 97.7% and 68.8%, SAEs: 15.9% (7 of 44 subjects) and 3.1% (1 of 32 subjects), and severe AEs: 59.1% and 9.4%).

The most common AEs were related to decreases in white blood cells (lymphopenia, leukopenia and neutropenia) as well as rash. Lymphopenia was expected based on the mechanism of action of teplizumab and was observed in approximately 80% of Stage 3 and 73% of Stage 2 T1D subjects who received teplizumab compared with approximately 18% of Stage 3 and 6% of Stage 2 subjects who received placebo. Lymphopenia was commonly mild to moderate and resolved within 14 days. In Stage 3 T1D subjects, approximately 36% and 12% of teplizumab - and placebo-treated subjects, respectively, reported rash. In Stage 2 TID subjects, approximately 14% and 0% of teplizumab - and placebo-treated subjects, respectively, reported rash. In teplizumab-treated patients, the rash was predominantly mild to moderate and usually resolved within one to two weeks. Laboratory abnormalities were also reported as AEs. The main differences in incidence in teplizumab and placebo subjects were related to liver function tests. For example, increased alanine aminotransferase occurred in 27.8% and 12.7% of Stage 3 teplizumab and placebo subjects and 4.5% and 3.1% of Stage 2 teplizumab and placebo subjects. These transaminase elevations were likely due to cytokine effects on the liver, usually resolved within 14 days of dose completion, and did not cause significant or lasting clinical concern. Cytokine release syndrome, which may include symptoms of rash, headache, nausea, vomiting, and chills/fever, occurred in 6% and 1.4% of teplizumab- and placebo-treated Stage 3 subjects and 2.3% and 0% of teplizumab- and placebo-treated Stage 2 subjects. Cytokine release syndrome was predominantly mild to moderate in severity, and in the majority of subjects (~80%), the treatment course was completed.

In both Stage 3 and Stage 2 subjects, a total of 118 subjects (98 teplizumab (12.4%), 20 control (8.2%)) experienced one or more SAEs for a total of 167 SAEs. The majority, 76.7%, (128 out of 167) of SAEs were not considered treatment-related, while 23.4% (39 out of 167) were deemed related.

Three deaths were observed in Stage 3 subjects and categorized by the principal investigator (in accordance with International Conference on Harmonisation/Good Clinical Practice guidelines) and included in the Investigator Brochure for teplizumab filed with the FDA. The relationship between each death and teplizumab is listed in the Investigator Brochure as follows: one death, “none”; one death “not related”; and one death “unlikely.” The specific causes of deaths were (1) unknown for subject with gastrointestinal symptoms which the relationship was listed as “none” in the Investigator Brochure, (2) anterior myocardial infarction with ventricular tachycardia and cardio-respiratory arrest for which the relationship was listed as “not related” in the Investigator Brochure and (3) diabetic ketoacidosis for which the relationship was listed as “unlikely” in the Investigator Brochure. No deaths were reported in Stage 2 subjects.

The most common severe AE occurring in at least 10% of Stage 3 subjects was lymphopenia observed in 43.6% (326 out of 729 subjects) and 5.2% (11 out of 213 subjects) of teplizumab and placebo subjects, respectively. In Stage 2 subjects, lymphopenia was also the most frequently observed severe AE, occurring in 47.5% (21of 44 subjects) teplizumab-treated subjects but none of the placebo subjects. This AE is consistent with the mechanism of action of teplizumab.

Overall, in both Stage 3 and Stage 2 subjects, infections were reported in comparable rates between teplizumab and controls (53.0% vs 52.7%) with the most common infections reported involving upper respiratory infections (19.0% vs 17.6%), nasopharyngitis (11.1% vs 9.4%) and pharyngitis (5.1% vs 4.5%). The rate of primary EBV infections does not appear to be increased with teplizumab (1.9% vs 3.6%). While there were more cases of EBV reactivation with teplizumab (3.9% vs 1.2%), they were asymptomatic in the majority of subjects and were associated with transient viremia.

The safety profile of teplizumab in the at-risk population (Stage 2 T1D), appeared to be comparable with those of newly diagnosed patients (Stage 3 T1D). No new safety signals were identified. The majority of the adverse events were mild to moderate and were transient and manageable.

Phase 2 Clinical Trial of teplizumab in combination with AG019 in newly diagnosed T1D patients

We believe that combination therapy may enhance the potential therapeutic benefit of teplizumab by increasing efficacy, enhancing the durability of response, or restoring insulin production by beta cells. Combination therapies may include islet or beta-cell transplant, regulatory T cells, beta cell antigens, tolerogenic cytokines and other immune modulators, which could enhance the removal of self-reactive lymphocytes or increase the function of Tregs, or metabolic agents that could further improve or preserve beta cell function or mass.

We are collaborating with Precigen and its subsidiary, Precigen ActoBio, to explore the combination of teplizumab and the orally administered AG019, a Lactococcus lactis (“L. lactis”) strain genetically engineered to secrete human proinsulin and human interleukin-10, an anti-inflammatory cytokine. Precigen reported positive interim results from the Phase 1b/2a clinical trial, in June 2021 and October 2021, for the combination of AG019 and teplizumab, with a 79% response (C-peptide preservation) in newly diagnosed T1D. In addition to this collaboration, we plan to explore other combination therapies in the future.

AG019 is an oral-capsule consisting of engineered L. lactis specifically modified to deliver autoantigen human proinsulin and the tolerance-enhancing cytokine human interleukin-10 to the mucosal lining of the gastro-intestinal tissues. The primary objective of the study was to assess the safety and tolerability of different doses of AG019 alone as well as AG019 in association with teplizumab. The secondary objectives of this study are: to obtain PD data of AG019 as monotherapy as well as AG019 in combination with teplizumab; and PK data to determine the potential presence of AG019 in systemic circulation (safety - systemic exposure) and the presence of L. lactis bacteria in fecal excretion (local exposure). The study has been completed and was conducted in two phases:

The study commenced in October 2018 and enrollment is completed. Precigen presented updates in June and October 2021, on their interim data from the Phase 1b (monotherapy) and Phase 2a (combination) arms of the study:

PRV-3279 (Humanized CD32B x CD79B Dual Affinity Biologic for SLE and Other Autoimmune Diseases)

PRV-3279 is a humanized CD32B x CD79B dual affinity biologic in a new class of bispecific scaffold antibody-like molecules called DARTs. It is designed to simultaneously bind to CD32B and CD79B on B cells. The simultaneous binding of both CD32B and CD79B triggers CD32B-coupled immunoreceptor tyrosine-based inhibitory motif signaling, which leads to the suppression of B cells activated to produce auto-antibodies, while not causing broad B cell depletion.

We believe PRV-3279 may intercept the pathophysiology of SLE by preventing the production of auto-antibodies by abnormally active B cells. Additionally, based on our published clinical (hepatitis A vaccination) and pre-clinical (Pompe disease gene therapy model) studies, we believe PRV-3279 may prevent the detrimental immunogenicity of biotherapeutic products, such as gene therapy products, though, we will need to conduct additional clinical studies to confirm and support our belief.

Current Clinical Development Program in SLE

Preclinical Studies for the SLE

In support of the clinical evaluation of PRV-3279 in lupus, we and our partner, MacroGenics, studied the effect of PRV-3279 on B cells from lupus patients ex vivo. PRV-3279 reduced the activation of these B cells similarly to its effects on healthy volunteer B cells, regardless of the activity level of the lupus patients. These data were presented at the American College of Rheumatology (“ACR”) conference in November 2020.

Phase 1b/2a clinical trial of PRV-3279 in Healthy Volunteers and Patients with Lupus

We are conducting a two-part study in SLE, the PREVAIL (PRV-3279 EVAluation In Lupus) study. PREVAIL is a randomized, double-blind, placebo-controlled Phase 1b/2a clinical trial to evaluate the safety, tolerability, PK, PD, and immunogenicity of multiple ascending doses of PRV-3279 in 16 healthy adult volunteers (Part 1) and the efficacy of PRV-3279 in patients with lupus (Part 2). Our ultimate goal is to determine if PRV-3279 can intercept the pathophysiology of SLE by preventing the production of auto-antibodies by abnormally active B cells.

On March 12, 2020, we announced positive top-line results from the Phase 1b portion of the PREVAIL study. PRV-3279 was well-tolerated, with no serious adverse events, and as expected, did not deplete B cells and demonstrated profound and sustained binding to circulating B lymphocytes, with reduction of circulating immunoglobulin M levels in a dose-proportional manner. While anti-drug antibody production was observed at both dose levels tested, immunogenicity was found not to affect exposure, safety or pharmacodynamic parameters. Data from PREVAIL-1 was presented at the ACR conference in November 2020.

On January 20, 2022, we announced the initiation of the Phase 2a PREVAIL-2 study. The PREVAIL-2 study is a Phase 2a POC study in moderate-to-severe SLE patients induced into response with a short course of corticosteroids, and then monitored for relapse, after randomization to either PRV-3279 or placebo treatment. This design enables the withdrawal of most concomitant medications and clear POC evaluation. The study will be conducted in the United States and Hong Kong. Screening has commenced in the United States with the goal of identifying and enrolling approximately 100 patients to 6 monthly infusions of PRV-3279 or placebo, with primary efficacy readout at 24 weeks. Stratification and pre-defined subset analysis in PREVAIL-2 of a potentially highly responsive SLE population using a B cell gene signature may identify patients most likely to benefit from PRV-3279 therapy in the future

Clinical endpoints for the PREVAIL-2 Study will include the Systemic Lupus Erythematosus Disease Activity Index 2000 (SLEDAI-2K), the British Isles Lupus Assessment Group score, urine protein to creatinine ratio, and daily glucocorticoid use. Additional biomarkers will include urinary/renal markers (e.g., serum creatinine, estimated glomerular filtration rate) and blood/circulating markers (e.g., auto-antibodies, complement (C3 and C4), B cell function/phenotype, including CD32B expression/response relationship).

Current Preclinical Development Program in Gene Therapy

Preclinical Studies for the Prevention of the Immunogenicity of Biotherapeutics Including Gene Therapy

We believe that PRV-3279 has the potential to prevent or reduce the immunogenicity of biotherapeutics, including but not limited to gene therapy vectors and transgenes (new proteins expressed as a result of the gene therapy).

As the field of gene therapy advances, patients’ immune responses to the viral vectors and the transgene products remain a key challenge negatively impacting the safety, efficacy and ability to deliver additional courses systemically. One of the current mitigation strategies to overcome these immune responses is pharmacological modulation of the patients’ antibody immune responses with the B cell depleting agent rituximab in combination with the immune-suppressive agent sirolimus. The use of rituximab has been associated with certain adverse events. The use of PRV-3279, as a non-depleting B cell inhibitor, is a potential strategy to address this unmet need in serious genetic diseases.

PRV-3279 reduced B cell responses to viral antigens using an experimental vaccine challenge in a Phase 1 study. In addition, In January 2021, we announced positive results of pre-clinical proof-of-concept experiments in support of the prevention of immunogenicity indication. A PRV-3279 mouse surrogate was tested in mice transgenic for human CD32B, which received gene therapy with an adeno-associated virus (“AAV”) vector AAV9 encoding for the enzyme acid-alpha-glucosidase (“GAA”) gene. Errors in the GAA gene cause the serious human glycogen storage disease type II known as Pompe disease. In the study, the PRV-3279 surrogate reduced anti-AAV9 vector antibody levels in a dose-dependent fashion. Anti-AAV9 antibodies have been linked to reduced efficacy, safety concerns and the inability to re-dose patients based on these and other study data, we believe PRV-3279 co-administration with gene therapy products has the potential to improve the safety and efficacy of this therapeutic modality. The PRV-3279 surrogate in combination with sirolimus increased skeletal muscle levels of GAA enzyme expression. Consistent with prior results from clinical trials in healthy human subjects, the PRV-3279 surrogate decreased Immunoglobulin M (“IgM”) production and was well tolerated. These results have been presented at the 2021 American Society for Gene and Cell Therapy conference.

Based on these data, we plan to look for opportunities to work with academic and industry experts to combine PRV-3279 with gene therapy and other biotherapeutic products to further our mission of preventing and intercepting devastating immune-mediated conditions.

SLE Market and Other Opportunities for PRV-3279

Sales of therapies to treat SLE are expected to climb to nearly $3.0 billion by 2025-2027, approximately 7-8% annual growth from 2019. This growth is driven primarily by treatments that target B cells, such as belimumab, with a new indication in lupus nephritis in 2020, off-label use of rituximab, and the approval of new mechanisms (voclosporin for lupus nephritis, approved in January 2021, and the type I interferon inhibitor, anifrolumab, approved in July 2021 for systemic lupus). Despite these available medications, substantial unmet need remains, for novel and safe non-depleting B cell therapy with greater efficacy than belimumab.

In addition to SLE, PRV-3279 has the potential to treat other B cell- and auto-antibody-driven autoimmune diseases. Such diseases include multiple sclerosis and RA, where B cell therapies rituximab and ocrelizumab have sales in excess of $1 billion. Several niche/orphan indications may also be explored, including T1D (potentially in combination with teplizumab), Sjogren’s syndrome, vasculitis (e.g., polymyalgia rheumatica, giant cell arteritis, Behçets disease), myasthenia gravis, pemphigus, neuromyelitis optica, anti-NMDA receptor encephalitis, Guillain-Barré syndrome, chronic inflammatory demyelinating polyneuropathy, Grave’s ophthalmopathy, IgG4-related disease, and idiopathic thrombocytopenic purpura.

SLE Background Information

SLE is a chronic autoimmune disorder that can affect nearly every major organ system, causing inflammation, tissue injury, organ damage, and in some patients, organ failure. The prognosis of SLE is highly variable in individual patients, often waxing and waning throughout their lifetime. The natural history of SLE ranges from relatively benign disease to rapidly progressive and even fatal disease. Comorbidities, such as infections, malignancies, hypertension, lipid disorders and diabetes increase the risk of disability and death in patients with SLE. Organ systems commonly affected by SLE include the central nervous system, kidneys, gastrointestinal system, mucous membranes, heart, skin, hematologic system, musculoskeletal system and lungs, with specific organ involvement defining subsets of the disease (e.g., lupus nephritis). According to the Lupus Foundation of America, at least 1.5 million Americans are afflicted by SLE and more than 16,000 new cases of lupus are reported annually. It is estimated that five million people throughout the world suffer from some form of lupus. Lupus affects primarily women of childbearing age (15 to 44 years). However, men, children, and teenagers can also develop lupus.

The pathogenesis of SLE is characterized by an abnormal overactivation of B cells and subsequent pathologic production of auto-antibodies (antibodies that attack one’s own cells and tissues). Uncontrolled activation of B cells is normally terminated when the activating stimulus is exhausted and when a negative feedback loop is triggered by the engagement of an inhibitory Fc receptor (“FcR”), known as FcgammaRIIb (“CD32B”). Mutations in the CD32B gene in humans are associated with an increased likelihood of SLE, and reduced expression of CD32B is apparent in B cells from SLE patients. It is thought that activation of this inhibitory pathway could ameliorate the overactive B cell-driven pathology of SLE and other autoimmune diseases. In addition, the excess auto-antibodies produced bind to target antigens and form immune complexes.

When the B cell receptor (“BCR”) (which is the “Y” shaped molecule, resembling an antibody in the figure below) is bound and activated by an antigen, it initiates a cascade of biochemical changes necessary for the activation of the CD32B inhibitory pathway, thus triggering the negative feedback loop. CD79B is a subunit of the BCR that plays a key role in this process when it is close to CD32B. Therefore, if a pharmacologic treatment is to activate the CD32B inhibitory pathway, it also has to simultaneously bind to CD79B. PRV-3279 (formerly MGD010), is a humanized CD32B x CD79B DART protein developed originally by MacroGenics as a bi-specific therapy with these properties, and thus a potential treatment for SLE and other similar diseases. It is designed to simultaneously bind to CD32B and CD79B on B cells.

PRV-3279 and related molecules have shown inhibitory effects on BCR-induced B cell proliferation and antibody secretion (including B cells obtained from SLE patients) as well as beneficial effects in mouse models of autoimmunity. PRV-3279 is expected to boost the negative feedback loop on B cells by robustly engaging the available CD32B and CD79B.

PRV-3279 has been studied in humans and was shown to be well tolerated. Proof of mechanism and PRV-3279’s inhibitory effect on antibody immune responses were demonstrated in a Phase 1a single ascending dose study in healthy volunteers, including a cohort demonstrating inhibition of the immunogenicity of the hepatitis A vaccine. Immunogenicity of PRV-3279 was also observed, but had no impact on mechanistic effects, safety or pharmacokinetics, and decreased with increasing doses of PRV-3279, possibly a reflection of its mechanism of action.

Our ultimate goal is to determine if PRV-3279 can intercept the pathophysiology of SLE by preventing the production of auto-antibodies by abnormally active B cells.

Current Treatment Options for SLE and Their Limitations

The treatment and management of SLE depends on disease severity and disease manifestations. Hydroxychloroquine plays a central role in the long-term treatment of SLE and is the cornerstone of SLE therapy. Corticosteroids, nonsteroidal anti-inflammatory drugs (“NSAIDs”), and immunosuppressive agents (e.g., azathioprine, cyclophosphamide, cyclosporine, methotrexate, and mycophenolate mofetil) have also been used in the treatment and management of SLE. These treatments are only modestly effective and present safety and/or immune suppression concerns with prolonged use. The B cell-depleting antibody rituximab (Rituxan), while not approved for treatment of SLE, appears to be beneficial in certain subsets of patients.

In 2011, the FDA approved belimumab (Benlysta), an antibody that targets B lymphocyte stimulator, for the treatment of mild to moderate SLE in combination with standard therapy, providing additional clinical validation of the therapeutic benefit of B cell-targeted therapy for autoimmune diseases. However, the modest therapeutic benefit of belimumab and delayed onset of disease intervention indicate the need for additional therapeutic strategies to inhibit overactive B cells. We believe PRV-3279 can fulfill that requirement and is uniquely differentiated to allow for rapid inhibition of activated B cells (potentially more effective than belimumab), while sparing non-activated B cells from depletion or inactivation (potentially safer than rituximab).

In December 2020, January 2021, and July 2021, the FDA approved belimumab, voclosporin and anifrolumab, respectively, for the treatment of lupus (lupus nephritis, in the case of voclosporin). We are focused on development of PRV-3279 in SLE.

Overview of CD32B Biology and Relevance in Lupus

CD32B is expressed widely on the surface of human B cells. In addition to its expression on B cells, CD32B is also expressed on other immune cells such as dendritic cells, macrophages, neutrophils, and mast cells. It is a single-chain protein with a portion that sits outside of the cell membrane, which can be bound by chemical signals.

CD32B is the only known inhibitory FcR in the immune system. It plays an important role not only for innate and adaptive immune responses, but also in the maintenance of immune tolerance and controlling autoimmunity. Mice deficient in CD32B have increased antibody responses due in part to chronic B cell activation, and as a result, develop autoimmune disease similar to human SLE. In contrast, B cell-specific overexpression of CD32B and cross-linking of CD32B with antibodies ameliorate the incidence and severity of lupus in mouse lupus models. In humans, mutations and decreased expression of the CD32B gene are associated with an increased likelihood of SLE. These results underscore the important role of CD32B in regulating the antibody immune response and suggest that drug-mediated engagement of CD32B could provide therapeutic benefit in autoimmune diseases by dampening the effects of chronically activated B cells and reducing the production of auto-antibodies. In particular, preventing the production of auto-antibodies could intercept the disease course in lupus nephritis, a subtype of lupus driven by accumulation of auto-antibodies and immune complexes (a mass of antibodies and other molecules) in the kidneys.

Consistently, a monoclonal antibody anti-CD19 which binds CD32B with high affinity, XmAb5871 (Xencor), was shown in 2018 to be efficacious -albeit missing the primary endpoint- in a Phase 2 lupus trial, particularly in patients with B cell biomarker signatures, providing indirect validation for the potential of PRV-3279 in lupus. XmAb5871, which has shown thrombocytopenia (unlike PRV-3279, XmAb5871 appears to bind to CD32A, which is expressed on platelets), has not moved forward in development to date. In November 2021, Xencor announced the licensing of XmAb5871 (obexelimab) to Zenas BioPharma.

Mechanism of Action of PRV-3279

PRV-3279 is in a new class of bispecific scaffold antibody-like molecules called DARTs. It is designed to simultaneously bind to CD32B and CD79B on B cells. The simultaneous binding of both CD32B and CD79B triggers CD32B-coupled immunoreceptor tyrosine-based inhibitory motif signaling, which leads to the suppression of B cells activated to produce auto-antibodies, while not causing broad B cell depletion.

To prolong its half-life in the body, PRV-3279 contains a human IgG1 Fc region (a specific antibody fragment) that is manipulated to eliminate its effector function. As a molecule designed to inhibit immune responses, PRV-3279 does not activate any part of the immune system either in the body or in laboratory tests. PRV-3279 also does not bind to platelets, a unique feature compared to competing molecules targeting CD32B that are associated with toxicity due to binding to platelets (e.g., XmAb5871, an anti-CD19 mAb which binds to CD32 via the Fc fragment).

Prior Preclinical Evaluation of PRV-3279

The only nonhuman species that PRV-3279 binds to is chimpanzees. An initial non-GLP study with PRV-3279 in chimpanzees demonstrated it to be well tolerated at all doses, with an assigned no observed-adverse-effect level (“NOAEL”), of 10 mg/kg.

Due to the lack of target binding, chronic four-week and three-month repeat-dose GLP toxicology studies were performed using a surrogate DART molecule similar to PRV-3279 that was designed to target human CD32B and mouse CD79B in a transgenic mouse line that expresses human CD32B. A NOAEL at the highest dose of 50 mg/kg was assigned in the three-month study. We believe these studies, and our regulatory interactions, support the advancement of PRV-3279 in long-term efficacy studies in humans, such as PREVAIL-2.

Prior Clinical Evaluation and Proof of Mechanism for PRV-3279

To date, there have been two clinical trials completed with PRV-3279. The first study was conducted at a single site in the United States, from February 2015 to February 2017 and was a first-in-human (“FIH”), double-blind, placebo-controlled Phase 1a clinical trial to evaluate the safety, tolerability, PK, PD, and immunogenicity of PRV-3279 in healthy adult volunteers.

A total of 49 subjects were randomized; 12 received placebo and 37 received PRV-3279 intravenously at escalating doses from 0.1 mg/kg to 10 mg/kg in six cohorts. PRV-3279 was well tolerated over the range of doses, with only mild adverse events that resolved quickly, including headache, somnolence (sleepiness), upper respiratory tract infection, folliculitis and night sweats. Target binding and proof of mechanism were demonstrated by measuring functional B cell inhibition at doses of 1 mg/kg or higher, without broader B cell activation or depletion observed.

Subsequently, proof of mechanism was further confirmed in a dose escalation extension of the study in which single doses of PRV-3279 at 3 mg/kg and 10 mg/kg (16 subjects) were compared with placebo (eight subjects) for the ability to affect B cell responses to a hepatitis A vaccine, which was administered to participants who had no previous hepatitis A immunity, on day two of the study. At both doses, PRV-3279 reduced the proportion of volunteers who generated an immune response against the vaccine, as well as the amount of antibody they produced, in both cases as compared to placebo.

PRV-3279 exhibited an approximate half-life of seven days after a single dose. A majority (~86%) of study participants developed antibodies against PRV-3279 (i.e., immunogenicity) after receiving the 3 mg/kg dose, but no detrimental effect was observed on the pharmacokinetics of PRV-3279. The proportion of participants developing antibodies against PRV-3279 decreased with increasing dose (29% in the 10 mg/kg dose) and such antibodies did not occur in the multiple dose chimpanzee study, suggesting that PRV-3279 may limit its own immunogenicity at therapeutic doses, which is consistent with its mechanism of action.

The second study was the Phase 1b portion of the PREVAIL study, which was a double-blind, placebo-controlled, multiple ascending dose study in 16 health volunteers described above.

PRV-015 (ordesekimab, human anti-interleukin 15 mAb) for Non-Responsive Celiac Disease (NCRD)

PRV-015 (ordesekimab) is a fully human immunoglobulin (“IgG1”) mAb that binds to and inhibits pro-inflammatory cytokine interleukin (“IL-15”), which has been identified as a major mediator in the pathophysiology of celiac disease. PRV-015 has emerged as a leading candidate for the treatment of nonresponsive celiac disease, in which patients continue to have disease activity despite ongoing gluten free diet (“GFD”).

PRV-015 has undergone clinical testing in approximately 250 subjects who have received PRV-015 across two Phase 1 (healthy volunteers and psoriasis, rheumatoid arthritis (“RA”)) and three Phase 2 clinical trials (celiac disease, RCD-II, RA). No serious adverse events deemed related to PRV-015 were observed that would preclude further clinical development. Proof of mechanism and/or proof of concept was demonstrated in RA, celiac disease and refractory celiac disease Type II. The effect of PRV-015 in celiac disease was evidenced by reduction in inflammation and symptoms after a controlled gluten challenge in a Phase 2a clinical trials with 63 celiac patients.

Celiac Disease Market

There is no approved drug for CD. The annual healthcare utilization by NRCD patients in 2013 was $18,206, for $4,796 in matched controls due to the extra costs of uncontrolled CD investigations and treatment of complications. Given the large prevalence (15 to 20 million patients world-wide, 1% of the population in the Western world and 0.5% in Asia), and the unmet need (50% of patients on GFD continue to suffer from disease activity due to contaminating gluten in the diet), NRCD is considered a substantial opportunity for pharmaceutical development of an effective and well-tolerated adjunctive treatment to the GFD.

Current Clinical Development Program

Phase 2b Clinical Trial of PRV-015 (ordesekimab) in Celiac Disease (PROACTIVE Study)

We and our partner Amgen conducted chronic toxicology studies in 2019 and early 2020. In August 2020, we initiated the PROACTIVE study (PROvention Amgen Celiac ProtecTIVE Study), a randomized, double-blind, placebo-controlled, parallel-group, multicenter Phase 2 clinical trial in adult patients with NRCD. PRV-015 will be administered every two weeks via subcutaneous route for six months. The hypothesis of this study is that PRV-015 will be superior to the GFD at intercepting the effects of contaminating gluten exposure in celiac patients following a GFD, as measured by symptoms and objective signs of intestinal inflammation after 24 weeks of treatment. Approximately 220 subjects are planned to be enrolled. Due to the impacts of the COVID-19 pandemic on certain aspects of medical care during the pandemic, such as a temporary halting of elective endoscopy procedures, lack of prioritization of chronic life-threatening conditions and reduced exposure to gluten due to reductions of travel and dining out, we are experiencing enrollment delays that have extended the enrollment target. We now expect to report top line results from the Phase 2b PROACTIVE study by the end of 2023.

Celiac Disease Background Information

Celiac disease is a systemic autoimmune disease triggered by gluten consumption in genetically susceptible individuals. Approximately 1% of the western population is affected by celiac disease. This prevalence has been reported to be doubling every 20 years. Gluten is ubiquitous in food and elicits autoimmune responses in celiac patients, with damage to the mucosal lining of the small intestine. Celiac disease causes debilitating symptoms and serious medical complications, as the small bowel damage can lead to nutrient malabsorption and results in a range of subsequent intestinal and extra-intestinal clinical manifestations. The stimulation of intestinal lymphocytes for decades can lead to the development of lymphoma, with increased mortality.

Gluten is the main protein present in some of the most common cereals (wheat, barley, rye). Modern diets are increasingly enriched with gluten and it is also used as an additive in processed foods, cosmetics and oral medications. Gluten is also present in trace amounts in foods labeled as “gluten-free”, as a tableting excipient, and in products such as toothpaste and lipstick. As little as 50mg/day of gluten triggers the disease. A normal diet contains >10 g/day, 200 times the amount that causes damage and intestinal histological abnormalities. As such, celiac patients face enormous challenges to follow a strict GFD.

The pathophysiology of celiac disease is characterized by an abnormal immune response to gluten. Humans lack enzymes to fully digest gluten, which against the right genetic background triggers inflammation and autoimmunity in the intestine and in other organs. An adaptive immune response is triggered when gluten peptides are deamidated in the extracellular space, by the enzyme tissue transglutaminase, normally an intracellular enzyme that is released by damaged cells. This deamidation renders gluten peptides high-avidity binders to HLA-DQ2 and HLA-DQ8, which present these peptides to intestinal CD4+ T cells, thereby activating these T cells and initiating the inflammatory cascade. The innate immune system’s intraepithelial lymphocytes (“IELs”), primarily CD8+, are able to directly lyse and destroy intestinal epithelial cells, damaging the mucosal lining of the small intestine, in response to IL-15 release stimulated by gluten peptides. In healthy individuals, the activated T cells are controlled by Tregs, but this does not happen in celiac disease as IL-15 confers the effector CD4+ T cells resistance to suppression by Tregs.

Celiac disease causes debilitating symptoms and serious medical complications. In many patients, gastrointestinal symptoms derived from intestinal mucosal damage dominate the patient reported symptoms at diagnosis. The normal villi (absorptive finger-like prolongations) present in the gut of healthy individuals are lost in active celiac disease as a result of mucosal atrophy and crypt enlargement. Small bowel damage often leads to nutrient malabsorption that can result in a range of further clinical manifestations (anemia, osteopenia, failure to thrive in children). In addition, extra-intestinal symptoms and systemic manifestations are often present, such as dermatitis, infertility, or neurological and skeletal disorders. Mortality is increased in subjects with persistent intestinal mucosal damage.

The most serious complication of celiac disease is the development of an in situ small bowel T cell lymphoma after many years of exposure, voluntary or inadvertent, to gluten. This malignant complication of celiac disease, which appears to be independent of gluten and unresponsive to a strict GFD, is termed RCD-II when the percentage of aberrant IELs is >20% and Type I refractory celiac disease when the percentage is <20%. In RCD-II, aberrant IELs proliferate in what represents a slow-growing non-Hodgkin lymphoma localized (in situ) in the small bowel, primarily in the epithelial compartment. RCD-II affects approximately 0.5% of celiac patients and can lead to overt and systemic enteropathy-associated T cell lymphoma, with very poor prognosis and >80% mortality in five years.

Current Treatment Options and Their Limitations

Celiac disease is the only common autoimmune disorder with no approved medication. The only current available strategy for the management of celiac disease is a lifelong total avoidance of gluten. While simple in theory, the ubiquity of gluten in foodstuffs, medications, household substances, cosmetics, and gluten-free items makes total avoidance of gluten difficult, if not impossible.

The main challenge to the successful maintenance of a GFD is that cereal flours are widely used in the food industry and are present in numerous food products either naturally or as additives. Although gluten-free products can be purchased, commercially manufactured gluten-free products may be difficult to find, tend to be less flavorful and are more expensive than regular gluten containing foods. In addition, labeling of food products is deficient in many countries. Even in countries with superior labeling guidelines foods labeled “gluten-free” may nevertheless contain gluten. For example, in northern European countries amounts of up to 100 parts per million are permitted in gluten-free products designated apt for celiac sufferers.

For these reasons, celiac sufferers are regularly exposed to gluten contamination in the food and beverages they consume. This exposure to gluten contamination and the associated physiological and psychological consequences results in a self-limitation of social activities and/or a reduction in the variety of foods consumed. Thus, the only currently available management option of a GFD presents both a considerable challenge and substantial burden for patients. A study by Shah and collaborators (2014) found the burden of celiac disease and GFD on patient quality of life to be very high, second only to end-stage renal disease – a condition that requires multiple, weekly dialysis treatments.

As a result of the difficulty in maintaining total avoidance of gluten while on a GFD, gluten contamination causes 50% or more of all diagnosed celiac patients on a GFD to continue to experience disease activity. Patients who continue to have symptoms despite attempting to maintain a GFD are deemed to have NRCD. NRCD has been defined as “persistent symptoms, signs or laboratory abnormalities typical of celiac disease despite 6–12 months of dietary gluten avoidance”. As requested by patient support groups and experts, alternative treatment options that can be administered independently or in combination with a GFD, as well as treatments for refractory celiac disease, are required in order to improve the quality of life for celiac patients.

Overview of IL-15 Biology and PRV-015 Mechanism of Action

IL-15 is a pro-inflammatory cytokine that serves as a potent growth, survival, and activation factor for T cells, particularly IELs, and for natural killer (“NK”), cells. Increased expression of IL-15 has been demonstrated in a variety of inflammatory conditions, including celiac disease, RA, and psoriasis. IL-15 is considered a central regulator of celiac disease immunopathology and a non-redundant driver of lymphomagenesis in RCD-II.

Substantial evidence suggests a pathophysiological role for IL-15 in celiac disease:

Innate immunity:

Adaptive immunity:

By activating the IELs, IL-15 is believed to be the main mediator in the mucosal damage that ensues in response to gluten exposure in celiac disease. The expression of IL-15 in the intestinal epithelium is necessary for villous atrophy in animal models of celiac disease and circumstantial evidence suggests this to be the case in humans, as well. In addition, IL-15 renders effector T cells resistant to inhibition by Tregs, promoting loss of tolerance to food antigens.

One of the studied mouse models of celiac disease is an IL-15-transgenic mouse, in which IL-15 overexpression by gut epithelial cells leads to celiac-like disease, including T and B cell-mediated pathology. IEL apoptosis has been observed in this animal model after treatment with anti-IL-15 or anti-IL-15-receptor monoclonal antibodies.

Figure 1. Multiple actions of IL-15 in the pathophysiology of celiac and refractory celiac disease

PRV-015 (ordesekimab, also known as AMG 714, and formerly HuMax-IL15), is a fully human immunoglobulin (IgG1κ) mAb which binds to and inhibits the function of IL-15 in all its forms (cis, trans, soluble IL-15 bound to IL-15Rα). PRV-015 inhibits IL-15-induced T cell proliferation and shows a dose-dependent inhibition of IL-15-induced TNF-α production. PRV-015 underwent preclinical testing and was subsequently evaluated in a Phase 1 and Phase 2 study in subjects with RA, in a Phase 1 study in healthy volunteers and in patients with psoriasis, and in two Phase 2a studies in celiac disease and refractory celiac disease Type-II.

Pre-clinical Evaluation of PRV-015

The nonclinical development of PRV-015 consisted of a series of in vitro studies demonstrating the binding properties of PRV-015 against human IL-15; in vitro and in vivo studies providing proof-of-concept for the benefit of blocking the IL-15 pathway in celiac disease; and a series of GLP studies evaluating the nonclinical safety profile of Hu714MuXHu, the PRV-015 surrogate molecule which is active in macaques.

Pharmacology

PRV-015 was found to be efficacious in a mouse model of celiac disease triggered by the transgenic expression of human IL-15 in the gut epithelium. In this model, PRV-015 prevented IEL activation and proliferation, as well as histological abnormalities. In addition, PRV-015 was able to induce apoptosis of human IELs in ex vivo culture of small intestinal explants from active celiac disease and RCD-II patients. In this culture experiment, PRV-015 resulted in a suppression of IL-15-driven anti-apoptotic signaling via JAK3 and STAT5.

Toxicology

In vitro studies demonstrated that PRV-015 had high binding affinity for human IL-15, but lower affinity for macaque IL-15. Additionally, PRV-015 neutralized human IL-15 but did not efficiently neutralize macaque IL-15. To enable preclinical and toxicology studies in macaques, a surrogate antibody, Hu714MuXHu, was developed by Amgen by fusing the F(ab) portion of a mouse anti-human IL-15 mAb known to neutralize macaque IL-15, M111, with human IgG1 Fc. Hu714MuXHu was shown to neutralize macaque IL-15 with approximately the same potency as PRV-015 neutralizes human IL-15.

There was a decrease in NK cell counts and NK cell activity following administration of Hu714MuXHu to monkeys, reflecting a PD response to IL-15 blockade in this species, given the known role of IL-15 in NK cell biology in animal models (rodents and non-human primates). Of note, no changes in absolute or relative numbers of NK cells were observed in any of the human studies. This difference between observations in preclinical studies and clinical trials appears related to a differential sensitivity of human versus cynomolgus monkey NK cells to IL-15 deprivation. Human NK cells are not dependent on IL-15 for their survival, possibly due to the redundant role of IL-2 on human NK cells.

Pharmacokinetics of PRV-015

The PK of PRV-015 was consistent with a typical human immunoglobulin G1 antibody with no apparent target-mediated disposition within the investigated dosing range. The mean half-life in human studies has been 20 to 22 days, potentially enabling monthly dosing.

There was no development of anti-drug antibodies to PRV-015 in healthy volunteers, patients with psoriasis or patients with refractory celiac disease. Only one RA patient in the phase 2b study was positive for anti-drug antibodies. Approximately 14% of patients with celiac disease developed anti-drug antibodies in the Phase 2a clinical trial, with an additional 10% presenting pre-existing anti-drug antibodies, a reflection of the abnormal antibody responses which characterize celiac disease. The anti-drug antibodies were not associated with injection reactions or adverse events, and they were non-neutralizing, with no impact on PK.

Proof of Mechanism for PRV-015 and Prior Clinical Evaluation

PRV-015 was initially developed for RA in two small Phase 1 and 2 studies with approximately 200 patients with moderate-to-severe disease. Although PRV-015 missed the primary endpoint in the Phase 2 study at week 14, the results were significant at weeks 12 and 16, establishing proof-of-concept. Approximately 60% of patients with active RA in both Phase 1 and Phase 2 studies versus approximately 30% of patients in the placebo groups demonstrated a response to treatment as measured by the American College of Rheumatology 20% improvement score (ACR 20) at 8 and 12 weeks, respectively. PRV-015 also led to decreases in RA inflammatory biomarkers such as C-reactive protein and erythrocyte sedimentation rate. PRV-015 was not effective in psoriasis in a small Phase 1 study, suggesting PRV-015’s action is selective, unlike that of broad systemic immune suppressants.

Upon gluten challenge in a Phase 2 clinical trial in celiac disease (CELIM-NRCD-001), PRV-015 did not prevent gluten-induced architectural mucosal injury, and thus missed the primary endpoint, yet the high dose of PRV-015, 300 mg, showed statistically significant attenuation of gluten’s effects on the change from baseline in intestinal inflammation, in patient-reported symptom questionnaires (the Celiac Disease Patient Reported Endpoint, CeD PRO, a registrational endpoint in NRCD) and in diarrhea, compared with placebo. The totality of the results from the patients who had gluten challenge indicate that 300 mg PRV-015 (formerly AMG 714) given every two weeks can ameliorate the inflammation and symptoms caused by substantial gluten exposure, the first demonstration of such dual benefit in intestinal inflammation and symptoms for any experimental medication for celiac disease. The results suggest that PRV-015 can be a potential adjunctive treatment for NRCD to the GFD to ameliorate or resolve persistent inflammation seen in the majority of celiac patients already on GFD.

In the Phase 2a clinical trial in RCD-II (CELIM-RCD-002), the primary endpoint (reduction in intestinal IELs) was not achieved, yet PRV-015 showed statistically significant benefit over placebo in reducing T cell receptor clonality (no increase in clonality with PRV-015) and symptoms (diarrhea). Other endpoints, such as histology, did not reach statistically significant differences between groups, but the results consistently favored PRV-015 numerically. PRV-015 was generally well tolerated, with no observed immunogenicity.

Summary data of the Phase 2a clinical trial as presented at Digestive Disease Week in June 2018 is shown below:

The CELIM-NRCD-001 study included 62 randomized celiac patients on a gluten-free diet, of which 49 patients underwent a substantial gluten challenge of 2.5 grams per day for 10 weeks in order to assess the ability of PRV-015 to ameliorate the effects of gluten. Upon gluten challenge, PRV-015 did not prevent gluten-induced architectural mucosal changes, the primary endpoint in the study. However, in secondary efficacy assessments, the PRV-015 300 mg dose consistently attenuated the effects of gluten in intestinal inflammation (intraepithelial lymphocyte density, p=0.03), and in gastrointestinal symptoms as measured by three independent endpoints: the Celiac Disease Patient Reported Endpoint (CeD-PRO, p=0.02), the Celiac Disease Gastrointestinal Symptom Rating Scale (CeD-GSRS, p=0.07) and the Bristol Stool Form Scale (BSFS/diarrhea, p=0.0002). The CeD-PRO is a validated endpoint acceptable for registrational trials. In addition, patients in the PRV-015 300 mg arm had a significantly improved Physician Global Assessment of disease (PGA, p=0.03). The totality of the results demonstrated proof-of-concept for PRV-015 300 mg given subcutaneously every two weeks in the amelioration of inflammation and symptoms caused by the consumption of gluten by celiac patients. Importantly, PRV-015 was well tolerated, and only 14% of patients developed anti-drug antibodies, which were non-neutralizing and not correlated with impact of efficacy or safety. The PK profile was consistent with a monoclonal antibody, and potentially enables future monthly dosing.

Summary of clinical trials

Safety of PRV-015

Approximately 250 subjects have been exposed to PRV-015 to date, including approximately 200 subjects for 12 weeks of biweekly dosing. In all studies to date, PRV-015 was generally well tolerated by healthy volunteers, patients with active RA, and patients with celiac disease or RCD-II. While PRV-015 has the potential, to increase susceptibility to infections as is the case with immune modulators, PRV-015 has not demonstrated this effect in the six clinical trials completed to date. No deaths or clinically significant changes in laboratory parameters were observed, including no NK cell depletion.

The only adverse events clearly increased in PRV-015-treated patients have been injection site reactions, which were more commonly reported in subjects exposed to PRV-015, in a dose-dependent fashion (up to ~52% on PRV-015 vs ~26% in placebo in the celiac Phase 2a clinical trial), and nasopharyngitis (most cases with suspected allergic origin at a single site in RCD-II). In the population which will be studied in Phase 2b, celiac disease, there were no SAEs in the Phase 2a clinical trial, while there were six SAEs (five on PRV-015 and one on placebo) in the RCD-II, a much sicker patient population with immune suppression at baseline. Of the five SAE on PRV-015 in RCD-II patients, two were infections (both resolved while on PRV-015). There was one mild balance disorder (considered unlikely to be related to PRV-015 and resolved while on the drug). Another patient had mild cerebellar syndrome which led to discontinuation from the study.

PRV-101 (CVB Vaccine) for Acute Infection and T1D

PRV-101 is a polyvalent inactivated prophylactic CVB vaccine candidate targeting all five key CVB serotypes associated the development of T1D, intended to prevent acute CVB infection and the development of CVB-induced T1D and celiac autoimmunity. Based on epidemiological and pre-clinical study data to date, we believe that, if successful, PRV-101 may prevent up to 50% of T1D cases and up to 20% of celiac cases. Preclinical studies completed to date by Vactech and replicated independently by us demonstrate that CVB triggers diabetes in animal models of T1D and that vaccination against CVB protects mice from acute infection as well as prevents the onset of diabetes triggered by CVB infection. Interim results in normal adult healthy volunteers, which we disclosed in a press release in October 2021, showed that in this study PRV-101 was well tolerated and elicited high titers of virus neutralizing antibodies, in a dose dependent fashion in healthy volunteers, against all CVB serotypes included in the vaccine, thus supporting further development of this vaccine.

Current Clinical Development Program

First in Human Phase 1 Clinical Trial of PRV-101 (PROVENT Study)

In December 2020, we initiated the PROVENT (PROtocol for coxsackievirus VaccinE in healthy voluNTeers) study, a first-in-human study of PRV-101. PROVENT is a placebo-controlled, double-blind, randomized first-in-human study. The study’s primary endpoint is the safety of two dose levels of PRV-101 in healthy adult volunteers provided three administrations with 4-week intervals. Tolerability and immunogenicity were also evaluated. We completed enrollment in April 2021.

We reported positive interim results from this first-in-human study in October 2021. The interim analysis was conducted after all trial participants completed 4 weeks of follow-up after the 3rd dose (Week 12) to assess vaccine response and safety. In this interim analysis, PRV-101 met the primary endpoint demonstrating that it was well tolerated in this study, with no treatment-emergent Serious Adverse Events, Adverse Events of Special Interest, or Adverse Events that led to study drug discontinuation or study withdrawal. PRV-101 also met the secondary efficacy endpoint as it induced high titers of viral-neutralizing antibodies against all CVB serotypes included in the vaccine in a dose-dependent fashion. The percent of subjects who responded to all 5 serotypes (response defined as seroconversion if baseline-negative or >= 4x increase in VNT if baseline-positive) was 0% in placebo, 67% in the low dose and 100% in the high dose arm of PRV-101.

An additional 6-month safety and efficacy follow up will be conducted and final trial results from the trial are expected in the first half of 2022.

CVB Infection Market

Enteroviruses are responsible for an estimated ten to 15 million symptomatic infections in the United States annually. CVB contributes to a major part of the healthcare costs of enteroviruses as they cause the most serious complications and are among the most frequently reported enteroviral infections according to the CDC. Acute CVB infection is usually asymptomatic or causes common cold-type symptoms. It often also leads to a febrile illness associated by rash, hand-foot-mouth disease and/or mild GI distress. However, CVB infections also cause more severe manifestations including pericarditis, myocarditis, meningitis and pancreatitis.

Overview of CVB Infection of the Pancreas, T1D and PRV-101’s Mechanism of Action

Longitudinal studies of more than 200,000 children studied for up to two decades in Finland by our technology licensor, Vactech, and its collaborators (“DIPP Study”), identified CVB infection as a likely environmental trigger in the onset of T1D autoimmunity and T1D-associated celiac disease (“CD”) autoimmunity. Subsequent full-virome analysis of the TEDDY Study (400,000 children international study) confirmed that CVB is the only virus whose persistent infection is associated with the development of T1D and celiac disease autoimmunity (T1D-associated and also independent of T1D).

CVB infection is very common and is responsible for various symptoms and complications ranging from mild respiratory disease, gastrointestinal disturbances and hand-foot-mouth disease to life-threatening cardiomyopathy and meningitis. However, in patients with a certain genetic background, CVB appears responsible for the development of autoimmunity. The T1D association with CVB infection has been observed in independent cohorts in 15 countries, including in North America, Europe and Australasia. These epidemiological observations have been substantiated by biological experimentation. Insulin-producing beta cells in the pancreas express specialized receptors associated with the transport, storage and release of insulin. These receptors appear to be used by CVB to preferentially infect these cells and polymorphism in these receptors are associated with development of T1D autoimmunity. Infection by enteroviruses can be detected in the pancreatic beta cells of approximately 60% of T1D patients and in the gut of most patients with T1D-associated CD. Importantly, if mothers have anti-CVB immunity at the time of the pregnancy, a 50% reduction in the onset of T1D autoimmunity (T1D-associated auto-antibodies) has been observed in their offspring, presumably due to protection by maternal antibodies passed on to the fetus. This observation strongly suggests the potential efficacy of CVB vaccination for children and/or mothers, resulting in the development of protective antibodies potentially capable of preventing or delaying the onset of T1D.

An analysis of stool samples collected from these individuals identified enterovirus infections prior to the first detection of T1D auto-antibodies. Enterovirus RNA was also detected in stool samples. Examination of antibodies present in DIPP children who developed at least two islet cell auto-antibodies (sign of early T1D) and/or progressed to clinical T1D confirmed that among all enteroviruses, only CVB was significantly associated with initiation of beta cell autoimmunity.

Enterovirus RNA in Blood is Linked to the Development of T1D

OR: odd ratio; CI: confidence interval; EV: enterovirus

Preclinical Evaluation PRV-101

Preclinical Data for PRV-101

The mechanism of action and efficacy of PRV-101 is supported by the results of several in vivo studies. Inactivated CVB-based viral vaccines efficiently protect mice from CVB infections and from viral spread to the pancreas, as seen for CVB1 and CVB3 vaccines. Similar experiments conducted with a vaccine covering all six CVB serotypes demonstrated that it can induce a strong neutralizing anti-CVB response in mice and protect the animals against multiple CVB infections from the corresponding live viruses. Independent experiments confirm that CVB infection can accelerate T1D onset in T1D susceptible NOD (Non-obese diabetic) or SOCS-1-Tg (suppressor of cytokine signaling 1 transgenic) mice, suggesting that protection from CVB infection would therefore protect against T1D development. This hypothesis has been confirmed in experiments conducted by the Karolinska Institute (Sweden) and the University of Tampere (Finland), demonstrating that CVB1 and CVB3 vaccines produced by Provention indeed protected SOCS-1-Tg mice against T1D induced by CVB1 and CVB3, respectively. These mice develop T1D after CVB infection as a consequence of a direct infection of insulin-producing beta cells in the pancreas and the subsequent immune response against the beta cells, mimicking human T1D. A three-injection vaccination course induced robust neutralizing antibody responses against CVB1/CVB3 and protected mice from both CVB1/CVB3 infection and CVB1/CVB3-driven T1D. CVB1/CVB3 infection led to a loss of insulin-producing cells in unvaccinated mice, which also was prevented by the vaccine. These data strongly supported the development of PRV-101 for the prevention of T1D in humans.

Formalin-Inactivated CVB1 Vaccine is effective against CVB1-Induced T1D in a Mouse Model.

As seen in the left panel below, CVB1 infection led to loss of insulin-producing cells, and this pathology was completely prevented by the CVB1 vaccine (right panel). In this experiment, while 50% of unvaccinated mice develop T1D as a consequence of CVB1 infection, all vaccinated mice were protected (not shown).

Important from a safety point of view, the formalin-inactivated CVB1 vaccines did not cause any undesirable effects in the pancreas. There was no vaccine-induced pancreatic pathological change, islet autoimmunity or diabetes in the vaccinated mice. Similar results were obtained for Provention-manufactured CVB1 and CVB3 vaccines (not shown).

Finally, maternal CVB infection during gestation in mice protects the offspring from CVB infection and subsequent T1D development, presumably through transfer of specific antibodies from the mother to the fetus, corroborating previous findings in humans in the DIPP study and further supporting the use of a prophylactic vaccine to protect against CVB-associated-T1D.

CTA-Enabling Program to Support FIH Study

The CVB vaccine toxicology program to date has consisted of Good Laboratory Practices (“GLP”) and non-GLP safety and immunogenicity studies conducted in mice. These studies were designed to identify and characterize potential toxicities associated with PRV-101 treatment, including those arising from the immune responses induced by the product. They mirrored the administration regimen that is now used in the PROVENT FIH study, and by the same route of administration.

Pharmacology studies have also been conducted to determine the desired composition of the vaccine, leading to successful GMP manufacturing of the final polyvalent vaccine for clinical trials.

Significant Contracts and Agreements Related to Research and Development Activities

License and Acquisition Agreements

MacroGenics Asset Purchase Agreement

In May 2018, we entered into an Asset Purchase Agreement (the “MacroGenics Asset Purchase Agreement”) with MacroGenics pursuant to which we acquired MacroGenics’ interest in teplizumab (renamed PRV-031), a humanized mAb for the treatment of T1D. As partial consideration for the MacroGenics Asset Purchase Agreement, we granted MacroGenics a warrant to purchase 2,162,389 shares of our common stock at an exercise price of $2.50 per share. In July 2019, these warrants were exercised by MacroGenics on a cashless basis. We are obligated to pay MacroGenics contingent milestone payments totaling $170.0 million upon the achievement of certain regulatory approval milestones, including $60.0 million payable within 90 days of an approval of a BLA for a first indication in the United States. In addition, we are obligated to make contingent milestone payments to MacroGenics totaling $225.0 million upon the achievement of certain sales milestones. We have also agreed to pay MacroGenics a single-digit royalty on net sales of the product. We have also agreed to pay third-party obligations, including low single-digit royalties, a portion of which is creditable against royalties payable to MacroGenics, aggregate milestone payments of up to approximately $0.7 million and other consideration, for certain third-party intellectual property under agreements we assumed pursuant to the MacroGenics Asset Purchase Agreement. Further, we are required to pay MacroGenics a low double-digit percentage of certain consideration to the extent it is received in connection with a future grant of rights to teplizumab by us to a third party. We are obligated to use reasonable commercial efforts to develop and seek regulatory approval for teplizumab.

MacroGenics License Agreement

In May 2018, we entered into a License Agreement with MacroGenics (the “MacroGenics License Agreement”), pursuant to which MacroGenics granted us exclusive global rights for the purpose of developing and commercializing MGD010 (renamed PRV-3279), a humanized protein and a potential treatment for SLE and other similar diseases. As partial consideration for the MacroGenics License Agreement, we granted MacroGenics a warrant to purchase 270,299 shares of our common stock at an exercise price of $2.50 per share. In July 2019, these warrants were exercised by MacroGenics on a cashless basis. We are obligated to make contingent milestone payments to MacroGenics totaling $42.5 million upon the achievement of certain developmental and approval milestones for the first indication and an additional $22.5 million upon the achievement of certain regulatory approvals for a second indication. In addition, we are obligated to make contingent milestone payments to MacroGenics totaling $225.0 million upon the achievement of certain sales milestones. We have also agreed to pay MacroGenics a single-digit royalty on net sales of the product. Further, we are required to pay MacroGenics a low double-digit percentage of certain consideration to the extent received in connection with a future grant of rights to PRV-3279 by us to a third party. In connection with our grant of certain rights for PRV-3279 to Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (“Huadong”) under the Huadong License Agreement (as defined below), in May 2021, we paid $1.1 million to MacroGenics related to “qualified” consideration, as defined in the MacroGenics License Agreement, that we received from Huadong. See below for further description of the Huadong License Agreement.

We are obligated to use commercially reasonable efforts to develop and seek regulatory approval for PRV-3279. The license agreement may be terminated by either party upon a material breach or bankruptcy of the other party, by us without cause upon prior notice to MacroGenics, and by MacroGenics in the event that we challenge the validity of any licensed patent under the agreement.

Huadong License Agreement

In February 2021, we entered into a License Agreement with Huadong, a wholly-owned subsidiary of Huadong Medicine Co., Ltd. (the “Huadong License Agreement”), pursuant to which we granted Huadong exclusive rights for the purpose of developing and commercializing PRV-3279, a DART® (bispecific antibody-based molecule) targeting the B cell surface proteins CD32B and CD79B, in Greater China (mainland China, Hong Kong, Macau and Taiwan). We will retain exclusive worldwide rights to develop PRV-3279 for combination uses to reduce the immunogenicity of biotherapeutics, but Huadong will have the exclusive right to distribute PRV-3279 in that field in Greater China. In consideration of the license and other rights granted as part of the Huadong License Agreement, we received an upfront payment of $6.0 million and will receive up to $11.5 million in research, development and manufacturing funding over the next three years, of which $2.5 million was received as of December 31, 2021. If Huadong successfully develops, obtains regulatory approval for, and commercializes PRV-3279 in Greater China, we are eligible to receive up to $37.0 million in regulatory milestones and up to $135.0 million in commercial milestones based on aggregate net sales in a calendar year in Greater China. If commercialized, we would also be eligible to receive low double-digit royalties on net sales of PRV-3279 by Huadong in Greater China. The License Agreement may be terminated by either party upon a material breach or bankruptcy of the other party, by Huadong without cause upon at least 12 months prior notice to us, and by us in the event Huadong challenges a licensed patent or in the event that our upstream license terminates. We may also terminate the License Agreement if Huadong ceases commercialization of PRV-3279 for a consecutive period of six months after first commercial sale. We are generally responsible for the manufacturing of PRV-3279 through regulatory approval in Greater China, and Huadong will exclusively purchase all clinical and commercial supply requirements of PRV-3279 from us until Huadong exercises its option to assume manufacturing responsibilities, which may be triggered after regulatory approval in China. We will retain all rights to PRV-3279 in the rest of the world. We recently initiated a Phase 2a trial of PRV-3279 in systemic lupus erythematosus in January 2022 and are conducting a portion of this trial in Hong Kong.

Vactech License

In April 2017, we entered into a License Agreement with Vactech (the “Vactech License Agreement”), pursuant to which Vactech granted us exclusive global rights for the purpose of developing and commercializing the CVB vaccine platform technology. In consideration of the licenses and other rights granted by Vactech, we issued two million shares of our common stock to Vactech. We recorded the issuance of the shares at their estimated fair value of approximately $1.70 per share, for a total of $3.4 million as a license fee expense included as part of research & development expense for the year ended December 31, 2017. We paid Vactech a total of approximately $0.5 million for transition and advisory services during the first 18 months of the term of the agreement. Vactech is obligated to transition its intellectual property, provide reference samples, assist with the technology transfer to a third-party contract manufacturer, and participate on our scientific advisory board. In addition, we may be obligated to make a series of contingent milestone payments to Vactech totaling up to an additional $24.5 million upon the achievement of certain clinical development and regulatory filing milestones, of which we paid $0.5 million to Vactech in April 2021. This payment was triggered upon the dosing of the first patient in the Phase 1 PROVENT study, which occurred in January 2021. In addition, we have agreed to pay Vactech tiered single-digit royalties on net sales of any approved product based on the CVB platform technology and three additional payments totaling $19.0 million upon the achievement of certain annual net sales levels. The Vactech License Agreement may be terminated by us on a country by country basis without cause (in which case the exclusive global rights to the technology will transfer back to Vactech) and by either party upon a material breach or insolvency of the other party. If we terminate the agreement with respect to two or more specified European countries, the agreement will be deemed terminated with respect to all of the European Union, and if we terminate the agreement with respect to the United States, the agreement will be deemed terminated with respect to all of North America. The agreement expires upon the expiration of our last obligation to make royalty payments to Vactech.

Amgen License and Collaboration Agreement

In November 2018, we entered into a License and Collaboration Agreement (the “Amgen Agreement”) with Amgen for PRV-015 (ordesekimab, also known as AMG 714), a novel anti-IL-15 monoclonal antibody being developed for the treatment of gluten-free diet NRCD. Under the terms of the agreement, we will conduct and fund a Phase 2b trial in NRCD and lead the development and regulatory activities for the program. Amgen agreed to make an equity investment of up to $20.0 million in us, which was completed in September 2019 through the purchase of 2,500,000 shares of our common stock. Amgen is also responsible for the manufacturing of PRV-015. Upon completion of the Phase 2b trial, a $150.0 million milestone payment is due from Amgen to us, plus an additional regulatory milestone payment, and single digit royalties on future sales; provided, however, that Amgen has the right to elect not to pay the $150.0 million milestone, in which case we will have an option to negotiate for the transfer to us of rights to AMG 714 pursuant to a termination license agreement between Amgen and us. The material terms of the termination license agreement have been negotiated and agreed and form part of the Amgen Agreement. Under the terms of the termination license agreement, we would be obligated to make certain contingent milestone payments to Amgen and other third parties totaling up to $70.0 million upon the achievement of certain clinical and regulatory milestones and a low double-digit royalty on net sales of any approved product based on the IL-15 technology. The agreement may be terminated by either party upon a material breach or upon an insolvency event and by Amgen if we are not able to fund our clinical development obligations (among other termination triggers). The agreement expires upon the expiration of Amgen’s last obligation to make royalty payments to us.

AGC Biologics Agreement

In February 2019, we entered into services agreement with AGC Biologics (“AGC”), to manufacture and supply teplizumab for our anticipated clinical and commercial supply needs. We may terminate the agreement or any stage of services thereunder with 90 days’ prior written notice. If we provide less than 12 months’ notice of termination for the termination of a scheduled batch, we may incur a cancellation fee. The amount of the cancellation fee would depend on the timing of such notice. Each party also has the right to terminate the agreement for other customary reasons such as material breach and bankruptcy. The agreement contains provisions relating to compliance by AGC with current GMP, cooperation by AGC in connection with potential marketing applications for teplizumab, indemnification, confidentiality, dispute resolution and other customary matters for an agreement of this kind.

Parexel Services Agreement

In February 2019, we entered into a services agreement with Parexel (the “Parexel Services Agreement”), pursuant to which we retained Parexel to perform implementation and management services in connection with the PROTECT study of teplizumab. We may terminate the services agreement or any work order for any reason and without cause with 90 days’ written notice. Either party may terminate the agreement in the event of a material breach or, bankruptcy petition by the other party or, if any approval from a regulatory authority is revoked, suspended or expires without renewal.

Intellectual Property

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

We plan to spend considerable resources and focus in the future on obtaining United States and foreign patents. We have and will continue to actively protect our intellectual property. No assurances can be given that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims. In addition, any issued patents may be contested, circumvented, found unenforceable or invalid, and we may not be able to successfully enforce our patent rights against third parties. No assurance can be given that others will not independently develop a similar or competing technology or design around any patents that may be issued to us. We intend to expand our international operations in the future and our patent portfolio, copyright, trademark and trade secret protections may not be available or may be limited in foreign countries.

PRV-031 (teplizumab anti-CD3 antibody)

Through our agreement with MacroGenics, we have acquired a patent portfolio that includes seven issued patents, including two United States patents and five ex-United States patents in Australia, Israel, Mexico and Singapore. The issued patents are set to expire no earlier than dates ranging from 2026 and 2028, subject to any disclaimers, patent term adjustments or extensions available under the law. These issued patents cover use of certain humanized antibodies that bind to CD3 in the treatment of autoimmune disorders, including T1D and RA.

We have additionally filed one PCT international patent application, three United States non-provisional patent application, four United States provisional patent applications, and fourteen ex-United States patent applications directed to various new uses of anti-CD3 antibodies, including teplizumab for the prevention or delay of clinical T1D, as well as new dosing regimens. If issued, patents claiming priority to these applications will expire no earlier than 2040, subject to any disclaimers, patent term adjustments or extensions available under the law.

PRV-101 (CVB vaccine for the prevention of T1D and celiac disease)

Through our agreement with Vactech, we have a licensed patent portfolio that includes three issued United States patents, two pending United States patent applications, and 14 patents in various European countries (i.e., one granted European patent validated in 14 European Patent Convention member states). We also have two pending provisional United States patent applications co-owned by Vactech and Provention. The pending United States patent applications and the European country patents disclose use of a CVB vaccine composition in the prevention or treatment of T1D.

The patents issued in the United States and various European countries generally have terms of 20 years from their respective priority filing dates, subject to available extensions, and are thus set to expire no earlier than 2032, subject to any disclaimers, patent term adjustments or extensions available under the law.

PRV-3279 (CD32B/CD79B diabody)

Through our agreement with MacroGenics, we have licensed a patent portfolio that includes: i) 191 issued patents, including 12 United States patents, 110 patents in European countries, and 69 patents in other ex-United States jurisdictions; and ii) 35 pending patent applications, including eight pending United States patent applications, four pending European patent applications, and 23 pending patent applications in other ex-United States jurisdictions.

The patents and patent applications disclose a platform technology for making diabodies, specific anti-CD32B antibodies, specific anti-CD79B antibodies, specific diabodies that co-ligate both CD32B and CD79B, as well as use of these antibodies and diabodies in treating various disorders, including cancer, autoimmune disorder, inflammatory disorder, and IgE-mediated allergic disorder.

The issued patents in the United States and various ex-United States countries generally have terms of 20 years from their respective priority filing dates, subject to available extensions, and are thus set to expire no earlier than dates ranging from 2032 and 2034, subject to any disclaimers, patent term adjustments or extensions available under the law. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2032 and 2037, subject to any disclaimers, patent term adjustments or extensions available under the law.

We have additionally filed two PCT international patent applications, three United States non-provisional patent application, and one United States provisional patent application directed to new uses of B cell inhibitors such as PRV-3279, including the prevention of immunogenicity associated with gene therapy, and treatment of B cell driven autoimmune and/or allergic diseases, among other things. If issued, patents claiming priority to these applications will expire no earlier than 2040, subject to any disclaimers, patent term adjustments or extensions available under the law.

PRV-015 (ordesekimab anti-IL-15 antibody)

Through our agreement with Amgen, we have licensed a patent portfolio that includes: i) 80 issued patents, including eight United States patents, 42 patents in European countries, and 30 patents in other ex-United States jurisdictions; and ii) 18 pending patent applications, including two pending United States patent applications, one pending European patent application, and 15 pending patent applications in other ex-United States jurisdictions.

The patents and patent applications disclose anti-IL-15 antibodies, methods of using the same, manufacturing conditions and dosages of the same.

The issued patents are set to expire no earlier than dates ranging from 2022 and 2027, subject to any disclaimers or extensions under the law. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2026 and 2037, subject to any disclaimers, patent term adjustments of extensions available under the law.

PRV-6527 (CSF-1R small molecule inhibitor)

Through our agreement with Janssen Pharmaceutica NV, we have licensed a patent portfolio that includes: i) 73 issued patents, including one United States patent, one patent in European countries, and 71 patents in other ex-United States jurisdictions; and ii) three pending patent applications, including one pending United States patent application, one pending European patent application, and one pending patent applications in other ex-United States jurisdictions. The issued patents are set to expire no earlier than dates ranging from 2027 and 2030, subject to any disclaimers, patent term adjustments or extensions under the law. In the event that the pending patent applications issue as patents, although there can be no assurance that the patent applications will issue, the patents would be set to expire no earlier than dates ranging from 2027 and 2030, subject to any disclaimers, patent term adjustments or extensions under the law.

Sales and Marketing

We are a clinical stage company without a history of commercial revenue or marketing experience. We intend to commercialize teplizumab ourselves in the United States, however, because commercialization is expensive and time consuming, we intend to explore multiple commercialization strategies outside the United States, including:

We expect that partnering with pharmaceutical or biotherapeutic companies may accelerate product acceptance into target market areas outside the United States and gain the sales and marketing advantages of the partner’s distribution infrastructure. We intend to continue to strengthen our market position and solidify our leadership position in immunotherapy by continuing to improve our technology, broadening our clinical and therapeutic applications, identifying new clinical and therapeutic applications and forming strategic relationships with our licensors.

Manufacturing

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates. Although we rely and intend to continue to rely upon third–party contract manufacturers to produce our products and product candidates, we have recruited personnel and consultants with experience to manage these third–party contract manufacturers. In certain cases, our collaboration partners for each respective program are responsible for providing clinical drug supply or drug product for those program’s clinical trials. In other cases, we have engaged third-party manufacturers to provide services related to process development, non-GMP and GMP manufacturing and other related services.

The table below lists the third-party responsible for manufacturing drug supply for each of our programs:

We have historically relied upon an existing supply of teplizumab produced by MacroGenics for use in our clinical trials of teplizumab. This existing supply is insufficient to fully supply the ongoing PROTECT study to completion or our potential commercialization need. In February 2019, we entered into an agreement with AGC Biologics to manufacture teplizumab for our anticipated clinical trial needs as well as for potential commercialization of teplizumab.

Supplies of teplizumab sufficient to supply the PROTECT study have been manufactured by our CMOs and are currently being utilized in the study.

In order to obtain regulatory approval for teplizumab, third-party manufacturers have been required to consistently produce teplizumab in commercial quantities and of specified quality on a repeated basis and document their ability to do so. The required number of batches of teplizumab have been manufactured at our CMOs by the processes we intend to use for commercialization. The quality and consistency of these lots, along with their comparability to teplizumab manufactured for clinical studies, is now under review by the FDA.

If the FDA concludes that the teplizumab manufactured by the current third-parties is not of sufficient quality, or is not comparable to drug product used in the TN-10 study, delays in FDA acceptance of our BLA resubmission may occur. If the FDA applies a shorter shelf life of teplizumab than we planned, this may negatively impact our commercial supply. Such impacts would, in turn, delay the potential marketing and commercialization of teplizumab, which would materially and adversely affect our business.

Competition

We face substantial competition from well-established large pharmaceutical companies, as well as innovative new entrants. Nevertheless, we believe our strategic intent is sufficiently differentiated in that we are focusing on intercepting or potentially preventing the onset and progression of immune-mediated and inflammatory diseases by selecting and developing product candidates that are aimed at relevant and predominantly upstream pathophysiological targets.

The symptomatic treatment of T1D is a highly competitive market with large incumbents such as Sanofi, Novo Nordisk and Eli Lilly providing insulin and Medtronic, Abbott, and Dexcom providing blood glucose monitoring products and many working on new ways to manage the disease. Our goal is to delay or prevent the onset of T1D and spare patients the need to live with blood glucose monitoring and daily insulin injections and this therapy’s many complications and clinically relevant shortfalls. We believe our enteroviral vaccine approach is unique in that it aims to prevent the onset of T1D prior to the rise of immune cells and auto-antibodies programmed to attack insulin producing beta cells. We are aware of competitive vaccine technologies in development that are attempting to alter the autoimmune cycle once these auto-antibodies have been detected. However, we believe our vaccine approach may intercept the process prior to this cycle being initiated (primary prevention).

We believe, our secondary prevention (i.e., interception) approach with teplizumab is more advanced and differentiated from other immunomodulation therapies which have shown preservation of beta cell function in early phase studies of newly diagnosed onset T1D including anti-thymocyte globulin (ATG), CTLA4-Ig (costimulatory blocker), anti-CD20 (Rituxan) and LFA3-Ig (alefacept). All of these Phase 2 studies were conducted by the academic community or by T1D networks and do not appear to be in active Phase 3 development by industry sponsors. The most recent data were reported with Thymoglobulin which is an approved anti-thymocyte globulin obtained by immunization of rabbits with human thymocytes and is indicated for the treatment of renal transplant acute rejection in conjunction with concomitant immunosuppression and for induction in adult renal transplant recipients. Low dose ATG was administered intravenously for 2 days in early onset T1D (within 100 days of diagnosis). While C-peptide preservation was observed, due to the risk of serum sickness, ATG was administered during a 2-3 day hospitalization and required pre-medication, including intravenous corticosteroids. In January 2020, a Phase 3 trial in newly diagnosed T1D patients with ladarixin (Dompe) an interleukin-8 inhibitor, was announced on the basis of post-hoc results in a subset of patients after the drug failed to improve C-peptide in Phase 2a. Importantly, teplizumab is the only experimental drug with positive data in Stage 2, in the prevention/delay of clinical T1D, and no other pivotal studies are on-going in this indication.

PRV-015 has the potential to be the first drug ever approved for CD since it is the only medication which has shown simultaneous improvement in gluten-induced symptoms and gut inflammation to date, and since most clinical-stage products are early in development and have not established proof-of-concept. There is another anti-IL-15 mAb in clinical development, CALY002 by Calypso, currently in Phase 1. Potential competition includes the recent initiation of a Phase 1b study with the marketed psoriasis anti-IL-23 mAb guselkumab (TREMFYA, Janssen), and experimental medications in development by: 9 Meters (larazotide acetate, Phase 2b study completed in 2014; Phase 3 started in 2019 as a symptomatic relief, not disease-modifying agent), ImmunogenX (IMGX-003/latiglutenase, Phase 2b study completed in 2016 missed primary endpoint, new phase 2a started in 2019), Zedira/Dr. Falk (ZED1227, positive phase 2a reported in 2021), Takeda (with TAK-101, formerly NP-GLI, in Phase 1b/2a after Phase 1/2 completed in 2019; and TAK-062, formerly KumaMax, in Phase 1b after Phase 1 completed in 2019) and Anokion (in Phase 1 with KAN-101).

The market for lupus is currently led by large pharmaceutical companies commercializing older, off-patent products such as steroids, immunosuppressive agents including azathioprine, cyclosphosphamide, cyclosporine and mycophenolate. In addition, Glaxo SmithKline (“GSK”) and Roche offer recently approved B cell-targeted agents. GSK received approval for belimumab (Benlysta) in 2011, the first drug approval in lupus in 50 years. Despite modest efficacy and slow onset of effect, belimumab’s annual sales are currently approximately $800 million and are expected to grow with the December 2020 approval in lupus nephritis. Roche’s rituximab (Rituxan), a blockbuster drug, is used off-label in lupus despite not having been approved in SLE. The calcineurin inhibitor voclosporin (Aurinia Pharmaceuticals) was approved for lupus nephritis in January 2021. Anifrolumab (SAPHNELO, Astra Zeneca) is a type 1 interferon receptor mAb approved in July 2021. The lupus field is competitive and new experimental drugs are being tested in late-stage trials by large pharmaceutical companies and early to mid-stage biotech companies. We expect that PRV-3279 will be differentiated from the competition because of greater and faster-onset efficacy, better safety (PRV-3279 does not deplete B cells and is not expected to be immune-suppressive), and less side effects (since PRV-3279 is a highly specific mAb with likely minimal off-target side effects).

There are no drugs approved for the prevention of the immunogenicity of biotherapeutics, and rituximab is occasionally used off-label in gene therapy. Experimental medications are being tested in Phase 1-2 by Selecta Biosciences and Hansa Biopharma.

Government Regulation

Our business activities, including the manufacturing, research, development and marketing of our product candidates, are subject to extensive regulation by numerous governmental authorities in the United States and other countries. Before marketing in the United States, any new drug developed by us or our collaborators must undergo rigorous preclinical testing, clinical trials and an extensive regulatory clearance process implemented by the FDA. The process for obtaining regulatory approval and compliance with applicable federal, state and local laws and regulations requires the expenditure of substantial time and financial resources. Moreover, government coverage and reimbursement policies will both directly and indirectly impact our ability to successfully commercialize any future approved products, and such coverage and reimbursement policies will be impacted by enacted and any applicable future healthcare reform and drug pricing measures. In addition, we are subject to state and federal laws, including, among others, anti-kickback laws, false claims laws, data privacy and security laws, and transparency laws that restrict certain business practices in the pharmaceutical industry.

US Regulation of Drugs and Biologics

In the United States, FDA regulates human drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and in the case of biologics, also under the Public Health Service Act (“PHSA”) and their implementing regulations. The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record keeping, packaging, labeling, storage, approval, advertising, promotion, import, export, sale and distribution of biopharmaceutical products.

The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following:

Nonclinical and Clinical Development

Before testing any drug product candidates in humans, the product candidate intended for human use must undergo rigorous laboratory and animal testing until adequate proof of safety is established. This preclinical testing generally involves laboratory evaluations of drug chemistry, formulation and stability, as well as in vitro and animal studies, to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND, An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, in accordance with GCP requirements, which include the requirement that all patients provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing the objectives of the study, inclusion and exclusion criteria, the parameters to be used in monitoring the safety and effectiveness criteria to be evaluated. Each protocol, as well as any subsequent amendments, must be submitted to the FDA as part of the IND. Additionally, each clinical trial and its related documentation, including the trial protocol and informed consent form, must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. Some clinical trials are also 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 may recommend continuation of the study as planned, changes in study conduct, or cessation of the study at designated checkpoints based on access to certain data from the study.

Clinical trials for new product candidates are then typically conducted in humans in three sequential phases that may overlap. Phase 1 trials involve the initial introduction of the product candidate into a small number of healthy human volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The emphasis of Phase 1 trials is on testing for safety or adverse events, dosage, tolerance, metabolism, distribution, excretion and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the compound for specific targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks. Once a compound shows evidence of effectiveness and is found to have an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to more fully evaluate clinical outcomes. Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product labeling. Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA. Failure to exhibit due diligence with regard to conducting mandatory Phase 4 clinical trials could result in withdrawal of approval for products.

During the development of a new drug or biological product, sponsors have the opportunity to meet with the FDA at certain points, including prior to submission of an IND, at the end of phase 2, and before submission of an NDA or BLA. 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. Regulatory authorities, IRBs and Data Monitoring Committees may require additional data before allowing clinical trials to commence, continue or proceed from one phase to another, and could demand that studies be discontinued or suspended at any time if there are significant safety issues. 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 FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the clinical protocol, GCP, or other IRB requirements or if the drug has been associated with unexpected serious harm to patients.

Information about certain clinical trials, including details of the protocol and eventually study results, also must be submitted within specific time frames to the National Institutes of Health for public dissemination on the Clinicaltrials.gov data registry.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the drug or biologic and finalize a process for manufacturing the product in commercial quantities in accordance with GMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, potency and purity of the final drug or biological product. For biological products in particular, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined in order to help reduce the risk of the introduction of adventitious agents. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

Generating the required data and information for regulatory approval takes many years and requires the expenditure of substantial resources. Following completion of the required testing, the results of the nonclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, and controls and proposed labeling, are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product in the proposed patient population to the satisfaction of the FDA. Under the PDUFA, each NDA or BLA must be accompanied by a user fee, which for federal fiscal year 2021 is $2,875,842 for an application requiring clinical data. The sponsor of an approved NDA or BLA is also subject to an annual program fee, which for fiscal year 2021 is $336,432. The FDA adjusts the PDUFA user fees on an annual basis, but fee waivers or reductions are available in certain circumstances.

Under applicable laws and FDA regulations, each NDA or BLA submitted for FDA approval is given an internal administrative review within 60 days following submission of the NDA or BLA. If deemed sufficiently complete to permit a substantive review, the FDA will accept the NDA or BLA for filing. The FDA can refuse to file any NDA and BLA that it deems incomplete or not properly reviewable. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. The FDA has established internal goals of eight months from submission for priority review of NDAs or BLAs that cover product candidates that offer major advances in treatment or provide a treatment where no adequate therapy exists, and 12 months from submission for the standard review of NDAs and BLAs. However, the FDA is not legally required to complete its review within these periods, these performance goals may change over time and the review is often extended by FDA requests for additional information or clarification.

Before approving an NDA or BLA, the FDA will typically conduct pre-approval inspections of the facilities at which the product is manufactured to determine whether the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of the product within required specifications. The FDA may also audit the clinical trial sponsor and one or more sites at which clinical trials have been conducted to determine compliance with GCPs and data integrity. Additionally, the FDA may refer any NDA or BLA, including applications for novel product candidates which present difficult questions of safety or efficacy, to an advisory committee. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making final decisions on approval. The FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.

Before receiving FDA approval to market a potential product, we or our collaborators must demonstrate through adequate and well-controlled clinical trials that the potential product is safe and effective in the patient population that will be treated. In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or BLA or supplement thereto must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers of the requirement to provide data from pediatric studies.

After the FDA evaluates an NDA or BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug or biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The Complete Response Letter may require additional clinical data and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant has one year to either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. In addition, delays or rejections may be encountered based upon changes in regulatory policy, regulations or statutes governing product approval during the period of product development and regulatory agency review.

If regulatory approval of a potential product is granted, this approval will be limited to those disease states and conditions for which the product is approved. Marketing or promoting a drug for an unapproved indication is generally prohibited. Furthermore, FDA approval may require that contraindications, warnings, or precautions be included in the product labeling and entail ongoing requirements for risk management, including post-marketing, or Phase 4, studies, testing and surveillance programs, and distribution restrictions. Following approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval and may require the development of additional data or preclinical studies and clinical trials.

Any drug is likely to produce some toxicities or undesirable side effects in animals and in humans when administered at sufficiently high doses and/or for sufficiently long periods of time. Unacceptable toxicities or side effects may occur at any dose level at any time in the course of studies in animals designed to identify unacceptable effects of a product candidate, known as toxicological studies, or during clinical trials of our potential products. The appearance of any unacceptable toxicity or side effect could cause us or regulatory authorities to interrupt, limit, delay or abort the development of any of our product candidates. Further, such unacceptable toxicity or side effects could ultimately prevent a potential product’s approval by the FDA or foreign regulatory authorities for any or all targeted indications or limit any labeling claims and market acceptance, even if the product is approved.

In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. A REMS uses risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use (“ETASU”). ETASU may 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. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.

Any trade name that we intend to use for a potential product must be approved by the FDA irrespective of whether we have secured a formal trademark registration from the United States Patent and Trademark Office. The FDA conducts a rigorous review of proposed product names and may reject a product name if it believes that the name inappropriately implies medical claims or if it poses the potential for confusion with other product names. The FDA will not approve a trade name until the NDA or BLA for a product is approved. If the FDA determines that the trade names of other products that are approved prior to the approval of our potential products may present a risk of confusion with our proposed trade name, the FDA may elect to not approve our proposed trade name. If our trade name is rejected, we will lose the benefit of any brand equity that may already have been developed for this trade name, as well as the benefit of our existing trademark applications for this trade name.

We and our collaborators and contract manufacturers also are required to comply with the applicable FDA GMP regulations. GMP regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA. These facilities must be approved before we can use them in commercial manufacturing of our potential products and must maintain ongoing compliance for commercial product manufacture. Manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with GMPs and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain GMP compliance. Future inspections by the FDA and other regulatory agencies may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution or require substantial resources to correct. In addition, the discovery of conditions that violate these rules, including failure to conform to GMPs, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA or BLA, including voluntary recall and regulatory sanctions.

If a product is approved, we must also comply with post-marketing requirements, including, but not limited to, compliance with advertising and promotion requirements, which include restrictions on promoting products for unapproved uses or patient populations (known as “off-label use”), monitoring and record-keeping activities, reporting of adverse events and other periodic reports, product sampling and distribution restrictions, and limitations on industry sponsored scientific and educational activities. If there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new NDA or BLA or an NDA or BLA supplement, which may require us to develop additional data or conduct additional pre-clinical studies and clinical trials.

Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to adverse publicity as well as significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

The FDA may withdraw approval of an NDA or BLA if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: restrictions on the marketing or manufacturing of the product; complete withdrawal of the product from the market or product recalls; issuance of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product; fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; refusal of the FDA to approve pending NDAs or BLAs or supplements to approved NDAs or BLAs, or suspension or revocation of product approvals; product seizure or detention, or refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; and consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.

In addition to FDA requirements, we must also comply with federal and state anti-fraud and abuse laws, including anti-kickback and false claims laws, healthcare information privacy and security laws, post-marketing safety surveillance, and disclosure of payments or other transfers of value to healthcare professionals and entities. In addition, we are subject to other federal and state regulation including, for example, the implementation of corporate compliance programs.

If we elect to distribute our products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.

Outside of the United States, our ability to market a product is contingent upon receiving a marketing authorization from the appropriate regulatory authorities, including the EMA. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. At present, foreign marketing authorizations are applied for at a national level, although within the European Community, centralized registration procedures are available to companies wishing to market a product in more than one European Community member state. If the regulatory authority is satisfied that adequate evidence of safety, quality and efficacy has been presented, marketing authorization will be granted. This foreign regulatory development and approval process involves all of the risks associated with achieving FDA marketing approval in the United States as discussed above. In addition, foreign regulations may include applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals and entities.

Expedited development and review programs

The FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include fast track designation, breakthrough therapy designation, priority review designation, and accelerated approval pathway.

The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. Fast track designation provides opportunities for more frequent interactions with the FDA review team to expedite development and review of the product. The sponsor of a drug or biologic can request the FDA to designate the product for fast track status any time before receiving NDA or BLA approval. Fast track designation may be withdrawn by the sponsor or rescinded by the FDA if the designation is no longer supported by data emerging from the clinical trial process.

Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. Drugs or biologics designated as breakthrough therapies are also eligible for accelerated approval of their respective marketing applications.

A product may also be eligible for accelerated approval if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (“IMM”) that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it will require such post-marketing restrictions as it deems necessary to assure safe use of the product. If the FDA determines that the conditions of approval are not being met, such as the required post-marketing confirmatory trial does not demonstrate a clinical benefit, the FDA can withdraw its accelerated approval for such drug or biologic. In addition, unless otherwise informed by the FDA, the FDA currently requires, as a condition for accelerated approval, that all advertising and promotional materials that are intended for dissemination or publication be submitted to the agency in advance for review.

Finally, the FDA may designate a product for priority review if it is a drug or biologic that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed drug represents a significant improvement in treatment, prevention or diagnosis of disease when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation. A priority review designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months for an original BLA or NDA from the date of filing.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, priority review, accelerated approval and breakthrough therapy designation, do not change the standards for approval and may not ultimately expedite the development or approval process.

Orphan drug designation and exclusivity

Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for the treatment of rare diseases or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available for the disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation qualifies a company for certain tax credits. In addition, if a drug candidate that has orphan drug designation subsequently receives the first FDA approval for that drug for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years following product approval unless the subsequent product candidate is demonstrated to be clinically superior. Absent a showing of clinical superiority, FDA cannot approve the same product made by another manufacturer for the same indication during the market exclusivity period unless it has the consent of the sponsor or the sponsor is unable to provide sufficient quantities.

A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible hypothesis that its product may be clinically superior to the first drug. More than one sponsor may receive orphan drug designation for the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete request for designation. To qualify for orphan exclusivity, however, the drug must be clinically superior to the previously approved product that is the same drug for the same condition. If a product designated as an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.

Rare pediatric disease priority review voucher program

Under the Rare Pediatric Disease Priority Review Voucher program, FDA may award a priority review voucher to the sponsor of an approved marketing application for a product that treats or prevents a rare pediatric disease. The voucher entitles the sponsor to priority review of one subsequent marketing application.

A voucher may be awarded only for an approved rare pediatric disease product application. A rare pediatric disease product application is an NDA or BLA for a product that treats or prevents a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years; in general, the disease must affect fewer than 200,000 such individuals in the U.S.; the NDA or BLA must be deemed eligible for priority review; the NDA or BLA must not seek approval for a different adult indication (i.e., for a different disease/condition); the product must not contain an active ingredient that has been previously approved by FDA; and the NDA or BLA must rely on clinical data derived from studies examining a pediatric population such that the approved product can be adequately labeled for the pediatric population. Before NDA or BLA approval, FDA may designate a product in development as a product for a rare pediatric disease, but such designation is not required to receive a voucher.

To receive a rare pediatric disease priority review voucher, a sponsor must notify FDA, upon submission of the NDA or BLA, of its intent to request a voucher. If FDA determines that the NDA or BLA is a rare pediatric disease product application, and if the NDA or BLA is approved, FDA will award the sponsor of the NDA or BLA a voucher upon approval of the NDA or BLA. FDA may revoke a rare pediatric disease priority review voucher if the product for which it was awarded is not marketed in the U.S. within 365 days of the product’s approval.

The voucher, which is transferable to another sponsor, may be submitted with a subsequent NDA or BLA and entitles the holder to priority review of the accompanying NDA or BLA. The sponsor submitting the priority review voucher must notify FDA of its intent to submit the voucher with the NDA or BLA at least 90 days prior to submission of the NDA or BLA and must pay a priority review user fee in addition to any other required user fee. FDA must take action on an NDA or BLA under priority review within six months of receipt of the NDA or BLA.

The Rare Pediatric Disease Priority Review Voucher program was reauthorized in the Creating Hope Reauthorization Act in December 2020, allowing a product that is designated as a product for a rare pediatric disease prior to October 1, 2020 to be eligible to receive a rare pediatric disease priority review voucher upon approval of a qualifying NDA or BLA prior to October 1, 2026.

Pediatric Exclusivity

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

United States Patent Term Restoration and Extension and Marketing Exclusivity

In the United States, a patent claiming a new drug product, its method of use or its method of manufacture may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent extension of up to five years for patent term lost during product development and FDA regulatory review. Assuming grant of the patent for which the extension is sought, the restoration period for a patent covering a product is typically one-half the time between the effective date of the IND and the submission date of the NDA, plus the time between the submission date of the NDA and the ultimate approval date, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date in the United States. Only one patent applicable to an approved product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent for which extension is sought. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any patent term extension in consultation with the FDA.

Marketing exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application (ANDA), or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Biosimilars And Exclusivity

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the ACA, which was signed into law in March 2010, included a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”). The BPCIA established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. A biosimilar is a biological product that is highly similar to an existing FDA-licensed “reference product.” The FDA has issued multiple guidance documents outlining an approach to review and approval of biosimilars. Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. Since the passage of the BPCIA, many states have passed laws or amendments to laws, including laws governing pharmacy practices, which are state regulated, to regulate the use of biosimilars.

Regulation of companion diagnostic tests

Although we do not believe that a companion diagnostic test will be required for the safe and effective use of our product candidates, FDA may disagree and require use of a companion diagnostic to identify appropriate patient populations for our products. Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, for novel drugs, a companion diagnostic device and its corresponding therapeutic should be approved or cleared contemporaneously by FDA for the use indicated in the therapeutic product’s labeling. Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population.

Reimbursement

Potential sales of any of our product candidates, if approved, will depend, at least in part, on the extent to which such products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly managing access and using restrictive measures to contain costs. If a third-party payor decides to provide coverage for an approved drug product, patient access and reimbursement is not certain. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Decreases in third-party reimbursement or a decision by a third-party payor to not cover a product candidate, if approved, could reduce utilization of our products, and have a material adverse effect on our sales, results of operations and financial condition. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

In addition, the United States government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our future revenues and results of operations.

Within the United States, if we obtain appropriate marketing approval in the future to market for any of our current product candidates, we may be required to provide discounts or rebates under government healthcare programs or to certain government and private purchasers in order to obtain coverage under federal health care programs such as Medicaid. Participation in such programs may require us to track and report certain drug prices. We may be subject to fines and other penalties if we fail to report such prices accurately.

Healthcare Laws and Regulations

Sales of our product candidates, if approved, or any other future product candidate will be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we might conduct our business. In the United States, our business operations and any current or future arrangements with healthcare professionals (including principal investigators), third-party payors, health care providers, patients and other customers may be subject to various federal and state fraud and abuse and other healthcare laws and regulations that may affect our current or future manufacturing, sales, marketing, scientific, educational or other business activities. The healthcare laws and regulations that may affect our ability to operate include the following:

Also, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply to claims reimbursed by private payors as well as government programs or regardless of reimbursement. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, impose specific restrictions on interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, as well as state laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. Many of these laws and regulations also contain ambiguous requirements or require administrative guidance for implementation.

Our current or future activities may also be subject to state and federal and state consumer protection and unfair competition laws and federal and state licensing requirements and regulations that apply to the manufacture, sale, warehousing, and distribution of pharmaceutical products.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Because of the breadth of these laws, the narrowness of available statutory exceptions and safe harbors and the lack of clear guidance on the application of these laws to certain activities, it is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

Violation of these laws can subject us to significant civil, criminal and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight and reporting obligations if we become subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to similar actions, penalties and sanctions. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from its business.

Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.

Segments and Geographic Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. We view our operations and manage our business in one operating and reporting segment.

In October 2021, we incorporated Provention Bio Limited, a wholly-owned private limited subsidiary, in the United Kingdom. We incorporated this subsidiary to facilitate the potential future submission of an MAA for teplizumab, to the MHRA.

Human Capital

Employees

As of February 21, 2022, we had 82 full-time employees which are located throughout the United States. While we lease office space for our principal executive offices in Red Bank, NJ, our employees work remotely. None of our employees are represented by a labor union or covered by a collective bargaining agreement, and we believe our relationship with our employees is good. Additionally, we utilize independent contractors and other third parties to assist with various aspects of our drug and product development.

We provide salaries and benefits that are competitive based on compensation information from independent compensation consultants. A portion of the compensation for almost all of our employees is performance-based. Performance-based compensation takes into account both individual and Company-wide performance. In addition, a portion of performance-based compensation consists of equity incentives. The split between base salary and performance-based compensation is tailored to each employee’s job function and level. In addition, we provide nationally competitive benefits, including healthcare, a 401(k) program and a technology allowance.

We are committed to the well-being of our employees and recognize that a remote workforce especially values the ability to balance work with other aspects of their lives. As a virtual company, we embrace variable work schedules for our employees. We also allow part-time arrangements and flexible work schedules.

We provide professional development and advancement opportunities for our employees that include internal training, skills building and opportunities for internal advancement.

Diversity and Inclusion

We seek to provide a collaborative and inclusive workplace where all employees feel empowered to do their best work and contribute to our mission. We are an equal opportunity employer and strictly prohibit and do not tolerate discrimination against employees, including based on race, creed, color, religion, national origin, citizenship status, age, gender, military and veteran status and sexual orientation. We also prohibit any form of harassment or abuse in the workplace.

We are focused on maintaining a diverse and inclusive work environment. Among other factors in hiring, we consider geographic, gender, age, racial and ethnic diversity. Currently, women represent 38% of our C-suite team, and 17% of our board of directors. We expect to continue implementing initiatives to enhance our workforce diversity, advance the development of diverse talent and ensure diverse succession plans both in our employee workforce and on our board of directors.

Our Corporate Information

We are a Delaware corporation formed on October 4, 2016. Our principal executive offices are located at 55 Broad Street, 2nd Floor, Red Bank, New Jersey 07701. Our phone number is (908) 336-0360 and our web address is http://www.proventionbio.com. Information contained in or accessible through our web site is not, and should not be deemed to be, incorporated by reference in, or considered part of, this Annual Report on Form 10-K.

Available Information

We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act. We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS

Certain factors may have a material adverse effect on our business, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors in its entirety, in addition to other information contained in this Annual Report on Form 10-K, as well as our other public filings with the SEC. The risks and uncertainties described below are those we currently believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, actually occur or become material risks, our business and financial condition could be materially and adversely affected.

Risks Related to Our Business

We are a clinical stage biopharmaceutical company with a limited operating history.

We are a clinical-stage biopharmaceutical company formed in October 2016 and have a limited operating history. We do not lease or own any laboratory space and we have historically had a remote work environment for our employees. We outsource most of our manufacturing and clinical trial operations as well as certain other functions.

We have acquired or in-licensed four clinical stage assets and a late stage preclinical enteroviral vaccine platform. Marketing approval of our product candidates will require extensive clinical testing data to support safety and efficacy requirements, as well as pharmaceutical development, manufacturing and preclinical data, all of which are needed for regulatory approval, and the requirements may be different in different jurisdictions in which we intend to launch our products. The likelihood of success of our business plan must be considered in light of the challenges, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive environment in which we operate. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk, and is a capital-intensive business.

Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, we may not be able to:

If we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be adversely affected.

We expect to incur substantial expenses and may never become profitable or be able to sustain profitability.

We expect to incur substantial expenses without corresponding revenues unless and until we are able to obtain regulatory approval and successfully commercialize our product candidates. We expect to incur significant expense to complete our clinical programs for our product candidates in the United States and elsewhere. We may never be able to obtain regulatory approval for the marketing of our product candidates in any indication in the United States or internationally. Even if we are able to commercialize our product candidates, we may not be able to generate significant revenues or ever achieve profitability.

We expect to incur significant research and development expenses as we advance clinical trials for our product candidates as well as significant costs to build out our commercial infrastructure and conduct pre-commercial activities for teplizumab as we prepare for potential commercialization. As a result, we expect to incur substantial losses for the foreseeable future, and these losses will be increasing. We are uncertain when or if we will be able to achieve or sustain profitability. If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable may impair our ability to sustain operations and adversely affect our business and our ability to raise capital.

We need to raise additional funding. If we are unable to raise sufficient capital when needed, we could be forced to delay, reduce or eliminate certain, or all of our product development programs or commercialization efforts.

We expect our operating costs to be substantial as we incur costs to support our commercialization efforts for teplizumab, including costs related to the buildout of an internal commercial infrastructure, and our ongoing and planned clinical trials for teplizumab and our other product candidates. We will operate at a loss for the foreseeable future or until such time as we obtain regulatory approval for and execute a successful commercial launch of teplizumab, if ever. For the years ended December 31, 2021 and 2020, we had a net loss of $114.4 million and $98.6 million, respectively, and as of December 31, 2021, we had an accumulated deficit of $292.1 million and $127.1 million in cash, cash equivalents and marketable securities. We believe our current cash, cash equivalents and marketable securities, will be sufficient to fund current operating requirements for at least the next 12 months from the issuance of the financial statements included in this report. We have based this estimate on assumptions that may prove to be wrong and our available capital resources could be consumed faster than we currently expect. However, if our teplizumab BLA resubmission is approved, we will need additional capital to fund increases in costs related to commercialization and payment of any potential milestones triggered under our current agreements, including with MacroGenics.

We do not have any prospective credit facilities as a source of future funds apart from the available capacity under our 2021 ATM Program (as defined below), and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. We may seek additional capital through a combination of private equity offerings, public equity offerings, debt financings and strategic collaborations. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, could increase our expenses and could require that our assets secure such debt. Moreover, any debt we incur must be repaid regardless of our operating results. If we choose to pursue additional indications and/or geographies for our product candidates, in-license or acquire additional development assets, or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital sooner than expected.

If we are unable to raise additional capital when required or on acceptable terms, we may need to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or cease operations altogether, or relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize.

Our forecast of the period of time through which our financial resources will adequately support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this Risk Factors section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include:

Any material increases in our operating expenses will have a material impact on our financial condition and business operations. In addition, if we are unable to correctly estimate or control our future operating expenses, we may need to raise additional capital, delay or cease development of one or more of our product candidates, which could have a material adverse effect on our business, operating results and prospects.

Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization

Our BLA resubmission in February 2022 and our regulatory efforts may not successfully address to the FDA’s satisfaction, the deficiencies identified by the FDA in the July 2021 CRL, including deficiencies related to the demonstration of PK comparability of our planned commercial product and drug product used in historical clinical trials as well as other product quality requirements. If we are not able to satisfy the FDA’s requests and requirements, including by, as requested by the FDA in our January 2022 Type B meeting, including in the BLA resubmission an adjusted dosing regimen for the planned commercial product to match the exposure of clinical material used in prior clinical trials with safety justifications to the FDA’s satisfaction, we may not be successful in obtaining approval of teplizumab for the at-risk patient indication in the near-term, or at all. Additionally, if we are not able to address the FDA’s PK comparability and other requirements and obtain approval for teplizumab for the delay of clinical T1D in at-risk individuals, we may be required to conduct additional research, analysis or clinical trials before we can submit a BLA for teplizumab in a newly diagnosed patient indication.

As required by the FDA, we provided in the initial BLA for the at-risk indication physiochemical and analytical data for teplizumab supporting the comparability between the study drug previously manufactured by MacroGenics and Eli Lilly and our to-be-commercialized drug product. In addition to conducting analytical tests to evaluate comparability we also conducted a double-blind, single low-dose, PK/PD bridging study in healthy subjects (“Bridging PK/PD Study”) to support the CMC comparability assessment between the teplizumab study drug derived from drug substance manufactured by Eli Lilly and the to-be-commercialized teplizumab drug product derived from the drug substance manufactured by our contract manufacturing partner, AGC Biologics in connection with the PROTECT Trial. This single low-dose Bridging PK/PD Study was the first time the teplizumab drug product derived from the drug substance manufactured by AGC Biologics was used in humans. We submitted to the FDA that we believe the results of the Bridging PK/PD Study suggests that the drug substances manufactured by AGC Biologics and Eli Lilly are comparable. Comparison of drug plasma concentration versus time after dosing in the Bridging PK/PD Study shows a lower AUC for the teplizumab drug product derived from the drug substance manufactured by AGC Biologics. Based on our PK/PD modeling, we submitted our supporting data and analysis to the FDA to support our belief that the lower AUC observed in the PK/PD Bridging Study is not significant enough to impact the efficacy or safety of the to-be-commercialized teplizumab drug product when used as proposed in our BLA filing. However, on July 2, 2021, the FDA issued a CRL for our BLA for teplizumab for the delay of clinical T1D in at-risk individuals. In the CRL, the FDA stated that the single, low-dose Bridging PK/PD Study we conducted had failed to show PK comparability between planned commercial product and historical clinical trial product and that we will need to establish PK comparability appropriately or provide other data that adequately justify why PK comparability is not necessary in order to obtain approval for the teplizumab BLA for an at-risk indication.

In September 2021, we announced that we had completed data collection from the PROTECT PK/PD Substudy we conducted with the goal of addressing the FDA’s PK comparability considerations and in November 2021 we announced preliminary top-line data from this substudy. We participated in a Type A meeting with the FDA on November 18, 2021, to discuss data and analysis from the PROTECT PK/PD Substudy data and PD markers that we believe are supportive of comparability and subsequently also had a Type B meeting with the FDA on January 26, 2022. In preliminary comments provided in advance of the January 26^th meeting, the FDA noted that our data package does not adequately support PK comparability by itself, because predicted primary PK parameters are indicative of a lower exposure from the AGC Biologics drug substance as compared to the Eli Lilly drug substance. To address this concern, the FDA proposed, and we agreed, to use PK modeling to adjust the 14-day dosing regimen for the planned commercial product to match the exposure of clinical material used in prior clinical trials by ensuring that the 90% confidence intervals for relevant PK parameters fall within the target 80-125% range. On this basis, the FDA agreed that we could proceed to resubmit the BLA.

Our teplizumab BLA resubmission in February 2022 for the At-Risk Indication may not be deemed complete and acceptable for review or ultimately approved by the FDA. Our BLA resubmission and other regulatory efforts may not be successful in addressing, to the FDA’s satisfaction, the deficiencies identified in the FDA’s July 2021 CRL for our original teplizumab BLA for an At-Risk Indication, including product quality and PK comparability considerations. Additionally, our BLA resubmission and our regulatory efforts may not successfully address the FDA’s requests and requirements discussed at our January 2022 Type B meeting. For example, although we included in the BLA resubmission, as requested by the FDA, an adjusted dosing regimen based on PK modeling and clinical data for teplizumab to match exposure of our planned commercial product to drug product used in historical clinical trials, the FDA’s PK comparability concerns may not be addressed to their satisfaction which could result in another CRL for our BLA resubmission. Additionally, as a result of any final resolutions to address the FDA’s considerations related to PK comparability in connection with the teplizumab BLA resubmission for an At-Risk Indication, the FDA may require that we further characterize the teplizumab planned commercial product in the PROTECT Trial, including potentially requiring additional research, analysis, clinical data or clinical trials, to support a regulatory pathway for a newly diagnosed indication of teplizumab.

Ultimately, we may not be successful in our goal to continue to work with the FDA to successfully secure approval of the teplizumab BLA for at-risk patients. We may not be able to address to the FDA’s satisfaction the agency’s concerns relating to PK comparability and other requirements in the short-term or at all. If we fail to address the FDA’s concerns and requirements, our business and operations may be materially and adversely impacted.

We may not be successful in our efforts to develop and obtain regulatory approval for our product candidates. If we are unable to obtain approval for or generate revenues from our product candidates, our ability to create stockholder value will be limited.

Our product candidates are in various stages of clinical development. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates, which may never occur. For example, our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products impractical to manufacture, unmarketable, or unlikely to receive marketing approval. We currently generate no revenue from sales of any product, and we may never be able to develop or commercialize a marketable product.

We will be required to submit our clinical trial protocols and receive approvals from the regulatory authorities before we can commence additional studies with our product candidates. Nonclinical study results for our product candidates, including toxicology studies, may not support the filing of an IND or foreign equivalent for the product candidate.

Moreover, we may not be successful in obtaining acceptance from the regulatory authorities to start our clinical trials. Prior to commencing any clinical trials, we will also have to obtain approval from the Institutional Review Board (“IRB”), or Ethics Committee (“EC”) for each of the institutions at which we plan to conduct our clinical trials. If we do not obtain such acceptance, the time in which we expect to commence clinical programs for any product candidate will be extended and such extension will increase our expenses and increase our need for additional capital.

Further, there is no guarantee that our clinical trials will be successful or that we will continue clinical development in support of an approval from the regulatory authorities for any indication. Our clinical trial results may show our product candidates to be less effective than expected or have unacceptable side effects or toxicities. For example, our Phase 2a PRINCE trial did not achieve its primary endpoint of a change in Crohn’s Disease Activity Index Score at week 12 as compared to placebo. We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval.

Our business currently depends entirely on the successful development, regulatory approval and commercialization of our product candidates. Our product candidates will require additional preclinical and clinical development, regulatory and marketing approval in multiple jurisdictions, obtaining sufficient manufacturing capacity and expertise for both clinical development and commercial production and substantial investment and significant commercialization efforts before we generate any revenue from product sales.

The success of our current and future product candidates will depend on several factors, including the following:

If we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates. We cannot assure you that our product candidates will be successfully developed or commercialized. If we are unable to develop, or obtain regulatory approval for, or, if approved, to successfully commercialize our product candidates, it could have a material adverse effect on our business, operating results and prospects.

The outbreak of the novel coronavirus 2019 (COVID-19) has caused delays to our clinical trials. Moreover, the longer the pandemic persists, the more impact it will have on our clinical trial and other business plans and timelines. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business, operations and ability to raise capital.

The COVID-19 pandemic continues to drive global uncertainty and has caused, and may continue to cause, delays to the development of certain of our product candidates. Delays in completing our clinical trials are expected to increase our costs, slow our development and approval process and could negatively impact our ability to commence product sales and generate revenues. We have experienced some level of disruption to three of our current or planned clinical trials. For example, in March 2020, we announced a temporary pause in the randomization of patients with newly diagnosed T1D into our global Phase 3 PROTECT study of teplizumab. During the second quarter of 2020, we resumed enrolling patients in the PROTECT study on a country by country and site by site basis and by the end of the third quarter of 2020, all sites were activated, with a majority of the sites actively enrolling patients. We completed target enrollment in the PROTECT study in August 2021 and expect to report top-line results from the PROTECT study in the second half of 2023, subject to change for any potential interruptions related to COVID-19, regulatory decisions, issues or other interruptions. In addition, we, with our development partner Amgen, collectively decided that, to protect the integrity and quality of the PRV-015 Phase 2b trial in gluten free diet NRCD, we would stagger study startup throughout the third quarter of 2020 rather than initiating screening in the second quarter of 2020, as had originally been scheduled. We initiated the Phase 2b trial in August 2020 and the pandemic has caused difficulties and delays in recruitment. As a result of these delays, we now expect to report top-line results from the PROACTIVE study by the end of 2023. Additionally, our plans to initiate the Phase 2a portion of the PREVAIL study in lupus patients were delayed, predominantly due to COVID-19 related impacts on our plans, and we recently initiated the study in January 2022.

Timely enrollment in our clinical trials is dependent upon global clinical trial sites which may be adversely affected by global health matters, such as pandemics. We are currently conducting clinical trials for our product candidates in many countries, including the United States, European Union, the UK and Canada and may expand to other geographies. Many of these regions in which we operate are currently being or may in the future be affected by COVID-19. Some factors from the COVID-19 outbreak that may delay or otherwise adversely affect enrollment in the clinical trials of our product candidates, as well as adversely impact our business generally, include:

Additionally, the COVID-19 pandemic, has significantly impacted the FDA’s ability to conducted domestic and foreign inspections. On March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products; and, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. In April 2021 the FDA issued guidance on conducting voluntary remote interactive evaluations of manufacturing and outsourcing facilities as well as facilities involved in non-clinical and clinical research. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could adversely impact our ability to raise additional funds through public offerings or private placements and may also impact the volatility of our stock price and trading in our stock. Moreover, it is possible the pandemic will continue to significantly impact economies worldwide, which could result in adverse effects on our business and operations. The rapid development and fluidity of the pandemic precludes any prediction as to the ultimate impact of COVID-19. Additionally, the pandemic could negatively impact our ability to execute a successful launch of teplizumab if we receive marketing approval, which could impact our revenue making potential and have other negative material adverse impacts on our business. The full extent of the impact and effects of COVID-19 on our business, operations, liquidity, financial condition and results of operations remain uncertain at this time.

Clinical drug development involves a risky, lengthy and expensive process with an uncertain outcome. Although prior pre-clinical and clinical studies, data and analysis may support our belief in the potential of our pipeline of products, the results of our ongoing clinical trials for them may not be positive or supportive of our beliefs. We may encounter substantial delays in completing our ongoing clinical trials or starting any new clinical trials, which in turn may require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of applicable regulatory authorities for our product candidates, which could negatively and materially impact our business.

It is impossible to predict if or when any of our product candidates will prove safe or effective in humans or will receive regulatory approval, and the risk of failure through the development process is high. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ECs of the institutions in which such trials are being conducted, by an independent Safety Review Board for such trial or by the FDA, MHRA, the competent authorities of the European Union Member States, or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, MHRA, the competent authorities of the European Union Member States, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Product development costs for any of our product candidates will increase if we have delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to the FDA, comparable foreign regulatory authorities, and IRBs/ECs for reexamination, which may impact the costs, timing or successful completion of that study. If we experience delays in completion of, or if we, the FDA or other regulatory authorities, the IRB, the ECs or other reviewing entities, or any of our clinical trial sites suspend or terminate any of our clinical trials of any of our product candidates, its commercial prospects may be materially harmed and our ability to generate product revenues will be delayed. Any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. In addition, if one or more clinical trials are delayed, our competitors may be able to bring products to market before we do, and the commercial viability of any of our product candidates could be significantly reduced. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Further, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. Additionally, data submitted to regulators are subject to varying interpretations that could delay, limit or prevent agency approval. We cannot assure you that the FDA, EMA, MHRA or comparable foreign regulatory authorities will view the results as we do, that the views of different regulatory authorities on our study results and data will be consistent with each other or that any future trials of any of our product candidates will achieve positive results. For example, in the European Union, we have initiated the process of seeking scientific advice from the EMA’s Committee for Medicinal Products for Human Use (“CHMP”), with respect to the regulatory pathway for teplizumab. While the guidance provided in scientific advice procedures do not seek to pre-evaluate the results of studies, the initial scientific advice letter that we received from CHMP in December 2020 suggested that an additional confirmatory study would be necessary to support a marketing authorization application (“MAA”), for the use of PRV-031 in at-risk individuals. We plan to engage with CHMP to further elucidate the disease-modifying effect of PRV-031 supported by study data in the context of clinical management of T1D, specifically in at-risk individuals. If, however, the EMA determines that our current PRV-031 data package is insufficient to support an MAA for at-risk individuals and requires additional studies or data, such determination would delay or prevent approval of PRV-031 in the European Union and European Economic Area (“EEA”) for this indication. We have independently engaged with the MHRA to discuss a potential regulatory path for PRV-031 in the United Kingdom. We filed for and received in July 2021 an Innovation Passport for teplizumab in the UK. The Innovation Passport is the mandated entry point to the ILAP in the United Kingdom to facilitate approval of and market access to an innovative medicine. Additionally, we have engaged the MHRA in a scientific advice procedure to discuss, among other topics, ILAP. The discussions with and feedback from the MHRA in the United Kingdom, ILAP partner agencies such as the NICE and the Scottish Medicines Consortium will help us evaluate the possible regulatory and market access paths forward in the UK for teplizumab. On April 20, 2021 we received a scientific advice letter from the MHRA on matters relating to the therapeutic position, non-clinical and clinical characterization of PRV-031. We have started a preliminary discussion with MHRA and its ILAP partners in the development of a TDP and identification of the relevant toolkits to support approval and market access of teplizumab in the United Kingdom. Further engagement with the MHRA and its ILAP partners is planned in 2022. There is no guarantee that a similar position would be taken by the EMA in the European Union. The advice given by the MHRA makes clear that it is not legally binding with regard to any future MAA for PRV-031, nor can it be taken as indicative of any future agreed position. The MHRA indicated in its letter that it is of the view that there is an unmet medical need for a treatment that delays or prevents progression to T1D in at-risk patients. The MHRA did not request another confirmatory study to be carried out, acknowledging that the indication being sought is rare and that we may have difficulties recruiting sufficient numbers of subjects for such a study. However, the MHRA has considered that an MAA may benefit from additional supplementary information on patient preference. Such additional information would seek to strengthen the argument that PRV-031 would benefit the at-risk patients according to the proposed label claim. The MHRA also considered that reliance on one pivotal study to obtain a marketing authorization ought to meet the criteria described in the EMA/CPMP guidance entitled “Points to consider on application with (i) meta-analyses and (ii) one pivotal study” (CPMP/EWP/2330/99) , which for the time being, is still relevant to applications made in the United Kingdom. We also plan additional engagements with EMA and other European stakeholders in 2022; however, these stakeholders may not agree with our views on our teplizumab data package or our view of the relevant medical need in at-risk populations and our efforts may not lead to favorable positions or decisions relating to or an approval of teplizumab by the MHRA or a positive opinion by the EMA and a subsequent marketing authorization by the European Commission. Even if PRV-031 is approved in United Kingdom and/or in the European Union, the MHRA or EMA/European Commission, may limit the indication for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of an approval, amongst other requirements which we may or may not be able to comply with. Even if teplizumab were to be granted a marketing authorization, we could not guarantee that the payers and health technology agencies in the United Kingdom and the Member States of the European Union would accept the therapeutic value and/or cost-effectiveness of teplizumab for it to be adopted for clinical use in the respective national health systems.

We have conducted and are conducting clinical trials outside the United States and anticipate conducting additional clinical trials outside the United States, and the FDA may not accept data from such trials.

We are currently conducting clinical trials for our product candidates in countries outside of the United States and we anticipate that we will conduct additional clinical trials in countries outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions. For example, the clinical trial must be conducted in accordance with GCP requirements and the FDA must be able to validate the data from the clinical trial through an onsite inspection if it deems such inspection necessary. Where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless those data are considered applicable to the United States patient population and United States medical practice, the clinical trials were performed by clinical investigators of recognized competence, and the data is considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. In addition, such clinical trials would be subject to the applicable local laws of the foreign jurisdictions where the clinical trials are conducted. A description of any studies related to overdosage is also required, including information on dialysis, antidotes, or other treatments, if known. There can be no assurance the FDA will accept data from clinical trials conducted outside of the United States. If the FDA does not accept any such data, it would likely result in the need for additional clinical trials, which would be costly and time-consuming and delay aspects of our development plan.

Risks inherent in conducting international clinical trials include, but are not limited to:

Biologics carry unique risks and uncertainties, which could have a negative impact on future results of operations.

The successful discovery, development, manufacturing and sale of biologics is a long, expensive and uncertain process. There are unique risks and uncertainties with biologics. For example, access to and supply of necessary biological materials, such as cell lines, may be limited and governmental regulations restrict access to and regulate the transport and use of such materials. In addition, the development, manufacturing and sale of biologics is subject to regulations that are often more complex and extensive than the regulations applicable to other pharmaceutical products. Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies. Such manufacturing also requires facilities specifically designed and validated for this purpose and sophisticated quality assurance and quality control procedures. Biologics are also frequently costly to manufacture because production inputs are derived from living animal or plant material, and some biologics cannot be made synthetically. In addition, after receiving product approval, the FDA and other regulatory authorities may require us to submit samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA and other regulatory authorities may require that we not distribute a lot until the agency authorizes its release. Failure to successfully discover, develop, manufacture and sell biologics could adversely impact our business and results of operations.

If we are not able to obtain any required regulatory approvals for our product candidates, we will not be able to commercialize our product candidates and our ability to generate revenue will be limited.

The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA, EMA, MHRA and other regulatory authorities in the United States, European Union, United Kingdom and other countries, where regulations differ from country to country. We are not permitted to market our product candidates as prescription pharmaceutical products in the United States until we receive approval of a New Drug Application (“NDA”), or BLA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA or a BLA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA or a BLA to the FDA or other regulatory authorities and even fewer are eventually approved for commercialization. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application. We have only limited experience in filing the applications necessary to gain regulatory approvals and expect to rely on consultants and third party CROs with expertise in this area to assist us in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities and grant of manufacturing authorizations and Good Manufacturing Practices (“GMP”) certificates by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. If our development efforts for our product candidates, including regulatory approval, are not successful for their planned indications, our business will be materially adversely affected. Our success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to a number of risks, including the following:

Additionally, even if we obtain regulatory approval for one indication, there is no guarantee we will be able to gain regulatory approval for additional indications. For example, we intend to initially seek regulatory approval for our CVB vaccine product candidate for the prevention of acute CVB infection. The results of longitudinal studies demonstrating the connection between CVB and T1D or celiac disease will be necessary to expand the indicated use of this vaccine to T1D. These studies must be completed and submitted to the FDA, MHRA or EMA prior to receiving approval in the United States, United Kingdom or European Union to market the CVB vaccine for additional indications such as prevention of T1D. Such studies will be costly and time consuming and may not demonstrate to the FDA’s, MHRA’s or EMA’s satisfaction the connection between the CVB virus and the onset of T1D or celiac disease. Failure or delay in obtaining regulatory approval for our product candidates for the foregoing, or any other reasons, will prevent or delay us from commercializing our product candidates, and our ability to generate revenue will be materially impaired. We cannot guarantee that regulators will agree with our assessment of the results of the clinical trials we have conducted or intend to conduct in the future or that such future trials will be successful. The FDA, EMA, MHRA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of our product candidates.

The FDA, EMA, MHRA or comparable foreign regulatory authorities could require the clearance, CE marking or approval of a companion diagnostic device for teplizumab as a post-marketing commitment or otherwise, which may require substantial financial resources and could delay or prevent regulatory approval of teplizumab.

The FDA has previously communicated that it (i) acknowledges that the diagnosis stage 2 T1D may be well understood to future prescribers of teplizumab, and therefore, specification of autoantibody testing in the labeling may not be required for the safe and effective use of teplizumab and (ii) is continuing to discuss internally the requirement for a companion diagnostic(s) for teplizumab, and given these uncertainties, we should consider seeking additional advice from the agency on the process of companion diagnostic development, as it remains possible it will be required as a post-marketing commitment. Our position is that a companion diagnostic should not be required for the use of teplizumab in at-risk individuals based upon, among other reasons, (i) relevant FDA precedent and guidance, (ii) the fact that the presence of autoantibodies is supportive, but not sufficient, for a diagnoses of stage 2 T1D and (iii) the commercial availability of FDA-cleared tests or Clinical Laboratory Improvement Amendments, licensed laboratory-developed tests to identify T1D, which the teplizumab final label can direct physicians to use.

Should the FDA, EMA, MHRA or comparable foreign regulatory authorities disagree with us and require the use of a companion diagnostic, we may face delays or obstacles in obtaining approval for teplizumab, as the FDA or other regulatory authorities may take the position that a companion diagnostic device is required prior to granting approval of teplizumab. In addition, if a companion diagnostic is required, we may be dependent on the cooperation and efforts of third-party collaborators to develop one or more companion diagnostics, which generally require FDA clearance or approval, or equivalent approval in other jurisdictions. We and our potential future collaborators may encounter difficulties in developing, validating or obtaining clearance/approval/CE marking for such companion diagnostics. Any delay or failure by us or our potential future collaborators to develop or obtain regulatory clearance, CE marking or approval of such companion diagnostics, if necessary, may delay or prevent approval of teplizumab, PRV-101 or our other product candidates.

Even if we obtain marketing approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates.

Even if we obtain regulatory approval for any of our product candidates for an indication, the FDA, EMA/European Commission, MHRA or foreign equivalent may still impose significant restrictions on their indicated uses or marketing or the conditions of approval or impose ongoing requirements for potentially costly and time-consuming patient registries or post-approval studies, including Phase 4 clinical trials, post-market surveillance to monitor safety and efficacy and a Risk Evaluation and Mitigation Strategy (“REMS”) or other risk minimization measures. If the FDA concludes a REMS is needed in the United States, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any such post-marketing requirements may negatively impact our commercialization plans or require us to raise additional capital to support the execution of such requirements. Additionally, if we face challenges or are unable to comply with post-marketing requirements, we may not be able to maintain marketing approval, or we may decide to abandon the program.

Our product candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current GCP regulations for any clinical trials that we conduct post-approval, and any additional requirements in other jurisdictions. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current GMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents.

With respect to sales and marketing activities by us or any future licensor, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. We may also be subject, directly or indirectly through our customers and licensors, to various fraud and abuse laws, including, without limitation, the United States Anti-Kickback Statute, United States False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the United States Medicaid Drug Rebate Program, the Federal Supply Schedule of the United States Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to United States federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.

In addition, if any of our product candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA, MHRA, and the competent authorities of the European Union Member States strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA, MHRA, or the European Commission as reflected in, or in a manner that is otherwise inconsistent with, the product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, or otherwise inappropriately promoted our products, we may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses and false or misleading claims, and a company that is found to have improperly promoted products, including off-label uses, may be subject to significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed.

If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions:

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue. Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Even though we apply for orphan drug designation for a product candidate, we may not be able to obtain such designation or obtain orphan drug marketing exclusivity. Even if we obtain orphan drug marketing exclusivity, it may not effectively protect the product from competition.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States or for which there is no reasonable expectation that the cost of developing and making a drug available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA or a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process. In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product. If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for any of our product candidates in the indications for which we think they might qualify, if we elect to seek such applications.

We have obtained orphan drug designation from the FDA for teplizumab for the treatment of newly diagnosed T1D, however, there is no guarantee that the FDA, the European Commission or comparable foreign regulatory authorities will grant any future application for orphan drug designation for any of our other product candidates, including teplizumab for the use in at-risk individuals, which would make us ineligible for the additional exclusivity and other benefits of orphan drug designation, and may also impact our ability to obtain benefits under other incentive programs, such as the rare pediatric disease priority review voucher program. For example, we applied for orphan drug designation of teplizumab for the use in at-risk individuals which was denied by the FDA’s OOPD in February 2021. We believe current data suggests that there may be an initial undiagnosed prevalence approaching 165,000-200,000 Stage 2 T1D subjects in all age groups, however, we believe the diagnosed prevalence for Stage 2 T1D subjects is less than 200,000, which, we believe could have met the FDA’s criteria for orphan drug designation. We currently do not have plans to take any additional steps to address OOPD’s positions.

Even if we obtain orphan drug exclusivity for teplizumab for the treatment of newly-diagnosed T1D in the United States, the FDA can still approve other drugs that have a different active ingredient for use in treating the same indication. Furthermore, the FDA can waive orphan drug exclusivity if we are unable to manufacture sufficient supply of teplizumab or if the FDA finds that a subsequent applicant for newly-diagnosed T1D demonstrates clinical superiority to teplizumab. Accordingly, orphan drug exclusivity for a product may not effectively protect the product from competition.

Although we may apply for rare pediatric disease designation for our product candidates, we may not be able to obtain such designation, and rare pediatric disease designation does not guarantee that the NDA or BLA for the product will qualify for a priority review voucher upon approval.

Under the Rare Pediatric Disease Priority Review Voucher program, upon the approval of a qualifying BLA or NDA for the treatment of a rare pediatric disease, the sponsor of such an application would be awarded a rare pediatric disease priority review voucher that can be used to obtain priority review for a subsequent BLA or NDA. On December 27, 2020, the Creating Hope Reauthorization Act extended the Rare Pediatric Disease Priority Review Voucher Program, and after September 30, 2024, the FDA may only award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the drug, and that designation was granted by September 30, 2024. After September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers.

We submitted a request for rare pediatric disease designation for teplizumab for the use in at-risk individuals, however, the FDA sent a second deficiency letter for our application in October 2021. In its letter, the FDA’s Office of OOPD, noted that they believe the At-Risk Stage 2 population is greater than 200,000 subjects in the United States and we have one year from the date of the deficiency letter (or any approved extension thereof) to provide arguments otherwise, or our request for Rare Pediatric Disease designation will be considered voluntarily withdrawn. We currently do not have plans to take any additional steps to address OOPD’s positions.

There is no guarantee that the FDA will grant any future requests for Rare Pediatric Disease designation for any of our product candidates, including teplizumab for the use in at-risk individuals. Moreover, even if we obtain rare pediatric disease designation, there is no guarantee that we will qualify for a rare pediatric disease priority review voucher upon FDA approval of the NDA or BLA for a rare pediatric disease. Rare pediatric disease designation does not lead to faster development or regulatory review of the product, or increase the likelihood that it will receive marketing approval.

Although we may pursue expedited regulatory approval pathways for a product candidate, it may not qualify for expedited development or, if it does qualify for expedited development, it may not actually lead to a faster development or regulatory review or approval process.

Although we believe there may be an opportunity to accelerate the development of certain of our product candidates through one or more of the FDA’s or EMA’s expedited programs, such as fast track, breakthrough therapy, accelerated approval or priority review, we cannot be assured that any of our other product candidates will qualify for such programs.

For example, in the United States, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Although breakthrough designation or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval. If we apply for breakthrough therapy designation or any other expedited program for our product candidates, the FDA may determine that our proposed target indication or other aspects of our clinical development plans do not qualify for such expedited program. Even if we are successful in obtaining a breakthrough therapy designation or access to any other expedited program, we may not experience faster development timelines or achieve faster review or approval compared to conventional FDA procedures. For example, the time required to identify and resolve issues relating to chemistry, manufacturing and controls, the acquisition of a sufficient supply of our product for clinical trial purposes or the need to conduct additional preclinical or clinical studies may delay approval by the FDA, even if the product candidate qualifies for a breakthrough therapy designation or access to any other expedited program. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory approval for such product candidate.

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.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/ or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our product candidates.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the United States Congress (“Congress”) of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We also cannot predict the likelihood, nature, or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either in the United States or abroad. For example, on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in response to the COVID-19 pandemic. Among other provisions, the CARES Act made a number of changes to the Federal Food, Drug, and Cosmetic Act (“FDCA”) aimed at preventing drug shortages. Similarly, the FDA has issued a number of guidance documents describing the agency’s expectations for how drug manufacturers should comply with various FDA requirements during the pandemic, including with respect to conducting clinical trials, distributing drug samples, and reporting post-marketing adverse events. Moreover, as a result of the COVID-19 pandemic, there has been increasing political and regulatory scrutiny of drug supply chains, resulting in proposed and enacted legislative and executive actions, including Executive Orders, to incentivize or compel drug manufacturing operations to relocate to the United States. It is not clear how these changes and proposals could impact our business. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.

Healthcare reform and other governmental and private payor initiatives may have an adverse effect upon, and could prevent, our product candidates’ commercial success, if approved.

The United States government and individual states have been aggressively pursuing healthcare reform designed to impact delivery of, and/or payment for, healthcare, which include initiatives intended to reduce the cost of healthcare. For example, in March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act (the “ACA”), which, among other things, expanded healthcare coverage through Medicaid expansion and the implementation of the individual health insurance mandate; included changes to the coverage and reimbursement of drug products under government healthcare programs; imposed an annual fee on manufacturers of branded drugs; and expanded government enforcement authority. We face uncertainties because there have been, and may be additional, federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the ACA. For example, tax reform legislation was enacted at the end of 2017 that eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019. The ACA has also been subject to judicial challenge. The case Texas v. Azar, which challenges the constitutionality of the ACA, including provisions that are unrelated to healthcare reform but were enacted as part of the ACA, was argued before the Supreme Court in November 2020. The Supreme Court dismissed this challenge to the ACA on June 17, 2021 and, therefore, all of the ACA but the individual mandate to buy health insurance currently remains in effect. Further, prior to the U.S. Supreme Court ruling on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open until August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. The ACA remains subject to legislative efforts to repeal, modify or delay the implementation of the law. However, if the ACA is repealed or modified, or if implementation of certain aspects of the ACA are delayed, any such repeal, modification or delay may materially adversely affect our business, strategies, prospects, operating results or financial condition. We are unable to predict the full impact of any repeal, modification or delay in the implementation of the ACA on us at this time.

In addition, the expansion of the 340B Drug Discount Program through the ACA has increased the number of “covered entity” purchasers who are eligible for significant discounts on branded drugs. Additionally, the Health Resources and Services Administration has interpreted the 340B Drug Discount Program law to require manufacturers to extend these discounts to contract pharmacies that have arrangements with covered entities. Several drug manufacturers have commenced litigation, which remains ongoing, challenging the legality of contract pharmacy arrangements under the 340B Drug Discount Program. The resolution of the litigation may affect the way in which manufacturers are required to extend the 340B Drug Discount Program prices to covered entities, including through contract pharmacies. There also are ongoing challenges regarding the implementation of the 340B Drug Discount Program administrative dispute resolution process, which is, in part, intended to resolve claims by covered entities that they have been overcharged for covered outpatient drugs by manufacturers, and claims by manufacturers regarding covered entity compliance with program requirements. The nature of the current administrative dispute resolution process, and the outcomes of these court cases, may have a material adverse impact on our revenue should we participate in the 340B Drug Discount Program after receiving approval for our product candidates.

Beyond the ACA, in 2020 and early 2021, the United States Department of Health and Human Services has issued various rules that affect pricing or payment for drug products. For example, effective January 2023, revisions to the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to pharmacy benefit managers and health plans. Additional healthcare reform efforts have sought to address certain issues related to the COVID-19 pandemic, including an expansion of telehealth coverage under Medicare and accelerated or advanced Medicare payments to healthcare providers. Some of these changes have been and may continue to be subject to legal challenge. For example, courts have temporarily enjoined a new “most favored nation” payment model for select drugs covered under Medicare Part B that was to take effect on January 1, 2021 and would limit payment based on international drug price. On January 13, 2021, in a separate lawsuit brought by industry groups, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District of California and that performance for any final regulation stemming from the most favored nation payment model interim final rule shall not commence earlier than sixty (60) days after publication of that regulation in the Federal Register. In addition, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several United States Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as Executive Orders and regulatory actions, designed to, among other things, reduce or limit the prices of drugs and make them more affordable for patients, such as by tying the prices that Medicare reimburses for physician-administered drugs to the prices of drugs in other countries, reform the structure and financing of Medicare Part D pharmaceutical benefits, including through increasing manufacturer contributions to offset Medicare beneficiary costs, bring more transparency to drug pricing rationale and methodologies (including, for example, by requiring manufacturers to disclose planned drug price increases and the rationales for such increases), implement data collection and reporting under Section 204 of Title II of Division BB of the Consolidated Appropriations Act, 2021, which requires, among other things, health plans and issuers to disclose rebates, fees, and other remuneration provided by drug manufacturers related to certain pharmaceutical products, enable the government to negotiate prices for drugs covered under Medicare, including H.R. 3 which passed the House, revise rules associated with the calculation of Medicaid Average Manufacturer Price and Best Price, including the removal of the current statutory 100% of Average Manufacturer Price per-unit cap on Medicaid rebate liability effective as of January 1, 2024 under the American Rescue Plan Act of 2021, which may significantly affect the amount of rebates paid on prescription drugs under Medicaid and the prices that are required to be charged to covered entities under the 340B Drug Discount Program, create new anti-kickback statute safe harbors applicable to certain point-of-sale discounts to patients and fixed-fee administrative fee payment arrangements with pharmacy benefit managers, each of which are currently stayed, and facilitate the importation of certain lower-cost drugs from other countries. The nature and scope of health care reform under the Biden administration remains uncertain, although President Biden supported reforms to lower drug prices during his campaign for the presidency. Adoption of new healthcare reform legislation at the federal or state level could affect demand for, or pricing of, our products or product candidates if approved for sale. We cannot predict, however, the ultimate content, timing or effect of any healthcare reform legislation or action, or its impact on us, and healthcare reform could increase compliance costs and may adversely affect our future business and financial results.

In addition, other legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ or product candidates’ commercial success. More broadly, the Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through 2030 (except May 1, 2020 to March 31, 2022). Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs, or any significant taxes or fees imposed as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, or otherwise, could have an adverse impact on our anticipated product revenues.

In addition to governmental efforts in the United States, foreign jurisdictions as well as private health insurers and managed care plans are likely to continue challenging manufacturers’ ability to obtain reimbursement, as well as the level of reimbursement, for pharmaceuticals and other healthcare-related products and services. These cost-control initiatives could significantly decrease the available coverage and the price we might establish for our products, which would have an adverse effect on our financial results. The pricing and reimbursement of medicinal products in the European Union and the UK is subject to strict governmental control. Pricing and reimbursement negotiations with governmental authorities are complex and may take significant amounts of time. To obtain reimbursement and/or pricing approval in the European Union Member States and/or the UK, we may be required to conduct studies or otherwise provide data demonstrating the cost effectiveness of our products compared with other available established therapies. The conduct of such studies could also result in delays in the commercialization of our products. Additionally, cost-control initiatives, increasingly based on affordability and accessibility, as well as post-marketing assessment of the product’s added value as compared to existing treatments, could decrease the price of our products or the indications for which we are able to obtain reimbursement, which would result in lower revenues to us. New legislative and policy initiatives in the European Union, aimed at increasing accessibility and affordability of medicinal products, and the increased cooperation between the European Union Member States may further impact the price and reimbursement status of our products in the future.

If we fail to successfully commercialize any of our product candidates, we may need to acquire additional product candidates and our business will be adversely affected.

We have never developed and obtained approval for any product candidates or commercialized any product candidates. We have limited product candidates and do not have any other compounds in pre-clinical testing, lead optimization or lead identification stages beyond our product candidates. We cannot be certain that any of our product candidates will prove to be sufficiently effective and safe to meet applicable regulatory standards for any indication. If we fail to successfully obtain regulatory approval or commercialize any of our product candidates for their targeted indications, whether as stand-alone therapies or in combination with other therapeutic agents, and if we are unable to acquire additional product candidates in the future, our business will be adversely affected.

Even if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product and the revenue that we generate from its sales, if any, may be limited.

If approved for marketing, the commercial success of our product candidates will depend upon each product’s acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance for any of our product candidates will depend on a number of factors, including:

If any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, health care payors, and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render our product candidates not commercially viable. For example, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve any of our product candidates with a label that does not include the labeling claims necessary or desirable for the successful commercialization for that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals or require risk management plans or a REMS, to assure the safe use of the drug. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.

We currently have a limited commercial organization. If we are unable to establish satisfactory sales and commercial support and marketing capabilities, we may not successfully commercialize any of our product candidates.

We have been gradually building our commercial infrastructure and at present, we have only limited sales personnel. In order to commercialize products that are approved for commercial sales, we must develop our own sales infrastructure. If we are not successful recruiting sales personnel or in building our sales and marketing infrastructure in the United States, we will have difficulty successfully commercializing our product candidates, which would adversely affect our business, operating results and financial condition.

If we are unable to establish a satisfactory sales infrastructure, we may not realize a positive return on this investment. In addition, we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and retain sales personnel. Factors that may inhibit our efforts to commercialize our product candidates without strategic partners or licensees include:

We may enter into collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to capitalize on the market potential of those product candidates.

We may seek additional third-party collaborators for the research, development, and commercialization of certain of the product candidates we may develop. If we enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of any product candidates we may seek to develop with them. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

Collaborations pose numerous risks to us, including the following:

If our collaborations do not result in the successful development and commercialization of product candidates, or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of product candidates could be delayed, and we may need additional resources to develop product candidates. In addition, if one of our collaborators terminates its agreement with us, we may find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval and commercialization described in this Annual Report on Form 10-K apply to the activities of our collaborators.

These relationships, or those like them, may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we could face significant competition in seeking appropriate collaborators, and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of several factors. If we license rights to any product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture.

Amgen has the right to assume control over the activities of our anti-IL-15 mAb product candidate.

Pursuant to the Amgen Agreement, Amgen reserves the right, at any time until 120 days after the delivery of the final data package relating to the Phase 2b PROACTIVE study which we initiated in August 2020, to assume control over all activities with respect to our anti-IL-15 monoclonal antibody (“mAb”), product candidate, including pricing and marketing decisions, after the payment of a $150.0 million milestone. There can be no assurance that Amgen’s strategic direction will be in line with ours should it assume control of activities, or that their decisions will have a positive impact on our results of operations. Moreover, we may not realize the full economic benefit of this agreement.

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

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have existing competitors and will have potential new competitors in a number of jurisdictions, many of which have or will have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make any of our product candidates obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to our product candidates. If we are not able to compete effectively against our current and future competitors, our business will not grow, and our financial condition and operations will suffer.

Our potential competitors both in the United States and throughout the world include companies developing and/or marketing drugs and therapeutic solutions for immune-mediated diseases, including oncological, autoimmune and inflammatory diseases, as well as companies working in our specific fields, including T1D, enteroviral and emerging viral diseases, lupus, and inflammatory bowel diseases, such as CD.

There can be no assurance that our product candidates will be more effective or achieve greater market acceptance than competitive products, or that our competitors will not succeed in developing products and technologies that are more effective than those being developed by us or that would render our products and technologies less competitive or obsolete. Additionally, there can be no assurance that the development by others of new or improved products will not make our product candidates superfluous or obsolete.

Our product candidates may face competition sooner than expected.

We intend to seek data exclusivity or market exclusivity for our monoclonal antibodies teplizumab and PRV-015, our DART molecule PRV-3279 and our PRV-101 CVB vaccine product candidates provided under the FDCA, and similar laws in other countries. In the United States, we believe that these product candidates will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which was enacted as part of the ACA. Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The law is complex and the processes the FDA establishes to implement the law could have a material adverse effect on the future commercial prospects for our biological product candidates. There is also a risk that Congress could repeal or amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated after the expiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Our product candidates that are not, or are not considered, biologics that would qualify for exclusivity under the BPCIA may be eligible for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. The Ensuring Innovation Act, enacted on April 23, 2021, amended the FDA’s statutory authority for granting such exclusivity to reflect the agency’s existing regulations and longstanding interpretation that award exclusivity based on a drug’s active moiety, as opposed to its active ingredient, which is intended to limit the applicability of this exclusivity, thereby potentially facilitating generic competition. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application (“ANDA”), or a 505(b)(2) NDA, submitted by another company for another version of such drug. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving 505(b)(2) NDAs or ANDAs for drugs containing the original active agent.

Even if, as we expect, our product candidates are considered to be reference products eligible for 12 years of exclusivity under the BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the BPCIA could result in a shorter exclusivity period for our product candidates, which would have a material adverse effect on our business.

In addition, the Further Consolidated Appropriations Act, 2020, which incorporated the framework from the Creating and Restoring Equal Access To Equivalent Samples (“CREATES”) legislation, was signed into law as part of the 2019 year-end federal spending package. The legislation purports to promote competition in the market for drugs and biological products by facilitating the timely entry of lower-cost generic and biosimilar versions of those drugs and biological products, including by allowing ANDA, 505(b)(2) NDA or biosimilar developers to obtain access to branded drug and biological product samples. While the full impact of these provisions is unclear at this time and initial litigation brought under this law is pending, its provisions do have the potential to facilitate the development and future approval of biosimilar or generic versions of our products if approved, introducing biosimilar or generic competition that could have a material adverse impact on our business, financial condition and results of operations.

Our future growth depends, in part, on our ability to penetrate international markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to commercialize our product candidates in international markets for which we intend to rely on collaborations with third parties. If we commercialize any of our product candidates in international markets, we would be subject to additional risks and uncertainties, including:

International sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.

If we market any of our product candidates or, if approved, commercial products, in a manner that violates healthcare laws, or if we violate government price reporting laws, we may be subject to civil or criminal penalties.

The marketing and sale of pharmaceutical products are subject to comprehensive governmental regulation within the United States, with similar requirements in other jurisdictions. Numerous federal, state and local authorities have jurisdiction over, or enforce laws related to, such activities, including the FDA, United States Drug Enforcement Agency, Centers for Medicare & Medicaid Services, the United States Department of Health and Human Services Office of Inspector General, the United States Department of Justice, state Attorneys General, state departments of health and state pharmacy boards. See the section entitled “Business—Government Regulation” in this Annual Report on Form 10-K.

The FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved prescribing information. While physicians may prescribe an approved product for a so-called “off label” use, it is unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company which engages in such conduct can subject that company to significant liability. The federal government has levied large civil and criminal fines and/or other penalties against companies for alleged improper promotion and has investigated and/or prosecuted several companies in relation to off-label promotion. The FDA has also requested that certain companies enter consent decrees or permanent injunctions under which specified promotional conduct is changed, curtailed or prohibited. Similarly, industry codes in the European Union and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings.

We are also subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws, for activities related to sales of any of our products or product candidates that may in the future receive marketing approval. Anti-kickback laws generally prohibit persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. Although the specific provisions of these laws vary, their scope is generally broad and there may not be regulations, guidance or court decisions that apply the laws to particular industry practices. False claims laws prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent.

These laws and regulations, among other things, constrain our current and future business, marketing and other promotional and research activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers of our products. In particular, these laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements, as well as interactions with healthcare professionals through consultant arrangements, product training, sponsorships, or other activities. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare and other laws and regulations will involve substantial costs. Even if such efforts are made, moreover, due to the breadth of these laws, the narrowness of statutory exceptions and regulatory safe harbors available, and the range of interpretations to which they are subject governmental authorities may possibly conclude that our business practices may not comply with healthcare laws and regulations.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulatory guidance. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies, healthcare providers and other third parties, including charitable foundations, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Numerous pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged improper promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Drug Rebate Program to reduce liability for Medicaid rebates; and providing kickbacks to patients in the form of indirect copay support. Most states also have statutes or regulations similar to the federal anti-kickback statute and False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Efforts to ensure that our activities comply with applicable healthcare laws and regulations will involve substantial costs. Given the breadth of the laws and regulations, limited guidance for certain laws and regulations and evolving government interpretations of the laws and regulations, governmental authorities may possibly conclude that our business practices may not comply with healthcare laws and regulations. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or government regulations.

Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. We may be subject to private qui tam actions brought by individual whistleblowers on behalf of the federal or state governments, with potential liability under the federal False Claims Act including mandatory treble damages and significant per-claim penalties. Additionally, as a result of these investigations and qui tam actions, we may have to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business, financial condition and results of operations. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to.

If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to sanctions, including substantial civil monetary penalties, exclusion of our products from reimbursement under government programs, integrity oversight and reporting obligations, substantial criminal fines and imprisonment, any of which could adversely affect our business, financial condition, results of operations, prospects and reputation.

If any of our product candidates are approved, we anticipate that we will need to participate in the Medicaid Drug Rebate Program and a number of other federal and state government pricing programs in the United States in order to obtain coverage for the product by certain government healthcare programs. These programs would generally require us to pay rebates or provide discounts to certain private purchasers or government payers in connection with our products when dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. We may have reimbursement obligations or be subject to penalties if we fail to provide timely and accurate information to the government, pay the correct rebates or offer the correct discounted pricing.

We are completely dependent on third parties to manufacture our product candidates, including teplizumab, with no, to limited redundancies in our supply chain and the commercialization of our product candidates could be halted, delayed or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices.

We do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture drug substance, in our product candidates for use in our clinical trials or for commercial products, if any. As a result, we are obligated to rely on contract manufacturers for clinical supplies of our product candidates and will be obligated, if and when any of our product candidates are approved for commercialization, to rely on contract manufacturers for commercial supply. We may not be able to engage a contract manufacturer for commercial supply of any of our product candidates on acceptable terms to us, or at all.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA, the competent authorities of the European Union Member States, MHRA or other regulatory authorities pursuant to inspections that will be conducted after we submit an NDA or BLA to the FDA or equivalent applications to other relevant regulatory authorities. We will be completely dependent on our contract manufacturers for compliance with GMPs for manufacture of both active drug substances and finished drug products. These GMP regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to our product candidates. If our contract manufacturers do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, the competent authorities of the European Union Member States, MHRA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA, the competent authorities of the European Union Member States, MHRA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Our contract manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with GMPs and similar regulatory requirements. Although we are responsible for oversight of manufacturing of our product candidates, we do not have control over our contract manufacturers’ compliance with these regulations and standards. Failure by any of our contract manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure to grant approval to market any of our product candidates, delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. In addition, although we have audit and certain other oversight rights under our contracts with our contract manufacturers, we do not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain any of these standards could adversely affect our ability to develop, obtain regulatory approval for or market any of our product candidates.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, to the extent applicable, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its respective manufacturing processes for our drug substance or finished drug products or should cease doing business with us, we could experience significant interruptions in the supply of any of our product candidates or may not be able to create a supply of our product candidates at all. Were we to encounter manufacturing issues, our ability to produce a sufficient supply of any of our product candidates might be negatively affected. Our inability to coordinate the efforts of our third-party manufacturers, or the lack of capacity available at our third-party manufacturers, could impair our ability to supply any of our product candidates at required levels. Because of the significant regulatory requirements that we would need to satisfy in order to qualify a new active drug substances or finished drug products manufacturer, if we face these or other difficulties with our current manufacturers, we could experience significant interruptions in the supply of any of our product candidates if we decided to transfer the manufacture of any of our product candidates to one or more alternative manufacturers in an effort to deal with the manufacturing issues. Additionally, failing to obtain sufficient supply of any of our product candidates, due to manufacturing or other issues, may lead to regulatory delays and other issues which may negatively affect our business.

Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a contract manufacturer caused by problems at suppliers could delay shipment of any of our product candidates, increase our cost of goods sold and result in lost sales.

We cannot guarantee that our future manufacturers and suppliers will be able to reduce the costs of commercial scale manufacturing of any of our product candidates over time. If the commercial-scale manufacturing costs of any of our product candidates are higher than expected, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.

If the contract manufacturers we use fail to comply with their teplizumab contractual obligations to us, or they fail to comply with applicable FDA regulations and requirements to support FDA review, requests and requirements in connection with our BLA resubmission, including any potential FDA decisions that result in limiting the use of our current planned commercial teplizumab supply such as assigning a shorter teplizumab shelf-life than we planned, we may be required to enter into new statements of work or other agreements with CMOs and incur additional costs to increase our planned commercial supply of teplizumab and if we are not able to do so successfully and in a timely manner our business may be negatively and materially impacted.

Each of our contract manufacturers for our product candidates is a single source supplier. If any of the contract manufacturers in the supply chain for one of our product candidates experiences a delay or is unable to deliver the products or components necessary to manufacture the subject product, our ability to produce the affected product would be materially impaired.

Although we believe we currently have adequate supply to support potential teplizumab clinical and commercial supply demands, and through existing contracts with our CMOs we have the ability to enter into new statements of work to increase our existing supply as needed, we do not have pre-set ongoing commitments from AGC Biologics for commercial supply of teplizumab or with any other contract manufacturers of our other product candidates. Our current agreement with AGC Biologics for the supply of teplizumab as well as agreements with other contract manufacturers of our other product candidates operate on a statement of work basis. If teplizumab is approved for commercial use but we are unable to reach agreement with AGC Biologics on the production of teplizumab for commercial use, or if we are unable to maintain commercial relationships with contract manufacturers of our other product candidates, we may not have sufficient supply of teplizumab to fulfill customer orders or sufficient supply for our other clinical trials. Identifying, qualifying and transferring manufacturing to secondary sources is a time-consuming process and there is no guaranty that we would be able to reach an agreement with a secondary source on acceptable terms, which could have a material adverse effect on our sales, results or operations and financial condition.

Our experience manufacturing teplizumab and our other product candidates is limited, and if the FDA requires any changes to our manufacturing process for our products, we are dependent on our CMOs and service providers to timely and compliantly deliver on their contractual obligations. If they fail to do so, this can materially and adversely impact our product development plans and timelines. Additionally, if we are not able to successfully partner with our CMOs and service providers in addressing the FDA’s product quality and other considerations as part of its review of our BLA resubmission, or if we encounter any other manufacturing issues, we may experience delays or disruptions to our efforts to bring teplizumab to market and/or to our other ongoing product development efforts, including our ongoing and planned clinical trials.

We have limited experience manufacturing teplizumab and we currently rely on single-source, third-party manufacturers to supply us with drug substance and drug product. We historically relied upon an existing supply of teplizumab drug substance produced by Eli Lilly to manufacture drug product at our third-party manufacturer for use in our clinical trials of teplizumab. We have entered into agreements with our third-party manufacturers to manufacture teplizumab for our anticipated clinical trial needs and plan to enter into additional statements or work and agreements to support teplizumab supply needs, including for a potential commercialization. We believe supplies of teplizumab sufficient to supply the PROTECT study and to fulfill our initial commercial launch needs in the United States have already been manufactured by our third-party manufacturers and have the ability to enter into new statements of work with our manufacturers to increase our teplizumab supply.

In order to obtain regulatory approval for teplizumab, third-party manufacturers have been required to consistently produce teplizumab in commercial quantities and of specified quality on a repeated basis and document their ability to do so. The required number of batches of teplizumab have been manufactured at our CMOs by the processes we intend to use for commercialization. The quality and consistency of these lots, along with their comparability to teplizumab manufactured previously for clinical studies, will need to be approved by the FDA. In the July 2, 2021 CRL received by the Company, the FDA stated that as PK remains the primary endpoint for demonstration of comparability between the two products, the Company will need to establish PK comparability appropriately between the intended commercial product and the clinical trial product or provide other data that adequately justify why PK comparability is not necessary. Additionally, the CRL raised product quality and other considerations that we believe we have addressed in our February 2022 BLA resubmission, however, the FDA will ultimately determine whether our efforts sufficiently address their considerations and support an approval. Addressing the FDA’s requests and requirements in the CRL and in subsequent Type A and Type B meetings, including our related efforts to otherwise complete work to support approval of teplizumab for the at-risk indication, as well as the development of our other product candidates will require additional time, resources and successful execution and support by our CMOs and service providers, on whom we are highly dependent to execute on our business plans in a compliant and timely manner. If they fail to do so, it could result in delays or failures of execution that could negatively impact the FDA’s review and decision on our BLA resubmission or any potential commercialization of teplizumab, or otherwise negatively impact our product development efforts including our ongoing clinical trials, such as the PROTECT Study, and planned clinical trials. The FDA may conduct additional site-inspections at any of our CMOs which, depending on timing and outcomes, could negatively impact timing of or regulatory decisions relating to our BLA resubmission. Additionally, we have critical testing and stability work ongoing at one of our CMOs for teplizumab, that if not executed in a timely and compliant manner by our CMO, could negatively impact our BLA resubmission and product development efforts.

Changes in product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered in an effort to optimize processes. During the course of a development program, sponsors may also change the contract manufacturers used to produce the product candidates. Also, if we, through third-parties, engage in the scale-up of manufacturing, we may encounter unexpected issues relating to the manufacturing process or the quality, purity and stability of the product, and we may be required to refine or alter our manufacturing processes to address these issues. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of clinical trials. Such changes may also require additional testing, notification or approval by the FDA, the competent authorities of the European Union Member States, MHRA or other regulatory authorities. This could delay completion of clinical trials; require the conduct of bridging clinical trials or studies, or the repetition of one or more clinical trials; increase clinical trial costs; delay approval of our product candidates and jeopardize our ability to commence product sales and generate revenue.

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

We rely on third-party CROs and vendors to conduct and manage our clinical programs including contracting with clinical sites to perform our clinical trials. We plan to rely heavily on these parties for execution of clinical trials for our product candidates and will control only certain aspects of their activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs and clinical sites will not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EEA and comparable foreign regulatory authorities for any products in clinical development. The FDA and its foreign equivalents enforce these GCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or other regulatory authorities will determine that any of our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with products produced under GMP regulations and will require a large number of test subjects. Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

Although we design the clinical trials for our product candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs are delegated to third-parties. In addition, the CROs and clinical sites may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of any of our product candidates for the subject indication may be delayed or our development program materially and irreversibly harmed. We fully cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or any of our product candidates. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials, which could significantly delay commercialization and require significantly greater expenditures.

If any of our relationships with these third-party CROs or clinical sites terminate, we may not be able to enter into arrangements with alternative CROs or clinical sites. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for any of our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

The outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.

We currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any future collaborators may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in pre-clinical studies and early-stage clinical trials does not mean that future larger registration clinical trials will be successful. This is because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and comparable foreign regulatory authorities despite having progressed through pre-clinical studies and early-stage clinical trials.

From time to time, we may publish or report interim or preliminary data from our clinical trials. Interim or preliminary data from clinical trials that we may conduct may not be indicative of the final results of the trial and are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Interim or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the interim or preliminary data. As a result, interim or preliminary data should be viewed with caution until the final data are available.

In some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, differences in and adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain marketing approval to market our product candidates.

Third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.

Our ability to successfully market our product candidates will depend in part on the level of reimbursement that government health administration authorities, private health coverage insurers and other organizations provide for the cost of our products and related treatments. Countries in which any of our product candidates are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any subsequent price changes. In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices. We may not be able to sell our product candidates profitably if adequate prices are not approved or coverage and reimbursement is unavailable or limited in scope. Increasingly, third-party payors attempt to contain health care costs in ways that are likely to impact our development of products including:

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered. Some third-party payors may impose barriers to coverage of products, such as pre-approval of coverage for new drug therapies before they will reimburse healthcare providers who use such therapies. Many private third-party payors, such as managed care plans, manage access to drug products’ coverage partly to control costs to their plans, and may use drug formularies and medical policies to limit their exposure. Factors considered by these payors include product efficacy, cost effectiveness, and safety, as well as the availability of other treatments including generic prescription drugs. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Moreover, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial products. There have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. While any proposed measures will require authorization through additional legislation to become effective, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. See “Healthcare reform and other governmental and private payor initiatives may have an adverse effect upon, and could prevent, our product candidates’ commercial success, if approved.”

Risks Relating to Our Intellectual Property Rights

We depend on rights to certain pharmaceutical compounds that are licensed to us. We do not control these pharmaceutical compounds and any loss of our rights to them could prevent us from selling our products.

We are dependent on licenses from third parties for all but one of our pharmaceutical compounds. We do not own the patents that underlie these licenses. Our rights to use the pharmaceutical compounds we license are subject to the continuation of and compliance with the terms of those licenses. Thus, the patents and patent applications applicable to our product candidates were not written by us or our attorneys, and we did not have control over the drafting and prosecution. The former patent owners and our licensors might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting. Moreover, under certain of our licenses, patent prosecution activities remain under the control of the licensor. We cannot be certain that drafting of the licensed patents and patent applications, or patent prosecution, by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights.

Our rights to develop and commercialize the product candidates we license are subject to the validity of the owner’s intellectual property rights. Enforcement of our licensed patents or defense or any claims asserting the invalidity of these patents is often subject to the control or cooperation of our licensors. Legal action could be initiated against the owners of the intellectual property that we license and an adverse outcome in such legal action could harm our business because it might prevent such companies or institutions from continuing to license intellectual property that we may need to operate our business. In addition, such licensors may resolve such litigation in a way that benefits them but adversely affects our ability to develop and commercialize our product candidates.

In addition, our rights to practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Our licenses may be terminated by the licensor if we are in material breach of certain terms or conditions of the license agreement or in certain other circumstances. Certain of our licenses contained in our license agreements contain provisions that allow the licensor to terminate the license if (i) we breach any payment obligation or other material provision under the agreement and fail to cure the breach within a fixed time following written notice of termination, (ii) we or any of our affiliates, licensees or sublicensees directly or indirectly challenge the validity, enforceability, or extension of any of the licensed patents, (iii) we declare bankruptcy or dissolve, (iv) we fail to maintain a licensed product in active development or fail to use commercially reasonable efforts to develop or commercialize a licensed product. Our rights under the licenses are subject to our continued compliance with the terms of the license, including the payment of royalties due under the license. Termination of these licenses could prevent us from marketing some or all of our products. Because of the complexity of our products and the patents we have licensed, determining the scope of the license and related royalty obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some or all of our products.

It is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.

Our commercial success will depend, in part, on obtaining and maintaining patent protection for our technologies, products and processes, successfully defending these patents against third-party challenges and successfully enforcing these patents against third party competitors. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowable or enforceable in our patents. The existing patents and patent applications relating to our product candidates and related technologies may be challenged, invalidated or circumvented by third parties and might not protect us against competitors with similar products or technologies.

The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights, permit us to gain or keep our competitive advantage, or provide us with any competitive advantage at all. For example, others have filed, and in the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to any of our product candidates, or important to our business. We cannot be certain that any patent application owned by a third party will not have priority over patent applications filed by us, or that we will not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices. Additionally, the composition of matter patents for teplizumab have expired, and although we have filed method of use patents for teplizumab, these may not provide adequate protection from competitors.

In the future we may rely on know-how and trade secrets to protect technology, especially in cases when we believe patent protection is not appropriate or obtainable. However, know-how and trade secrets are difficult to protect. While we intend to require employees, academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately protect our trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our proprietary technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information owned by us may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts are sometimes less willing to protect trade secrets than patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

If we fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.

We may also rely on the trademarks we may develop to distinguish our products from the products of our competitors. We cannot guarantee that any trademark applications filed by us or our licensors will be approved. Third parties may also oppose such trademark applications, or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we will have adequate resources to enforce these trademarks.

Our product candidates may infringe the intellectual property rights of others, which could increase our costs and delay or prevent our development and commercialization efforts.

Our success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third-party patent rights that may be relevant to our proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates or any future product candidate. There may be certain issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop or commercialize any of our product candidates, and we do not know if such patents and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties would be time-consuming and may:

Third parties may hold proprietary rights that could prevent any of our product candidates from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to any of our product candidates or our processes could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or market any of our product candidates or any future product candidates. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, we cannot be sure that we could redesign our product candidates or any future product candidates or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing any of our product candidates or a future product candidate, which could harm our business, financial condition and operating results.

A number of companies, including several major pharmaceutical companies, have conducted, or are conducting, research in immune-mediated diseases within the therapeutic fields in which we intend to operate, which has resulted, or may result, in the filing of many patent applications related to this research. If we were to challenge the validity of these or any issued United States patent in court, we would need to overcome a statutory presumption of validity that attaches to every issued United States patent. This means that, in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. If we were to challenge the validity of these or any issued United States patent in an administrative trial before the Patent Trial and Appeal Board in the United States Patent and Trademark Office, we would have to prove that the claims are unpatentable by a preponderance of the evidence. There is no assurance that a jury and/or court would find in our favor on questions of infringement, validity or enforceability.

We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.

As is commonplace in our industry, we will employ individuals who were previously employed at other pharmaceutical companies, including our competitors or potential competitors. We may be subject in the future to claims that our employees or prospective employees are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations) and that such obligations has been breached or claims that our employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Risks Related to Ownership of our Common Stock

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for stockholders.

The market price of our common stock has been volatile and can be subject to wide fluctuations in response to various factors, some of which are beyond our control, including, the reporting of results of our clinical trials or partner-sponsored clinical trials involving our programs. Other factors may include those discussed in this “Risk Factors” section of this Annual Report on Form 10-K:

In addition, the stock markets in general, and the markets for biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the market price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer.

On May 21, 2021, a putative class action complaint was filed in the U.S. District Court for the District of New Jersey (the “Court”), naming the Company, Chief Executive Officer Ashleigh Palmer, and Chief Financial Officer Andrew Drechsler as defendants (the “Securities Action”). The complaint alleges violations of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 in connection with disclosures made regarding the teplizumab BLA and teplizumab’s commercialization timeline. The plaintiff seeks to represent a class of shareholders who purchased or otherwise acquired the Company’s securities between November 2, 2020 and April 8, 2021. The complaint seeks unspecified damages. Per the procedures set forth by federal securities laws, applications for appointment of lead plaintiff(s) and lead counsel were due to the Court on July 20, 2021. Two applications for lead plaintiff and lead counsel were submitted to the Court on that date; one of the two movants subsequently withdrew its application. On November 17, 2021, the Court appointed a Lead Plaintiff and Lead Counsel.

On December 23, 2021, the Lead Plaintiff and named plaintiff filed an amended complaint (the “Amended Complaint”). The Amended Complaint similarly alleges violations of the Exchange Act and Rule 10b-5 by the Company, Mr. Palmer, and Mr. Drechsler in connection with disclosures concerning the teplizumab BLA and its commercialization timeline, as well as disclosures concerning the TN-10 At-Risk Study. Lead Plaintiff now seeks to represent a class of shareholders who purchased or otherwise acquired the Company’s securities between November 2, 2020 and July 6, 2021. The Amended Complaint also seeks unspecified damages. The Company, Mr. Palmer, and Mr. Drechsler filed their response, a motion to dismiss, to the Amended Complaint on February 8, 2022.

On August 5, 2021 and October 7, 2021, two shareholder derivative lawsuits concerning substantially the same facts and disclosures underlying the Securities Action (the “Derivative Actions”) were filed in the same Court, naming Chief Executive Officer Ashleigh Palmer, retired and former Chief Financial Officer Andrew Drechsler, and Company directors Jeffrey Bluestone, Avery Catlin, Sean Doherty, John Jenkins, Wayne Pisano, and Nancy Wysenski as defendants (the “Individual Defendants”). The Company is named in both Derivative Actions as a nominal defendant. The Derivative Actions allege: (1) violations of Section 14(a) of the Exchange Act against the Company directors (including Ashleigh Palmer) in connection with the Company’s March 29, 2021 proxy statement; (2) breaches of fiduciary duty against all Individual Defendants in connection with disclosures made regarding the teplizumab BLA and teplizumab’s commercialization timeline, among other common law causes of action; and (3) seek contribution under Sections 10(b) and 21D of the Exchange Act against Ashleigh Palmer and Andrew Drechsler in connection with the Securities Action. The Derivative Actions seek unspecified damages, including legal fees associated with the Securities Action and compensation paid to the Individual Defendants. The Derivative Actions also seek an order directing the Company and Individual Defendants to take all necessary actions to reform and improve the Company’s corporate governance and internal procedures.

Proceedings in the first Derivative Action, filed August 5, 2021, were originally stayed until November 15, 2021. On October 28, 2021, both plaintiffs and all defendants in the Derivative Actions filed a joint stipulation and proposed order to consolidate the Derivative Actions and appoint co-lead counsel, which the Court granted on November 1, 2021. The consolidation order extended the stay of proceedings to both Derivative Actions. In response to the parties’ joint stipulation to continue the temporary stay of the proceedings, filed on November 15, 2021, the Court granted a further temporary stay of the Derivative Actions until December 30, 2021. On December 10, 2021, the Company and the Individual Defendants moved to extend the temporary stay of proceedings in the Derivative Actions pending the resolution of a motion to dismiss in the Securities Action. Plaintiffs do not oppose the relief sought in motion to stay. On January 4, 2022, the Court stayed proceedings in the Derivative Actions until resolution of the motion to stay, which remains pending before the Court.

These lawsuits and these types of litigation could result in substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle litigation.

An active, liquid and orderly market for our common stock may not develop, which could result in substantial losses for stockholders.

Prior to our IPO, there was no public market for shares of our common stock. Although our common stock is listed on The Nasdaq Global Select Market (“Nasdaq”), the market for our shares has demonstrated varying levels of trading activity and an active public market for our shares may not be sustained. The lack of an active market may impair the ability to sell shares at the time a shareholder wish to sell them or at a price that a shareholder may consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications, or technologies using our shares as consideration.

We have incurred increased costs as a result of operating as a public company, and our management is now required to devote substantial time to additional compliance initiatives and corporate governance practices.

As a public company, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly.

Future capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations.

If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced, and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish some rights to our technologies or product candidates, or to grant licenses on terms that are not favorable to us.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 24.7% of our voting stock as of December 31, 2021. Therefore, these stockholders may have the ability to influence us through this ownership position. For example, if these stockholders were to choose to act together, they may be able to significantly influence all matters submitted to our stockholders for approval, including elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline.

In accordance with the guidelines specified under Rule 10b5-1 of the Exchange Act and our policies regarding stock transactions, a number of our employees, including executive officers, have adopted and may continue to adopt stock trading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directors require public filings. Sales by such persons could be viewed negatively by holders and potential purchasers of our common stock, resulting in a decline in the market price of our common stock.

In addition, as of December 31, 2021, approximately 15.6 million shares of common stock were subject to outstanding options, reserved for future issuance under our equity incentive plans or subject to outstanding warrants. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decrease.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting

If we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or if we are unable to provide an attestation report from our independent registered public accounting firm, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease.

Provisions in our organizational documents and provisions under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and bylaws contains provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following:

In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws became effective immediately prior to the completion of the IPO and our indemnification agreements that we have entered into with our directors and officers provide that:

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction.

The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

We do not intend to pay dividends on our common stock, and, consequently, the ability to achieve a return on investment will depend on appreciation in the price of our common stock.

We do not intend to pay any cash dividends on our common stock for the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. Therefore, shareholders are not likely to receive any dividends on their common stock for the foreseeable future. Since we do not intend to pay dividends, the ability to receive a return on investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

General Risk Factors

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As our development and commercialization plans and strategies continue to develop, we intend to expand the size of our employee and consultant/contractor base. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to develop and commercialize our product candidates and any other future product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage our future growth.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of our co-founders would adversely impact our business prospects.

Our management team has expertise in many different aspects of drug development and commercialization. However, our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We will need to hire additional personnel as we further develop our product candidates. Competition for skilled personnel in our market is intense and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. We have entered into employment agreements with certain of our executive officers. However, these employment arrangements will provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. Moreover, there can be no assurance that anyone we expect to employ in a key management position will be available to join our team when we expect them to, if at all. The loss of the services of any of our executive officers or other key employees, or our inability to hire targeted executives, could potentially harm our business, operating results or financial condition. In particular, we believe that the loss of the services of our co-founders would have a material adverse effect on our business. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates would be limited.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any of our product candidates or any other future product. For example, we may be sued if any product we develop, including any of our product candidates, or any materials that we use in our products allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. In the United States, claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We maintain product liability insurance covering our clinical trials. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.