As filed with the U.S. Securities and Exchange Commission on June 22, 2020.
Registration No. 333-
Castle Biosciences Inc S-1, filed Jun 22, 2020
Castle Biosciences Inc (CSTL)
S-1
2020-06-22
View Original
Added on
October 22, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Castle Biosciences, Inc.
(Exact Name of Registrant as Specified in Its Charter)
(Exact Name of Registrant as Specified in Its Charter)
Delaware | | | 8071 | | | 77-0701774 |
(State or Other Jurisdiction of Incorporation or Organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
820 S. Friendswood Drive, Suite 201
Friendswood, Texas 77546
(866) 788-9007
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Friendswood, Texas 77546
(866) 788-9007
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Derek Maetzold
President and Chief Executive Officer
Castle Biosciences, Inc.
820 S. Friendswood Drive, Suite 201
Friendswood, Texas 77546
(866) 788-9007
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
President and Chief Executive Officer
Castle Biosciences, Inc.
820 S. Friendswood Drive, Suite 201
Friendswood, Texas 77546
(866) 788-9007
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Thomas A. Coll, Esq. Karen E. Deschaine, Esq. Cooley LLP 4401 Eastgate Mall San Diego, California 92121 (858) 550-6000 | | | Peter N. Handrinos, Esq. Wesley Holmes, Esq. Anthony Gostanian, Esq. Latham & Watkins LLP 200 Clarendon Street Boston, Massachusetts 02116 (617) 880-4500 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☒ |
| | | | | Emerging growth company | | | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered | | | Proposed Maximum Aggregate Offering Price(1)(2) | | | Amount of Registration Fee |
Common Stock, $0.001 par value per share | | | $73,105,500 | | | $9,490 |
(1) | Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
(2) | Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. Represents an aggregate of 1,725,000 shares of common stock (which includes the additional shares of common stock that the underwriters have an option to purchase) at the assumed public offering price of $42.38 per share, the last reported sale price of the common stock as reported on the Nasdaq Global Market on June 19, 2020. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale of these securities is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 22, 2020PRELIMINARY PROSPECTUS
1,500,000 Shares
Common Stock
We are offering 1,500,000 shares of our common stock. Our common stock is listed on the Nasdaq Global Market and trades under the symbol “CSTL.” The last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020 was $42.38 per share.
You should read this prospectus, together with additional information described under the headings “Incorporation of Certain Information by Reference” and “Where You Can Find More Information,” carefully before you purchase our common stock.
We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 8 of this prospectus as well as in the documents incorporated by reference into this prospectus.
| | | Per Share | | | Total | |
Public offering price | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds to us (before expenses) | | | $ | | | $ |
(1) | See “Underwriting” for additional information regarding underwriting compensation. |
We have granted the underwriters the right to purchase up to 225,000 additional shares of common stock.
The underwriters expect to deliver the shares to purchasers on or about , 2020.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Joint Book-Running Managers
SVB Leerink | | | Baird |
Passive Book-Runner
Canaccord Genuity |
Co-Manager
BTIG |
The date of this prospectus is , 2020
TABLE OF CONTENTS
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We incorporate by reference important information into this prospectus. You may obtain the information incorporated by reference without charge by following the instructions under “Where You Can Find More Information.” You should carefully read this prospectus as well as additional information described under “Incorporation of Certain Information by Reference,” before deciding to invest in our common stock.
Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take responsibility for, or can provide assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.
This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes and other documents incorporated by reference in this prospectus, as well as the information under the caption “Risk Factors” herein and under similar headings in the other documents that are incorporated by reference into this prospectus. Unless the context requires otherwise, references in this prospectus to “Castle Biosciences,” “we,” “our,” “us,” the “Company” or similar terms refer to Castle Biosciences, Inc.
Overview
We are a commercial-stage dermatological cancer company focused on providing physicians and their patients with personalized, clinically actionable genomic information to make more accurate treatment decisions. We believe that the traditional approach to developing a treatment plan for certain cancers using clinical and pathology factors alone can be improved by incorporating personalized genomic information. Our non-invasive genomic products utilize proprietary algorithms to provide an assessment of a patient’s specific risk of metastasis or recurrence of their cancer, allowing physicians to identify patients who are likely to benefit from an escalation of care as well as those who may avoid unnecessary medical and surgical interventions. Our lead product, DecisionDx-Melanoma, is a proprietary multi-gene expression profile, or GEP, test that predicts the risk of metastasis or recurrence for patients diagnosed with invasive cutaneous melanoma, a deadly skin cancer. We also market DecisionDx-UM, which is also a proprietary GEP test that predicts the risk of metastasis for patients with uveal melanoma, a rare eye cancer. Based on the substantial clinical evidence that we have developed, we have received Medicare coverage for both of our products, which represents approximately 50% of our addressable patient population. We also have two proprietary products in late-stage development that address high-risk cutaneous squamous cell carcinoma, or high-risk SCC, and suspicious pigmented lesions, which are indications with high clinical need in dermatological cancer. Clinical validation studies have been completed for both of these late-stage pipeline products and we plan to make these products clinically available in the second half of 2020.
Skin cancer is the most commonly diagnosed cancer in the United States. There are more than 5.5 million new cases of skin cancer diagnosed annually, compared with 1.6 million new cases for all other cancers combined. DecisionDx-Melanoma targets an estimated 130,000 patients diagnosed with invasive cutaneous melanoma each year, which we believe is underreported. In addition, our two late-stage proprietary products in development target approximately 200,000 patients diagnosed with high-risk SCC and approximately 300,000 patients with suspicious pigmented lesions without a definitive diagnosis of skin cancer. We estimate that the total addressable U.S. market for these three products is approximately $2.0 billion.
Healthcare providers, predominately dermatologists and surgeons who treat melanoma patients, make nearly all treatment decisions for patients diagnosed with skin cancers based upon their expected risk of metastasis or recurrence. Historically these treatment decisions have been based solely on clinical and pathology factors, such as tumor depth or width, ulceration status, nerve invasion and evidence of metastasis to the sentinel lymph node, or SLN. Physicians use these factors to group, or stage, patients into stage-related populations. The average risk of metastasis within a population then guides treatment decisions for all patients within a respective population. However, an individual patient’s risk of metastasis can be significantly different from these stage-related population averages, thereby resulting in some patients receiving unnecessary medical and surgical interventions and some patients being undertreated. This treatment paradigm has led to suboptimal patient care and unnecessary costs to the healthcare system.
We believe that incorporating the genomics of each individual patient’s tumor biology to inform their specific risk of metastasis can aid the decision-making process for their treatment plan, help optimize patient outcomes and reduce healthcare costs. The genomics of cutaneous melanoma and other skin cancers are highly complex because, unlike some other types of cancer, the presence or absence of a single gene or a limited number of genes has not been shown to accurately predict the risk of metastasis or recurrence. Rather, we believe that risk of metastasis or recurrence of skin cancer requires the analysis of gene expression profiles occurring at the RNA level through the application of artificial intelligence, deep learning and proprietary techniques to identify clinically relevant genomic patterns. Once identified, we then undertake extensive clinical validation and clinical utility studies to develop products that address key unmet medical needs for patients and physicians.
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DecisionDx-Melanoma
In cutaneous melanoma, nearly every treatment plan decision is based upon a patient’s risk of metastasis and the traditional clinical and pathology factors that are used to estimate population-based rates of metastasis can be inaccurate predictors of an individual patient’s risk. A primary tumor diagnostic biopsy is used to identify most of these factors, such as tumor thickness and ulceration status. These factors then assist physicians in their decision of whether to discuss or recommend a second procedure, the invasive sentinel lymph node biopsy, or SLNB, surgery which can provide additional prognostic information.
However, the clinical and pathology factors that lead to a recommendation to perform the SLNB surgery have limitations in that they are not very predictive when it comes to the likelihood that the patient will have an SLN-positive biopsy result, meaning that melanoma cells are found in the sentinel lymph nodes. In fact, approximately 88% of patients who undergo the SLNB surgery are found to have an SLN-negative biopsy result, and these patients remain either as Stage I, the lowest risk group, or as Stage II, the next lowest risk group. Unfortunately, despite being classified as low risk, two out of three patients who develop metastatic disease and die from the primary melanoma tumor received an SLN-negative biopsy result remained classified as Stage I or II following SLNB surgery. The significant diagnostic discordance that exists between the clinical and pathologic factors and likelihood of both an SLN-positive biopsy result and the risk of metastasis or recurrence has led to an opportunity to improve care by adding personalized genomic information.
We developed our proprietary, non-invasive genomic DecisionDx-Melanoma product to address this diagnostic discordance in patients with Stage I-III cutaneous melanoma. The product interrogates the biology of a patient’s tumor by analyzing the gene expression profile of 31 genes, a process made possible by our proprietary algorithm, developed using machine learning techniques. DecisionDx-Melanoma reports the risk of metastasis or recurrence for a patient’s melanoma into two classes and two subclasses, ranging from Class 1A, the lowest risk group, through Class 2B, the highest risk group, based on the genomics of the patient’s tumor. Physicians and patients use this additional tumor-specific genomic information, along with traditional staging criteria, to make better-informed decisions about how to manage the disease.
Twenty-five peer-reviewed studies have been published that support the two current clinically actionable uses of DecisionDx-Melanoma. The first use immediately following diagnosis is based upon a patient’s likelihood of having an SLN-negative biopsy result so that physicians and their patients can discuss the risk and benefit of undergoing the SLNB surgery. Data from our independent prospective multi-center study of 1,421 patients showed that the 1,065 patients with a melanoma less than or equal to 2.0 mm thick, defined as T1-T2 melanoma, and who received a DecisionDx-Melanoma Class 1A test result, had only a 4.6% likelihood of an SLN-positive biopsy result. This is clinically relevant because current guidelines do not recommend offering the SLNB surgery if the likelihood of an SLN-positive biopsy result is 5% or less. Therefore, all patients with a T1-T2 melanoma and a DecisionDx-Melanoma Class 1A test result, which represented approximately 70% of all T1-T2 patients in our study, could avoid the SLNB surgery based on current guidelines. We recently completed analysis from a second, independent prospective multi-center study of 1,690 patients. This study confirmed data from the first study in that patients with a T1-T2 melanoma who received a DecisionDx-Melanoma Class 1A test result had a 4.5% likelihood of an SLN-positive biopsy result. The second use of our product is to inform the appropriate treatment plan, regardless of the decision to undergo or avoid the SLNB surgery. The aggregate data from all of our published long-term archival studies showed a 99.6% negative predictive value, or NPV, for melanoma-specific survival at five years for patients who received a DecisionDx-Melanoma Class 1A test result; meaning that at the five-year mark, 99.6% of patients with a Class 1A test result did not die from their melanoma. We have also demonstrated, in all four of our clinical impact studies, that physicians changed their treatment plans approximately 50% of the time after receiving our test results, showing that DecisionDx-Melanoma can significantly change the way physicians treat their patients. For contextual purposes, note that for patients who undergo the SLNB surgery, only 12% are SLNB positive, while the remaining 88% are SLNB negative. This means that only 12% would have a change in management.
DecisionDx-UM
We also market DecisionDx-UM, a genomic test for use in identifying patients diagnosed with uveal melanoma who are at a low risk of metastasis. Uveal melanoma is a rare but deadly eye cancer with approximately 1,600 patients diagnosed in the United States annually. Similar to DecisionDx-Melanoma, this product also uses a proprietary algorithm developed using machine learning techniques to interrogate the biology of a patient’s tumor by analyzing the gene expression profile of 15 genes of a patient’s tumor. Because approximately 30% of uveal melanoma patients go on to metastasize within three years, prior to the availability of DecisionDx-UM in 2010, once the primary eye
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tumor was treated, nearly all patients were managed under an aggressive metastatic surveillance treatment plan. Similar to our efforts to develop evidence for DecisionDx-Melanoma, we have supported development of an expansive, peer-reviewed publication dataset with 17 studies documenting the validity and utility of DecisionDx-UM. The first prospective, multi-center study reported a 98% NPV at five years for metastatic-free survival for patients who received a Class 1A test result. Based upon this and additional clinical validity data, two clinical impact studies we conducted reported that over 90% of post-diagnostic management decisions align with the DecisionDx-UM results.
Pipeline Products
We are developing additional products targeting the challenges faced by physicians in treating their patients’ skin cancer, with two products in late stage development.
DecisionDx-SCC
One of our pipeline products, DecisionDx-SCC, is a proprietary GEP test designed to predict the risk of metastasis in patients diagnosed with high-risk SCC. We estimate that approximately one million patients are diagnosed with SCC in the United States each year and, of these patients, we further estimate that approximately 200,000 patients are identified as having high-risk SCC, meaning that they have one or more high-risk features associated with their SCC. The current treatment pathway for patients with high-risk SCC suffers from a low positive predictive value for risk of metastasis or recurrence. As a result, many patients categorized as high risk receive adjuvant therapy and other unnecessary medical and surgical interventions even though they would not have gone on to metastasize. Conversely, there are also many patients categorized as high-risk who are placed in “a watchful waiting treatment plan” who could benefit from adjuvant therapy. To address this clinical need in high-risk SCC, we developed and validated DecisionDx-SCC, a proprietary GEP test designed to be used in patients with one or more high-risk features in order to improve treatment plan decisions by incorporating personalized genomic information provided by DecisionDx-SCC.
We recently published three studies regarding DecisionDx-SCC: our clinical validation study and two clinical use studies. Importantly, we demonstrated that applying the genomic profile of the SCC tumor using DecisionDx-SCC improves identification of high-risk SCC patients who are actually at low risk and the resultant group is at a much higher risk of metastasis than clinical or pathologic factors, alone, would predict. In parallel our two initial clinical use studies have identified a framework for integration of DecisionDx-SCC into existing management pathways for a risk-appropriate approach in high-risk SCC patients, designed to align treatment plans with predicted risk of metastasis using clinical, pathologic and genomic profile information. Separately, we also announced the publication of an intended use study involving 162 clinicians attending a national dermatology conference, which demonstrated that integration of DecisionDx-SCC test results impacted management decisions in a significant and risk-appropriate manner for high-risk SCC patient scenarios, while remaining aligned with national guidelines for patient management. Based on these published results, we have announced our intention to make this test clinically available in the third quarter of 2020.
DecisionDx for Suspicious Pigmented Lesions
We also recently completed development of a proprietary GEP test designed to assist physicians in the diagnosis of suspicious pigmented lesions. Of the approximately two million pigmented lesion skin biopsies performed for the diagnosis of melanoma annually in the United States, we estimate that approximately 300,000 biopsy specimens cannot be confidently confirmed as a melanoma or a benign lesion through the use of histopathology alone. We recently completed our clinical validation study and based on the estimated completion timing of our additional clinical studies, we believe we remain on track to launch this product in the second half of 2020.
Our Commercial Channel
We have built a commercial organization that focuses on providing solutions to dermatologists, including Mohs surgeons, surgeons and dermatological pathologists who care for patients with skin cancer. Our focus on dermatologic cancers has provided us with unique insights into the challenges faced by these physicians that have enabled us to drive adoption of DecisionDx-Melanoma, as well as to identify opportunities for additional products to address unmet clinical needs in dermatologic cancers and medical dermatology. We have processed over 60,000 clinical samples since commercial launch, with total proprietary GEP report volume increasing from less than 4,000 in 2015 to more
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than 17,000 in 2019. Our annual revenue increased from $22.8 million in 2018 to $51.9 million in 2019. During 2019, we also expanded our commercial and medical affairs organizations from the low 20s to the low 50s in externally facing employees, including expansion of our outside sales territories from 14 in January 2019 to 23 in February 2019 to 32 in December 2019 with the additional expansion coming from our inside sales support and our medical affairs group, to further educate physicians, which we believe drives adoption of our products. We will continue to develop evidence, including performance and utility data, to substantiate the value of our marketed products, which we believe is important for physicians as they adopt our products for multiple uses. We will also continue to evaluate our mix of outside sales territories, inside sales support, marketing and medical affairs and adjust our investments based upon these evaluations. We will also continue to evaluate other pipeline product opportunities and invest in those that we believe will solve clinically significant unmet needs.
Our Products
We currently market two proprietary products, DecisionDx-Melanoma and DecisionDx-UM, and have two late-stage proprietary products for which we have completed clinical validation. We believe these commercial and pre-commercial products support an estimated total addressable market of approximately $2.0 billion in the United States. We have received positive local coverage determinations, or LCDs, providing Medicare coverage for both of our commercial products. These LCDs facilitate reimbursement from Medicare, which represents approximately 50% of the addressable patient population.
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Recent Updates
Cash and Cash Equivalents
As of May 31, 2020, we had cash and cash equivalents of approximately $109.9 million, and the outstanding principal balance on our bank term loan was $26.7 million. This amount of cash and cash equivalents is preliminary, subject to adjustment and based solely upon information available to us as of the date of this prospectus. It includes an $8.3 million advance payment received from the Centers for Medicare & Medicaid Services, which will be applied against future Medicare claims we submit for reimbursement in 2020 and will increase our liabilities when recorded in the second quarter of 2020. This amount of cash and cash equivalents is not a comprehensive statement of our results of operations, liquidity or financial condition as of May 31, 2020, including with respect to our liabilities as of May 31, 2020, and has not been audited or reviewed by our independent registered public accounting firm. This amount is not intended to be indicative of expected cash and cash equivalents as of June 30, 2020, or other future fiscal periods. Accordingly, undue reliance should not be placed on this preliminary information, and it should be viewed in the context of all other available information regarding our results of operations, liquidity and financial condition.
COVID-19 Update
As previously reported, we recently experienced a decline in orders, which we believe is linked to delays and/or cancellations in patient visits, resulting in reduced diagnostic biopsies and thus reduced diagnoses of cutaneous melanoma in response to COVID-19. For example, we disclosed that from April 1, 2020 to May 6, 2020, orders for our lead product, DecisionDx-Melanoma, declined 43% as compared to the same period in 2019. While we are unable to predict the pace, timing or occurrence of any rescheduled patient visits, we anticipate that a majority of these delayed and/or canceled patient visits will be subsequently rescheduled throughout 2020 as state and local government restrictions and guidelines are eased, which we believe is supported by recent metrics available to us. For example, weekly orders of DecisionDx-Melanoma in the first three weeks of June were 96% of the weekly order volume of the first three weeks of January 2020.
As the overall effect of COVID-19 on our business is continuing to evolve, we cannot predict the extent to which our results of operations, financial condition or cash flows will be impacted by COVID-19. Accordingly, the information presented above is not necessarily indicative of our results of operations that can be expected for the three months ending June 30, 2020, or any other interim period, or for the year ending December 31, 2020. For more information on the potential impact of the COVID-19 pandemic on our business, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and the risk factors included under “Risks Related to Our Business” and the other risk factors included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 11, 2020.
Corporate and Other Information
We were incorporated in Delaware in September 2007. Our principal executive offices are located at 820 S. Friendswood Drive, Suite 201, Friendswood, Texas 77456 and our telephone number is (866) 788-9007. Our corporate website address is www.CastleBiosciences.com. Information contained on or accessible through our website is not incorporated by reference into this prospectus, and you should not consider information on our website as part of this prospectus.
This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
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Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, as amended, or the JOBS Act, enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
• | being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; |
• | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act; |
• | reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and |
• | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. |
We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) December 31, 2024, (2) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.07 billion or (b) in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the prior June 30th, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, the JOBS Act provides that an emerging growth company can leverage the extended transition period, provided in Section 102(b) of the JOBS Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates.
We are also a smaller reporting company as defined in the Exchange Act (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure.
We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different from what you might receive from other public reporting companies in which you hold equity interests.
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The Offering
Common stock offered by us
1,500,000 shares (or 1,725,000 shares if the underwriters exercise their option to purchase additional shares in full).
Common stock to be outstanding after this offering
18,703,496 shares (or 18,928,496 shares if the underwriters exercise their option to purchase additional shares in full).
Option to purchase additional shares
The underwriters have a 30-day option to purchase up to 225,000 additional shares of common stock from us.
Use of proceeds
We estimate that the net proceeds to us from the sale of shares that we are selling in this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $59.3 million, or $68.2 million if the underwriters exercise their option to purchase additional shares in full.
We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to further support and increase our research and development activities, including those to support the development of our product pipeline, to expand our commercial organization including our sales force and for working capital and other general corporate purposes.
See “Use of Proceeds” for additional information.
Risk factors
An investment in our securities involves a high degree of risk. See “Risk Factors” and the other information included in this prospectus and incorporated by reference herein for a discussion of factors you should carefully consider before deciding to invest in our securities stock.
Nasdaq trading symbol
“CSTL”
The number of shares of our common stock to be outstanding after this offering is based on 17,203,496 shares of common stock outstanding as of March 31, 2020, assumes the sale and issuance by us of 1,500,000 shares of common stock in this offering and excludes:
• | 2,762,364 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2020, at a weighted-average exercise price of $14.46 per share; |
• | 1,562,672 shares of common stock reserved for future issuance under the 2019 Equity Incentive Plan, or the 2019 Plan as of March 31, 2020; |
• | 543,257 shares of common stock reserved for future issuance under the 2019 Employee Stock Purchase Plan, or the ESPP, as of March 31, 2020; and |
• | 244,480 shares of our common stock issuable upon the exercise of certain warrants outstanding as of March 31, 2020, at a weighted-average exercise price of $1.02 per share. |
Unless otherwise indicated, all information contained in this prospectus assumes:
• | no exercise of the outstanding options described above; and |
• | no exercise by the underwriters of their option to purchase up to an additional 225,000 shares of common stock from us in this offering. |
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Investing in our common stock involves a high degree of risk. You should consider carefully the following risks and uncertainties as well as the risks and uncertainties described in the section entitled “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, or SEC, on March 10, 2020, as well as in our subsequent filings with the SEC, which descriptions are incorporated in this prospectus by reference in their entirety. These risks and uncertainties are not the only risks and uncertainties we face. Additional risks and uncertainties not currently known to us, or that we currently view as immaterial, may also impair our business. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Special Note Regarding Forward-Looking Statements.”
Risks Related to this Offering and Ownership of Our Common Stock
If you purchase shares of our common stock in this offering, you will experience substantial and immediate dilution.
Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer immediate and substantial dilution with respect to the net tangible book value of the common stock you purchase in this offering. Based on the assumed public offering price of $42.38 per share of common stock being sold in this offering, which was the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, and our net tangible book value as of March 31, 2020, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $34.51 per share with respect to the net tangible book value of the common stock. See the section entitled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
If we issue additional shares of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including investors who purchase shares of common stock in this offering, will experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock. We also cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.
Future sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock.
Future sales in the public market of shares of our common stock, including shares referred to in the foregoing risk factor or shares issued upon exercise of our outstanding stock options, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital.
We will have broad discretion in the use of the net proceeds of this offering and may not use them effectively or in ways that increase the value of our share price.
We will have broad discretion in the application of the net proceeds from this offering, including for any purposes described in the section titled “Use of Proceeds,” and you and other stockholders may disagree with how we spend or invest these proceeds. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.
8
This prospectus and the documents incorporated by reference herein contain forward-looking statements that reflect our beliefs and views with respect to future events and are subject to substantial risks and uncertainties within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Exchange Act and the safe harbor provisions for the U.S. Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, contained in this prospectus and the documents incorporated by reference herein, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking words such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “pro forma,” “project,” “seek,” “should,” “target,” “will,” “would” or other similar words or expressions (including their use in the negative), or by discussions of future matters such as the development of products, technology enhancements, possible changes in legislation, and other statements that are not historical.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, including risks described in “Risk Factors” and elsewhere in this prospectus and the documents incorporated by reference herein, regarding, among other things:
• | estimates of our addressable market, future revenue, expenses, capital requirements and our needs for additional financing; |
• | expectations with respect to reimbursement for our products, including third-party payor reimbursement and coverage decisions; |
• | anticipated cost, timing and success of our products in development, and our plans to research, develop and commercialize new tests; |
• | the impact of the COVID-19 pandemic on our business; |
• | our ability to obtain funding for our operations, including funding necessary to complete the expansion of our operations and development of our product candidates; |
• | the implementation of our business model and strategic plans for our products, technologies and businesses; |
• | our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers; |
• | our ability to develop and maintain sales and marketing capabilities; |
• | regulatory developments in the United States and foreign countries; |
• | the performance of our third-party suppliers; |
• | the success of competing diagnostic products that are or become available; |
• | our ability to attract and retain key personnel; |
• | our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; |
• | our use of the proceeds from this offering; and |
• | our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. We operate in a very competitive and rapidly changing environment. 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make, and accordingly you should not place undue reliance on our forward-
9
looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section in this prospectus and the documents incorporated by reference herein, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this prospectus, the documents incorporated by reference herein and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus and the documents incorporated by reference herein by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
10
We estimate that we will receive net proceeds of approximately $59.3 million (or approximately $68.2 million if the underwriters’ option to purchase additional shares is exercised in full) from the sale of the shares of common stock offered by us in this offering, assuming a public offering price of $42.38 per share, which was the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase or decrease in the assumed public offering price of $42.38 per share would increase or decrease the expected net proceeds of the offering to us by approximately $1.4 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 300,000 shares from the assumed number of shares sold in this offering would increase or decrease the expected net proceeds of the offering to us by approximately $12.0 million, assuming the public offering price of $42.38 per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purpose of our sale and issuance of our common stock in this offering is to obtain additional capital to support our operations. As of the date of this prospectus, we have no specific plan for the use of the net proceeds from this offering, or any significant portion thereof. However, we intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to further support and increase our research and development activities, including those to support the development of our product pipeline, to expand our commercial organization including our sales force and for working capital and other general corporate purposes. We may also use a portion of our net proceeds to co-develop, acquire or invest in products, technologies or businesses that are complementary to our business. However, we currently have no agreements or commitments to complete any such transaction.
Our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of those net proceeds. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we may invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
11
The following table sets forth our cash and cash equivalents and our capitalization as of March 31, 2020 as follows:
• | on an actual basis; and |
• | on an as adjusted basis to give effect to our issuance and sale of shares of our common stock in this offering at the assumed public offering price of $42.38 per share, which is the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
You should read this table together with our financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which are incorporated by reference herein.
| | | As of March 31, 2020 | ||||
| | | Actual | | | As Adjusted(1) | |
| | | (in thousands, except share and per share data) | ||||
Cash and cash equivalents | | | $98,653 | | | $157,934 |
| | | | | |||
Long-term debt(2) | | | $17,013 | | | 17,013 |
Stockholders’ equity: | | | | | ||
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized, no shares issued and outstanding, actual and as adjusted. | | | — | | | — |
Common stock, par value $0.001 per share, 200,000,000 shares authorized, 17,203,496 shares issued and outstanding, actual; and 200,000,000 shares authorized, 18,703,496 shares issued and outstanding, as adjusted | | | 17 | | | 19 |
Additional paid-in capital | | | 139,559 | | | 198,838 |
Accumulated deficit | | | (51,642) | | | (51,642) |
| | | | | |||
Total stockholders’ equity | | | 87,934 | | | 147,215 |
| | | | | |||
Total capitalization | | | $104,947 | | | $164,228 |
(1) | The as adjusted capitalization information discussed above is illustrative only and will change based on the actual public offering price. Each $1.00 increase (decrease) in the assumed public offering price of $42.38 per share, which is the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $1.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. A 300,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $12.0 million, assuming that the assumed public offering price of $42.38 per share, which is the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
(2) | Excludes current portion of long-term debt. |
The outstanding share information in the table above excludes the following:
• | 2,762,364 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2020, at a weighted-average exercise price of $14.46 per share; |
• | 1,562,672 shares of common stock reserved for future issuance under the 2019 Plan as of March 31, 2020; |
• | 543,257 shares of common stock reserved for future issuance under the ESPP as of March 31, 2020; and |
• | 244,480 shares of our common stock issuable upon the exercise of certain warrants outstanding as of March 31, 2020, at a weighted-average exercise price of $1.02 per share. |
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If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock after this offering.
As of March 31, 2020, our historical net tangible book value was $87.9 million, or $5.11 per share of common stock. Our historical net tangible book value is the amount of our total tangible assets less our total liabilities. Historical net tangible book value per common share is our historical net tangible book value divided by the number of shares of common stock outstanding as of March 31, 2020.
After giving effect to the sale of shares of common stock in this offering at an assumed public offering price of $42.38 per share, which was the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2020 would be $147.2 million, or $7.87 per share of common stock. This amount represents an immediate increase in as adjusted net tangible book value of $2.76 per share to our existing stockholders and an immediate dilution of $34.51 per share to investors participating in this offering. We determine dilution per share to investors participating in this offering by subtracting as adjusted net tangible book value per share after this offering from the assumed public offering price per share paid by investors participating in this offering.
The following table illustrates this dilution: | | | | | ||
Assumed public offering price per share | | | | | $42.38 | |
Historical net tangible book value per share as of March 31, 2020 | | | $5.11 | | | |
Increase in historical net tangible book value per share attributable to this offering | | | $2.76 | | | |
As adjusted net tangible book value per share after this offering | | | | | $7.87 | |
Dilution per share to new investors participating in this offering | | | | | $34.51 |
The as adjusted dilution information discussed above is illustrative only and will change based on the actual public offering price. Each $1.00 increase (decrease) in the assumed public offering price of $42.38 per share, which was the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020, would increase (decrease) the as adjusted net tangible book value per share after this offering by approximately $0.08, and dilution in net tangible book value per share to new investors by approximately $0.92, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.
We may also increase or decrease the number of shares we are offering. An increase of 300,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our as adjusted net tangible book value per share after this offering by approximately $0.50 and decrease the dilution to investors participating in this offering by approximately $0.50 per share, assuming that the assumed public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. Similarly, a decrease of 300,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the as adjusted net tangible book value per share after this offering by approximately $0.52 and increase the dilution to investors participating in this offering by approximately $0.52 per share, assuming that the assumed public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.
If the underwriters exercise their option to purchase additional shares of our common stock in full in this offering, the as adjusted net tangible book value after the offering would be $8.25 per share, the increase in as adjusted net tangible book value per share to existing stockholders would be $3.14 per share and the dilution per share to new investors would be $34.13 per share, in each case assuming a public offering price of $42.38 per share, which was the last reported sale price of our common stock on the Nasdaq Global Market on June 19, 2020.
The information discussed above is illustrative only and will be adjusted based on the actual public offering price, the actual number of shares that we offer in this offering, and other terms of this offering determined at pricing. We may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.
13
The following tables set forth our selected financial data for the periods indicated. The following selected condensed statements of operations and comprehensive income (loss) data for the years ended December 31, 2018 and 2019 and the condensed balance sheet data as of December 31, 2018 and 2019 are derived from our audited financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, 2019 which is incorporated by reference herein. The selected condensed statements of operations and comprehensive income (loss) data for the three months ended March 31, 2019 and 2020 and the condensed balance sheet data as of March 31, 2020 are derived from our unaudited financial statements appearing in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which is incorporated by reference herein. Our historical results are not necessarily indicative of our results in any future period and results from our interim period may not necessarily be indicative of the results of the entire year.
This selected financial data should be read together with our financial statements and related notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which are incorporated by reference herein. The selected financial data in this section are not intended to replace our financial statements and the related notes and are qualified in their entirety by the financial statements and related notes included elsewhere in this prospectus.
| | | Years Ended December 31, | | | Three Months Ended March 31, | |||||||
| | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | | | | (unaudited) | ||||||||
| | | (in thousands, except per share data) | ||||||||||
Statements of Operations and Comprehensive Income (Loss) Data: | | | | | | | | | ||||
Net revenues | | | $22,786 | | | $51,865 | | | $8,717 | | | $17,418 |
Cost of sales | | | 5,297 | | | 7,310 | | | 1,598 | | | 2,391 |
Gross margin | | | 17,489 | | | 44,555 | | | 7,119 | | | 15,027 |
Operating expenses: | | | | | | | | | ||||
Research and development | | | 4,854 | | | 7,385 | | | 1,394 | | | 2,913 |
Selling, general and administrative | | | 16,471 | | | 29,842 | | | 6,047 | | | 11,078 |
Total operating expenses | | | 21,325 | | | 37,227 | | | 7,441 | | | 13,991 |
Operating income (loss) | | | (3,836) | | | 7,328 | | | (322) | | | 1,036 |
Interest income | | | 24 | | | 312 | | | 21 | | | 298 |
Interest expense | | | (2,274) | | | (4,571) | | | (1,024) | | | (764) |
Gain on extinguishment of debt | | | — | | | 5,213 | | | — | | | — |
Other expense, net | | | (272) | | | (2,933) | | | (33) | | | — |
Income (loss) before income taxes | | | (6,358) | | | 5,349 | | | (1,358) | | | 570 |
Income tax expense | | | 9 | | | 72 | | | — | | | — |
Net income (loss) and comprehensive income (loss) | | | (6,367) | | | 5,277 | | | (1,358) | | | 570 |
Convertible preferred stock cumulative dividends | | | 3,577 | | | 2,156 | | | 928 | | | — |
Accretion of redeemable convertible preferred stock to redemption value | | | 219 | | | 130 | | | 56 | | | — |
Net income (loss) and comprehensive income (loss) attributable to common stockholders | | | $(10,163) | | | $2,991 | | | $(2,342) | | | $570 |
Earnings (loss) per share attributable to common stockholders: | | | | | | | | | ||||
Basic | | | $(5.33) | | | $0.35 | | | $(1.22) | | | $0.03 |
Diluted | | | (5.33) | | | (0.21) | | | (1.22) | | | 0.03 |
Weighted-average shares outstanding: | | | | | | | | | ||||
Basic | | | 1,906 | | | 8,584 | | | 1,917 | | | 17,372 |
Diluted | | | 1,906 | | | 8,658 | | | 1,917 | | | 18,734 |
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| | | As of December 31, | | | As of March 31, | ||||
| | | 2018 | | | 2019 | | | 2020 | |
| | | | | | | (unaudited) | |||
| | | (in thousands) | |||||||
Balance Sheet Data: | | | | | | | |||
Cash and cash equivalents | | | $4,479 | | | $98,845 | | | $98,653 |
Working capital(1) | | | $11,389 | | | $101,392 | | | $101,296 |
Total assets | | | $22,405 | | | $119,746 | | | $120,257 |
Long-term debt(2) | | | $24,500 | | | $19,289 | | | $17,013 |
Preferred stock warrant liability | | | $1,194 | | | $— | | | $— |
Convertible preferred stock | | | $1,501 | | | $— | | | $— |
Redeemable convertible preferred stock | | | $44,995 | | | $— | | | $— |
Total stockholders’ equity (deficit) | | | $(56,566) | | | $85,113 | | | $87,934 |
(1) | We define working capital as current assets minus current liabilities. |
(2) | Excludes current portion of long-term debt. |
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The following table sets forth information regarding beneficial ownership of our capital stock by:
• | each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; |
• | each of our directors; |
• | our named executive officers; and |
• | all of our current executive officers and directors as a group. |
The percentage ownership information under the column entitled “Before Offering” is based on 17,360,096 shares of common stock outstanding as of May 29, 2020.
The percentage ownership information under the column entitled “After Offering” is based on the sale of 1,500,000 shares of common stock in this offering, assuming no exercise of the underwriters’ option to purchase additional shares.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on or before July 28, 2020, which is 60 days after May 29, 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
The following table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Except as otherwise noted below, the address for each person or entity listed in the table is c/o Castle Biosciences, Inc., 820 S. Friendswood Drive, Suite 201, Friendswood, Texas 77546.
| | | Number of Shares Beneficially Owned | | | Percentage of Shares Beneficially Owned | ||||
Name and Address of Beneficial Owner | | | Before Offering | | | After Offering | |||
Greater than 5% Stockholders | | | | | | | |||
Derek J. Maetzold(1) | | | 1,958,937 | | | 11.2% | | | 10.3% |
Entities affiliated with MGC Venture Partners 2013, L.P.(2) | | | 1,618,364 | | | 9.3% | | | 8.6% |
Sofinnova HealthQuest Partners, L.P.(3) | | | 1,433,577 | | | 8.3% | | | 7.6% |
SH Castle Biosciences, LLC(4) | | | 916,275 | | | 5.2% | | | 4.8% |
BioBrit, LLC(5) | | | 893,578 | | | 5.1% | | | 4.7% |
Directors and Named Executive Officers | | | | | | | |||
Bonnie H. Anderson(6) | | | 31,841 | | | * | | | * |
Mara G. Aspinall(7) | | | 41,966 | | | * | | | * |
Daniel M. Bradbury(5) | | | 893,578 | | | 5.1% | | | 4.7% |
G. Bradley Cole(8) | | | 9,796 | | | * | | | * |
Joseph C. Cook III(9) | | | 1,826,417 | | | 10.5% | | | 9.7% |
Miles D. Harrison | | | — | | | * | | | * |
David Kabakoff, Ph.D.(3) | | | 1,433,577 | | | 8.3% | | | 7.6% |
Derek J. Maetzold(1) | | | 1,958,937 | | | 11.2% | | | 10.3% |
Frank Stokes(10) | | | 143,533 | | | * | | | * |
All current executive officers and directors as a group (10 persons)(11) | | | 6,532,650 | | | 36.9% | | | 34.0% |
* | Represents beneficial ownership of less than 1%. |
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(1) | The number of shares beneficially owned consists of (i) 1,622,348 shares of common stock held by Derek J. Maetzold, (ii) 159,329 shares of common stock held by DJM Grantor Retained Annuity Trust No. 1, or the Maetzold Trust, and (iii) 177,260 shares of common stock issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020. Mr. Maetzold is a trustee of the Maetzold Trust. |
(2) | Consists of (i) 1,368,364 shares held by MGC Venture Partners 2013, L.P., or MGC 2013 LP, (ii) 115,300 shares held by MGC Venture Partners 2018, L.P., or MGC 2018 LP, and (iii) 134,700 shares held by MGC Venture Partners QP 2018, L.P., or MGC 2018 QP LP. MGC Venture Partners 2013 GP, LLC, or MGC 2013 GP, is the general partner of MGC 2013 LP. MGC Venture Partners 2018 GP, LLC, or MGC 2018 GP, is the general partner of MGC 2018 LP and MGC 2018 QP LP. MGC 2013 GP has shared voting and shared dispositive power over the shares held by MGC 2013 LP. MGC 2018 GP has shared voting and shared dispositive power over the shares held by MGC 2018 LP and MGC 2018 QP LP. Joseph C. Cook III is a managing director of MGC 2013 GP and a managing partner of MGC 2018 GP and has shared voting power and shared dispositive power over the shares of common stock held by MGC 2013 LP, MGC 2018 LP and MGC 2018 QP LP. Mr. Cook III, however, disclaims beneficial ownership of such shares of common stock, except to the extent of any pecuniary interest therein. The address of each of the foregoing entities and Mr. Cook III is 3835 Cleghorn Avenue, Suite 300 Nashville, TN 37215. |
(3) | HealthQuest Venture Management, L.L.C., or HealthQuest Management, is the general partner of Sofinnova HealthQuest Partners, L.P., or HealthQuest Partners. David Kabakoff, Ph.D., is a partner of HealthQuest Management. Garheng Kong is the managing member of HealthQuest Management and has sole voting and investment power over the shares held by HealthQuest Partners. Each of HealthQuest Management, Mr. Kong and Dr. Kabakoff disclaims beneficial ownership over all shares held by HealthQuest Partners except to the extent of any pecuniary interest therein. The address of HealthQuest Management, HealthQuest Partners, Mr. Kong and Dr. Kabakoff is 1301 Shoreway Road, Suite 350, Belmont, CA 94002. |
(4) | The number of shares beneficially owned consists of (i) 707,032 shares of common stock and (ii) 209,243 shares of common stock issuable upon the exercise of a warrant. The Stonebridge-Highland Healthcare Private Equity Fund, or Stonebridge-Highland Fund, is the sole member of Castle Bio, LLC, which is the sole member of SH Castle Biosciences, LLC, or SH Castle. Stonebridge-Highland Fund is a Korea-based private fund co-managed by Highland Capital Management Korea, Ltd., a wholly owned subsidiary and relying adviser of Highland Capital Management, L.P., or HCMLP, and Stonebridge Capital, Inc. James Dondero is the sole shareholder of Strand Advisors, Inc., HCMLP's general partner, and may be deemed to be an indirect beneficial owner of shares held by SH Castle or entities indirectly advised by HCMLP. Effective January 2020 as a result of the change of control of HCMLP, Mr. Dondero no longer serves as the President or sole director of Strand Advisors, Inc. Mr. Dondero disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Stonebridge Capital Inc. is majority owned by Dean Geehun Kim who also serves on the entity's board of directors. By virtue of such relationship, Stonebridge Capital Inc. and/or Mr. Kim may be deemed to have voting and investment power with respect to the shares held by SH Castle and as a result may be deemed to have beneficial ownership of such shares. Mr. Kim disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The address of SH Castle is c/o Highland Capital Management, L.P., 300 Crescent Ct. Suite 700, Dallas, TX 75201. |
(5) | Daniel M. Bradbury is the managing member of BioBrit, LLC, or BioBrit, and has voting and investment power of the shares held by BioBrit. The address of BioBrit is 2223 Avenida de la Playa, Suite 108, La Jolla, CA 92037. |
(6) | Consists of (i) 30,723 shares of common stock held by the Bonnie H. Anderson Living Trust, or Anderson Trust, and (ii) 1,118 shares of common stock issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020. Bonnie H. Anderson is the trustee of the Anderson Trust. |
(7) | Consists of (i) 40,848 shares of common stock and (ii) 1,118 shares of common stock issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020. |
(8) | The number of shares beneficially owned consists of 9,796 shares of common stock issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020. |
(9) | The number of shares beneficially owned consists of (i) 208,053 shares of common stock and (ii) the shares described in footnote 2 above. |
(10) | Consists of (i) 826 shares of common stock and (ii) 142,707 shares of common stock issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020. |
(11) | Includes the shares described in footnotes (1), (3) and (5) through (10), and includes (i) 157,859 outstanding shares of common stock and (ii) 35,146 shares issuable upon the exercise of stock options that are exercisable or will be exercisable within 60 days of May 29, 2020 by executive officers who are not named in the table above. |
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Certain Related Person Transactions
The following includes a summary of transactions since January 1, 2017 to which we have been a party, in which the amount involved in the transaction exceeded the lesser of $120,000 or 1% of the average of the Company’s total assets at year end for the last two completed fiscal years, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described in the “Executive Compensation” and “Director Compensation” Sections of our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 23, 2020.
Series F Preferred Stock Financings
In January 2018 we completed a second Series F financing in which we sold and issued an aggregate of 940,605 shares of our Series F redeemable convertible preferred stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $5.5 million, and issued warrants to purchase an aggregate of 67,233 shares of our Series F redeemable convertible preferred stock, at a purchase price of $0.01 per warrant share, for aggregate gross proceeds of approximately $672. The participants in this financing included the following executive officers, members of our board of directors and beneficial owners of more than 5% of our capital stock, or entities affiliated with them:
Participants | | | Shares of Series F Redeemable Convertible Preferred Stock(7) | | | Warrants to Purchase Shares of Series F Redeemable Convertible Preferred Stock(7) | | | Aggregate Consideration |
Sofinnova HealthQuest Partners, L.P.(1) | | | 167,230 | | | 14,107 | | | $973,412 |
MGC Venture Partners 2013, L.P.(2) | | | 154,988 | | | 13,077 | | | $902,154 |
Industry Ventures Healthcare, LLC(3) | | | 140,832 | | | 11,880 | | | $819,755 |
BioBrit, LLC(4) | | | 98,145 | | | 8,279 | | | $571,282 |
Joseph C. Cook, Jr.(5) | | | 30,233 | | | 2,550 | | | $175,980 |
Joseph C. Cook, III(6) | | | 24,840 | | | 2,095 | | | $144,589 |
Mara G. Aspinall | | | 17,180 | | | — | | | $100,001 |
Bernhard E. Spiess | | | 6,872 | | | — | | | $40,001 |
Derek J. Maetzold | | | 1,000 | | | — | | | $5,821 |
(1) | Sofinnova HealthQuest Partners, L.P. is affiliated with David Kabakoff, Ph.D., one of our non-employee directors. |
(2) | MGC Venture Partners 2013, L.P. is affiliated with each of Joseph C. Cook, III, one of our non-employee directors, and Joseph C. Cook, Jr., a former non-employee director. |
(3) | Industry Ventures Healthcare, LLC was previously a beneficial owner of more than 5% of our capital stock. |
(4) | BioBrit, LLC is affiliated with Daniel M. Bradbury, one of our non-employee directors. |
(5) | Joseph C. Cook, Jr., a former non-employee director, resigned from our board of directors in August 2018. |
(6) | Joseph C. Cook, III, one of our non-employee directors, was elected to our board of directors in August 2018. |
(7) | On July 29, 2019, in connection with the IPO, all outstanding shares of redeemable convertible preferred stock automatically converted into shares of common stock at a rate of one common share for each 1.219 shares of redeemable convertible preferred stock. Any warrants to purchase shares of redeemable convertible preferred stock that were outstanding at the time of IPO automatically became exercisable for shares of common stock at a rate of one share of common stock for each 1.219 shares of redeemable convertible preferred stock and at an exercise price equal to the stated exercise price of the warrant multiplied by 1.219. |
In May 2018, we completed the initial closing of a third Series F financing in which we sold and issued an aggregate of 783,248 shares of our Series F redeemable convertible preferred stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $4.6 million. In June 2018, we completed a second closing under this financing in which we sold and issued an aggregate of 85,711 shares of our Series F redeemable convertible preferred
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stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $0.5 million. The participants in this financing included the following executive officers, members of our board of directors and beneficial owners of more than 5% of our capital stock, or entities affiliated with them:
Participants | | | Shares of Series F Redeemable Convertible Preferred Stock(7) | | | Aggregate Consideration |
Sofinnova HealthQuest Partners, L.P(1) | | | 429,494 | | | $2,499,999 |
MGC Venture Partners 2013, L.P.(2) | | | 112,243 | | | $653,344 |
Industry Ventures Healthcare, LLC(3) | | | 85,227 | | | $496,089 |
BioBrit, LLC(4) | | | 52,458 | | | $305,348 |
Joseph C. Cook, Jr.(5) | | | 21,138 | | | $123,040 |
Joseph C. Cook, III(6) | | | 13,784 | | | $80,234 |
(1) | Sofinnova HealthQuest Partners, L.P. is affiliated with David Kabakoff, Ph.D., one of our non-employee directors. |
(2) | MGC Venture Partners 2013, L.P. is affiliated with each of Joseph C. Cook, III, one of our non-employee directors, and Joseph C. Cook, Jr., a former non-employee director. |
(3) | Industry Ventures Healthcare, LLC was previously a beneficial owner of more than 5% of our capital stock. |
(4) | BioBrit, LLC is affiliated with Daniel M. Bradbury, one of our non-employee directors. |
(5) | Joseph C. Cook, Jr., a former non-employee director, resigned from our board of directors in August 2018. |
(6) | Joseph C. Cook, III, one of our non-employee directors, was elected to our board of directors in August 2018. |
(7) | On July 29, 2019, in connection with the IPO, all outstanding shares of redeemable convertible preferred stock automatically converted into shares of common stock at a rate of one common share for each 1.219 shares of redeemable convertible preferred stock. |
Convertible Promissory Note Financing
In January 2019 and February 2019, we issued and sold to investors convertible promissory notes, or the Q1 2019 Notes, in the aggregate principal amount of approximately $11.8 million. The Q1 2019 Notes carried an interest rate of 8% per annum. Upon the closing of the IPO on July 29, 2019, all outstanding principal and accrued interest under the Q1 2019 Notes automatically converted into an aggregate of 954,074 shares of our common stock, based on a price of $12.80 per share, or 80% of the IPO price of $16.00 per share. The participants in this convertible promissory note financing included the following executive officers, members of our board of directors and beneficial owners of more than 5% of our capital stock, or entities affiliated with them:
Participants | | | Aggregate Principal Amount | | | Aggregate Number of Shares of Common Stock Issued upon Conversion |
Sofinnova HealthQuest Partners, L.P(1) | | | $1,027,882 | | | 83,453 |
MGC Venture Partners 2013, L.P.(2) | | | $1,200,000 | | | 97,428 |
Industry Ventures Healthcare, LLC(3) | | | $727,492 | | | 59,065 |
BioBrit, LLC(4) | | | $874,537 | | | 71,003 |
Joseph C. Cook, Jr.(5) | | | $600,000 | | | 48,714 |
Joseph C. Cook, III(6) | | | $205,971 | | | 16,722 |
Derek J. Maetzold | | | $100,000 | | | 8,098 |
Bernhard E. Spiess | | | $20,000 | | | 1,619 |
(1) | Sofinnova HealthQuest Partners, L.P. is affiliated with David Kabakoff, Ph.D., one of our non-employee directors. |
(2) | MGC Venture Partners 2013, L.P. is affiliated with each of Joseph C. Cook, III, one of our non-employee directors, and Joseph C. Cook, Jr., a former non-employee director. |
(3) | Industry Ventures Healthcare, LLC was previously a beneficial owner of more than 5% of our capital stock. |
(4) | BioBrit, LLC is affiliated with Daniel M. Bradbury, one of our non-employee directors. |
(5) | Joseph C. Cook, Jr., a former non-employee director, resigned from our board of directors in August 2018. |
(6) | Joseph C. Cook, III, one of our non-employee directors, was elected to our board of directors in August 2018. |
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Investor Agreements
In connection with our preferred stock financings described above, we entered into amendments of our existing investor rights agreement, voting agreement and right of first refusal and co-sale agreement, which contain voting rights, information rights, rights of first refusal and co-sale and registration rights, among other things, with certain of our stockholders. These rights terminated upon the closing of the IPO, except for the registration rights, which will expire upon the earliest to occur of (1) July 29, 2024 and (2) the consummation of a liquidation event.
Stock Options Granted to Executive Officers and Directors
Pursuant to our Non-Employee Director Compensation Policy, on June 4, 2020, we granted each member of our board of directors who is not also serving as an employee or consultant to us an option to purchase 8,000 shares of our common stock, at an exercise price of $37.50 per share, all of which vest on June 4, 2021.
Separation and Consulting Agreements
On May 29, 2020, in connection with his resignation as Chief Medical Officer of the Company, the Company entered into an Employment Separation Agreement, or Separation Agreement, with Federico A. Monzon, M.D., and a Master Services Agreement, or the Consulting Agreement, with Genomic Path LLC, a consulting firm wholly owned by Dr. Monzon, or the Consultant, pursuant to which Dr. Monzon will provide consulting services to the Company.
Under the Separation Agreement, which contains a customary release of claims in favor of the Company, (i) Dr. Monzon will receive a cash payment for his accrued salary and paid time off through May 31, 2020, subject to standard withholdings and deductions, (ii) the Company agreed to enter into the Consulting Agreement and (iii) Dr. Monzon’s outstanding equity awards will continue to vest and remain exercisable in accordance with their terms during the term of the Consulting Agreement.
The Consulting Agreement provides that the Consultant will provide certain services to the Company on a project basis from time to time at a rate of $350.00 per hour. The Consulting Agreement has an initial term through May 31, 2021, which may be renewed for consecutive one-year periods by mutual written agreement. The Consulting Agreement also requires the Consultant to adhere to non-solicitation and non-interference restrictions for a period of three years following termination of the Consulting Agreement and non-competition restrictions for a period of one year following termination of the Consulting Agreement. Among other termination provisions, the Company has the right to terminate the Consulting Agreement immediately for any reason with or without prior notice.
Indemnification Agreements
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
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General
The following description summarizes the most important terms of our common stock. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description of the matters set forth in this “Description of Common Stock,” you should refer to our amended and restated certificate of incorporation (the “Restated Certificate”) and amended and restated bylaws (the “Restated Bylaws”), which are included as exhibits to our Annual Report on Form 10-K, and to the applicable provisions of the Delaware General Corporation Law (the “DGCL”). Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. Our board of directors has the authority, without stockholder approval, except as required by the listing standards of The Nasdaq Stock Market LLC, to issue additional shares of our capital stock. In addition, our board of directors has the authority, without further action by our stockholders, to designate the rights, preferences, privileges, qualifications and restrictions of our preferred stock in one or more series.
As of May 29, 2020, there were approximately 132 holders of record our common stock, which does not include shares held in street name.
Voting
Our common stock is entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders, including the election of directors, and does not have cumulative voting rights. Except as otherwise provided by statute or by applicable stock exchange rules, or by the Restated Certificate or the Restated Bylaws, (i) in all matters other than the election of directors, the affirmative vote of the majority of shares present in person, by remote communication, if applicable, or represented by proxy at a meeting of stockholders and entitled to vote generally on the subject matter shall be the act of the stockholders, and (ii) directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at a meeting of stockholders and entitled to vote generally on the election of directors. Exceptions to this include removing directors for cause and amending our Restated Certificate and Restated Bylaws, each of which will require the approval of the holders of at least 66-2/3% of the voting power of all then-outstanding shares of capital stock entitled to vote generally at an election of directors.
Dividends
Subject to preferences that may be applicable to any then-outstanding preferred stock, the holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation, Dissolution or Winding Up
In the event of our liquidation, dissolution or winding-up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.
Other Rights and Preferences
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Board of Directors
Our board of directors is divided into three classes. At each annual meeting of stockholders, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified.
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Registration Rights
Certain holders of shares of our common stock, including certain holders of five percent of our capital stock and entities affiliated with certain of our directors, are entitled to certain rights with respect to registration of shares held by such persons or entities under the Securities Act. These shares are referred to as registrable securities. The holders of these registrable securities possess registration rights pursuant to the terms of an investors’ rights agreement and are described in additional detail below.
The registration of shares of our common stock pursuant to the exercise of the registration rights described below would enable the holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We are required to pay all registration expenses, other than underwriting discounts, selling commissions and stock transfer taxes of the shares registered pursuant to the demand, piggyback and Form S-3 registrations described below.
Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares the holders may include. The demand, piggyback and Form S-3 registration rights described below will expire upon the earliest to occur of (1) July 29, 2024 and (2) the consummation of a liquidation event.
Demand Registration Rights
The holders of the registrable securities are entitled to certain demand registration rights. Subject to the terms of the lockup agreements described under “Underwriters,” the holders of at least 50% of the registrable securities then outstanding may make a written request that we register all or a portion of their shares, subject to certain specified exceptions. Such request for registration must cover securities that have an aggregate offering price that exceeds $10,000,000. We will not be required to effect more than two registrations pursuant to these demand registration rights.
Piggyback Registration Rights
In connection with this offering, the holders of registrable securities were entitled to, and the necessary percentage of holders waived, their rights to notice of this offering and to include their shares of registrable securities in this offering. If we propose to register for offer and sale any of our securities under the Securities Act in another offering, either for our own account or for the account of other security holders, the holders of registrable securities will be entitled to certain “piggyback” registration rights allowing them to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, including a registration statement on Form S-3 as discussed below, other than with respect to a demand registration or a registration statement on Forms S-4 or S-8, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration.
Form S-3 Registration Rights
The holders of the registrable securities are entitled to certain Form S-3 registration rights. Holders of at least 10% of the registrable securities may request that we register for offer and sale their shares on Form S-3 if we are qualified to file a registration statement on Form S-3, subject to certain specified exceptions. Such request for registration on Form S-3 must cover securities the aggregate offering price of which exceeds $1,000,000. We will not be required to effect more than one registration on Form S-3 within any six-month period.
Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law
Delaware Anti-Takeover Law
We are subject to Section 203 of the DGCL, which generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time that such stockholder became an interested stockholder, unless:
• | prior to such time the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
• | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation |
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outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
• | at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock which is not owned by the interested stockholder. |
Section 203 defines a business combination to include:
• | any merger or consolidation involving the corporation and the interested stockholder; |
• | any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; |
• | subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
• | subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and |
• | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Provisions of our Restated Certificate and our Restated Bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our Restated Certificate and our Restated Bylaws:
• | permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control); |
• | provide that the authorized number of directors may be changed only by resolution of the board of directors; |
• | provide that the board of directors or any individual director may only be removed with cause and the affirmative vote of the holders of at least 66 2/3% of the voting power of all of our then-outstanding common stock; |
• | provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
• | divide our board of directors into three classes; |
• | require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent; |
• | provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice; |
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• | do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); |
• | provide that special meetings of our stockholders may be called only by the chairman of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; |
• | provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (iii) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of our certificate of incorporation or our bylaws; (v) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants; provided these provisions of our amended and restated certificate of incorporation and amended and restated bylaws will not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction; and |
• | provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision. |
The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, would require approval by the holders of at least 66-2/3% of our then-outstanding common stock.
The foregoing provisions may make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.
These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or management. As a consequence, these provisions also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts.
Exchange Listing
Our common stock is listed on The Nasdaq Global Market and trades under the symbol “CSTL.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Broadridge Corporate Issuer Solutions, Inc.
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SVB Leerink LLC and Robert W. Baird & Co. Incorporated are acting as representatives of each of the underwriters named below and as joint book-running managers for this offering. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock set forth opposite its name below.
Underwriters | | | Number of Shares |
SVB Leerink LLC | | | |
Robert W. Baird & Co. Incorporated | | | |
Canaccord Genuity LLC | | | |
BTIG, LLC | | | |
Total | | | 1,500,000 |
Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Commissions and Discounts
The representatives have advised us that the underwriters propose to initially offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. After the initial offering of the shares, the public offering price, concession or any other term of the offering may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their option to purchase additional shares of our common stock.
| | | | | Total | |||||
| | | Per Share | | | Without Option | | | With Option | |
Public offering price | | | $ | | | $ | | | $ |
Underwriting discounts and commissions paid by us | | | $ | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ | | | $ |
We estimate expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $475,000. We also have agreed to reimburse the underwriters for certain of their expenses in an amount up to $35,000.
Option to Purchase Additional Shares
We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to 225,000 additional shares at the public offering price, less the underwriting discount. If the underwriters exercise this option, each underwriter will be obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.
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No Sales of Similar Securities
We, our executive officers and our directors have agreed not to sell or transfer any common stock or securities convertible into or exchangeable or exercisable for common stock, for 90 days after the date of this prospectus without first obtaining the written consent of SVB Leerink LLC and Robert W. Baird & Co. Incorporated on behalf of the underwriters. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:
• | offer, pledge, sell or contract to sell any common stock; |
• | sell any option or contract to purchase any common stock; |
• | purchase any option or contract to sell any common stock; |
• | grant any option, right or warrant for the sale of any common stock; |
• | otherwise dispose of or transfer any common stock; |
• | exercise any right with respect to the registration of any common stock, or file or cause to be filed any registration statement in connection therewith; or |
• | enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any common stock, whether any such swap, agreement or transaction is to be settled by delivery of shares or other securities, in cash or otherwise. |
The lock-up provisions apply to common stock and to securities convertible into or exchangeable or exercisable for common stock. They also apply to common stock owned now or acquired later by the person executing the lock-up agreement or for which the person executing the lock-up agreement later acquires the power of disposition. Except for customary lock-up exceptions, including an exception allowing our directors and officers to make sales under preexisting 10b5-1 plans, there are no existing agreements between the underwriters and any of our stockholders who have executed a lock-up agreement providing consent to the sale of shares prior to the expiration of the lock-up period.
Nasdaq Global Market Listing
Our common stock is listed on the Nasdaq Global Market under the symbol “CSTL.”
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option described above. The underwriters may close out any covered short position by either exercising their option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the option granted to them. “Naked” short sales are sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the
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market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Distribution
In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.
Other Relationships
The underwriters and their affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. For instance, Silicon Valley Bank, a lender under our loan agreement, is an affiliate of SVB Leerink LLC, one of the underwriters in this offering.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
Notice to Prospective Investors in the European Economic Area and the United Kingdom
In relation to each Member State of the European Economic Area and the United Kingdom (each, a “Relevant State”), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
(a) | to any legal entity which is a qualified investor as defined under the Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation) subject to obtaining the prior consent of the underwriters for any such offer; or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of shares of common stock shall require us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
Each person in a Relevant State who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with us and the underwriters that it is a qualified investor within the meaning of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation.
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In the case of any shares being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in a Relevant State to qualified investors, in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.
We, the underwriters and each of our and the underwriters’ respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.
For the purposes of this provision, the expression “offer to the public” in relation to any shares of common stock in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe the shares of common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129, as amended.
References to the Prospectus Regulation include, in relation to the United Kingdom, the Prospectus Regulation as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000, as amended.
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.
Notice to Prospective Investors in Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Cooley LLP. The underwriters are being represented by Latham & Watkins LLP.
The financial statements of Castle Biosciences, Inc. as of December 31, 2019 and 2018, and for each of the years in the two-year period ended December 31, 2019, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.
We are subject to the information and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at 820 S. Friendswood Drive, Suite 201, Friendswood, Texas 77546, or calling us at (866) 788-9007. We also maintain a website at www.CastleBiosciences.com, at which you may access these materials free of charge after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus.
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The SEC allows us to “incorporate by reference” information from other documents that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus.
We incorporate by reference into this prospectus and the registration statement of which this prospectus forms a part the information or documents listed below that we have filed with the SEC:
• |
• | the information specifically incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2019 from our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 23, 2020; |
• |
• | our Current Reports on Form 8-K (other than information furnished rather than filed) filed with the SEC on January 9, 2020, March 5, 2020, March 10, 2020, April 1, 2020, April 15, 2020, May 28, 2020, June 2, 2020 and June 9, 2020. |
Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus modifies or supersedes the statement. Any statements so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
You can read our SEC filings, including the registration statement, over the Internet at the SEC's website at www.sec.gov. We will furnish without charge to you, on written or oral request, a copy of any or all of the documents incorporated by reference in this prospectus, including exhibits to these documents that have been incorporated by reference in this prospectus but not delivered with this prospectus. You should direct any requests for documents to 820 S. Friendswood Drive, Suite 201, Friendswood, Texas 77546; telephone (866) 788-9007.
You also may access these filings on our website at www.CastleBiosciences.com. We do not incorporate the information on our website into this prospectus and you should not consider any information on, or that can be accessed through, our website as part of this prospectus (other than those filings with the SEC that we specifically incorporate by reference into this prospectus).
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1,500,000 Shares
Common Stock
PROSPECTUS
Joint Book-Running Managers
SVB Leerink
Baird
Baird
Passive Book-Runner
Canaccord Genuity
Co-Manager
BTIG
You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of these securities.
The date of this prospectus is , 2020
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INFORMATION NOT REQUIRED IN PROSPECTUS
Unless otherwise indicated, all references to “Castle Biosciences,” “we,” “our,” “us,” the “Company” or similar terms refer to Castle Biosciences, Inc.
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses to be paid by us, other than underwriting discounts and commissions, in connection with this offering. All amounts shown are estimates except for the SEC registration fee and the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee.
SEC registration fee | | | $9,490 |
FINRA filing fee | | | 11,466 |
Printing and engraving expenses | | | 50,000 |
Legal fees and expenses | | | 250,000 |
Accounting fees and expenses | | | 100,000 |
Transfer agent and registrar fees and expenses | | | 4,500 |
Miscellaneous expenses | | | 49,544 |
Total | | | $475,000 |
Item 14. Indemnification of Directors and Officers.
We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who were, are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were, are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys’ fees) actually and reasonably incurred.
Our amended and restated certificate of incorporation and amended and restated bylaws, respectively, provide for the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
• | transaction from which the director derives an improper personal benefit; |
• | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
• | unlawful payment of dividends or redemption of shares; or |
• | breach of a director’s duty of loyalty to the corporation or its stockholders. |
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Our amended and restated certificate of incorporation includes such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to it of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by us.
Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
As permitted by the Delaware General Corporation Law, we have entered into indemnity agreements with each of our directors and executive officers, that require us to indemnify such persons against any and all costs and expenses (including attorneys’, witness or other professional fees) actually and reasonably incurred by such persons in connection with any action, suit or proceeding (including derivative actions), whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director or officer or is or was acting or serving as an officer, director, employee or agent of us or any of our affiliated enterprises. Under these agreements, we are not required to provide indemnification for certain matters, including:
• | indemnification beyond that permitted by the Delaware General Corporation Law; |
• | indemnification for any proceeding with respect to the unlawful payment of remuneration to the director or officer; |
• | indemnification for certain proceedings involving a final judgment that the director or officer is required to disgorge profits from the purchase or sale of our stock; |
• | indemnification for proceedings involving a final judgment that the director’s or officer’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct or a breach of his or her duty of loyalty, but only to the extent of such specific determination; |
• | indemnification for proceedings or claims brought by an officer or director against us or any of our directors, officers, employees or agents, except for claims to establish a right of indemnification or proceedings or claims approved by our board of directors or required by law; |
• | indemnification for settlements the director or officer enters into without our consent; or |
• | indemnification in violation of any undertaking required by the Securities Act of 1933, as amended, or the Securities Act, or in any registration statement filed by us. |
The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
We have an insurance policy in place that covers our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act, or otherwise.
We plan to enter into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.
Item 15. Recent sales of unregistered securities.
Set forth below is information regarding securities issued and options granted by us since January 1, 2017 that were not registered under the Securities Act. Also included is the consideration, if any, received by us, for such securities and options and information relating to the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
(1) | In March 2017, we issued warrants to purchase an aggregate of 64,432 shares of our Series F redeemable convertible preferred stock to each of Silicon Valley Bank, or SVB, and Oxford Finance LLC, or Oxford, in connection with the entry into a loan and security agreement with SVB and Oxford. In connection with the closing of our initial public offering on July 29, 2019, or the IPO, these warrants became exercisable for approximately 52,856 shares of common stock. |
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(2) | In January 2018, we sold and issued an aggregate of 940,605 shares of our Series F redeemable convertible preferred stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $5.5 million, and issued warrants, at a purchase price of $0.01 per warrant share, to purchase an aggregate of 67,233 shares of our Series F redeemable convertible preferred stock, for aggregate gross proceeds of approximately $672, each to accredited investors. At various dates prior to the closing of the IPO, certain of these warrants were exercised for an aggregate of 34,005 shares of Series F redeemable convertible preferred stock. In connection with the closing of the IPO, the shares converted into approximately 799,515 shares of common stock and the remaining warrants outstanding were net exercised for 27,207 shares of common stock. |
(3) | In May 2018, we sold and issued an aggregate of 783,248 shares of our Series F redeemable convertible preferred stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $4.6 million. In connection with the closing of the IPO, these shares converted into approximately 642,533 shares of common stock. |
(4) | In June 2018, we sold and issued an aggregate of 85,711 shares of our Series F redeemable convertible preferred stock at a purchase price of $5.8208 per share, for aggregate gross proceeds of approximately $0.5 million. In connection with the closing of the IPO, these shares converted into approximately 70,312 shares of common stock. |
(5) | In November 2018, we issued warrants to each of SVB and Oxford to purchase an aggregate of 21,478 shares of our Series F redeemable convertible preferred stock in connection with the entry into our current loan and security agreement with SVB and Oxford. In connection with the closing of the IPO, these warrants became exercisable for approximately 17,619 shares of common stock. |
(6) | In January 2019 and February 2019, we issued convertible promissory notes in an aggregate principal amount of approximately $11.8 million to investors. In connection with the closing of the IPO, the outstanding principal amount plus accrued interest under the promissory notes converted into 954,074 shares of common stock. |
(7) | In July 2019, we issued to SH Castle Biosciences, LLC a convertible promissory note in the principal amount of $10.0 million and a warrant to purchase 209,243 shares of common stock at an exercise price of approximately $0.001 per share. In connection with the closing of the IPO, the outstanding principal amount plus accrued interest under the promissory note converted into 707,032 shares of common stock, and the warrant remains outstanding. |
(8) | In November 2019, we issued an aggregate of 51,238 shares of our common stock to SVB Financial Group upon the net exercise of certain warrants to purchase an aggregate of 67,250 shares of common stock at a weighted-average exercise price of $6.77 per share. In accordance with the terms of the warrants, the net exercises were based on the fair market value of our common stock on the business day immediately prior to the date of delivery of the exercise notices, in each case $28.42 per share, and did not result in any cash proceeds to us. |
(9) | From January 1, 2017 through July 29, 2019, we granted stock options to purchase an aggregate of 1,383,367 shares of our common stock at a weighted-average exercise price of $4.61 per share, to certain of our employees, consultants and directors in connection with services provided to us by such persons. |
The offers, sales and issuances of the securities described in paragraphs (1) through (8) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) (or Regulation D promulgated thereunder) in that the issuance of securities to the accredited investors did not involve a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor under Rule 501 of Regulation D. No underwriters were involved in these transactions.
The offers, sales and issuances of the securities described in paragraph (9) were deemed to be exempt from registration under the Securities Act in reliance on either Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701 or Section 4(a)(2) in that the
II-3
issuance of securities to the accredited investors did not involve a public offering. The recipients of such securities were our employees, directors or bona fide consultants and received the securities under the Castle Biosciences, Inc. 2008 Stock Plan, the Castle Biosciences, Inc. 2018 Equity Incentive Plan and the Castle Biosciences, Inc. 2019 Equity Incentive Plan.
Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.
Item 16. Exhibits and financial statement schedules.
(a) | Exhibits. |
Exhibit Number | | | Description of document |
| | | Form of Underwriting Agreement. | |
| | | ||
| | | Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019. | |
| | | ||
| | | Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2019. | |
| | | ||
| | | Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Sixth Amended and Restated Investors’ Rights Agreement, dated July 12, 2019, by and among the Registrant and certain of its stockholders, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Form of warrant to purchase Series F redeemable convertible preferred stock issued to Oxford Finance LLC and Silicon Valley Bank on March 31, 2017, incorporated by reference to Exhibit 4.6 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Form of warrant to purchase Series F redeemable convertible preferred stock issued to Oxford Finance LLC and Silicon Valley Bank on November 30, 2018, incorporated by reference to Exhibit 4.7 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Warrant to purchase common stock issued to SH Castle Biosciences, LLC on July 12, 2019, incorporated by reference to Exhibit 4.9 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Opinion of Cooley LLP. | |
| | | ||
| | | Form of Indemnity Agreement by and between the Registrant and its directors and officers, incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Castle Biosciences, Inc. 2008 Stock Plan, incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | |
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Exhibit Number | | | Description of document |
| | | Forms of Stock Option Agreement, Exercise Notice and Investment Representation Statement under the 2008 Stock Plan, incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Castle Biosciences, Inc. 2018 Equity Incentive Plan, as amended, incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the 2018 Equity Incentive Plan, incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Castle Biosciences, Inc. 2019 Equity Incentive Plan, incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Forms of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the 2019 Equity Incentive Plan, incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Castle Biosciences, Inc. 2019 Employee Stock Purchase Plan, incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Amended and Restated Executive Employment Agreement, dated September 20, 2012, as amended, by and between the Registrant and Derek J. Maetzold, incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Offer Letter Agreement, dated March 2, 2016, by and between the Registrant and Bernhard Spiess, incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Offer Letter Agreement, dated November 9, 2017, by and between the Registrant and Frank Stokes, incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Standard Office Lease, dated as of October 5, 2015, by and between the Registrant and Merced Restart Phoenix Investors II, LLC, incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | First Amendment to Lease, dated December 4, 2018, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.15 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 10, 2020. | |
| | |
II-5
Exhibit Number | | | Description of document |
| | | Office Building Lease, dated as of March 11, 2015, by and between the Registrant and RMG Leasing (a/k/a Cedarwood Professional Building), as amended, incorporated by reference to Exhibit 10.15 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Standard Office Lease, dated December 16, 2019, by and between the Registrant and Alturas Siete, II, LLC, incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. | |
| | | ||
| | | Second Amendment to Standard Office Lease, dated December 16, 2019, by and between the Registrant and Alturas Siete I, LLC, incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. | |
| | | ||
| | | Commercial Lease, dated December 17, 2019, by and between the Registrant and Tannos Land Holding III, LLC, incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2019. | |
| | | ||
| | | Exclusive License Agreement, dated as of November 14, 2009, by and between the Registrant and The Washington University, incorporated by reference to Exhibit 10.17 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Non-Employee Director Compensation Policy, as amended effective April 1, 2020, incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2020. | |
| | | ||
| | | Loan and Security Agreement, dated November 30, 2018, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank, incorporated by reference to Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | First Amendment to Loan and Security Agreement, dated June 13, 2019, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank, incorporated by reference to Exhibit 10.19 of the Registrant’s Registration Statement on Form S-1 (File No. 333-232369), as amended, originally filed with the SEC on June 26, 2019. | |
| | | ||
| | | Waiver and Second Amendment to Loan and Security Agreement, dated February 28, 2020, to Loan and Security Agreement, dated November 30, 2018, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank, incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2020. | |
| | | ||
| | | Third Amendment to Loan and Security Agreement, dated March 4, 2020, to Loan and Security Agreement, dated November 30, 2018, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank, incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2020. | |
| | | ||
| | | Fourth Amendment to Loan and Security Agreement, dated May 10, 2020, to Loan and Security Agreement, dated November 30, 2018, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank. | |
| | | ||
| | | Consent of Independent Registered Public Accounting Firm, KPMG LLP. |
II-6
Exhibit Number | | | Description of document |
| | | Consent of Cooley LLP (included in Exhibit 5.1). | |
| | | ||
| | | Power of Attorney (included on signature page). |
+ | Indicates management contract or compensatory plan. |
# | Certain portions of this exhibit (indicated by “[***]”) have been omitted as we have determined (i) the omitted information is not material and (ii) the omitted information would likely cause harm to us if publicly disclosed. |
II-7
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(a) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(b) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-8
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Friendswood, State of Texas, on June 22, 2020.
| | | CASTLE BIOSCIENCES, INC. | ||||
| | | | | |||
| | | By: | | | /s/ Derek J. Maetzold | |
| | | | | Derek J. Maetzold President and Chief Executive Officer | ||
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Derek J. Maetzold and Frank Stokes, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | | | Title | | | Date |
| | | | | |||
/s/ Derek J. Maetzold | | | President, Chief Executive Officer and Member of the Board of Directors (Principal Executive Officer) | | | June 22, 2020 |
Derek J. Maetzold | | |||||
| | | | | |||
/s/ Frank Stokes | | | Chief Financial Officer (Principal Financial and Accounting Officer) | | | June 22, 2020 |
Frank Stokes | | |||||
| | | | | |||
/s/ Daniel M. Bradbury | | | Chairman of the Board of Directors | | | June 22, 2020 |
Daniel M. Bradbury | | | | | ||
| | | | | |||
/s/ Bonnie H. Anderson | | | Member of the Board of Directors | | | June 22, 2020 |
Bonnie H. Anderson | | | | | ||
| | | | | |||
/s/ Mara G. Aspinall | | | Member of the Board of Directors | | | June 22, 2020 |
Mara G. Aspinall | | | | | ||
| | | | | |||
/s/ G. Bradley Cole | | | Member of the Board of Directors | | | June 22, 2020 |
G. Bradley Cole | | | | |
II-9
Signature | | | Title | | | Date |
| | | | | |||
/s/ Joseph C. Cook III | | | Member of the Board of Directors | | | June 22, 2020 |
Joseph C. Cook III | | | | | ||
| | | | | |||
/s/ Miles D. Harrison | | | Member of the Board of Directors | | | June 22, 2020 |
Miles D. Harrison | | | | | ||
| | | | | |||
/s/ David Kabakoff, Ph.D. | | | Member of the Board of Directors | | | June 22, 2020 |
David Kabakoff, Ph.D. | | | | |
II-10
Exhibit 1.1
CASTLE BIOSCIENCES, INC.
(a Delaware corporation)
[ ● ] Shares of Common Stock
UNDERWRITING AGREEMENT
[ ● ], 2020
SVB Leerink LLC
Robert W. Baird & Co. Incorporated
as Representatives of the several Underwriters
c/o SVB Leerink LLC
1301 Avenue of the Americas, 12th Floor
New York, NY 10019
New York, NY 10019
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
777 East Wisconsin Avenue
Milwaukee, WI 53202
Ladies and Gentlemen:
Castle Biosciences, Inc., a Delaware corporation (the “Company”), confirms its agreement with SVB Leerink LLC (“SVB Leerink”), Robert W. Baird & Co. Incorporated (“Baird”)
and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for which SVB Leerink and
Baird are acting as representatives (in such capacity, the “Representatives”), with respect to (i) the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of
common stock, par value $0.001 per share, of the Company (“Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section
2(b) hereof to purchase all or any part of [ ● ] additional shares of Common Stock. The aforesaid [ ● ] shares of Common Stock (the “Initial
Securities”) to be purchased by the Underwriters and all or any part of the [ ● ] shares of Common Stock subject to the option
described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.”
The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Underwriting Agreement (this “Agreement”)
has been executed and delivered.
The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S‑1 (No. 333-[ ● ]), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “1933 Act”). Promptly after execution and
delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”)
and Rule 424(b) (“Rule 424(b)”) of the 1933 Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time such registration statement became effective but that is deemed to be
part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information.” Such registration statement, including the amendments thereto, the exhibits thereto and any
schedules thereto, and the documents incorporated by reference therein pursuant to Item 12 of Form S-1 under the 1933 Act, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.”
Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b)
Registration Statement. Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of
this Agreement, including the documents incorporated by reference therein pursuant to Item 12 of Form S-1 under the 1933 Act, is herein called a “preliminary prospectus.” The final prospectus, in the form first furnished to the
Underwriters for use in connection with the offering of the Securities, including the documents incorporated by reference therein pursuant to Item 12 of Form S-1 under the 1933 Act, is herein called the “Prospectus.” For purposes of this
Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).
As used in this Agreement:
“Applicable Time” means [ ● ] A.M/P.M., New York City time, on [ ● ], 2020 or such other time as agreed by the Company and the Representatives.
“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus, including
any documents incorporated therein by reference, that is distributed to investors prior to the Applicable Time and the information included on Schedule B‑1 hereto, all considered together.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), including without
limitation any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show for an offering
that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of
the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule
433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its
being specified in Schedule B‑2 hereto.
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the 1933 Act.
2
“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the 1933 Act.
All references in this Agreement to financial statements and schedules and other information which is “contained,” “included” or “stated” (or other references of like import) in the Registration
Statement, any preliminary prospectus or the Prospectus shall include all such financial statements and schedules and other information which is incorporated by reference in or otherwise deemed by 1933 Act Regulations to be a part of or included
in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be, prior to the execution and delivery of this Agreement; and all references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall include the filing of any document under the Securities Exchange Act of 1934, as amended (the “1934 Act”), which is incorporated by reference in or otherwise deemed by 1933 Act
Regulations to be a part of or included in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be, at or after the execution and delivery of this Agreement.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter
as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:
(i) Registration Statement and Prospectuses. Each of the Registration
Statement and any amendment thereto has become effective under the 1933 Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued by the Commission under the 1933 Act,
no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued by the Commission and no proceedings for any of those purposes have been instituted by the Commission or are pending or, to the Company’s
knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information.
Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations. Each preliminary prospectus, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, complied in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations. Each preliminary prospectus delivered to the Underwriters for use in connection with the offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
The Registration Statement, any preliminary prospectus and the Prospectus, and the filing of the Registration Statement, any preliminary prospectus and the Prospectus with the
Commission have been duly authorized by and on behalf of the Company, and the Registration Statement has been duly executed pursuant to such authorization.
The documents incorporated or deemed to be incorporated by reference in the Registration Statement, any preliminary prospectus and the Prospectus, when they became effective or
at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission under the 1934 Act (the “1934 Act
Regulations”).
3
(ii) Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery,
contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As of the Applicable
Time, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, nor (C) any individual Written Testing-the-Waters Communication, when
considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission
pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus, at the
time the Registration Statement became effective or when such documents incorporated by reference were filed with the Commission, as the case may be, when read together with the other information in the Registration Statement, the General
Disclosure Package or the Prospectus, as the case may be, did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not
misleading.
The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General
Disclosure Package or the Prospectus (or any amendment or supplement thereto, including any prospectus wrapper) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the
Representatives expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information in the first paragraph under the heading “Underwriting—Commissions and Discounts,” the information in the
first, second, third and fourth paragraphs under the heading “Underwriting—Price Stabilization, Short Positions and Penalty Bids” and the information under the heading “Underwriting—Electronic Distribution,” in each case contained in the
Prospectus (collectively, the “Underwriter Information”).
(iii) Incorporation of Documents by Reference. The Company meets the requirements to incorporate documents by reference in the Registration Statement pursuant
to General Instruction VII to Form S-1 under the 1933 Act and the 1933 Act Regulations.
(iv) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement
or the Prospectus, including any document incorporated by reference therein, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. Any Issuer Free Writing Prospectus that the Company is
required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the 1933 Act and the 1933 Act Regulations. Each Issuer Free Writing Prospectus that the
Company has filed, or is required to file, pursuant to Rule 433(d) under the 1933 Act or that was prepared by or behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations. Except for the Issuer Free Writing Prospectuses, if any, identified in Schedule B-2 hereto, and electronic road shows, if any, each furnished to the Representatives before first use, the Company has not
prepared, used or referred to, and will not, without the prior consent of the Representatives, prepare, use or refer to, any issuer free writing prospectus.
4
(v) Testing-the-Waters Materials. The Company (A) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the
consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are accredited investors within the meaning of Rule 501 under the 1933 Act and (B) has
not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The
Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule B-3 hereto.
(vi) Company Not Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter
that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and
is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(vii) Emerging Growth Company Status. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the
first date on which the Company engaged directly or through any individual or entity authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as
defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).
(viii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Registration Statement, the General
Disclosure Package and the Prospectus are independent public accountants as required by the 1933 Act, the 1933 Act Regulations, the 1934 Act, the 1934 Act Regulations and the Public Company Accounting Oversight Board (United States).
(ix) Financial Statements; Non-GAAP Financial Measures. The financial statements included or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectus, together with the related schedules and notes, comply as to form in all material respects with Regulation S-X under the 1933 Act and present fairly, in all material respects, the financial position of the
Company at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting
principles (“GAAP”) applied on a consistent basis throughout the periods involved, except in the case of unaudited interim financial statements, which are subject to normal year-end audit adjustments and exclude certain footnotes as
permitted by applicable rules of the Commission. The supporting schedules, if any, present fairly, in all material respects, in accordance with GAAP the information required to be stated therein. The selected financial data and the summary
financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the
audited financial statements included therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the
General Disclosure Package or the Prospectus under the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations. Any disclosures contained in the Registration Statement, the General Disclosure Package or the Prospectus, or
incorporated by reference therein, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the 1934 Act, and Item 10 of Regulation S-K, to the extent applicable.
The interactive data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly presents the information called for in all material respects and has
been prepared in accordance with the Commission’s rules and guidelines applicable thereto.
5
(x) Sarbanes-Oxley Act of 2002. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities
as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to
certifications.
(xi) No Material Adverse Change in Business. Except as otherwise stated therein, since the respective dates as of which information is given in the Registration
Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising
in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company, other than those in the ordinary course of business, which are material with respect to the Company, (C)
there have been no material liabilities or obligations, direct or contingent, entered into by the Company and (D) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.
(xii) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of
Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to be so qualified or to be in good standing would not result in a Material Adverse Effect.
(xiii) Subsidiaries. The Company does not own an interest in any corporation, partnership, limited liability company, joint venture, trust or other business
entity.
(xiv) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the General
Disclosure Package and the Prospectus in the column entitled “Actual” under the caption “Capitalization” (except for subsequent issuances, if any, (A) pursuant to this Agreement, (B) pursuant to reservations, agreements or employee benefit plans
referred to in the Registration Statement, the General Disclosure Package and the Prospectus or (C) pursuant to the conversion of convertible securities or exercise of options referred to in the Registration Statement, the General Disclosure
Package and the Prospectus). The outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and non‑assessable. None of the outstanding shares of capital stock of the Company were issued in
violation of the preemptive or other similar rights of any securityholder of the Company.
6
(xv) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(xvi) Authorization and Description of Securities. The Securities to be purchased by the Underwriters from the Company have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non‑assessable; and the
issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company. The Common Stock conforms, in all material respects, to all statements relating thereto contained in the Registration
Statement, the General Disclosure Package and the Prospectus and such description conforms to the rights set forth in the instruments defining the same. No holder of Securities will be subject to personal liability by reason of being such a
holder.
(xvii) Registration Rights. There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the
Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this Agreement, other than those rights that have been disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus and have been waived.
(xviii) Absence of Violations, Defaults and Conflicts. The Company is not (A) in violation of its charter, by-laws or similar organizational document, (B) in default
in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company is a
party or by which it is bound or to which any of the properties or assets of the Company or any Subsidiary is subject (collectively, “Agreements and Instruments”), except for any such default that would not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other
authority, body or agency having jurisdiction over the Company or any of its properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, result in a Material
Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder have been duly authorized by all
necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or
encumbrances that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or similar organizational document of
the Company or any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.
7
(xix) Listing. The Securities have been approved for listing on the NASDAQ Global Market, subject to notice of issuance.
(xx) Absence of Labor Dispute. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, and the Company is not
aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers, customers or contractors, which, in either case, would reasonably be expected to result in a Material Adverse Effect.
(xxi) Absence of Proceedings. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit,
proceeding, inquiry or investigation before or brought by any Governmental Entity (including, without limitation, any action, suit proceeding, inquiry or investigation before or brought by the U.S. Food and Drug Administration (the “FDA”))
now pending or, to the knowledge of the Company, threatened, against or affecting the Company, which would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect its
properties or assets or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder; and the aggregate of all pending legal or governmental proceedings to which the Company is
a party or of which any of its properties or assets is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would
not reasonably be expected to result in a Material Adverse Effect.
(xxii) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package
or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.
(xxiii) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any
Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by
this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the NASDAQ Stock Market LLC, state securities laws or the rules of the Financial Industry Regulatory
Authority, Inc. (“FINRA”).
(xxiv) Possession of Licenses and Permits. The Company possesses such material permits, licenses, waivers, certificates, accreditations, clearances, registrations,
exemptions, provider or supplier numbers, approvals, consents and other authorizations and supplements or amendments thereto (collectively, “Governmental Licenses”) required by the appropriate Governmental Entities necessary to conduct the
business now operated by it (including, without limitation, all Governmental Licenses required by the FDA, the U.S. Department of Health and Human Services or any other federal, state, local or foreign agencies or bodies engaged in the regulation
of clinical or preclinical studies, pharmaceuticals, biologics, biohazardous substances, medical devices, laboratory tests or other activities related to the business now operated by the Company). The Company is in compliance with the terms and
conditions of all Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company has fulfilled and performed all of its material
obligations with respect to the Governmental Licenses and, to the knowledge of the Company, no event has occurred which allows, or after notice or lapse of time would reasonably be expected to allow, revocation or termination thereof or result in
any other material impairment of the rights of the Company as a holder of any permit. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company has not received any notice of proceedings relating to the revocation,
suspension or material modification of any Governmental Licenses which, singly or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.
8
(xxv) Title to Property. The Company has good and marketable title to all real property owned by it (other than Intellectual Property (as defined below) which is
addressed by Section 1(a)(xxv)) and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are
described in the Registration Statement, the General Disclosure Package and the Prospectus or (B) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and all of the leases and subleases material to the business of the Company, and under which the Company holds properties described in the Registration Statement, the General Disclosure Package or the
Prospectus, are in full force and effect, and the Company does not have any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company to the continued possession of the leased or subleased premises under any such lease or sublease.
(xxvi) Title to Intellectual Property. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company owns or has
valid, binding and enforceable licenses or other rights under the patents, patent applications, licenses, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, the “Intellectual Property”) reasonably necessary for, or used in the conduct, or the proposed conduct, of the business of the
Company in the manner described in the Registration Statement, the General Disclosure Package and the Prospectus; the patents, trademarks, and copyrights, if any, included within the Intellectual Property owned or licensed by the Company (the “Company
Intellectual Property”) are valid, enforceable, and subsisting; other than as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, (A) the Company is not obligated to pay a material royalty, grant a
license to, or provide other material consideration to any third party in connection with the Company Intellectual Property, (B) the Company has not received any notice of any claim of infringement, misappropriation or conflict with any asserted
rights of others with respect to any of the Company’s product candidates, services, processes or Company Intellectual Property, other than those that, singly or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect, (C) to the knowledge of the Company, neither the sale nor use of any of the discoveries, inventions, product candidates, services or processes of the Company referred to in the Registration Statement, the General Disclosure Package or the
Prospectus do or will, to the knowledge of the Company, infringe, misappropriate or violate any right or valid patent claim of any third party, (D) the unpatented technology employed by the Company has been kept confidential and has not been
obtained or used by the Company in material violation of any contractual obligation binding on the Company or, to the Company’s knowledge, upon any of its officers, directors or employees or otherwise in violation of the rights of any persons,
(E) to the knowledge of the Company, no third party has any ownership right in or to any Intellectual Property that is claimed to be owned by the Company, (F) to the Company’s knowledge, there is no material infringement by third parties of any
Company Intellectual Property, (G) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s rights in or to any Company Intellectual Property, and (H) there is no pending
or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any Company Intellectual Property. The Company is in compliance, in all material respects, with the terms of each
agreement pursuant to which Intellectual Property has been licensed to the Company, and all such agreements are in full force and effect.
9
(xxvii) Patents and Patent Applications. To the Company’s knowledge, all patents and patent applications owned by the Company and filed with the U.S. Patent and
Trademark Office (the “USPTO”) or any foreign or international patent authority (the “Company Patent Rights”) and all patents and patent applications in-licensed by the Company and filed with the USPTO or any foreign or
international patent authority (the “In-licensed Patent Rights”) have been duly and properly filed and maintained in all material respects; the Company believes it and the parties prosecuting such patent applications have complied with
their duty of candor and disclosure to the USPTO for the Company Patent Rights and the In-licensed Patent Rights. The Company is not aware of any facts required to be disclosed in the USPTO or any foreign or international patent authority that
were not disclosed to the USPTO or any foreign or international patent authority and which would preclude the grant of a patent in connection with any such application or would reasonably be expected to form the basis of a finding of invalidity
with respect to any patents that have issued with respect to such applications.
(xxviii) Tests and Clinical Trials. The studies, tests and clinical trials conducted by or, to the Company’s knowledge, on behalf of the Company were and, if still
ongoing, are being conducted in all material respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and all Authorizations and Applicable Laws; the descriptions of the
results of such studies, tests and trials contained in the Registration Statement, the General Disclosure Package and the Prospectus are, to the Company’s knowledge, accurate and complete in all material respects and fairly present the data
derived from such studies, tests and trials; except to the extent disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company is not aware of any studies, tests or trials, the results of which the
Company believes reasonably call into question the study, test, or trial results described or referred to in the Registration Statement, the General Disclosure Package and the Prospectus; and, except to the extent disclosed in the Registration
Statement, the General Disclosure Package or the Prospectus, the Company has not received any notices or correspondence from any Governmental Entity requiring the termination or suspension of any studies, tests or clinical trials conducted by or
on behalf of the Company.
(xxix) Compliance with Health Care Laws. The Company has operated and currently is in material compliance with all applicable health care laws, rules and
regulations, including, without limitation, (i) the Federal, Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.); (ii) all applicable federal, state, local and all applicable foreign health care related fraud and abuse laws, including, without
limitation, the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark Law (42 U.S.C. Section 1395nn), the U.S. Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the
criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to healthcare fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and 287, the healthcare fraud criminal provisions under the U.S. Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) (42 U.S.C. Section 1320d et seq.), the exclusion laws (42 U.S.C. § 1320a-7), and the civil monetary penalties law (42 U.S.C. § 1320a-7a); (iii) HIPAA, as amended by the Health
Information Technology for Economic Clinical Health Act (42 U.S.C. Section 17921 et seq.); (iv) all applicable federal, state, local and foreign licensure, quality, safety and accreditation requirements, clinical laboratory licensing, permitting
and registration laws, including, without limitation, the Clinical Laboratory Improvement Amendments of 1988 (42 U.S.C. Section 263a et seq.); (v) the regulations promulgated pursuant to such laws; and (vi) any other similar local, state,
federal, or foreign laws (collectively, the “Health Care Laws”). Neither the Company, nor to the Company’s knowledge, any of its officers, directors, employees or agents have engaged in activities which are, as applicable, cause for false
claims liability, civil penalties, or mandatory or permissive exclusion from Medicare, Medicaid, or any other state or federal healthcare program (collectively, the “Programs”). The Company has not received written notice or other
correspondence of any claim, action, suit, audit, survey, proceeding, hearing, enforcement, investigation, arbitration or other action (“Action”) from any court or arbitrator or governmental or regulatory authority or third party alleging
that any product operation or activity is in violation of any Health Care Laws, and, to the Company’s knowledge, no such Action is threatened. The Company is not a party to and do not have any ongoing reporting obligations pursuant to any
corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, plan of correction or similar agreement imposed by any governmental or regulatory authority. Additionally, neither the
Company, any of its employees, officers or directors, nor to the Company’s knowledge its agents has been excluded, suspended or debarred from, or is otherwise ineligible for participation in any U.S. state or federal health care program or human
clinical research or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.
10
(xxx) Participation in Third-Party Payor Programs. The Company meets all Program requirements and conditions of participation and is a party to valid participation
or other agreements required for payment by such Programs and other third-party payor program agreements (each, a “Third-Party Payor Program Agreement”). There are no material suspensions, offsets or recoupments of any Program payments or
payments pursuant to Third-Party Payor Program Agreements being sought, requested or claimed, or to the Company’s knowledge, threatened against the Company. As of the date of this Agreement, the Company has not received any written notice of
denial of material payment, recoupment, or overpayment from any Program or other Third-Party Payor Program Agreement in excess of $500,000. There is no Action pending or received or, to the Company’s knowledge, threatened, against the Company
which relates in any way to a violation of any legal requirement pertaining to the Programs or which could result in the imposition of material penalties, termination or the exclusion of Company from participation in any Programs.
(xxxi) Privacy and Security Compliance. The Company has complied, and is presently in compliance with their privacy
policies and other legal and contractual obligations regarding the collection, use, transfer, storage, protection, disposal and disclosure by the Company of personally identifiable information and/or any other information collected from or
provided by third parties, and the Company is currently taking or has taken commercially reasonable actions to prepare to comply with the California Consumer Privacy Act of 2018 by January 1, 2020 (collectively, the “Data Privacy and Security
Requirements”). Neither the Company nor any Subsidiary: (i) has received written notice of any actual or potential liability under or relating to, or actual or potential violation of, any of the Data Privacy and Security Requirements, and
has no knowledge of any event or condition that would reasonably be expected to result in any such notice and, to the Company’s knowledge, no such notices are threatened; (ii) is currently conducting or paying for, in whole or in part, any
material investigation, remediation, or other corrective action pursuant to any Data Privacy and Security Requirement; or (iii) is a party to any order, decree, or agreement that imposes any obligation or liability under any Data Privacy and
Security Requirement. The Company has taken commercially reasonable steps to protect the information technology systems and data used in connection with the operation of each of the Company. The Company has used commercially reasonable efforts
to establish, and has established, commercially reasonable disaster recovery and security plans, procedures and facilities for each of their businesses, including, without limitation, for the information technology systems and data held or used
by or on behalf of or for the Company. The Company has not experienced or been notified of a security breach or other compromise of, or relating to, any such information technology system or data requiring notice to any third party under
applicable state or federal law.
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(xxxii) Environmental Laws. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus or would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, (A) neither the Company nor any Subsidiary is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common
law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with their requirements, (C) there
are no pending or, to the knowledge of the Company threatened, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any
Environmental Law against the Company or any Subsidiary and (D) there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private
party or Governmental Entity, against or affecting the Company or any Subsidiary relating to Hazardous Materials or any Environmental Laws.
(xxxiii) Accounting Controls and Disclosure Controls. The Company maintains effective internal control over financial reporting (as defined under Rule 13‑a15 and
15d‑15 under the rules and regulations of the Commission under the 1934 Act Regulations) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s
general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance
with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (E) the interactive
data in eXtensible Business Reporting Language incorporated by reference in the Registration Statement, the General Disclosure Package and the Prospectus fairly presents the information called for in all material respects and is prepared in
accordance with the Commission’s rules and guidelines applicable thereto. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there
has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially adversely affected, or is
reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.
The Company maintains an effective system of disclosure controls and procedures (as defined in Rule 13a‑15 and Rule 15d‑15 under the 1934 Act Regulations) that are designed to ensure that
information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is
accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate, to allow timely decisions regarding disclosure.
12
(xxxiv) [Reserved].
(xxxv) Payment of Taxes. All United States federal income tax returns of the Company required by law to be filed have been filed and all taxes shown by such returns
or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided in conformity with GAAP. The United States
federal income tax returns of the Company through the fiscal year ended December 31, 2018 have been settled and no assessment in connection therewith has been made against the Company. The Company has filed all other material tax returns that
are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not reasonably be expected to result in a Material Adverse Effect, and have paid all taxes
due pursuant to such returns or pursuant to any assessment received by the Company, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company. The charges, accruals
and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are, in conformity with GAAP, adequate to meet any assessments or re-assessments for additional income tax for
any years not finally determined, except to the extent of any inadequacy that would not reasonably be expected to result in a Material Adverse Effect.
(xxxvi) Insurance. The Company carries or is entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such
risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (A) to renew its
existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a
Material Adverse Effect. The Company has not been denied any insurance coverage which it has sought or for which it has applied.
(xxxvii) Investment Company Act. The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).
(xxxviii) Absence of Manipulation. Neither the Company nor, to the Company’s knowledge, any affiliate of the Company has taken, nor will the Company or any affiliate
take, directly or indirectly, any action which is designed, or would reasonably be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or
resale of the Securities or to result in a violation of Regulation M under the 1934 Act.
(xxxix) Foreign Corrupt Practices Act. None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the
“FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office,
in contravention of the FCPA and the Company has and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and
which are reasonably expected to continue to ensure, continued compliance therewith.
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(xl) Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company, threatened.
(xli) OFAC. None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company is an
individual or entity (“Person”) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets
Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that
is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partners or other Person,
to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person
participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(xlii) Lending Relationship. Except as disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company (i) does not have any material lending or other relationship with any banking or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Securities to repay any
outstanding debt owed to any affiliate of any Underwriter.
(xliii) Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the
Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.
(xliv) Maintenance of Rating. The Company has no debt securities or preferred stock that is rated by any “nationally recognized statistical rating organization” (as
that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act).
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(xlv) Privacy and Data Protection. The Company has operated their business in a manner compliant in all material respects with all United States federal, state,
local and non-United States privacy, data security and data protection laws and regulations applicable to the Company’s collection, use, transfer, protection, disposal, disclosure, handling, storage and analysis of personal data, including,
HIPAA, HITECH, the FTC Act, the General Data Protection Regulation (EU) 2016/679 (“GDPR”) and all applicable national laws implementing or supplementing the GDPR and all related national laws, regulations and secondary legislation. The
Company has been and is in compliance in all material respects with internal policies and procedures designed to ensure the integrity and security of the data collected, handled or stored in connection with its business; the Company has been and
is in compliance in all material respects with internal policies and procedures designed to ensure compliance with the Health Care Laws that govern privacy and data security and take, and have taken reasonably appropriate steps designed to assure
compliance with such policies and procedures. The Company has taken reasonable steps to maintain the confidentiality of its personally identifiable information, protected health information, personal data, consumer information and other
confidential information of the Company and any third parties in its possession (“Sensitive Company Data”). The tangible or digital information technology systems (including computers, screens, servers, workstations, routers, hubs,
switches, networks, data communications lines, technical data and hardware), software and telecommunications systems used or held for use by the Company (the “Company IT Assets”) are adequate and operational for, in accordance with their
documentation and functional specifications, the business of the Company as now operated and as currently proposed to be conducted as described in the Registration Statement, the General Disclosure Package and the Prospectus. The Company has
used reasonable efforts to establish, and have established, commercially reasonable disaster recovery and security plans, procedures and facilities for the business consistent with industry standards and practices in all material respects,
including, without limitation, for the Company IT Assets and data held or used by or for the Company. The Company has not suffered or incurred any security breaches, compromises or incidents with respect to any Company IT Asset or Sensitive
Company Data and have not been notified of and have no knowledge of any event or condition that would reasonably be expected to result in any security breaches, compromises or incidents, except where such breaches, compromises or incidents would
not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect; and there has been no unauthorized or illegal use of or access to any Company IT Asset or Sensitive Company Data by any unauthorized third party. The
Company has not been required to notify any individual of any information security breach, compromise or incident involving Sensitive Company Data.
(xlvi) No Broker Fees. Except as disclosed in the General Disclosure Package, there are no contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the offering of the Securities contemplated hereby.
(xlvii) Cybersecurity. (A) There has been no material security breach or incident, unauthorized access or disclosure, or other compromise of or relating to the
Company or its subsidiaries information technology and computer systems, networks, hardware, software, data and databases (including the data and information of their respective customers, employees, suppliers, vendors and any third party data
maintained, processed or stored by the Company and its subsidiaries, and any such data processed or stored by third parties on behalf of the Company and its subsidiaries), equipment or technology (collectively, “IT Systems and Data”); (B)
neither the Company nor its subsidiaries have been notified of, and each of them have no knowledge of any event or condition that could result in, any material security breach or incident, unauthorized access or disclosure or other compromise to
their IT Systems and Data; and (C) the Company and its subsidiaries have implemented appropriate controls, policies, procedures, and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of
their IT Systems and Data reasonably consistent with industry standards and practices, or as required by applicable regulatory standards. The Company and its subsidiaries are presently in material compliance with all applicable laws or statutes
and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection
of such IT Systems and Data from unauthorized use, access, misappropriation or modification.
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(b) Officer’s Certificates. Any certificate signed by any officer of the Company delivered to the
Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to
the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A,
that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.
(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [ ˜ ] shares of
Common Stock, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The
option hereby granted may be exercised for 30 days after the date hereof and may be exercised in whole or in part at any time and from time to time upon notice by the Representatives to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the
Representatives, but any Date of Delivery after the Closing Time shall not be later than seven full business days nor earlier than two full business days after the exercise of said option, nor in any event prior to the Closing Time. If the
option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representatives in their sole discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of certificates or security entitlements for,
the Initial Securities shall be made at the offices of Latham & Watkins LLP, or at such other place as shall be agreed upon by the Representatives and the Company, at 10:00 A.M. (New York City time) on the second (third, if the pricing occurs
after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed
upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”). Delivery of the Initial Securities at the Closing Time shall be made through the facilities of The Depository
Trust Company unless the Representatives shall otherwise instruct.
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In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates or security entitlements for,
such Option Securities shall be made at the above‑mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the
Company. Delivery of the Option Securities on each such Date of Delivery shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.
Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representatives for the respective
accounts of the Underwriters of certificates or security entitlements for the Securities to be purchased by them (which delivery shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise
instruct). It is understood that each Underwriter has authorized the Representatives, for their accounts, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any,
which it has agreed to purchase. Each of SVB Leerink and Baird, individually and not as representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations
hereunder.
SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b),
will comply with the requirements of Rule 430A, and will notify the Representatives as soon as practicable, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any
amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the
Prospectus, including any document incorporated by reference therein, or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective
amendment or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening
of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act
in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as
it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
(b) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act
Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus. If at any time when a prospectus relating to
the Securities is (or, but for the exception afforded by Rule 172 of the 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the General Disclosure Package or the Prospectus in order that the General
Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or
the 1933 Act Regulations, the Company will promptly (A) give the Representatives notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the
General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the
Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall reasonably object. The Company will furnish to the
Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representatives notice of any filings made pursuant to the 1934 Act or the 1934 Act Regulations within 48
hours prior to the Applicable Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents a
reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.
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(c) Delivery of Registration Statements. Upon request, the Company will furnish or will deliver to the
Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents
incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as
originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S‑T.
(d) Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies
of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the
period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by Regulation S‑T.
(e) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the Underwriters, to
qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may reasonably designate and to maintain such qualifications in effect so long
as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
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(f) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order
to make generally available to its securityholders as soon as practicable an earning statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(g) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in
all material respects in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under the heading “Use of Proceeds.”
(h) Listing. The Company will use its best efforts to effect and maintain the listing of the Securities on
the Nasdaq Global Market.
(i) Restriction on Sale of Securities. During a period of 90 days from the date of the Prospectus, the
Company will not, without the prior written consent of the Representatives, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file or confidentially submit any registration statement under the
1933 Act with respect to any of the foregoing, (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any
such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any such swap, agreement or other
transaction described in clauses (i) and (ii). The foregoing sentence shall not apply to (A) the Securities to be sold hereunder; (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of
a convertible security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to
existing employee benefit plans of the Company referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (D) any shares of Common Stock issued pursuant to any existing non-employee director stock plan or
dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus; or (E) the filing by the Company of any registration statement on Form S-8 or a successor form thereto.
(j) Reporting Requirements. The Company, during the period when a Prospectus relating to the Securities is
(or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and
1934 Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Securities as may be required under Rule 463 under the 1933 Act.
(k) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent
of the Representatives, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by
the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show that is
a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed
consented to, by the Representatives as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the
Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted
or would conflict with the information contained in the Registration Statement which has not been superseded or modified, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted
or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly
amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
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(l) Testing-the-Waters Materials. If at any time following the distribution of any Written
Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to
state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or
supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(m) Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company
ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Securities within the meaning of the 1933 Act and (ii) completion of the 90-day restricted period referred to in Section 3(i).
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and
delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by
the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable
upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(e) hereof, including filing fees and up to $15,000 of the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of a “Blue Sky Survey” and any
supplement thereto, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of
the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged by the Company in connection with the road show presentations, travel and lodging
expenses of the representatives and officers of the Company and any such consultants (it being understood and agreed that the Underwriters will pay all of the travel, lodging and other expenses of the Underwriters or any of their employees or
representatives incurred by them in connection with the “road show” and the Underwriters will pay 50% of the costs of any aircraft or other transportation chartered in connection with the “road show,” the other 50% of which will be paid by the
Company), (viii) the filing fees incident to, and up to $35,000 of the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA of the terms of the sale of the Securities, (ix) the fees and expenses
incurred in connection with the listing of the Securities on the Nasdaq Global Market, and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability)
associated with the reforming of any contracts for sale of the Securities made by the Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii).
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(b) Termination of Agreement. If this Agreement is terminated by the Representatives in accordance with the
provisions of Section 5, Section 9(a)(i), Section 9(a)(iii) or Section 10 hereof, the Company shall reimburse the Underwriters for all of their reasonably documented out‑of‑pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters; provided however, that if this Agreement is terminated by the Representatives pursuant to Section 10, the Company shall have no obligation to reimburse any out of pocket
expense of the Underwriters that have failed to purchase the Securities that they have agreed to purchase hereunder.
SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained herein or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including
any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto shall have been issued under the 1933 Act, no
order preventing or suspending the use of any preliminary prospectus or the Prospectus shall have been issued and no proceedings for any of those purposes shall have been instituted or be pending or, to the Company’s knowledge, contemplated; and
the Company shall have complied with each request (if any) from the Commission for additional information to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the Rule 430A Information shall have been filed with
the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in
accordance with the requirements of Rule 430A.
(b) Opinion of Counsel for Company. At the Closing Time, the Representatives shall have received the opinion
and the negative assurance letter, each dated the Closing Time, of Cooley LLP, counsel for the Company, together with the opinion of McDonnell Boehnen Hulbert & Berghoff LLP, special counsel for the Company with respect to intellectual
property matters, each in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of each such letter for each of the other Underwriters to the effect set forth in Exhibits A-1, and A-2
hereto and to such further effect as counsel to the Underwriters may reasonably request.
(c) Opinion of Counsel for Underwriters. At the Closing Time, the Representatives shall have received the
opinion, and negative assurance letter, each dated the Closing Time, of Latham & Watkins LLP, counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters in form and substance
satisfactory to the Representatives. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the General Corporation Law of the State of Delaware and the
federal securities laws of the United States, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers and other representatives of the Company and certificates of public officials.
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(d) Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof or since
the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any Material Adverse Effect, whether or not arising in the ordinary course of business, and the Representatives
shall have received a certificate of the principal executive officer of the Company and of the principal financial officer of the Company, dated the Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the
representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement under the 1933 Act has been issued, no order preventing or suspending the use
of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated.
(e) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representatives shall
have received from KPMG LLP a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of
the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.
(f) Bring-down Comfort Letter. At the Closing Time, the Representatives shall have received from KPMG LLP a
letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business
days prior to the Closing Time.
(g) Approval of Listing. At the Closing Time, the Securities shall have been approved for listing on the
Nasdaq Global Market, subject only to official notice of issuance.
(h) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and
reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.
(i) Lock-up Agreements. At the date of this Agreement, the Representatives shall have received an agreement
substantially in the form of Exhibit B hereto signed by all of the Company’s directors, officers and securityholders.
(j) Chief Financial Officer’s Certificate. On the date of this Agreement and at the Closing Time, the
Representatives shall have received from the Company a certificate of its principal financial officer with respect to certain financial data contained in the General Disclosure Package and the Prospectus, which certificate shall be substantially
in the form attached hereto as Exhibit C.
(k) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company hereunder shall be true
and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:
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(i) Officers’ Certificate. A certificate, dated such Date of Delivery, of the principal executive officer of the Company and of the principal financial officer
of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. If requested by the Representatives, the opinion, and negative assurance letter, of Cooley LLP, counsel for the Company,
together with the opinion of McDonnell Boehnen Hulbert & Berghoff LLP, special counsel for the Company with respect to intellectual property matters, each in form and substance satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinions and negative assurance letter required by Section 5(b) hereof.
(v) Opinion of Counsel for Underwriters. If requested by the Representatives, the opinion, and negative assurance letter, of Latham & Watkins LLP counsel
for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion and negative assurance letter required by Section 5(c) hereof.
(vi) Bring-down Comfort Letter. If requested by the Representatives, a letter from KPMG LLP, in form and substance satisfactory to the Representatives and dated
such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to subsection (f) of this Section, except that the “specified date” in the letter furnished pursuant to this paragraph
shall be a date not more than three business days prior to such Date of Delivery.
(vii) [Chief Financial Officer’s Certificate. A certificate, dated such Date of Delivery, of the principal financial officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(j) hereof remains true and correct as of such Date of Delivery.]
(l) Additional Documents. At the Closing Time and at each Date of Delivery (if any), counsel for the
Underwriters shall have been furnished with such other documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall
be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters.
(m) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant
Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 4, 6, 7, 8, 14, 15 and 16 shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter,
its affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
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(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters
Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing
of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary
prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package, the Prospectus (or any amendment or supplement thereto) or in any Marketing Materials of a material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;
(iii) against any and all expense whatsoever, as incurred (including the reasonable fees and disbursements of counsel chosen by the Representatives), reasonably
incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or
omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the
Underwriter Information.
(b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify
and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with
the Underwriter Information.
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(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties
indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be
selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also
be counsel to the indemnified party. In no event shall the indemnifying parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount
received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.
The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
25
The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of
the underwriting discounts and commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s
Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several
in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any
person controlling any Underwriter, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.
SECTION 9. Termination of Agreement.
(a) Termination. The Representatives may terminate this Agreement, by notice to the Company, at any
time at or prior to the Closing Time (i) if there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement,
the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course
of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in U.S. or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or
inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially
limited by the Commission or the Nasdaq Global Market, or (iv) if trading generally on the NYSE MKT or the New York Stock Exchange or in the Nasdaq Global Market has been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.
26
(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be
without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 4, 6, 7, 8, 14, 15 and 16 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the
Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non‑defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if,
however, the Representatives shall not have completed such arrangements within such 24‑hour period, then:
(i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non‑defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non‑defaulting Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of
any non‑defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a
termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representatives or (ii) the Company shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or
arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed
or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to SVB Leerink at 1301 Avenue of the Americas, 12th
Floor, New York, New York 10019, attention of Stuart R. Nayman and to Baird at 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, attention of Matt Deering.
27
SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities
pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the
several Underwriters, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company, or
its stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading
thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations
expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not
provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.
SECTION 13. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and
their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. Waiver of Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders
and affiliates), and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
SECTION 15. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.
SECTION 16. Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the
City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of
any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and
irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
28
SECTION 17. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW
YORK CITY TIME.
SECTION 18. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not
affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made
such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
SECTION 19. Recognition of the U.S. Special Resolution Regimes. (a) In the event that any Underwriter that is a Covered Entity becomes subject
to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective
under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United State.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default
Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed
by the laws of the United States or a state of the United States.
For purposes of this Section 19, a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. §
1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is
defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has
the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal
Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
SECTION 20. Counterparts. This Agreement may be executed in any number of counterparts (which may include counterparts delivered by any
standard form of telecommunication), each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement.
SECTION 21. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
SECTION 22. Entire Agreement. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company
and the Underwriters, or any of them, with respect to the subject matter hereof.
[SIGNATURE PAGES FOLLOW]
29
If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the Underwriters and the Company in accordance with its terms.
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Very truly yours,
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CASTLE BIOSCIENCES, INC.
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By:
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Name: Derek J. Maetzold
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Title: President and Chief Executive Officer
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CONFIRMED AND ACCEPTED
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As of the date first above written:
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SVB LEERINK LLC
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By:
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Name:
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Title:
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ROBERT W. BAIRD & CO. INCORPORATED
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By:
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| Name: |
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Title:
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For themselves and as Representatives of the other Underwriters named in Schedule A hereto.
[Signature Page to Underwriting Agreement]
SCHEDULE A
The public offering price per share for the Securities shall be $[ ● ].
The purchase price per share for the Securities to be paid by the several Underwriters shall be $[ ● ], being an amount equal to the public offering price set forth above less $[ ● ] per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on
the Initial Securities but not payable on the Option Securities.
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Name of Underwriter
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Number of
Initial Securities
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SVB Leerink LLC
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[ ● ]
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Robert W. Baird & Co. Incorporated
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[ ● ]
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Canaccord Genuity LLC
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[ ● ]
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BTIG, LLC
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[ ● ]
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Total
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[ ● ]
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SCHEDULE B-1
Pricing Terms
1. The Company is selling [ ● ] shares of Common Stock.
2. The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional [ ● ] shares of Common Stock.
3. The initial public offering price per share for the Securities shall be $[ ● ].
SCHEDULE B-2
Free Writing Prospectuses
[None.]
SCHEDULE B-3
List of Written Testing-the-Waters Communications
| • |
None.
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Exhibit B
FORM OF LOCK-UP AGREEMENT
____________, 2020
SVB Leerink LLC
Robert W. Baird & Co. Incorporated
as Representatives of the several Underwriters
c/o SVB Leerink LLC
1301 Avenue of the Americas, 12th Floor
New York, NY 10019
c/o Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Re: Proposed Public Offering by Castle Biosciences, Inc.
Ladies and Gentlemen:
The undersigned, a stockholder, officer and/or director of Castle Biosciences, Inc., a Delaware corporation (the “Company”), understands that SVB Leerink LLC (“SVB Leerink”) and
Robert W. Baird & Co. Incorporated (together with SVB Leerink, the “Representatives”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company and certain selling stockholders to be
named in the Underwriting Agreement (each, a “Selling Stockholder”) providing for the public offering (the “Public Offering”) of shares (the “Securities”) of the Company’s common stock, par value $0.001 per share (the “Common
Stock”). In recognition of the benefit that such an offering will confer upon the Company, the Selling Stockholders and the undersigned as a stockholder, an officer and/or a director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Underwriting Agreement (collectively, the “Underwriters”) that, during the period beginning on
the date hereof and ending at the end of the day on the date that is 90 days from the date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned will not, without the prior written consent of the Representatives, on
behalf of the Underwriters, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-Up Securities, or file or cause to be filed any registration statement in
connection therewith, under the Securities Act of 1933, as amended, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of
the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise. If the undersigned is an officer or director of the Company,
the undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed Securities the undersigned may purchase in the Public Offering.
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer or otherwise dispose of Lock-Up Securities without the prior written consent of the
Representatives, provided, in each case, that (1) in the case of transfers pursuant to clauses (i) – (v) below, the Representatives receive a signed lock-up agreement for the balance of the Lock-Up Period from each donee, trustee,
distributee, or transferee, as the case may be, (2) in the case of transfers pursuant to clauses (i) – (iii) and (v) – (vi) below, any such transfer shall not involve a disposition for value, (3) in the
case of transfers pursuant to clauses (i) – (vi) below, such transfers are not required to be reported with the Securities and Exchange Commission (the “SEC”) on Form 4 in accordance with Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (4) in the case of transfers pursuant to clause (vii) below, any filing under Section 16 of the Exchange Act made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing
relates to the circumstances described in clause (vii), and (5) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers (other than a filing on a Form 5 made
after the expiration of the Lock-Up Period):
| (i) |
as a bona fide gift or gifts;
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| (ii) |
to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin);
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| (iii) |
as a distribution or other transfer by a partnership to its partners or former partners or by a limited liability company to its members or retired members or by a corporation to its stockholders or former stockholders or to any
wholly-owned subsidiary of such corporation;
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| (iv) |
to the undersigned’s affiliates or to any investment fund or other entity controlled or managed by the undersigned;
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| (v) |
pursuant to a qualified domestic relations order or in connection with a divorce settlement;
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| (vi) |
by will or intestate succession upon the death of the undersigned; or
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| (vii) |
to the Company in satisfaction of any tax withholding obligation.
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Furthermore, no provision in this letter shall be deemed to restrict or prohibit (1) the transfer of the undersigned’s Lock-Up Securities to the Company in connection with the termination of
the undersigned’s services to the Company, provided that any filing under Section 16 of the Exchange Act made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing relates to the circumstances
described in this clause (1); (2) the exercise or exchange by the undersigned of any option or warrant to acquire any shares of Common Stock or options to purchase shares of Common Stock, in each case for cash or on a “cashless” or “net
exercise” basis, pursuant to any stock option, stock bonus or other stock plan or arrangement; provided, however, that the underlying shares of Common Stock shall continue to be subject to the restrictions on transfer set forth in this letter
and that any filing under Section 16 of the Exchange Act made in connection with such exercise or exchange shall clearly indicate in the footnotes thereto that (a) the filing relates to the circumstances described in this clause (2) and (b)
no shares were sold by the reporting person; and (3) the transfer of Lock-Up Securities upon the completion of a bona fide third-party tender offer, merger, consolidation or other similar transaction
made to all holders of the Company’s securities involving a change of control of the Company; provided, however, that in the event that such tender offer, merger, consolidation or other such transaction is not completed, such securities held
by the undersigned shall remain subject to the restrictions on transfer set forth in this letter.
-2-
Notwithstanding anything herein to the contrary, nothing herein shall prevent the undersigned from establishing a 10b5-1 trading plan that complies with Rule 10b5-1 under the Exchange Act (“10b5-1
Trading Plan”) or from amending an existing 10b5-1 Trading Plan so long as there are no sales of Lock-Up Securities under any such 10b5-1 Trading Plan during the Lock-Up Period; and provided
that, the establishment of a 10b5-1 Trading Plan or the amendment of a 10b5-1 Trading Plan shall only be permitted if (i) the establishment or amendment of such plan is not required to be reported in any public report or filing with the SEC,
or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding the establishment or amendment of such plan.
Notwithstanding anything herein to the contrary, nothing herein shall prevent the undersigned from sales of Common Stock made pursuant to a 10b5-1 Trading Plan entered into prior to the date
hereof and provided to the Underwriters as of the date hereof; provided that such 10b5-1 Trading Plan shall not be amended to allow for any transfers of Common Stock during
the Lock-Up Period; and provided, further, that to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntary made by on or on behalf of the undersigned or
the Company regarding any such sales, such announcement or filing shall include a statement to the effect that any sales were effected pursuant to such 10b5-1 Trading Plan.
In addition, the undersigned agrees that, without the prior written consent of the Representatives, on behalf of the Underwriters, it will not, during the Lock-Up Period, make
any demand for or exercise any right with respect to, the registration of any Lock-Up Securities.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer
of the Lock-Up Securities except in compliance with the foregoing restrictions. This lock-up agreement shall automatically terminate, and the undersigned shall be released from the undersigned’s obligations hereunder, upon the earliest to
occur, if any, of (i) prior to the execution of the Underwriting Agreement, the Company advises the Representatives in writing that it has determined not to proceed with the Public Offering; (ii) the Company files an application to withdraw
the registration statement related to the Public Offering; (iii) the Underwriting Agreement is executed but is terminated prior to the closing of the Public Offering (other than the provisions thereof which survive termination), or (iv) July
31, 2020, in the event that the Underwriting Agreement has not been executed by such date.
This agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGE FOLLOWS]
-3-
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Very truly yours,
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Name of Security Holder (Print exact name)
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| By: | ||
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Signature
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Name of Authorized Signatory (Print)
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Very truly yours,
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Name of Security Holder (Print exact name)
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| By: | |
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Signature
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If not signing in an individual capacity:
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Name of Authorized Signatory (Print)
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Title of Authorized Signatory (Print)
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(indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity)
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Exhibit C
FORM OF CHIEF FINANCIAL OFFICER’S CERTIFICATE
TO BE ISSUED PURSUANT TO SECTION 5(j)
CASTLE BIOSCIENCES, INC.
CHIEF FINANCIAL OFFICER CERTIFICATE
[ ● ], 2020
I, Frank Stokes, do hereby certify that I am the Chief Financial Officer of Castle Biosciences, Inc. (the “Company”), and, solely in my capacity as such, and not in my personal
capacity, in connection with the public offering (the “Offering”) of the Company’s common stock, par value $0.001 per share, pursuant to Section 5(j) of the Underwriting Agreement, dated [ ● ], 2020, by and among the Company, SVB Leerink LLC and Robert W. Baird & Co. Incorporated, as representatives of the several underwriters listed on Schedule A thereto, do hereby certify
on the date above that:
| 1. |
I am providing this certificate based on an examination of the internal accounting records of the Company undertaken by myself or members of my staff who are responsible for the Company’s financial and accounting matters.
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| 2. |
I have reviewed the Registration Statement, any preliminary prospectus, the General Disclosure Package and the Prospectus (each as defined in the Underwriting Agreement) in connection with the Offering.
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| 3. |
I am familiar with the accounting records and accounting practices, policies, procedures and internal controls of the Company and, together with the members of the financial and accounting staff who report to me, have
responsibility for financial and accounting matters with respect to the Company. I have reviewed the Company’s financial statements, books, records or schedules and analyses derived therefrom that I have deemed necessary to make the
certifications set forth herein.
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| 4. |
I have supervised compilation of and reviewed the circled information contained in the attached Exhibit A, which is included in the Prospectus (the “Financial Information”).
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| 5. |
I or members of my staff who are responsible for the Company’s financial and accounting matters compared the Financial Information to the Company’s accounting books and records and found such items to be in agreement in all
material respects. The Financial Information was derived from the internal accounting records of the Company and was prepared in good faith and based on reasonable assumptions.
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| 6. |
The applicable Financial Information presents fairly, in all material respects, the Company’s cash balance as of May 31, 2020, provided that such Financial Information is preliminary, has not been audited and is subject to change
in connection with the completion of the Company’s financial and accounting closing procedures, final adjustments and other developments which may arise between the date hereof and the time the financial results for the Company’s
fiscal quarter ended June 30, 2020 are finalized.
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[Signature Page to CFO Certificate]
Capitalized terms not defined in this certificate have the meaning assigned to them in the Underwriting Agreement.
[Signature page follows]
Exhibit 5.1
Karen E. Deschaine
+1 858 550 6088
kdeschaine@cooley.com
June 22, 2020
Castle Biosciences, Inc.
820 S. Friendswood Drive, Suite 201
Friendswood, TX 77546
Ladies and Gentlemen:
We have acted as counsel to Castle Biosciences, Inc., a Delaware corporation (the “Company”), in connection with the filing by the Company of a Registration
Statement on Form S‑1 (the “Registration Statement”) with the Securities and Exchange Commission, including a related prospectus included in the Registration Statement (the “Prospectus”), covering an underwritten public offering of up to 1,725,000 shares of the Company’s common stock, par value $0.001 (the “Shares”)
(including up to 225,000 Shares that may be sold by the Company upon exercise of an over-allotment option to be granted to the underwriters).
In connection with this opinion, we have (i) examined and relied upon (a) the Registration Statement and Prospectus, (b) the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, as currently in effect, and (c) originals or copies certified to our satisfaction of such records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion
expressed below and (ii) assumed that the Shares will be sold at a price established by the Board of Directors of the Company or a duly authorized committee thereof. We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies, the accuracy, completeness and authenticity of certificates of public officials and the due authorization, execution and delivery of all
documents by all persons other than the Company where authorization, execution and delivery are prerequisites to the effectiveness thereof. As to certain factual matters, we have relied upon a certificate of an officer of the Company and have not
independently verified such matters.
Our opinion is expressed only with respect to the General Corporation Law of the State of Delaware. We express no opinion to the extent that any other laws are applicable to the subject matter hereof and express no
opinion and provide no assurance as to compliance with any federal or state securities law, rule or regulation.
On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued against payment therefore in accordance with the Registration Statement and the Prospectus, will be
validly issued, fully paid and non-assessable.
We consent to the reference to our firm under the caption “Legal Matters” in the Prospectus included in the Registration Statement and to the filing of this opinion as an exhibit to the Registration Statement.
Sincerely,
Cooley LLP
|
By:
|
/s/ Karen E. Deschaine |
|
|
Karen E. Deschaine
|
Cooley LLP 3175 Hanover Street Palo Alto, CA 94304-1130
t: (650) 843-5000 f: (650) 849-7400 cooley.com
t: (650) 843-5000 f: (650) 849-7400 cooley.com
Exhibit 10.24
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE CASTLE BIOSCIENCES, INC. HAS DETERMINED THE INFORMATION (I) IS NOT MATERIAL AND (II) WOULD
LIKELY CAUSE COMPETITIVE HARM TO CASTLE BIOSCIENCES, INC. IF PUBLICLY DISCLOSED.
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into as of May 10, 2020 (the “Fourth
Amendment Date”), by and among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314, as collateral agent (in its individual capacity, “Oxford”; and in its capacity as collateral agent, “Collateral Agent”), the Lenders listed on Schedule 1.1 of the Loan Agreement (as defined below) or otherwise
party thereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (“Bank” or “SVB”) (each a “Lender” and collectively, the “Lenders”), and CASTLE BIOSCIENCES, INC., a Delaware Corporation with offices located
at 820 S. Friendswood, Suite 201, Friendswood, TX 77546 (“Borrower”).
WHEREAS, Collateral Agent, Borrower and the Lenders party to the Loan Agreement from time to time have entered into that certain Loan and Security Agreement, dated as of November 30, 2018 (as
amended, supplemented or otherwise modified from time to time, including, but without limitation, pursuant to that certain First Amendment to Loan and Security Agreement dated as of June 13, 2019, that certain Waiver and Second Amendment to Loan
and Security Agreement dated as of February 28, 2020, and that certain Third Amendment to Loan and Security Agreement dated as of March 4, 2020, collectively, the “Loan Agreement”) pursuant to which the
Lenders have provided to Borrower certain loans in accordance with the terms and conditions thereof; and
WHEREAS, Borrower, the Lenders and Collateral Agent also desire to amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions
and in reliance upon the representations and warranties set forth below;
NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower, the Lenders and Collateral Agent hereby agree as follows:
| 1. |
Capitalized terms used herein but not otherwise defined shall have the respective meanings given to them in the Loan Agreement.
|
| 2. |
Borrower hereby reaffirms the security interest granted by Borrower previously in Section 4.1 of the Loan Agreement with respect to the Collateral.
|
| 3. |
Section 6.10 of the Loan Agreement is hereby amended and restated in their entirety as follows:
|
“6.10 Financial Covenant. Borrower, at all times, shall achieve and/or be in compliance with at least one of
the following covenants:
(i) If at any time Borrower fails to comply with the financial covenant set forth in Section 6.10(ii), Borrower shall achieve the following, to be tested as of the last day of the
applicable quarter, on a consolidated basis with respect to Borrower and its Subsidiaries:
(1) Revenues for the three months ended at the end of the applicable quarter-end month set forth below of at least:
|
Trailing 3-Month Period Ending
|
Minimum Trailing 3 Months
Revenue ([***]% of Plan)
|
|||
|
6/30/2019
|
$
|
7,646,880.00
|
||
|
9/30/2019
|
$
|
7,596,081.00
|
||
|
12/31/2019
|
$
|
8,014,761.00
|
||
|
3/31/2020
|
$
|
11,062,938.00
|
||
|
6/30/2020
|
$
|
15,110,788.00
|
||
|
9/30/2020
|
$
|
15,661,698.00
|
||
|
12/31/2020
|
$
|
14,372,737.00
|
||
[***]=CERTAIN CONFIDENTIAL INFORMATION OMITTED
1
, and thereafter, the required revenues of Borrower shall be determined by Collateral Agent and the Lenders upon receipt and review by Collateral Agent and the Lenders of Borrower’s Annual
Projections delivered in accordance with Section 6.2(a)(iii); provided that such required revenues shall be (i) based on a minimum requirement of at least [***] percent ([***]%) of Borrower’s board of directors-approved revenue plan (provided that
such plan is acceptable to Collateral Agent and the Lenders), (ii) in no event less than the amounts required hereunder with respect to the [***], and (iii) at such levels that [***]. Collateral Agent, Borrower and the Lenders shall execute and
deliver to each other an amendment to this Agreement which provides the terms of such Future Minimum Revenue Covenants no later than March 31st of each year. It shall be an immediate Event of Default if Borrower, Collateral Agent and the Lenders
(in each case acting reasonably) fail to enter into the aforementioned amendment on or prior to March 31st of each year.
GAAP revenue recognized from consolidated DecisionDx-CM Medicare claims in which a payment decision was awarded through an Administrative Law Judge appeal process shall not be part of GAAP revenue
as measured by this performance-to-plan revenue covenant.”
(ii) If at any time Borrower fails to achieve the financial covenant set forth in Section 6.10(i), Borrower shall maintain the following, to be tested as of the
last day of the applicable quarter:
(1) A ratio of (a) Borrower’s unrestricted cash and Cash Equivalents maintained with Bank or any Bank Affiliate to (b) all of Borrower’s outstanding Obligations to Lenders, equal to or
greater than 2.00 to 1.00.
| 4. |
Section 13.1 of the Loan Agreement is hereby amended by amending and restating the following defined term in its entirety:
|
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having
maturities of not more than two (2) years from the date of acquisition, (b) marketable obligations fully collateralized by Cash Equivalents of the kinds described in clause (a), (c) commercial paper maturing no more than two (2) years after its
creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (e) certificates of deposit maturing no more than two (2) years after issue provided that the account in which any such
certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent, and (e) money market funds at least ninety-five (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a)
through (d) of this definition. For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative
transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such
transaction shall expressly violate each other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing,
purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or
municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “Auction Rate Security”).
| 5. |
Exhibit C of the Loan Agreement is hereby amended and restated in its entirety as set forth on Exhibit C attached hereto.
|
| 6. |
Limitation of Amendment.
|
| a. |
The amendments set forth in Sections 3 and 5, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment,
waiver or modification of any other term or condition of any Loan Document, or (ii) otherwise prejudice any right or remedy which the Lenders, or obligation which Borrower, may now have or may have in the future under or in connection with
any Loan Document.
|
[***]=CERTAIN CONFIDENTIAL INFORMATION OMITTED
2
| b. |
This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.
|
| 7. |
Release by Borrower.
|
| a. |
FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Collateral Agent and each Lender and their respective present or former employees, officers, directors, agents, representatives, attorneys,
and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether
known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time
through and including the date of execution of this Amendment solely to the extent such claims arise out of or are in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or
documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing (collectively “Released Claims”).
|
| b. |
In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:
|
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her
favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or releasing party.” (Emphasis added.)
| c. |
By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true,
but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected in respect of the Released Claims; accordingly, if Borrower
should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof,
regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts
underlying this release or with regard to any of such party’s rights or asserted rights.
|
| d. |
This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Borrower
acknowledges that the release contained herein constitutes a material inducement to Collateral Agent and the Lenders to enter into this Amendment, and that Collateral Agent and the Lenders would not have done so but for Collateral Agent’s
and the Lenders’ expectation that such release is valid and enforceable in all events.
|
| e. |
Borrower hereby represents and warrants to Collateral Agent and the Lenders, and Collateral Agent and the Lenders are relying thereon, as follows:
|
| i. |
Except as expressly stated in this Amendment, neither Collateral Agent, the Lenders nor any agent, employee or representative of any of them has made any statement or representation to Borrower regarding any
fact relied upon by Borrower in entering into this Amendment.
|
3
| ii. |
Borrower has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary.
|
| iii. |
The terms of this Amendment are contractual and not a mere recital.
|
| iv. |
This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment is signed freely, and without duress, by Borrower.
|
| v. |
Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or
purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Borrower shall indemnify Collateral Agent and the Lenders, defend and hold each harmless from and against all claims based upon or
arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.
|
| 8. |
To induce Collateral Agent and the Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and the Lenders as follows:
|
| a. |
Immediately after giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are true and correct as of such date) and (ii) no Event of Default has occurred and is continuing;
|
| b. |
Borrower has the power and due authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;
|
| c. |
The organizational documents of Borrower delivered to Collateral Agent on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;
|
| d. |
The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (i) any law or regulation binding on or
affecting Borrower, (ii) any contractual restriction with a Person binding on Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (iv)
the organizational documents of Borrower;
|
| e. |
The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and
|
| f. |
This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.
|
4
| 9. |
Except as expressly set forth herein, the Loan Agreement shall continue in full force and effect without alteration or amendment. This Amendment and the Loan Documents represent the entire agreement about this subject matter and
supersede prior negotiations or agreements.
|
| 10. |
This Amendment shall be deemed effective as of the Fourth Amendment Date upon (a) the due execution and delivery to Collateral Agent of this Amendment by each party hereto, and (b) Borrower’s payment of all Lenders’ Expenses incurred
through the date hereof, which may be debited (or ACH’d) from any of Borrower’s accounts with the Lenders.
|
| 11. |
This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument.
|
| 12. |
This Amendment and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of California.
|
[Balance of Page Intentionally Left Blank]
5
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Loan and Security Agreement to be executed as of the date first set forth above.
BORROWER:
CASTLE BIOSCIENCES, INC.
|
By:
|
/s/ Frank Stokes
|
|
Name:
|
Frank Stokes
|
|
|
Title:
|
Chief Financial Officer
|
COLLATERAL AGENT AND LENDER:
OXFORD FINANCE LLC
|
By:
|
/s/ Colette H Featherly
|
|
Name:
|
Colette H. Featherly
|
|
|
Title:
|
Senior Vice President
|
LENDER:
SILICON VALLEY BANK
|
By:
|
/s/ Kristine Rohmer
|
|
Name:
|
Kristine Rohmer
|
|
|
Title:
|
Vice President
|
EXHIBIT C
Compliance Certificate
|
TO:
|
OXFORD FINANCE LLC, as Collateral Agent and Lender
SILICON VALLEY BANK, as Lender
|
|
FROM:
|
CASTLE BIOSCIENCES, INC.
|
The undersigned authorized officer (“Officer”) of CASTLE BIOSCIENCES, INC. (“Borrower”), hereby certifies that in accordance with the
terms and conditions of the Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Loan Agreement),
(a) Borrower is in complete compliance for the period ending with all required covenants except as noted below;
(b) There are no Events of Default, except as noted below;
(c) Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above;
provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.
(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, or obtain extensions thereof, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign,
federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;
(e) No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to
Collateral Agent and the Lenders.
Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and
subject to year-end audit adjustments as to the interim financial statements.
Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.
|
Reporting Covenant
|
Requirement
|
Actual
|
Complies
|
||||
|
1)
|
Financial statements
|
Quarterly within 5 days SEC Filings
|
Yes
|
No
|
N/A
|
||
|
2)
|
Annual (CPA Audited) statements
|
Within 150 days after FYE or within 5 days SEC Filings
|
Yes
|
No
|
N/A
|
||
|
3)
|
Annual Financial Projections/Budget (prepared on a quarterly basis)
|
Annually (within earlier of 60 days of FYE or 7 Business Days of approval by Board), and within 7 Business Days of any revision
|
Yes
|
No
|
N/A
|
||
|
4)
|
A/R & A/P agings
|
Quarterly within 30 days
|
Yes
|
No
|
N/A
|
||
|
5)
|
8-K, 10-K and 10-Q Filings
|
If applicable, within 5 days of filing
|
Yes
|
No
|
N/A
|
||
|
6)
|
Security Holder reports and notices
|
Within 5 days of delivery
|
Yes
|
No
|
N/A
|
||
|
7)
|
Compliance Certificate
|
Quarterly/Annually within 5 days of SEC Filings
|
Yes
|
No
|
N/A
|
||
|
8)
|
IP Report
|
When required
|
Yes
|
No
|
N/A
|
||
|
9)
|
Total amount of Borrower’s cash and cash equivalents at the last day of the measurement period
|
|
$ |
Yes
|
No
|
N/A
|
|
|
10)
|
Total amount of Borrower’s Subsidiaries’ cash and cash equivalents at the last day of the measurement period
|
|
$ |
Yes
|
No
|
N/A
|
Deposit and Securities Accounts
(Please list all accounts; attach separate sheet if additional space needed)
|
Institution Name
|
Account Number
|
New Account?
|
Account Control Agreement in place?
|
||
|
1)
|
Yes
|
No
|
Yes
|
No
|
|
|
2)
|
Yes
|
No
|
Yes
|
No
|
|
|
3)
|
Yes
|
No
|
Yes
|
No
|
|
|
4)
|
Yes
|
No
|
Yes
|
No
|
|
Financial Covenants
|
Covenant
|
Requirement
|
Actual
|
Compliance
|
||
|
Trailing
|
Minimum
|
||||
|
trailing
|
|||||
|
3-month
|
3 months
|
||||
|
revenue
|
|||||
|
period ending
|
([***] of plan)
|
||||
|
Minimum Revenues
(trailing three months)
|
6/30/2019
9/30/2019
12/31/2019
|
$$7,646,880.00
$$7,596,081.00
$$8,014,761.00
|
[$ ]
|
Yes
|
No
|
|
3/31/2020
|
$11,062,938.00
|
||||
|
6/30/2020
|
$15,110,788.00
|
||||
|
9/30/2020
|
$15,661,698.00
|
||||
|
12/31/2020
|
$14,372,737.00
|
||||
|
Thereafter, at least [***]% of projections
|
|||||
|
Minimum Liquidity Ratio
|
At least 2.00 to 1.00
|
[ ] to 1:00
|
Yes
|
No
|
|
|
[***] Bank Account
|
Not above $[***] as of the end of any Business Day
|
[$ ]
|
Yes
|
No | |
[***]=CERTAIN CONFIDENTIAL INFORMATION OMITTED
Other Matters
|
1)
|
Have there been any changes in management since the last Compliance Certificate?
|
Yes
|
No
|
|
2)
|
Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan Agreement?
|
Yes
|
No
|
|
3)
|
Have there been any new or pending claims or causes of action against Borrower that involve more than [***] Dollars ($[***])?
|
Yes
|
No
|
|
4)
|
Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries other than as already included in a Quarterly Report on Form 10-Q, an Annual
report on Form 10-K or a Current Report on Form 8-K? If yes, provide copies of any such amendments or changes with this Compliance Certificate.
|
Yes
|
No
|
[***]=CERTAIN CONFIDENTIAL INFORMATION OMITTED
Exceptions
Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional space needed.)
CASTLE BIOSCIENCES, INC.
|
By
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
|
Date:
|
|
|
|
LENDER USE ONLY
|
||||
|
Received by:
|
Date:
|
|||
|
Verified by:
|
Date:
|
|||
|
Compliance Status:
|
Yes
|
No
|
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Castle Biosciences, Inc.:
We consent to the use of our report incorporated by reference herein and to the reference to our firm under the heading “Experts” in the prospectus.
/s/ KPMG LLP
San Diego, California
June 22, 2020