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As filed with the U.S. Securities and Exchange Commission on October 9, 2025.

Registration No. 333-   

 

 
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

EVOMMUNE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   2834  

85-0742575

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

1841 Page Mill Road, Suite 100

Palo Alto, CA 94304

Telephone: (925) 247-4487

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Luis Peña

President and Chief Executive Officer

Evommune, Inc.

1841 Page Mill Road

Suite 100

Palo Alto, CA 94304

Telephone: (925) 247-4481

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Eric Blanchard

Minkyu Park

Cooley LLP

500 Boylston Street, 14th Floor

Boston, MA 02116

Tel: (617) 937-2300

 

Kyle Carver

Gregory S. Moss

Evommune, Inc.

345 Park Avenue South, 2nd Floor

New York, NY 10010

Tel: (650) 223-7745

 

Brian K. Rosenzweig

Matthew T. Gehl

Michael D. Maline

Mark Edlund

Covington & Burling LLP

30 Hudson Yards

New York, NY 10001-2170

Tel: (212) 841-1000

 

 

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, 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  

☐

   Accelerated filer  

☐

Non-accelerated filer  

☒

   Smaller reporting company  

☒

     Emerging growth company  

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

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, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 
 


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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 it is not soliciting offers to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS (Subject to Completion)

Issued    , 2025

   Shares

 

 

LOGO

Common Stock

 

 

This is Evommune, Inc.’s initial public offering. We are offering    shares of our common stock.

We expect the initial public offering price to be between $   and $   per share. Currently, no public market exists for shares of our common stock. We have applied to list our common stock on the New York Stock Exchange (“NYSE”) under the symbol “EVMN” and this offering is contingent upon obtaining approval of such listing.

We are an “emerging growth company” and a “smaller reporting company” as defined under the federal securities laws and, as such, will be subject to certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Smaller Reporting Company.”

 

 

PRICE $    A SHARE

 

 

 

      

Per Share

      

Total

 

Initial public offering price

       $              $      

Underwriting discounts and commissions(1)

       $              $      

Proceeds, before expenses, to us

       $              $      
 
(1)

See “Underwriting” for a description of all compensation payable to the underwriters.

At our request, the underwriters have reserved up to  % of the shares offered by this prospectus for sale at the initial public offering price to certain individuals through a directed share program, including our directors, officers, employees and certain other individuals identified by management. See the section titled “Underwriting—Directed Share Program.”

We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase an additional     shares of our common stock solely to cover over-allotments, if any.

Investing in our common stock involves risks, including those that are described in the “Risk Factors” section beginning on page 14 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body 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.

The underwriters expect to deliver the shares of common stock against payment to purchasers on our about      , 2025.

 

 

 

MORGAN STANLEY   LEERINK PARTNERS   EVERCORE ISI   CANTOR

     , 2025


Table of Contents

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     14  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     81  

MARKET AND INDUSTRY DATA AND FORECASTS

     83  

USE OF PROCEEDS

     84  

DIVIDEND POLICY

     86  

CAPITALIZATION

     87  

DILUTION

     89  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     92  

BUSINESS

     110  

MANAGEMENT

     175  

EXECUTIVE COMPENSATION

     186  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     200  

PRINCIPAL STOCKHOLDERS

     204  

DESCRIPTION OF CAPITAL STOCK

     208  

SHARES ELIGIBLE FOR FUTURE SALE

     214  

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS

     217  

UNDERWRITING

     221  

LEGAL MATTERS

     230  

EXPERTS

     230  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     230  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  
 

 

 

Through and including      , 2025 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

You should rely only on the information contained in this prospectus and any free writing prospectus that we may provide to you in connection with this offering. We have not, and the underwriters have not, authorized anyone to provide you with any other information other than in this prospectus, and we take no responsibility for, and the underwriters have not taken responsibility for, any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.

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 the owner will not assert, to the fullest extent under applicable law, its rights. 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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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included elsewhere in this prospectus. You should also consider, among other things, the matters described in the sections entitled “Risk Factors,” “Special Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In this prospectus, unless the context requires otherwise, all references to “us,” “our,” “Evommune,” “we,” the “Company” and similar designations refer to Evommune, Inc. and its wholly owned subsidiaries on a consolidated basis.

Overview

Evommune is a clinical-stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases, with initial clinical development programs focusing on chronic spontaneous urticaria (“CSU”), atopic dermatitis (“AD”) and ulcerative colitis (“UC”). Chronic inflammation is a significant healthcare problem in the world, substantially impacting patients’ quality of life and leading to life-threatening conditions. These conditions, if not prevented, ultimately lead to fatal diseases, such as cardiovascular diseases, diabetes and cancer, which contribute to three out of every five deaths worldwide and result in an estimated $90 billion of annual cost to the healthcare system in the United States.

Our mission is to improve patients’ daily lives and prevent the long-term effects of uncontrolled inflammation that are a consequence of the limitations of existing therapies. To achieve this, we are advancing a portfolio of differentiated product candidates that target key drivers of chronic inflammation.

Our management team’s proven drug development expertise and experience in the field of immunology and inflammation, combined with advanced scientific tools, enable us to identify and advance potent, highly selective molecules with distinctive mechanisms of action. By identifying treatment gaps of chronic inflammatory diseases, we strive to transform the treatment landscape, developing therapies that have the potential to offer rapid symptom relief and provide safe, durable resolution of the underlying disease. Among our portfolio of programs, we currently have two product candidates, EVO756 and EVO301, in Phase 2 trials. We are initially developing EVO756 for the treatment of CSU and AD, and EVO301 for the treatment of AD and UC. We see broad expansion potential for both programs across additional chronic inflammatory diseases. We also intend to advance additional preclinical programs into clinical development.

Our most advanced clinical-stage product candidate, EVO756, is a potent and highly selective oral small molecule antagonist of MRGPRX2, a receptor predominantly found on mast cells and peripheral sensory neurons. We conducted a Phase 1 proof-of-concept trial in 132 healthy volunteers designed to assess the safety, tolerability, pharmacokinetic (“PK”) properties and pharmacodynamic (“PD”) properties of orally administered EVO756. EVO756 was observed to be well-tolerated at all doses tested, with no serious adverse events (“SAEs”), and PK results supporting daily dosing. As part of the trial, we conducted a skin challenge test in which EVO756 was observed to robustly decrease the healthy volunteers’ wheals induced by a MRGPRX2 ligand (“icatibant”), evidencing meaningful target engagement at all doses tested. We are currently conducting a Phase 2b trial of EVO756 in CSU and have completed a Phase 2 trial of EVO756 in chronic inducible urticaria (“CIndU”, and together with CSU, chronic urticarias or “CU”). Our CIndU Phase 2 trial was completed in May 2025 and generated data that demonstrated clinical activity (including improvement in FricTest score and pruritus numerical rating score (“pruritus-NRS”), as described below) in a patient population with symptomatic dermographism. Given significant overlap between the diseases and patient populations along with the contribution of neurogenic inflammation, we believe this supports the continued advancement of our CSU program. In addition, we believe EVO756’s clinical activity in symptomatic dermographism patients strongly supports the role of MRGPRX2 in neurogenic inflammation and supports the initiation of our AD program, as neurogenic inflammation plays a crucial role in both symptomatic dermographism and AD.

 

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In our Phase 2 CIndU trial, 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients achieving a complete response (achieving a FricTest score of zero (a clinician rated measure of symptomatic dermographism severity ranging from 0 to 4, with higher scores indicating greater severity)), of which 50% were immunoglobulin E (“IgE”) high (as defined by a serum IgE level of ≥100 IU/mL). An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score. Observed patients in the 300 mg once daily (“QD”) cohort saw an average reduction of 1.4 points in FricTest score after four weeks and observed patients in the 50 mg twice daily (“BID”) cohort saw an average reduction of 1.5 points. By comparison, in separate, independent trials conducted by third parties, patients treated with 300 mg omalizumab (n=19) saw a reduction of 1.4 points and patients treated with 300 mg barzolvolimab (n=33) saw a reduction of 1.6 points in FricTest score after four weeks.

In addition, in our Phase 2 CIndU trial, both the 300 mg QD and the 50 mg BID doses of EVO756 were observed to result in rapid itch relief to patients, with observed patients in the 300 mg QD cohort experiencing an average reduction in pruritus-NRS of 2.4 points and observed patients in the 50 mg BID cohort seeing an average reduction of 2.1 points. Importantly, 93% (n=25) of observed patients demonstrated improvement at just four weeks in either FricTest or pruritus-NRS. Further, 75% (n=6) of those who did not achieve a decrease in FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response.

We initiated a Phase 2b dose-ranging trial in CSU in April 2025 and expect to report initial results in the first half of 2026. We also initiated a Phase 2b dose-ranging trial in moderate-to-severe AD patients in August 2025 and expect to report initial results in the second half of 2026. We plan to evaluate EVO756 in additional indications in which mast cell degranulation and neuroinflammation are key drivers of disease.

Our second clinical-stage product candidate, EVO301, is a long-acting fusion protein consisting of an IL-18 binding protein (“BP”) and an anti-serum albumin Fab-associated (“SAFA”) domain. IL-18 is a pro-inflammatory cytokine of the IL-1 family that regulates various immune processes that drive inflammation and is a potent modulator of ongoing inflammation. We believe EVO301’s optimized approach to IL-18 binding and neutralization could enable significant advantages and differentiated clinical outcomes for patients, including with respect to efficacy, tissue distribution, dosing profile and reduced immunogenicity risk. In addition, EVO301’s distinct mechanism and modality complement those of EVO756, providing us with multiple potential avenues to bring innovative therapeutics to the large, underserved and rapidly expanding patient population suffering from chronic inflammatory diseases. We initiated a Phase 2 trial of EVO301 in adult patients with moderate-to-severe AD in March 2025 and expect to report initial results in the first half of 2026. Beyond AD, we plan to initiate a Phase 2 trial in moderate-to-severe UC patients in 2026. After completion of this UC trial, we may also evaluate EVO301 in Crohn’s disease and additional indications for which regulating the IL-18 pathway may reduce pro-inflammatory mediators driving tissue damage and chronic inflammation.

 

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Our Clinical Pipeline

 

LOGO

 

 
Notes:

(1) Other potential indications for EVO756 include asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus. To date, based on our data from the successful completion of our Phase 1 proof-of-concept trial of EVO756 in healthy volunteers, we believe there is a path to proceed to Phase 2 clinical development for these other indications, similar to our initiation of our Phase 2b trial in AD, subject to standard regulatory requirements. (2) We are currently prioritizing development in other indications ahead of CIndU and may conduct additional CIndU trials in the future.

Our Approach to Drug Development and Chronic Inflammation

Collectively, our team members have held leadership roles at over 25 companies and have played key roles in the discovery and development of nearly 30 approved small molecules and biologics, primarily in immunology and inflammation, including Ebglyss (lebrikizumab), Cimzia (certolizumab pegol) and Rezurock (belumosudil). These therapies have significantly impacted patient outcomes, generated billions of dollars in sales and have led to multiple company acquisitions. This experience has informed our approach to drug development and commercialization to become one focused on identifying the areas of highest unmet need in chronic inflammatory diseases, identifying the molecules with the highest probability of improving patient outcomes in those diseases and then advancing our molecules through rigorous and thoughtful development programs.

Our deep knowledge of immunology and inflammation enables us to focus our efforts on key drivers of disease in which a single therapeutic could treat a broad range of indications and address areas of significant unmet patient need. We prioritize targets with high potential for meaningful patient outcomes and commercial value.

As we discover or in-license product candidates and advance them to the clinic, we design development strategies to rapidly establish proof-of-concept and apply stringent criteria to decide which product candidates should move forward. At every stage, we focus on advancing differentiated candidates that we believe have the highest potential for clinical advancement, guided by regulatory, clinical and commercial considerations.

EVO756, Targeting MRGPRX2 for Chronic Inflammatory Diseases

Our most advanced clinical-stage product candidate, EVO756, is a potent and highly selective oral small molecule antagonist of MRGPRX2, a receptor predominantly found on mast cells and peripheral sensory neurons. Dysregulated MRGPRX2 activity can play a key role as both a catalyst and perpetuator of disease pathogenesis across a multitude of systemic chronic inflammatory diseases. By targeting MRGPRX2, we believe EVO756 is the only dual mechanism clinical approach that modulates both mast cells and peripheral sensory neurons, representing a new potential therapeutic option to reduce inflammation and provide rapid relief of itch (pruritus).

 

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Mast cells are critical regulators of immune response and can be found in most vascularized tissues including skin, lung and the digestive tract. These cells tend to be distributed in close proximity to peripheral sensory neurons, where the activation of the neurons can trigger the inflammatory cascade and mast cells are implicated in further perpetuating neuroinflammation and its related symptoms. We believe MRGPRX2 is the only clinical approach aimed at inhibiting this neuroimmune interaction. In addition, the cytoplasm of mast cells contains numerous membrane-bound granules that are filled with inflammatory mediators such as histamine and tryptase. When activated under normal conditions, mast cells degranulate, releasing their inflammatory mediators to protect against infections and toxins. They also may play a role in wound healing, angiogenesis (formation of new blood vessels) and initiating adaptive immune responses. However, aberrant activation of MRGPRX2 triggers excessive inflammation, resulting in symptoms such as hives (urticarial wheals), itch, pain, swelling and redness in a multitude of systemic chronic inflammatory diseases across organ systems. Our initial development plan for EVO756 focuses on CSU and AD; however, we see broad expansion potential across additional chronic inflammatory diseases.

We conducted a Phase 1 proof-of-concept trial in 132 healthy volunteers designed to assess the safety, tolerability, PK properties and PD properties of orally administered EVO756. Comprehensive trial results were presented at the UCARE Global Urticaria Forum meeting in December 2024. The Phase 1 trial enrolled 55 healthy adults in a single ascending dose (“SAD”) portion and 77 healthy adults in a multiple ascending dose (“MAD”) portion in which participants were treated for 14 days. EVO756 was observed to have an encouraging tolerability profile at all doses tested, including the highest QD dose of 500 mg, with no SAEs observed. A skin challenge test was also conducted in the MAD portion of the trial in which icatibant, representative of a broad class of disease relevant ligands, was administered via intradermal injection to healthy volunteers creating measurable wheals on their skin. EVO756 was observed to robustly decrease the healthy volunteers’ wheals induced by icatibant, evidencing meaningful target engagement at all doses tested. We believe this proof-of-concept portion of the trial supports the potential benefits of EVO756 in CSU.

In May 2025, we reported topline results from our U.S. multicenter Phase 2 trial of EVO756 in CIndU that demonstrated clinical activity (including improvement in FricTest score and pruritus-NRS, as described below) in a patient population with symptomatic dermographism. CIndU is a form of urticaria that has known environmental triggers, including pressure or exposure to cold and has underlying disease pathogenesis similar to CSU. The trial was designed to generate additional patient data in a population with symptomatic dermographism, which we believe will be highly translatable to the CSU patient population given the shared pathologies. Third party studies have demonstrated that symptomatic dermographism affects approximately 25% of the CSU patient population; similarly, we believe EVO756’s clinical activity in symptomatic dermographism patients strongly supports the role of MRGPRX2 in neurogenic inflammation, which plays a crucial role in AD. A total of 30 patients were enrolled in the trial, with 11 patients enrolled in the 300 mg QD cohort and 19 patients enrolled in the 50 mg BID cohort. Rapid clinical activity was observed in both dosing regimens, with some patients demonstrating responses by week one in both FricTest score (complete response score of zero) and pruritus-NRS (≥2-point decrease). 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients achieving a complete response (achieving a FricTest score of zero), of which 50% were IgE high. An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score, as described below. The population of subjects observed at four weeks does not include three patients who were unevaluable or lost to follow-up. Observed patients in the 300 mg QD cohort saw an average reduction of 1.4 points in FricTest score after four weeks and observed patients in the 50 mg BID cohort saw an average reduction of 1.5 points. By comparison, in separate, independent trials conducted by third parties, patients treated with 300 mg omalizumab saw a reduction of 1.4 points and patients treated with 300 mg barzolvolimab saw a reduction of 1.6 points in FricTest score after four weeks. Both the QD and BID regimens were observed to result in rapid and meaningful itch relief. Observed patients in the 300 mg QD cohort experienced an average reduction of 2.4 in pruritus-NRS, while those in the 50 mg BID cohort saw an average reduction of 2.1 points. Importantly, 93% (n=25) of observed patients demonstrated improvement at just four weeks in either FricTest or pruritus-NRS.

 

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Further, 75% (n=6) of those who did not achieve a decrease in FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response. EVO756 was observed to be well-tolerated at both dose levels, including the higher 300 mg QD dose. No SAEs were observed and there were no discontinuations due to adverse events (“AEs”).

In CSU, we initiated a Phase 2b dose-ranging trial in approximately 160 moderate-to-severe antihistamine-refractory CSU patients and expect initial data in the first half of 2026. This is a randomized, double-blind, placebo-controlled trial in which participants will receive one of three active dose regimens or placebo. The primary endpoint of the trial is change in a patient’s Urticaria Activity Score over seven days (“UAS7”) at 12 weeks. Beyond the primary endpoint, we are also evaluating other measures of disease, including itch, hive severity and angioedema.

In AD, we initiated a Phase 2b dose-ranging trial in moderate-to-severe AD patients in August 2025 and expect to report initial results in the second half of 2026. In addition, should EVO756 demonstrate a positive treatment effect on itch in the Phase 2b dose-ranging trial, we may subsequently evaluate its potential in other forms of inflammatory itch.

EVO301, Our SAFA IL-18BP Product Candidate

Our second clinical-stage product candidate, EVO301, is currently in Phase 2 development for the treatment of moderate-to-severe AD. In June 2024, we secured exclusive global rights to develop and commercialize EVO301 from AprilBio Co. Ltd. (Kosdaq: 397030), a biopharmaceutical company based in South Korea dedicated to developing specialized biologics and antibody drugs, after they progressed EVO301 through a Phase 1 trial.

IL-18 is a pro-inflammatory cytokine of the IL-1 family that not only regulates various immune processes that drive inflammation, but also acts as a potent modulator of ongoing inflammation. The IL-18 pathway is believed to play a role in the severity and progression of several large, highly prevalent chronic inflammatory disease populations with a significant number of uncontrolled patients, including AD and UC. We believe EVO301 has the potential to improve upon prior efforts by others to therapeutically neutralize IL-18.

EVO301 is a long-acting injectable SAFA-IL-18BP fusion protein consisting of a native human IL-18BP domain linked to a human Fab antibody fragment-targeting albumin, designed to neutralize the IL-18 inflammatory pathway. We believe this design, differentiated from mAbs targeting IL-18, potentially confers several advantages including improved activity, decreased immunogenicity and better distribution to sites of inflammation. Based on learnings from biologics targeting other inflammatory targets, we believe these benefits may provide faster onset of action and deliver comparable or better efficacy results to commercially available biologics while potentially offering better tolerability, durability, safety and more convenient dosing.

In a Phase 1 randomized, placebo-controlled SAD trial conducted in 31 healthy volunteers, EVO301 was observed to be well-tolerated at all doses tested, with no SAEs or discontinuations due to AEs. PK observations were favorable and support monthly dosing. We are conducting a Phase 2 randomized, double-blind, parallel group, placebo-controlled trial of EVO301 in approximately 60 adult patients with moderate-to-severe AD dosed on day 1 and day 29. The primary endpoint is percent change in Eczema Area and Severity Index score at week 12 and secondary endpoints include the Investigator Global Assessment, Body Surface Area and Pruritus Numerical Rating Scale. We expect to report initial data from this trial in the first half of 2026.

Beyond AD, we plan to initiate a Phase 2 trial in moderate-to-severe UC patients in 2026. After completion of this UC trial, we may also evaluate EVO301 in Crohn’s disease and additional indications for which regulating the IL-18 pathway may reduce pro-inflammatory mediators driving tissue damage and chronic inflammation.

 

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We believe EVO301’s distinct mechanism and modality complement those of EVO756, providing us with multiple potential avenues to bring innovative therapeutics to the large, underserved and rapidly expanding population of patients suffering from chronic inflammatory diseases.

Founding Members, Management Team and Investors

We were co-founded in 2020 by our Chief Executive Officer, Luis Peña, our Chief Medical Officer, Eugene A. Bauer, M.D., both highly experienced entrepreneurs and company builders in the biopharmaceutical industry, and Hans Hofland, Ph.D., our former Senior Vice President of Research. Prior to founding Evommune, Mr. Peña and Dr. Bauer were co-founders and executives at Dermira, Inc. (“Dermira”), until Dermira was acquired by Eli Lilly and Company for $1.1 billion in January 2020. We have built a seasoned leadership team that complements Mr. Peña’s and Dr. Bauer’s experience and skills and that has played critical roles in the successful discovery, development and commercialization of novel therapies. Importantly, our leadership team includes highly experienced and accomplished drug developers with significant depth of knowledge in immunology and inflammation. Collectively, our team members have held leadership roles at over 25 companies and have played key roles in the discovery and development of nearly 30 approved small molecules and biologics.

We are supported by leading life science investors with significant industry experience and expertise including Andera Partners, EQT Life Sciences, Pivotal bioVenture Partners, RA Capital Management and SymBiosis. Prospective investors should not rely on the investment decisions of our existing investors, as these investors may have different risk tolerances and in certain cases received their shares in prior offerings at prices lower than the price offered to the public in this offering. See the sections titled “Certain Relationships and Related Person Transactions” and “Principal Stockholders” for more information.

Our Mission and Strategy

Chronic inflammation is a significant healthcare problem in the world, substantially impacting patients’ daily quality of life, and if not prevented, ultimately leads to fatal diseases, such as cardiovascular diseases, diabetes and cancer, which contribute to three out of every five deaths worldwide. Our mission is to improve patients’ daily lives and prevent the long-term consequences of uncontrolled chronic inflammation, which often persist due to the limitations of existing therapies. By identifying and targeting critical gaps in treatment, we strive to transform the treatment landscape, developing therapies that have the potential to offer rapid symptom relief and provide safe, durable resolution of the underlying disease. We aim to achieve this by utilizing the following strategies:

 

  •  

maximize potential of EVO756 and EVO301 in a broad range of chronic inflammatory disease indications;

 

  •  

advance clinical development of EVO756 for the treatment of CSU and AD;

 

  •  

advance clinical development of EVO301 for the treatment of AD and UC;

 

  •  

expand our pipeline through internal drug discovery and development as well as selective in-licensing opportunities and strategic collaborations; and

 

  •  

commercialize our product candidates, if approved, to revolutionize the immunology and inflammation treatment paradigm.

Summary of Risks Associated with Our Business

Investing in our common stock involves significant risks. You should carefully consider the risks described in the section titled “Risk Factors” immediately following this prospectus summary and elsewhere in this prospectus before making a decision to invest in our common stock. If we are unable to successfully address these risks and challenges, our business, financial condition, results of operations or prospects could be

 

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materially and adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face.

 

  •  

We have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability. We have incurred net losses in every year since our inception. We expect to continue to incur net losses in the future.

 

  •  

We will need substantial additional funding in order to maintain our operations and advance the development and commercialization of our product candidates. Failure to obtain this necessary capital when needed, or on acceptable terms, may force us to delay, reduce or eliminate certain of our product development or research operations.

 

  •  

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential product candidates. These decisions may prove to have been wrong and may adversely affect our ability to develop our own programs, our attractiveness as a commercial partner and may ultimately have an adverse impact on our commercial success.

 

  •  

Preclinical and clinical drug development is a lengthy and expensive process, with uncertain timelines and outcomes. If preclinical studies or clinical trials of our product candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our therapeutic candidates or any of our future therapeutic candidates on a timely basis or at all.

 

  •  

Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates or any future product candidates, which would prevent or delay or limit the scope of regulatory approval and commercialization.

 

  •  

Our product candidates may be associated with serious adverse, undesirable or unacceptable side effects or other properties or safety risks, which may delay or halt their clinical development, prevent their marketing approval, or lead to limited market demand, if approved. If such side effects are identified during the development of our product candidates or following approval, we may suspend or abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval.

 

  •  

Our product candidates are subject to extensive regulatory and compliance obligations, which is costly and time-consuming and which may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.

 

  •  

We currently have no marketing, sales or distribution capabilities, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing, sales or distribution capabilities or enter into agreements with third parties to perform such activities, we may not be able to generate product revenue.

 

  •  

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

 

  •  

We rely on third-party manufacturers, contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and suppliers to supply, develop and test components of our product candidates. The loss of our third-party manufacturers, CROs, CDMOs or suppliers, their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, or changes in methods of product candidate manufacturing, development or formulation would materially and adversely affect our business.

 

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  •  

We are highly dependent on the services of our senior management team and if we are not able to retain members of our management team and recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

 

  •  

Our existing collaborations are, and our future collaborations may be, important to our business. If we are unable to enter into new collaborations, or, if our collaborations are not successful, our business could be adversely affected.

 

  •  

We have licensed intellectual property rights from third parties and may do so in the future. Such licenses may be subject to early termination if we fail to comply with our obligations in our licenses with third parties, which could result in the loss of rights or technology that are material to our business.

 

  •  

We may rely on one or more in-licenses from third parties. If we lose these rights, our business may be materially adversely affected, and if disputes arise with one or more licensors, we may be subject to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technologies covered by these license agreements.

Corporate Information

We were incorporated under the laws of the State of Delaware in April 2020 under the name “Evommune, Inc.” We have two wholly owned subsidiaries: Evommune Research, LLC and Evommune Biologics, LLC.

Our principal executive offices are located at 1841 Page Mill Road, Suite 100, Palo Alto, CA 94304, and our telephone number is (925) 247-4481. Our website address is www.evommune.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

As a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We may remain an EGC until the last day of the fiscal year in which the fifth anniversary of the closing of this offering occurs or such earlier time that we are no longer an EGC. If the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of June 30 of any year or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an EGC. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. We have elected to use the extended transition period for complying with new or revised accounting standards and will do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an EGC. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates.

We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even after we are no longer an EGC. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the

 

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fiscal year following the determination that (i) our voting and non-voting common stock held by non-affiliates is at least $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenues are at least $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is at least $700.0 million measured on the last business day of our second fiscal quarter.

 

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THE OFFERING

 

Common stock offered by us

  

    shares

Underwriters’ over-allotment option

  

We have granted the underwriters an option to purchase up to     additional shares of common stock from us, solely to cover over-allotments, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Common stock to be outstanding immediately after this offering

  


    shares (or     shares if the underwriters exercise their over-allotment option in full)

Use of proceeds

  

We estimate that the net proceeds from this offering will be approximately $    million, or $    million if the underwriters exercise in full their over-allotment option, assuming an initial public offering price of $    per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

We currently intend to use the net proceeds from this offering to fund the clinical development of our most advanced clinical-stage product candidate, EVO756, including to conduct our Phase 2/3 trials in CSU and AD, to fund the Phase 2 clinical development of our product candidate EVO301 in AD and the remainder, if any, for additional research and development activities, business development activities, working capital and other general corporate purposes. See the section entitled “Use of Proceeds” for additional information.

Risk factors

  

You should read carefully the section entitled “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in our common stock.

Directed share program

  

At our request, the underwriters have reserved up to  % of the shares offered by this prospectus for sale at the initial public offering price to certain individuals through a directed share program, including our directors, officers, employees and certain other individuals identified by management. The sales will be made at our direction by Morgan Stanley & Co. LLC and its affiliates through a directed share program. The number of shares of our common stock available for sale to the general public in this offering will be reduced to the extent that such persons purchase such reserved shares. Any reserved

 

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shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of our common stock offered by this prospectus. Except for any shares acquired by our directors and officers, shares purchased pursuant to the directed share program will not be subject to lock-up agreements with the underwriters. See the section titled “Underwriting” for additional information.

Proposed NYSE symbol

  

“EVMN”

The number of shares of our common stock to be outstanding after this offering is based on    shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock, as defined below, into    shares of common stock upon the closing of this offering and excludes:

 

  •  

31,741,410 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2025 under the 2020 Stock Plan (the “2020 Plan”) at a weighted-average exercise price of $0.36 per share;

 

  •  

3,728,809 shares of our common stock issuable upon the vesting of unvested restricted stock units outstanding as of June 30, 2025 under the 2020 Plan;

 

  •  

3,790,449 shares of our common stock underlying stock appreciation rights outstanding as of June 30, 2025;

 

  •  

    shares of our common stock issuable upon the exercise of options granted after June 30, 2025 pursuant to the 2020 Plan at a weighted-average exercise price of $    per share;

 

  •  

1,131,506 shares of our common stock reserved for future issuance under the 2020 Plan as of June 30, 2025;

 

  •  

    shares of our common stock reserved for future issuance under our 2025 Equity Incentive Plan (the “2025 Plan”), which will become effective in connection with this offering; and

 

  •  

    shares of our common stock reserved for future issuance under our 2025 Employee Stock Purchase Plan (the “ESPP”), which will become effective in connection with this offering.

Unless otherwise indicated, this prospectus reflects and assumes the following:

 

  •  

a 1-for-    reverse stock split of our common stock which was effected on    , 2025;

 

  •  

the automatic conversion of all outstanding shares of our Series Seed Preferred Stock, par value $0.0001 per share, Series A Preferred Stock, par value $0.0001 per share, Series B Preferred Stock, par value $0.0001 per share, and Series C Preferred Stock, par value $0.0001 per share (collectively, our “convertible preferred stock”), into an aggregate of 163,099,487 shares of our common stock immediately prior to the closing of this offering;

 

  •  

no exercise of the outstanding options or vesting of the outstanding restricted stock units described above;

 

  •  

no purchases of shares of our common stock by existing stockholders or their affiliates pursuant to the directed share program;

 

  •  

no exercise by the underwriters of their over-allotment option; and

 

  •  

the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur immediately prior to the closing of this offering.

 

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SUMMARY FINANCIAL DATA

You should read the following summary consolidated financial data together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. We have derived the statements of operations data for the years ended December 31, 2024 and 2023 from our consolidated financial statements appearing elsewhere in this prospectus. The following summary interim consolidated statements of operations data for the six months ended June 30, 2025 and 2024, and the summary interim consolidated balance sheet data as of June 30, 2025, have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected for any future period, and our results for any interim period are not necessarily indicative of results that may be expected for any full year. The summary consolidated financial data included in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

     Years Ended December 31,     (Unaudited)
Six Months Ended
June 30,
 
     2024     2023     2025     2024  

(in thousands, except for share and per share data)

        

Consolidated Statements of Operations Data:

        

Revenue

   $ 7,000     $ 5,000     $ 3,000     $ 7,000  

Operating expenses:

        

Research and development

     64,244       31,997       34,000       33,125  

General and administrative

     12,769       10,853       7,026       5,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     77,013       42,850       41,026       39,043  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (70,013 )      (37,850 )      (38,026 )      (32,043 ) 

Total other income

     3,205       3,797       9,904       1,877  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (66,808 )    $ (34,053 )    $ (28,122 )    $ (30,166 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Deemed dividend

     (1,500 )      —        —        —   

Net loss attributable to common stockholders

   $ (68,308 )    $ (34,053 )    $ (28,122 )    $ (30,166 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (5.32 )    $ (3.19 )    $ (2.15 )    $ (2.37 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average number of shares used in computing net loss per common share—basic and diluted(1)

     12,847,919       10,675,277       13,099,369       12,708,722  
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share—basic and diluted(2)

        
  

 

 

       

Weighted-average number of shares used in computing pro forma net loss per common share—basic and diluted(2)

        
  

 

 

       
 
(1)

See Note 2 to our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023 and Note 2 to our unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2025 and 2024 appearing elsewhere in this prospectus for details on the calculation of basic and diluted net loss per share attributable to common stockholders.

(2)

The pro forma basic and diluted net loss per share for the six months ended June 30, 2025 has been computed to give effect to the automatic conversion of all outstanding shares of our convertible preferred

 

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stock into 163,099,487 shares of common stock. The unaudited pro forma basic and diluted net loss per share for the six months ended June 30, 2025 was computed using the weighted average number of shares of common stock outstanding, including the pro forma effect of the conversion of all outstanding shares of our convertible preferred stock into shares of common stock as if the conversion had occurred on the later of the first day of the period presented or the original issuance dates of the respective convertible preferred stock.

 

     (Unaudited)
June 30, 2025
 
     Actual     Pro Forma(1)      Pro Forma
as Adjusted(2)
 
     (In thousands)  

Condensed Consolidated Balance Sheet Data:

       

Cash, cash equivalents and short-term investments

   $ 86,795     $            $        

Working capital(3)

     84,083       

Total assets

     96,210       

Total liabilities

     10,439       

Convertible preferred stock

     257,004       

Total stockholders’ (deficit) equity

   $ (171,233 )    $        $    
 
(1)

The pro forma balance sheet data give effect to the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 163,099,487 shares of our common stock upon the closing of this offering.

(2)

The pro forma as adjusted balance sheet data give further effect to our issuance and sale of shares of our common stock in this offering at the initial public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, for proceeds of $    million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

We define working capital as current assets less current liabilities. See our consolidated financial statements and related notes included at the end of this prospectus for further details regarding our current assets and current liabilities.

The pro forma as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term investments, working capital, total assets and total stockholders’ (deficit) equity by $    , 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. An increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term investments, working capital, total assets and total stockholders’ (deficit) equity by $    , assuming no change in the assumed initial public offering price of $     per share.

 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. Before deciding to invest in shares of our common stock, you should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including our consolidated financial statements and their related notes included elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may materially and adversely affect our business, prospects, operating results and financial condition.

Risks Related to Our Limited Operating History, Financial Position and Capital Requirements

We have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability. We have incurred net losses in every year since our inception. We expect to continue to incur net losses in the future.

We are a clinical-stage biotechnology company with a limited operating history. Since our inception in 2020, we have invested most of our resources in developing our product candidates, building our intellectual property portfolio, conducting business planning, organizing and staffing our company, raising capital, conducting preclinical studies and, more recently, clinical trials and providing general and administrative support for these operations. Biopharmaceutical product development is a highly speculative undertaking, involving substantial upfront capital expenditure and significant risk. Any product candidate may fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval or become commercially viable, despite substantial investment on development or commercialization. To date, Evommune has not yet demonstrated its ability to successfully obtain regulatory approvals, manufacture a product on a commercial scale, or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if Evommune had a longer operating history or a history of successfully developing and commercializing biopharmaceutical products. We continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each year since our inception. For the years ended December 31, 2024 and 2023, we had net losses of $66.8 million and $34.1 million, respectively. For the six months ended June 30, 2025, we had a net loss of $28.1 million. As of June 30, 2025, we had an accumulated deficit of $180.3 million. We expect to continue to incur significant losses for the foreseeable future and expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our two clinical-stage product candidates, EVO756 and EVO301, along with any future product candidates we may develop.

We anticipate that our expenses will increase substantially if, and as, we:

 

  •  

continue the research and development of our clinical- and preclinical-stage product candidates and discovery-stage programs, including the continued development of our most advanced product candidates, EVO756 and EVO301;

 

  •  

increase the amount of research and development activities to identify and develop product candidates to advance into clinical trial development;

 

  •  

make milestone, royalty or other payments under in-license or collaboration agreements;

 

  •  

maintain, expand and protect our intellectual property portfolio;

 

  •  

expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts;

 

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  •  

establish sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with third parties;

 

  •  

address any competing therapies and market developments;

 

  •  

incur additional costs associated with operating as a public company following the closing of this offering;

 

  •  

acquire or in-license other technologies; and

 

  •  

experience any delays or encounter any issues with any of the above, including but not limited to failed studies or trials, complex results, manufacturing challenges, safety issues or other regulatory challenges.

To become and remain profitable, we and any potential future collaborators must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials, manufacturing our product candidates, either on our own or with contract development and manufacturing organizations (“CDMOs”), obtaining marketing approval for product candidates, marketing and selling any products for which we may obtain marketing approval and satisfying any post-marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our future results of operations will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.

We will need substantial additional funding in order to maintain our operations and advance the development and commercialization of our product candidates. Failure to obtain this necessary capital when needed, or on acceptable terms, may force us to delay, reduce or eliminate certain of our product development or research operations.

The development of biopharmaceutical product candidates, including conducting preclinical studies and clinical trials, is a time-consuming, capital-intensive and uncertain process. Our operations have consumed substantial amounts of cash since inception. To date, we have funded our operations primarily with proceeds from the sale of our convertible preferred stock. We expect our expenses to increase in connection with our ongoing activities, particularly as we advance our Phase 2 trials of EVO756 and EVO301, and continue to research, develop and initiate clinical trials of any other future product candidates. In addition, if we successfully develop and obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our product development programs or any future commercialization efforts.

As of June 30, 2025, we had cash, cash equivalents and short-term investments of approximately $86.8 million. Based on current operating assumptions, we expect that our existing cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements     . We have based this estimate on assumptions that may prove to be wrong, and we

 

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could use our capital resources sooner than we currently expect. Future capital requirements for EVO756 and EVO301 or any of our other product development programs will depend on many factors, including:

 

  •  

the progress, timing and completion of preclinical studies and clinical trials for our current or any future product candidates, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to disease outbreaks, epidemics and pandemics or other causes;

 

  •  

the timing and amount of milestone and royalty payments we are required to make or are eligible to receive under our license agreements with Dermira, Inc. (“Dermira”), Maruho Co., Ltd. (“Maruho”), AprilBio Co. Ltd. (“AprilBio”) and any future license or collaboration agreements;

 

  •  

the number and characteristics of potential new product candidates we identify and decide to develop;

 

  •  

the need for additional or expanded preclinical studies and clinical trials beyond those that we plan to conduct with respect to our current and future product candidates;

 

  •  

the cost involved in growing the organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates;

 

  •  

the costs involved in filing patent applications, maintaining and enforcing patents or defending against infringement or other claims raised by third parties;

 

  •  

the maintenance of our existing license and collaboration agreements and the entry into new license and collaboration agreements;

 

  •  

the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates;

 

  •  

the effect of competing technological and market developments;

 

  •  

the cost and timing of completion of commercial-scale outsourced manufacturing activities;

 

  •  

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own;

 

  •  

the cost associated with manufacturing and supply of our product candidates;

 

  •  

the cost associated with operating as a public company;

 

  •  

the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our product candidates, if approved; and

 

  •  

market acceptance of any approved product candidates.

We do not have any committed external source of funds or other support for our development efforts and we cannot be certain that additional funding will be available on acceptable terms or at all. Until we can generate sufficient product or other revenue to finance our cash requirements, which we may never achieve, we expect to finance our future cash requirements through a combination of equity offerings, debt financings or other capital sources, including potential collaborations, out-licenses or dispositions and other similar arrangements.

Our ability to raise additional funds will depend on financial, economic and market conditions and other factors, over which we may have no or limited control. Market volatility resulting from geopolitical and economic instability, including as a result of trade policy, inflation and the wars between Russia and Ukraine and in the Middle East or other factors could also adversely impact our ability to access capital as and when needed. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate the development or commercialization of all or part of our research programs or product candidates or we may be unable to take advantage of future business opportunities.

 

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Raising additional capital may cause dilution to our stockholders and may restrict our operations or require us to relinquish rights to our product candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, out-licenses or dispositions and other similar arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect the rights of our stockholders. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights.

If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish certain valuable rights to our intellectual property, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our clinical development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential product candidates. These decisions may prove to have been wrong and may adversely affect our ability to develop our own programs, our attractiveness as a commercial partner and may ultimately have an adverse impact on our commercial success.

Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward our product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the biotechnology industry, in particular for our most advanced product candidates, EVO756 and EVO301, our business, financial condition and results of operations could be materially adversely affected.

Risks Related to Discovery, Development and Regulatory Approval of Product Candidates

Preclinical and clinical drug development is a lengthy and expensive process, with uncertain timelines and outcomes. If preclinical studies or clinical trials of our product candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our therapeutic candidates or any of our future therapeutic candidates on a timely basis or at all.

Successful development of pharmaceutical products involves a lengthy and expensive process, is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Product candidates that appear promising in the early phases of development may fail to reach the market for several reasons, including:

 

  •  

clinical trial results may show the product candidates to be less effective than expected (for example, a clinical trial could fail to meet its primary or key secondary endpoint(s)) or have an unacceptable or unexpected safety profile;

 

  •  

failure to receive the necessary regulatory approvals or a delay in receiving such approvals, which, among other things, may be caused by patients who fail the trial screening process, slow enrollment in clinical trials, patients dropping out of trials, patients lost to follow-up, length of time to achieve trial

 

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endpoints, additional time requirements for data analysis or marketing application preparation, discussions with the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”) or other comparable foreign regulatory authorities, including FDA, EMA or other comparable foreign regulatory authorities requesting additional preclinical or clinical data (such as long-term toxicology studies), or encountering unexpected safety or manufacturing issues;

 

  •  

preclinical study results may show the product candidate to be less effective than desired or to have harmful on-target or off-target side effects; imposition of extensive post-marketing approval requirements; or

 

  •  

the proprietary rights of others and their competing products and technologies that may prevent our product candidates from being commercialized.

Furthermore, the length of time necessary to complete clinical trials and submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one product candidate to the next and from one country or jurisdiction to another and may be difficult to predict. Even if we are successful in obtaining marketing approval, commercial success of any approved products will also depend in large part on the availability of coverage and adequate reimbursement from third-party payors, including government payors such as the Medicare and Medicaid programs and managed care organizations in the United States or country-specific governmental organizations in foreign countries, which may be affected by existing and future healthcare reform measures designed to reduce the cost of healthcare. Third-party payors could require us to conduct additional studies, including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and divert our resources. If government and other healthcare payors were not to provide coverage and adequate reimbursement for our products once approved, market acceptance and commercial success would be reduced. Even if we are able to obtain coverage and adequate reimbursement for our products once approved, there may be features or characteristics of our products, such as dose preparation requirements, that prevent our products from achieving market acceptance by the healthcare or patient communities.

In addition, if any of our product candidates receive marketing approval, we will be subject to significant regulatory obligations regarding the submission of safety and other post-marketing information and reports and registration and will need to continue to comply (or ensure that our third-party providers comply) with current Good Manufacturing Practice (“cGMPs”) and Good Clinical Practice (“GCPs”) for any clinical trials that we conduct post-approval. In addition, there is the risk that we, a regulatory authority or a third party might identify previously unknown problems with a product post-approval, such as adverse events (“AEs”) of unanticipated severity or frequency. Compliance with these requirements is costly, and any failure to comply or other issues with our product candidates post-approval could adversely affect our business, financial condition and results of operations.

Disruptions at the FDA and other government agencies caused by funding shortages or layoffs could hinder their ability to hire, retain or deploy key leadership and other personnel or otherwise prevent product candidates from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA and applicable foreign authorities to review and approve new product candidates can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees and statutory, regulatory and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and approved by necessary government agencies, which would adversely affect our business. For example, over

 

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the last several years, the U.S. government shut down several times and certain regulatory agencies, such as the FDA, furloughed or laid off critical employees and ceased critical activities. If a prolonged government shutdown or disruption occurs, it could significantly impact the ability of the FDA and applicable foreign authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. In addition, such issues could also prevent the FDA or applicable foreign authorities from conducting their regular inspections, reviews or other regulatory activities, which in turn could significantly impact the ability of such authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates or any future product candidates, which would prevent or delay or limit the scope of regulatory approval and commercialization.

To obtain the requisite regulatory approvals to market and sell any of our product candidates, including EVO756, EVO301 and any other future product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective for use in each targeted indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing. Further, the process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications, patient population and regulatory agency. Prior to obtaining approval to commercialize EVO756, EVO301 and any future product candidates in the United States or abroad, we or our potential future collaborators must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses.

Clinical trials that we conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. If the results of our ongoing or future clinical trials are inconclusive with respect to the efficacy of our product candidates, if we do not meet the clinical endpoints with statistical and clinically meaningful significance, or, if there are safety concerns associated with our product candidates, we may be delayed in obtaining marketing approval, if at all. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications.

Even if the trials are completed to our satisfaction, clinical data are often susceptible to varying interpretations and analyses or may not provide a sufficient risk-benefit ratio, and we cannot guarantee that the FDA or comparable foreign regulatory authorities will interpret the results as we do or find a risk-benefit ratio for a proposed indication acceptable, and more trials could be required before we submit our product candidates for approval. We cannot guarantee that the FDA or comparable foreign regulatory authorities will view our product candidates as having efficacy even if we believe results observed in clinical trials are positive. Moreover, results acceptable to support approval in one jurisdiction may be deemed inadequate by another regulatory authority to support regulatory approval in that other jurisdiction. To the extent that the results of the trials are not satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing application, approval of EVO756, EVO301 and any future product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials

 

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in support of potential approval of our product candidates. Even if regulatory approval is secured for a product candidate, the terms of such approval may limit the scope and use of the specific product candidate, which may also limit our commercial potential.

The results of preclinical studies and early-stage clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials or results in other indications. Initial positive results in our clinical trials may not be indicative of results obtained when these trials are completed or in later-stage trials.

The results of preclinical studies and early-stage clinical trials may not be predictive of the results of later-stage clinical trials, and results in one indication may not predict results for the same product candidate in another indication. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Furthermore, there can be no assurance that any of our clinical trials will ultimately be successful or support further clinical development of any of our product candidates. There is a high failure rate for product candidates proceeding through clinical trials. Many companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development and any such setbacks in our clinical development could have a material adverse effect on our business and operating results. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in preclinical studies and clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain regulatory approval. Further, negative clinical trial results for a product candidate with respect to one indication may impact the potential or perceived potential of other indications. If our product candidates fail to demonstrate satisfactory characteristics in late-stage clinical trials, it could have a material adverse effect on our business, financial condition and results of operations.

Our product candidates may be associated with serious adverse, undesirable or unacceptable side effects or other properties or safety risks, which may delay or halt their clinical development, prevent their marketing approval or lead to limited market demand, if approved. If such side effects are identified during the development of our product candidates or following approval, we may suspend or abandon our development of such product candidates, the commercial profile of any approved label may be limited or we may be subject to other significant negative consequences following marketing approval.

Undesirable side effects that may be caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. While our most advanced product candidates, EVO756 and EVO301, have generally been observed to be well tolerated in their preclinical studies and clinical trials to date, the results from future preclinical studies and clinical trials, including of our other product candidates, may identify safety concerns or other undesirable properties of our product candidates.

The results of our ongoing Phase 2 trials of EVO756 and EVO301 and future clinical trials of these and other product candidates may show that our product candidates cause undesirable or unacceptable side effects or even death. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. Furthermore, we may be required to expend time and incur costs to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Any of these occurrences may harm our business, financial condition and results of operations significantly.

Moreover, if our product candidates are associated with undesirable side effects in preclinical studies or clinical trials or have characteristics that are unexpected, we may elect to abandon their development or limit

 

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their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for the product candidate, if approved.

Additionally, adverse developments in clinical trials of pharmaceutical and biopharmaceutical products conducted by others may cause the FDA or other regulatory oversight bodies to suspend or terminate our clinical trials or to change the requirements for approval of any of our product candidates. For example, immunogenicity is a concern for all protein therapeutics in human clinical trials, and immunogenic reactions in patients in our trials may lead to adverse effects and impact exposure, which in turn may lead to protocol amendments, clinical holds or other actions that delay or significantly impact the prospects for our product candidates.

Additionally, if any of our product candidates receive marketing approval and we or others later identify undesirable or unacceptable side effects caused by such products, a number of potentially significant negative consequences could result, including:

 

  •  

regulatory authorities may withdraw approvals of such product and require us to take such approved product off the market;

 

  •  

regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;

 

  •  

regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients or that we implement a risk evaluation and mitigation strategy (“REMS”) plan to ensure that the benefits of the product outweigh its risks;

 

  •  

we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;

 

  •  

we may be subject to limitations on how we may promote the product;

 

  •  

we may suspend or abandon our development of the product;

 

  •  

sales of the product may decrease significantly;

 

  •  

we may be subject to litigation or product liability claims; and

 

  •  

our reputation may suffer.

Any of these events could prevent us or our potential future partners from achieving or maintaining market acceptance of the affected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our product candidates, if approved.

Interim, top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. Data from our clinical trials reported as of a measurement date may not be predictive of the effect, if any, of our product candidates at any later measurement date.

From time to time, we may publish interim, top-line or preliminary data from our clinical trials. Preliminary and interim data from our clinical trials may change as more patient data become available. Preliminary or interim data from our clinical trials are not necessarily predictive of final results. Preliminary and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues, more patient data become available and we issue our final clinical trial report. Interim, top-line and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary, top-line and interim data should be viewed with caution until the final data are available. Moreover, in connection with any data that is presented, caution should be exercised in drawing any conclusions from a comparison of data that does not come from head-to-head analysis. Material differences in the final data compared to the interim data could significantly harm our business prospects.

 

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Additionally, data from a clinical trial as of any measurement date are only reflective of observations in such clinical trial at such date and should not be unduly used to predict any effect at a later measurement date. For example, in our Phase 2 trial of EVO756 in CIndU, we reported observations after four weeks of dosing. It is not possible to accurately predict what impact EVO756 would have had in this trial’s subjects at any subsequent date.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could delay or prevent regulatory approval of, or limit commercial prospects for, the particular product candidate and harm our business prospects. In addition, the information we choose to publicly disclose regarding a particular preclinical study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine to include in our public disclosure. If the preliminary and interim data that we report differ from actual results or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, which could adversely affect our business, operating results and prospects.

Patient enrollment and retention in clinical trials is a significant factor in the timing of clinical trials and depends on many factors, including the size and nature of the patient population, the eligibility criteria for the clinical trial, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number, nature and duration of competing treatments and ongoing clinical trials of competing drugs for the same indication and the proximity of patients to clinical trial sites. As we progress our programs, we may not be able to initiate or continue clinical trials for any product candidates we identify or develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA, EMA or other comparable foreign authorities or as needed to provide appropriate statistical power for a given trial. Potential patients for any planned clinical trials may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for such trials. We also may encounter difficulties in identifying and enrolling patients with a stage of disease appropriate for our planned clinical trials and monitoring such patients adequately during and after treatment. Other pharmaceutical companies targeting these same diseases are recruiting clinical trial patients from these patient populations, which may make it more difficult to fully enroll our clinical trials.

In addition, we compete for trial participants with other clinical trials for product candidates that are in the same areas as our product candidates, which could reduce the number and types of participants available to us and could affect the timing and cost of our clinical trials. For example, some participants who might have opted to enroll in our clinical trials may instead opt to enroll in a clinical trial being conducted by one of our competitors or to use currently marketed therapies. Delay in recruiting clinical trial participants could adversely affect our ability to bring a product to market prior to our competitors and increase trial costs. Further, research and discoveries by others may result in breakthroughs that render our product candidates obsolete even before they begin to generate any revenue.

The eligibility criteria of our clinical trials, once established, may further limit the pool of available trial participants. If the actual number of patients that meet such criteria is smaller than we anticipate, we may encounter difficulties in enrolling patients in our clinical trials, thereby delaying or preventing development and approval of our product candidates. Even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials.

Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials. In addition, any negative results we may report in clinical trials of a product candidate may make it difficult or impossible to recruit and retain patients in other clinical trials of that same product candidate or other product candidates. Delays or failures in planned patient

 

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enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates or could render further development impossible. Further, if patients drop out of our clinical trials, miss scheduled doses or follow-up visits or otherwise fail to follow clinical trial protocols, the integrity of data from our clinical trials may be compromised or not accepted by the FDA, EMA or other comparable foreign regulatory authorities, which would represent a significant setback for the applicable program. We have in the past and may in the future experience participant withdrawals or discontinuations from our clinical trials. Withdrawal of participants from our clinical trials may compromise the quality of our data. In addition, we may rely on contract research organizations (“CROs”) and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance. Such delays or failures could adversely affect our business, operating results and prospects.

If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our therapeutics may be delayed and, as a result, our stock price may decline.

From time to time, we estimate the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial or the initiation of other clinical programs. All of these milestones are and will be based on numerous assumptions, including:

 

  •  

our available capital resources or capital constraints we experience;

 

  •  

the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators;

 

  •  

our ability to identify and enroll patients who meet clinical trial eligibility criteria;

 

  •  

our receipt of approvals by the FDA, EMA and other comparable foreign regulatory authorities and the timing thereof;

 

  •  

other actions, decisions or rules issued by regulators;

 

  •  

our ability to access sufficient, reliable and affordable supplies of materials used to manufacture our product candidates;

 

  •  

the securing of, costs related to and timing issues associated with, product manufacturing as well as sales and marketing activities; and

 

  •  

securing product reimbursement.

The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. If we do not meet these milestones as publicly announced, or at all, the commercialization of our product candidates may be delayed or never achieved and, as a result, our stock price may decline.

Obtaining and maintaining marketing approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining marketing approval of our product candidates in other jurisdictions.

Obtaining and maintaining marketing approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction. For example, even if the FDA grants marketing approval of a product candidate, it does not mean that comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion and reimbursement of the product candidate in those countries. However, a failure or delay in obtaining marketing approval in one jurisdiction may negatively impact the marketing approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.

 

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In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign marketing approvals and establishing and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we or any future collaborator fail to comply with the regulatory requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed, which would adversely affect our business, prospects, financial condition and results of operations.

Our product candidates are subject to extensive regulatory and compliance obligations, compliance with which is costly and time-consuming and which may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.

The research, clinical development, testing, quality control, safety, effectiveness, manufacturing, labeling, packaging, storage, record-keeping, advertising, promotion, marketing, import, export, distribution, post-approval monitoring and post-approval reporting of our product candidates are subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in foreign markets. In the United States, neither we nor any future collaborators are permitted to market our product candidates until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. Approval policies or regulations may change, new relevant statutes or regulations may be enacted, and the FDA, EMA and other comparable foreign regulatory authorities have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our potential future collaborators must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA, EMA or other comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA, EMA and other comparable foreign regulatory authorities, which could require us to delay or abandon clinical development plans.

In addition, regulatory authorities may require us to conduct further preclinical studies before evaluating our product candidate in a clinical trial. Once we initiate clinical trials, the FDA, EMA or other comparable foreign regulatory authorities may require additional clinical trials or suggest changes to our planned clinical trials, prior to and in support of the approval of a marketing application. Changes to data requirements by the FDA, EMA or other comparable foreign regulatory authorities during the development of our product candidates may cause the applicable regulatory authorities to require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or regulatory authorities may object to elements of our clinical development program.

The FDA, EMA or other comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including:

 

  •  

such authorities may disagree with the design or implementation of our clinical trials;

 

  •  

results from our clinical trials may not be sufficient for approval;

 

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  •  

serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;

 

  •  

the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

 

  •  

such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;

 

  •  

we may be unable to demonstrate that a product candidate is safe and effective, and that a product candidate’s clinical and other benefits outweigh its safety risks;

 

  •  

such authorities may disagree with our interpretation or analysis of data from preclinical studies or clinical trials, such authorities may not agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support a submission to obtain regulatory approval in the United States or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials;

 

  •  

such authorities may disagree regarding the formulation, labeling or the specifications of our product candidates;

 

  •  

approval may be granted only for indications that are significantly more limited than what we apply for or with other significant restrictions on distribution and use;

 

  •  

such authorities may find deficiencies in the manufacturing processes, approval policies or facilities of our third-party manufacturers with which we or any of our current or future collaborators contract for clinical and commercial supplies; or

 

  •  

the approval policies or regulations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators’ clinical data insufficient for approval.

With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased cautiousness by the FDA, EMA and other comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us or any of our potential future collaborators from commercializing our product candidates.

Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

We may develop our current or future product candidates in combination with other therapies, which would expose us to additional risks.

We may develop our current or potential future product candidates in combination with one or more currently approved therapies or therapies in development. Even if any of our current or future product candidates were to receive marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA, EMA or other comparable foreign regulatory authorities could revoke approval of the therapy used in combination with any of our product candidates, or safety, efficacy, manufacturing or supply issues could arise with these existing therapies. In addition, it is possible that existing therapies with which our product candidates are approved for use could themselves fall out

 

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of favor or be relegated to later lines of treatment. This could result in the need to identify other combination therapies for our product candidates or our own products being removed from the market or being less successful commercially.

We may also evaluate our current or future product candidates in combination with one or more other therapies that have not yet been approved for marketing by the FDA, EMA or other comparable foreign regulatory authorities. We will not be able to market and sell any product candidate in combination with any such unapproved therapies that do not ultimately obtain marketing approval.

Furthermore, we cannot be certain that we will be able to obtain a steady supply of such therapies for use in developing combinations with our product candidates on commercially reasonable terms or at all. Any failure to obtain such therapies for use in clinical development and the expense of purchasing therapies in the market may delay our development timelines, increase our costs and jeopardize our ability to develop our product candidates as commercially viable therapies. If the FDA, EMA or other comparable foreign regulatory authorities do not approve or withdraw their approval of these other therapies, or, if safety, efficacy, commercial adoption, manufacturing or supply issues arise with the therapies we choose to evaluate in combination with any of our current or future product candidates, we may be unable to obtain approval of or successfully market any one or all of the current or future product candidates we develop. Additionally, if the third-party providers of therapies or therapies in development used in combination with our current or future product candidates are unable to produce sufficient quantities for clinical trials or for commercialization of our current or future product candidates, or, if the cost of combination therapies are prohibitive, our development and commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.

The FDA and any comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.

Outside of the United States, we are presently conducting or plan to conduct clinical trials in Australia, New Zealand, Japan, Canada and the EU, and will likely choose to conduct additional international clinical trials in the future. The acceptance of trial data by the FDA or any comparable foreign regulatory authority from clinical trials conducted outside of their respective jurisdictions may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice, (ii) the trials are performed by clinical investigators of recognized competence and pursuant to compliance with current GCP requirements and (iii) the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including the adequacy of the patient population studied and statistical powering, must be met. In addition, such foreign trials are subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any applicable foreign regulatory authority will accept data from trials conducted outside of its applicable jurisdiction. If the FDA or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval for commercialization in the applicable jurisdiction.

Conducting trials outside the United States also exposes us to additional risks, including risks associated with:

 

  •  

additional foreign regulatory requirements;

 

  •  

foreign exchange fluctuations;

 

  •  

compliance with foreign manufacturing, customs, shipment and storage requirements;

 

  •  

cultural differences in medical practice and clinical research;

 

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  •  

diminished protection of intellectual property in some countries; and

 

  •  

interruptions or delays in our trials resulting from geopolitical events, such as war or terrorism.

Risks Related to Commercialization, Marketing and Competition of Our Product Candidates

We currently have no marketing, sales or distribution capabilities, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing, sales or distribution capabilities or enter into agreements with third parties to perform such activities, we may not be able to generate product revenue.

We currently have no marketing, sales or distribution capabilities, nor has Evommune as a company commercialized a product, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing, sales or distribution capabilities or enter into agreements with third parties to perform such activities, we may not be able to generate product revenue. If any of our product candidates ultimately receives marketing approval, we will be required to build a marketing and sales organization with technical expertise and supporting distribution capabilities to commercialize each such product in the markets that we target, which will be expensive and time-consuming, or to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. Evommune has no prior experience as a company in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Furthermore, we are currently developing product candidates for multiple indications in different medical specialties, which will require us to build different sales and marketing capabilities that are tailored to a given product or medical specialty. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. We may not be able to enter into collaborations or hire consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable financial terms, or at all. In addition, our product revenues and our profitability, if any, may be lower if we rely on third parties for these functions than if we were to market, sell and distribute any products that we develop ourselves. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. If we are not successful in commercializing our products, either on our own or through arrangements with one or more third parties, we may not be able to generate any future product revenue and we would incur significant additional losses.

If the market opportunities for any of our product candidates, if approved, are smaller than we estimate, our revenue may be adversely affected, and our business may suffer.

The precise incidence and prevalence for all the conditions we aim to address with our product candidates are unknown. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, third party reports, patient foundations and market research, and may prove to be incorrect. Further, new information may change the estimated incidence or prevalence of these diseases. The total addressable market across our product candidates will ultimately depend upon, among other things, the diagnosis criteria included in the final label for each of our product candidates approved for sale for these indications, the availability of alternative treatments and the safety, convenience, cost and efficacy of our product candidates relative to such alternative treatments, acceptance by the medical community and patient access, drug pricing and

 

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reimbursement. The number of patients in the United States and other major markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our product candidates or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

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

The biotechnology and pharmaceutical industries are characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly as they develop novel approaches to treating disease indications that our product candidates are also focused on treating. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products. We believe the key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.

We anticipate that we will continue to face intense and increasing competition as new treatments enter the market and advanced technologies become available. There can be no assurance that our competitors are not currently developing, or will not in the future develop, products that are equally or more effective or are more economically attractive than any of our current or future product candidates. Competing products may gain faster or greater market acceptance than our products, if any, and medical advances or rapid technological development by competitors may result in our product candidates becoming non-competitive or obsolete before we are able to recover our research and development and commercialization expenses. If we or our product candidates do not compete effectively, we may suffer a material adverse effect on our business, financial condition and results of operations.

Even if a product candidate we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. The revenues that we generate from our sales may be limited, and we may never become profitable.

As a company, we have never commercialized a product. Even if our product candidates are approved by the appropriate regulatory authorities for marketing and sale, they may not gain acceptance among physicians, patients, third-party payors and others in the medical community. If any product candidates for which we obtain regulatory approval do not gain an adequate level of market acceptance, we could be prevented from, or significantly delayed in, achieving profitability. Market acceptance of our product candidates by the medical community, patients and third-party payors will depend on a number of factors, some of which are beyond our control. For example, physicians are often reluctant to switch their patients to new treatments and patients may be reluctant to switch from existing therapies even when new and potentially more effective or safer treatments enter the market.

 

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Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If any of our product candidates are approved but do not achieve an adequate level of market acceptance, we could be prevented from or significantly delayed in achieving profitability. The degree of market acceptance of any product for which we receive marketing approval will depend on a number of factors, including:

 

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the clinical indications for which our product candidates are approved;

 

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physicians, hospitals and patients considering our product candidates as a safe and effective treatment;

 

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the potential and perceived advantages of our product candidates over alternative treatments;

 

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the prevalence and severity of any side effects;

 

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product labeling or product insert requirements of the FDA or comparable foreign regulatory authorities, including any limitations or warnings;

 

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the timing of market introduction of our product candidates in relation to other potentially competitive products;

 

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the cost of our product candidates in relation to alternative treatments;

 

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the amount of upfront costs or training required for physicians to administer our product candidates;

 

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the availability of coverage and adequate reimbursement from third-party payors and government authorities;

 

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the willingness of patients to pay out-of-pocket in the absence of comprehensive coverage and reimbursement by third-party payors and government authorities;

 

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the relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies;

 

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the effectiveness of our sales and marketing efforts and distribution support; and

 

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the presence or perceived risk of potential product liability claims.

Even if we are able to commercialize any product candidate, the third-party payor coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to market those products and decrease our ability to generate revenue.

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors in the United States are essential for most patients to be able to afford treatments such as our products or product candidates, if approved. Our ability to achieve acceptable levels of coverage and reimbursement for drug treatments by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our products and potentially attract additional collaboration partners to invest in the development of our product candidates. We cannot be sure that adequate coverage and reimbursement in the United States or elsewhere will be available for our products or any products that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future. For more information, see the section titled “Business—Government Regulation—Coverage and Reimbursement.”

Third-party payors increasingly are challenging prices charged for pharmaceutical products, medical devices and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug is available. It is possible that a third-party payor may consider our products or product candidates, if approved, and the generic or biosimilar parent drug as substitutable and only offer to reimburse patients for the generic drug. Even if we show improved efficacy or safety or improved

 

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convenience of administration with our products or product candidates, if approved, pricing of the existing parent drug may limit the amount we will be able to charge for such product. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products or product candidates and may not be able to obtain a satisfactory financial return on products that we may develop.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs, biologics and medical devices will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs, biologics and medical devices. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our products or product candidates.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our products and product candidates, if approved, and on related parent drugs. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Many countries, including the European Union (“EU”) Member States, established complex and lengthy procedures to obtain price approvals, coverage and reimbursement. These procedures vary from country to country but are commonly initiated after grant of the related marketing authorization. More particularly, in the EU, potential reductions in prices and changes in reimbursement levels could be the result of different factors, including reference pricing systems. It could also result from the application of external reference pricing mechanisms, which consist of arbitrage between low-priced and high-priced countries. Reductions in the pricing of our medicinal products in one EU Member State could affect the price in other EU Member States and, thus, have a negative impact on our financial results. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products or product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits. As an example, many EU Member States review periodically their decisions concerning the pricing and reimbursement of medicinal products. The outcome of these reviews cannot be predicted and could have adverse effects on the pricing and reimbursement of our medicinal products in the EU Member States.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our products or product candidates. We expect to experience pricing pressures in connection with the sale of our products and product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes or executive orders. The downward pressure on healthcare costs in general, particularly prescription drugs, medical devices and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

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

Even if we obtain any marketing approval for our current or any future product candidates, such approvals will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising,

 

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promotion, sampling, record-keeping and submission of safety and other post-market information. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as on-going compliance with cGMPs and GCPs, for any clinical trials that we may conduct post-approval. Any marketing approvals that we receive for our current or future product candidates may also be subject to a REMS, limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval or contain requirements for potentially costly post-marketing testing, including Phase 4 trials and surveillance to monitor the quality, safety and efficacy of the drug.

In addition, biopharmaceutical manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the marketing application. If we or a regulatory authority discover previously unknown problems with a product, such as AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requesting a recall or requiring withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements following approval of our current or future product candidates, a regulatory authority may, among other things:

 

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issue an untitled letter or warning letter asserting that we are in violation of the law;

 

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seek an injunction or impose administrative, civil or criminal penalties or monetary fines;

 

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suspend or withdraw marketing approval;

 

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suspend any ongoing clinical trials;

 

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refuse to approve a pending marketing authorization application or supplement submitted by us or our strategic partners;

 

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restrict or suspend the marketing or manufacturing of the drug;

 

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seize or detain the drug or otherwise require the withdrawal of the drug from the market;

 

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refuse to permit the import or export of product candidates; or

 

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refuse to allow us to enter into supply contracts, including government contracts.

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

The FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could cause changes to or delays in the drug review process or suspend or restrict marketing approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the

 

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United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability, which would harm our business, financial condition, results of operations and prospects.

Our future growth may depend, in part, on our ability to commercialize products in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future growth may depend, in part, on our ability to develop and commercialize our product candidates in foreign markets. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from applicable regulatory authorities in foreign markets, and we may never receive such regulatory approvals for any of our product candidates. To obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our product candidates. If we obtain regulatory approval of our product candidates and ultimately commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including:

 

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different regulatory requirements for approval of drugs in foreign countries;

 

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reduced protection for intellectual property rights;

 

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the existence of additional third-party patent rights of potential relevance to our business;

 

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unexpected changes in tariffs, trade barriers and regulatory requirements;

 

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economic weakness, including inflation, or political instability in particular foreign economies and markets;

 

  •  

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 

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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

 

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foreign reimbursement, pricing and insurance regimes;

 

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workforce uncertainty in countries where labor unrest is common;

 

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

 

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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

Risks Related to Our Business and Operations, Employee Matters and Managing Growth

If our information technology systems or those of third parties with whom we work or our data, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions, litigation, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits and other adverse consequences.

In the ordinary course of our business, we and the third parties with whom we work process sensitive data, including personal data (such as health-related data). Cyber-attacks, malicious internet-based activity, online and offline fraud and other similar activities threaten the confidentiality, integrity and availability of our sensitive data and information technology systems and those of the third parties with whom we work. Such threats are prevalent and continue to rise, are increasingly difficult to detect and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states and nation-state-supported actors.

 

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Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, the third parties with whom we work, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our goods and services.

We and the third parties with whom we work are subject to a variety of evolving threats, including social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, inability to provide our products or services, loss of sensitive data and income, reputational harm and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

It may be difficult and costly to detect, investigate, mitigate, contain and remediate a security incident. Our efforts to do so may not be successful. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain and remediate a security incident could result in outages, data losses and disruptions of our business. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.

Remote work has increased risks to our information technology systems and data, as our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.

Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We rely on third parties to operate critical business systems to process sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If the third parties with whom we work experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if the third parties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and software, including that of third parties with

 

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whom we work). We have not and may not in the future, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we have and may in the future experience delays in deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats have in the past and may in the future cause a security incident or other interruption that have in the past and may in the future result in unauthorized, unlawful or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of or access to our sensitive data or our information technology systems or those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our services.

We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents. Certain data privacy and security obligations have required us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data.

Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators and investors, of security incidents or to take other actions, such as providing credit monitoring and identity theft protection services. Such disclosures and related actions can be costly, and the disclosure or the failure to comply with such applicable requirements could lead to adverse consequences.

If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience material adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits and inspections), additional reporting requirements and oversight, restrictions on processing sensitive data (including personal data), litigation (including class claims), indemnification obligations, negative publicity, reputational harm, monetary fund diversions, diversion of management attention, interruptions in our operations (including availability of data), financial loss and other similar harms. Security incidents and attendant material consequences may prevent or cause customers to stop using our services, deter new customers from using our services and negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect or infer sensitive data about us from public sources, data brokers or other means that reveal competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive data of the Company could be leaked, disclosed or revealed as a result of or in connection with our employees’, personnel’s or vendors’ use of generative AI technologies.

 

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We and the third parties with whom we work are subject to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security. Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation (including class claims) and mass arbitration demands, fines and penalties, disruptions of our business operations, reputational harm, loss of revenue or profits and other adverse business consequences.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit and share (collectively, “process”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect about trial participants in connection with clinical trials and sensitive third-party data (collectively, “sensitive data”).

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements and other obligations relating to data privacy and security. In the United States, federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (for example, Section 5 of the Federal Trade Commission Act) and other similar laws (for example, wiretapping laws). For example, the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), imposes specific requirements relating to the privacy, security and transmission of individually identifiable protected health information by covered entities, business associates and their covered subcontractors.

Numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct or delete certain personal data and to opt-out of certain data processing activities, such as targeted advertising, profiling and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive data, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives and employees who are California residents and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines and allows private litigants affected by certain data breaches to recover significant statutory damages. The CCPA and other comprehensive U.S. state privacy laws exempt some data processed in the context of clinical trials, but these developments may further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties with whom we work. Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

Outside the United States, an increasing number of laws, regulations and industry standards govern data privacy and security. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”) (collectively, “GDPR”), New Zealand’s Privacy Act and Australia’s Privacy Act impose strict requirements for processing personal data. For example, under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

Our employees and personnel may use generative artificial intelligence (“AI”) or automated decision-making technologies to perform their work, and the disclosure and use of personal data in AI technologies is

 

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subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating AI and automated decision-making technologies. Our use of this technology could result in additional compliance costs, regulatory investigations and actions and lawsuits. If we are unable to use AI or automated decision-making technologies, it could make our business less efficient and result in competitive disadvantages.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (“EEA”) and the United Kingdom (“UK”) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt or have already adopted similarly stringent data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States or if the requirements for a legally compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants and activist groups.

Additionally, the U.S. Department of Justice issued a rule entitled the Preventing Access to U.S. Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons, which places additional restriction on certain data transactions involving countries of concern (for example, China, Russia and Iran) and covered individuals (individuals and entities located in or controlled by individuals or entities located in those jurisdictions) that may impact certain business activities such as vendor engagements, sale or sharing of data, employment of certain individuals and investor agreements. Violations of the rule could lead to significant civil and criminal fines and penalties. The rule applies regardless of whether data is anonymized, key-coded, pseudonymized, de-identified or encrypted, which presents particular challenges for companies like ours and may impact our ability to transfer data in connection with certain transactions or agreements.

We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We also publish privacy policies, marketing materials and other statements concerning data privacy and security. Regulators in the United States are increasingly scrutinizing these statements, and if these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems and practices and to those of any third parties that process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations.

 

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If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (for example, investigations, fines, penalties, audits, inspections and similar), litigation (including class-action claims) and mass arbitration demands, additional reporting requirements or oversight, bans or restrictions on processing personal data, orders to destroy or not use personal data and imprisonment of company officials.

In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations.

Any of these events could have a material adverse effect on our reputation, business or financial condition, including: loss of customers, interruptions or stoppages in our business operations (including, as relevant, clinical trials), inability to process personal data or to operate in certain jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry, adverse publicity or substantial changes to our business model or operations.

We are highly dependent on the services of our senior management team and if we are not able to retain members of our management team and recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

We are highly dependent on our senior management team. The employment agreements we have with these officers do not prevent such persons from terminating their employment with us at any time. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives. In addition, we will need to attract, retain and motivate highly qualified additional management, clinical and scientific personnel. If we are not able to retain our management and to attract, on terms acceptable to us, additional qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow.

We may not be able to attract or retain qualified personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer operating history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what we have to offer. If we are unable to attract, retain and motivate high-quality personnel and consultants to accomplish our business objectives, the rate and success at which we can discover and develop product candidates and our business will be limited and we may experience constraints on our development objectives.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions, including civil or criminal penalties, private litigation and adverse publicity and could negatively affect our operating results and business.

We and any current and future collaborators may be subject to federal, state/provincial, municipal and foreign data protection laws and regulations, such as laws and regulations that address privacy and data security. In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws, including Section 5 of the Federal Trade Commission Act, that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations. In addition, we may obtain health information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy and security requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to civil, criminal and administrative penalties if we violate HIPAA.

 

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Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data or, in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and other individuals about whom we or our current or future collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Our ability to use our U.S. net operating loss carryforwards and certain other U.S. tax attributes may be limited.

As of December 31, 2024, we had U.S. federal net operating loss carryforwards of approximately $38.5 million. The amount of net operating loss carryforwards that we are permitted to deduct is limited to 80% of taxable income in each such taxable year to which the net operating loss carryforwards are applied. In addition, our U.S. federal net operating losses and tax credits may be subject to limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), if we have undergone or undergo an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a rolling three-year period. We may have experienced such ownership changes in the past and may experience ownership changes in the future as a result of shifts in our stock ownership, some of which are outside our control. As a result, our ability to utilize our net operating loss carryforwards could be limited by an “ownership change,” which could result in increased tax liability to us.

Legislation or other changes in U.S. tax law may have a material adverse effect on our business, cash flow, financial condition or results of operations.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service (“IRS”) and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future. On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law. The Act includes significant changes to the U.S. tax code, including restoration of immediate recognition of domestic research and development expenditures and reinstatement of 100% bonus depreciation for qualifying property. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations.

It cannot be predicted whether, when, in what form or with what effective dates, new tax laws may be enacted, or regulations and rulings may be enacted, promulgated or issued under existing or new tax laws, which could result in an increase in our or our stockholders’ tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law or in the interpretation thereof. Investors should consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.

We or the third parties upon whom we depend may be adversely affected by earthquakes, fires or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

If earthquakes, fires, other natural disasters, terrorism and similar events beyond our control prevent us from using all or a significant portion of our headquarters or other facilities, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. We have a disaster recovery plan in place and are in the process of implementing a business continuity plan. We may incur substantial expenses as a

 

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result of the absence or limited nature of our internal or third-party service provider disaster recovery and business continuity plans, which could have a material adverse effect on our business. In addition, the long-term effects of climate change on general economic conditions and the pharmaceutical manufacturing and distribution industry in particular are unclear, and changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and delivery may affect the availability or cost of goods and services, including raw materials and other natural resources, necessary to run our business. If such an event were to affect our supply chain, it could have a material adverse effect on our ability to conduct our clinical trials, our development plans and business.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product candidate that we may develop.

We face an inherent risk of product liability exposure related to the testing of our current and any future product candidates in clinical trials and may face an even greater risk if we commercialize any product candidate that we may develop. If we cannot successfully defend ourselves against claims that any such product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

 

  •  

decreased demand for any product candidate that we may develop;

 

  •  

product recalls, withdrawals or labeling, marketing or promotional restrictions;

 

  •  

loss of revenue;

 

  •  

substantial monetary awards to trial participants or patients;

 

  •  

significant time and costs to defend the related litigation;

 

  •  

a diversion of management’s time and our resources;

 

  •  

withdrawal of clinical trial participants;

 

  •  

initiation of investigations by regulators;

 

  •  

the inability to commercialize any product candidate that we may develop;

 

  •  

injury to our reputation and significant negative media attention; and

 

  •  

a decline in our stock price.

We currently hold approximately $5.0 million in product liability insurance coverage in the aggregate. We may need to increase our insurance coverage as we expand our clinical trials and if we successfully commercialize any product candidate. Insurance coverage can be increasingly expensive. We may not be able to obtain or maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. Although we will maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies will also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As of July 31, 2025, we had 45 full-time employees. As we advance our research and development programs, we may need to further increase the number of our employees and the scope of our operations, particularly in the areas of clinical development, discovery biology, chemistry, manufacturing, general and administrative matters related to being a public company, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage any future growth, we must:

 

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identify, recruit, integrate, maintain and motivate additional qualified personnel;

 

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  •  

manage our development efforts effectively, including the initiation and conduct of clinical trials for our product candidates; and

 

  •  

improve our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to develop, manufacture and commercialize our product candidates, if approved, will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert financial, other resources and a disproportionate amount of its attention away from day-to-day activities to managing these growth activities.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct or improper activities by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include insider trading, intentional failures to comply with FDA regulations or the regulations applicable in other jurisdictions, provide accurate information to the FDA and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm and the curtailment or restructuring of our operations, any of which could have a negative impact on our business, financial condition, results of operations and prospects.

If we or any CDMOs and suppliers we engage fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We and any CDMOs and suppliers we engage are subject to numerous federal, state and local environmental, health and safety laws, regulations and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee health and safety. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any

 

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resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at third-party facilities. We could also incur significant costs associated with civil or criminal fines and penalties.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research and product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Failure to comply with these laws, regulations and permitting requirements also may result in substantial fines, penalties or other sanctions or business disruption, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any third-party CDMOs and suppliers we engage will also be subject to these and other environmental, health and safety laws and regulations. Liabilities they incur pursuant to these laws and regulations could result in significant costs or an interruption in operations, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.

We operate in a global economy, which includes utilizing third-party suppliers in several countries outside the United States. There is inherent risk, based on the complex relationships among the U.S. and the countries in which we conduct our business, that political, diplomatic and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business and operations. The current international trade and regulatory environment is subject to significant ongoing uncertainty. The U.S. government has recently announced substantial new tariffs affecting a wide range of products and jurisdictions and has indicated an intention to continue developing new trade policies, including with respect to the pharmaceutical industry. In response, certain foreign governments have announced or implemented retaliatory tariffs and other protectionist measures. These developments have created a dynamic and unpredictable trade landscape, which may adversely impact our business, results of operations, financial condition and prospects.

We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for clinical testing, as well as for manufacture of any products that we may commercialize, if approved. Currently, several of our suppliers are located outside of the United States, including in China. We also rely on specialized laboratory equipment, supplies and materials, all or part of which we believe may be ultimately sourced from multiple countries outside the United States, to advance our research and development efforts.

Current or future tariffs could result in increased research and development expenses, including with respect to increased costs associated with active pharmaceutical ingredients, raw materials, laboratory equipment and research materials and components. In addition, such tariffs could increase our supply chain complexity and could also potentially disrupt our existing supply chain. Trade restrictions affecting the import of materials necessary for clinical trials could result in delays to our development timelines. Increased development costs and

 

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extended development timelines could place us at a competitive disadvantage compared to companies operating entirely domestically or in regions with more favorable trade relationships and could reduce investor confidence, negatively impacting our ability to secure additional financing on favorable terms or at all. In addition, as we advance toward commercialization in the future, tariffs and trade restrictions could hinder our ability to establish cost-effective production capabilities, negatively impacting our growth prospects.

The complexity of announced or future tariffs may also increase the risk that we or our customers or suppliers may be subject to civil or criminal enforcement actions in the United States or foreign jurisdictions related to compliance with trade regulations. Foreign governments may also adopt non-tariff measures, such as procurement preferences or informal disincentives to engage with, purchase from or invest in U.S. entities, which may limit our ability to compete internationally and attract non-U.S. investment, employees, customers and suppliers. Foreign governments may also take other retaliatory actions against U.S. entities, such as decreased intellectual property protection, increased enforcement actions or delays in regulatory approvals, which may result in heightened international legal and operational risks. In addition, the United States and other governments have imposed and may continue to impose additional sanctions, such as trade restrictions or trade barriers, which could restrict us from doing business directly or indirectly in or with certain countries or parties and may impose additional costs and complexity to our business.

Trade disputes, tariffs, restrictions and other political tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability and economic recessions or downturns. The ultimate impact of current or future tariffs and trade restrictions remains uncertain and could materially and adversely affect our business, financial condition, results of operations and prospects. While we actively monitor these risks, any prolonged economic downturn, escalation in trade tensions or deterioration in international perception of U.S.-based companies could materially and adversely affect our business, ability to access the capital markets or other financing sources, results of operations, financial condition and prospects. In addition, tariffs and other trade developments have and may continue to heighten the risks related to the other risk factors described elsewhere in this prospectus.

Risks Related to Government Regulatory and Legal Requirements

Our relationships with customers, physicians and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, other healthcare laws and regulations and health data privacy and security laws and regulations, contractual obligations and self-regulatory schemes. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Healthcare providers and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors may subject us to various federal and state fraud and abuse laws and other healthcare laws, including, without limitation, the federal Anti-Kickback Statute, the federal civil and criminal false claims laws, the health care fraud provisions of HIPAA and the federal Physician Payments Sunshine Act and their implementing regulations. These laws will impact, among other things, our clinical research, as well as our proposed sales and marketing programs. In addition, we may be subject to health information privacy and security laws by the federal government, including HIPAA, as amended by HITECH, the states and other jurisdictions in which we may conduct our business. For more information, see the section titled “Business–Government Regulation–Other Healthcare Laws.”

Because of the breadth of these laws and the limited statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

 

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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations.

Healthcare legislative reform measures may have a negative impact on our business and results of operations.

In the United States and foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. For more information, see the section titled “Business—Government Regulation—Current and Future Healthcare Reform Legislation.”

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives, including the 2010 Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), which substantially changed the way healthcare is financed by both the government and private insurers and significantly impacts the U.S. pharmaceutical industry.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

 

  •  

the demand for any of our product candidates, if approved;

 

  •  

the ability to set a price that we believe is fair for any of our product candidates, if approved;

 

  •  

our ability to generate revenues and achieve or maintain profitability;

 

  •  

the level of taxes that we are required to pay; and

 

  •  

the availability of capital.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical and biologic products. In addition, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA includes several provisions that may impact our business, depending on how various aspects of the IRA are implemented.

 

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Provisions that may impact our business include a $2,000 out-of-pocket cap for Medicare Part D beneficiaries, the imposition of new manufacturer financial liability on most drugs in Medicare Part D, permitting the U.S. government to negotiate Medicare Part B and Part D pricing for certain high-cost single-source drugs that have been on the market for at least seven years and biologics that have been on the market for at least 11 years covered under Medicare (the “Medicare Drug Price Negotiation Program”) and requiring companies to pay rebates to Medicare for drug prices that increase faster than inflation. Further, under the IRA, orphan drugs are exempted from the Medicare Drug Price Negotiation Program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition. If a product receives multiple orphan designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The IRA permits the United States Department of Health and Human Services (“HHS”) to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. These provisions began to take effect progressively starting in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon reimbursement price of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional products covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. In December 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

We cannot be sure whether additional legislative changes will be enacted, whether FDA regulations, guidance or interpretations will be changed or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. The current Trump administration is pursuing policies to reduce regulations and expenditures across government including at HHS, the FDA, the Centers for Medicare and Medicaid Services (“CMS”) and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management and Budget, may propose policy changes that create additional uncertainty for our business. These actions include, for example, (1) directives to reduce agency workforce program cuts, (2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation to consider new payment and healthcare models to limit drug spending, (3) eliminating the Biden administration’s executive order that directed HHS to establish an AI task force and develop a strategic plan, (4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products, and (5) directing certain federal agencies to enforce existing law regarding hospital and plan price transparency and by standardizing prices across hospitals and health plans. Additionally, in its June 2024 decision in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court overturned the longstanding Chevron doctrine, under which courts were required to give deference to regulatory agencies’ reasonable interpretations of ambiguous federal statutes. The Loper Bright decision could result in additional legal challenges to current regulations and guidance issued by federal agencies applicable to our operations, including those issued by the FDA. Congress may introduce and ultimately pass health care related legislation that could, among others, impact the drug approval process, modify the Medicare Drug Price Negotiation Program, expand the orphan drug exclusion under the IRA and reduce Medicaid enrollment and funding.

In addition, individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We cannot predict what healthcare reform initiatives may be adopted in the future. We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for any approved drug. Any reduction in

 

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reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

We may be exposed to liabilities under the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption and anti-bribery laws, as well as trade sanctions, embargoes and anti-money laundering laws and regulations. Compliance with these legal standards could hinder our ability to compete in certain markets. We can face criminal liability and other serious consequences for violations, which can harm our business.

Our operations are subject to U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations. The FCPA and these other laws generally prohibit us, our officers and our employees and intermediaries from, directly or indirectly, offering, authorizing or making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business or other advantage. We engage third parties for clinical trials outside of the United States and may continue to do so in the future. We may also sell our products abroad if we enter a commercialization phase and/or to obtain necessary permits, licenses, patent registrations and other regulatory approvals for any product sales outside the United States. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. As our business expands, the applicability of the FCPA and other anti-bribery laws to our operations will increase. If our procedures and controls to monitor anti-bribery compliance fail to protect us from reckless or criminal acts committed by our employees or agents or if we, or our employees, agents, contractors or other collaborators, fail to comply with applicable anti-bribery laws, our reputation could be harmed and we could incur criminal or civil penalties, other sanctions and significant expenses, which could have a material adverse effect on our business, including our financial condition, results of operations, cash flows and prospects.

In addition, our products, if approved, may be subject to U.S. and foreign export controls, trade sanctions, embargoes and import laws and regulations. Governmental regulation of the import or export of our products or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international or domestic sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our products may create delays in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments and persons targeted by U.S. sanctions. If we fail to comply with export and import regulations and such economic sanctions, penalties could be imposed, including fines and denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations or in the countries, persons or products targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to, existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business.

There is substantial uncertainty regarding the new Administration’s initiatives and how these might impact the FDA, its implementation of laws, regulations, policies and guidance and its personnel. Similar initiatives may also be directed toward other government agencies. These initiatives could prevent, limit or delay development and regulatory approval and impact commercialization, of our product candidates, which would impact our business.

FDA-regulated industries, such as ours, face substantial uncertainty regarding the regulatory environment we will face as we proceed with research and development, and possibly in future commercialization, efforts following the inauguration of President Trump in January 2025 (the “Administration”). Some of these efforts have manifested to date in the form of personnel measures that could impact the FDA’s ability to hire and retain key personnel, which could result in delays in or limitations on our ability to obtain guidance from the FDA on our product candidates in development and obtain the requisite regulatory approvals in the future. Moreover, the

 

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Administration has proposed action to freeze or reduce the budget of the National Institutes of Health (“NIH”) related to its funding for medical research, which could decrease the ability of facilities that rely on NIH funding to enroll and conduct clinical trials or increase the costs to us of conducting clinical trials. There remains general uncertainty regarding future activities. The Administration could issue or promulgate executive orders, regulations, policies or guidance that adversely affect us or create a more challenging or costly environment to pursue the development and sale of new therapeutic products. For example, on January 20, 2025, the Administration announced an executive order establishing the Department of Government Efficiency to maximize government efficiency and productivity. Pressures on and uncertainty surrounding the U.S. federal government’s budget and potential changes in budgetary priorities could adversely affect the funding for existing programs and grants and increase the costs to us of conducting clinical trials. Alternatively, state governments may attempt to address or react to changes at the federal level with changes to their own regulatory frameworks in a manner that is adverse to our operations. If we or our collaborators become negatively impacted by future governmental orders, regulations, policies or guidance as a result of the Administration, there could be a material adverse effect on us and our business.

Risks Related to Third Party Relationships

We rely on third-party manufacturers, CROs, CDMOs and suppliers to supply, develop and test components of our product candidates. The loss of our third-party manufacturers, CROs, CDMOs or suppliers, their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, or changes in methods of product candidate manufacturing, development or formulation would materially and adversely affect our business.

We do not own or operate facilities for drug manufacturing, storage, distribution or quality testing. We currently rely exclusively, and may continue to rely exclusively, on third-party contract manufacturers, to manufacture and test bulk drug substances, biologic and drug products, raw materials, samples, components or other materials and reports. Reliance on third-party manufacturers may expose us to different risks than if we were to manufacture product candidates ourselves. There can be no assurance that our preclinical and clinical development product supplies will not be limited, interrupted, terminated or of satisfactory quality or continue to be available at acceptable prices. In addition, any replacement of our manufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.

The manufacturing process for a product candidate is subject to FDA, EMA and foreign regulatory authority review. In some cases, we, and our suppliers and manufacturers, some of which may be our sole source of supply, must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards, such as cGMPs. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA, EMA and other comparable foreign regulatory authorities. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA and other comparable foreign regulatory authorities, we may not be able to rely on their manufacturing facilities for the manufacture of elements of our product candidates. Moreover, we do not control the manufacturing process at our contract manufacturers and are completely dependent on them for compliance with current regulatory requirements. In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all, or the clinical development of our product candidates may be delayed. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such to another third party.

These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to enable us, or to have another third party, manufacture our product candidates. If we are

 

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required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines; and we may be required to repeat some of the development program. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. We will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. Any manufacturing facilities used to produce our products will be subject to periodic review and inspection by the FDA and foreign regulatory authorities, including for continued compliance with cGMP requirements, quality control, quality assurance and corresponding maintenance of records and documents. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully. Our or a third party’s failure to execute on our manufacturing requirements, comply with cGMPs or maintain a compliance status acceptable to the FDA or foreign regulatory authorities could adversely affect our business in a number of ways, including:

 

  •  

delay in the progress on certain research programs;

 

  •  

an inability to initiate or continue clinical trials of product candidates under development;

 

  •  

delay in submitting regulatory applications or receiving regulatory approvals, for product candidates;

 

  •  

loss of the cooperation of existing or future collaborators;

 

  •  

subjecting third-party manufacturing facilities to additional inspections by regulatory authorities;

 

  •  

requirements to cease distribution or to recall batches of our product candidates; and

 

  •  

in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our therapeutics.

Additionally, our contract manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our contract manufacturers were to encounter any of these difficulties, our ability to provide our product candidates to patients in preclinical and clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

In addition, we currently rely on foreign CROs and CDMOs, for manufacturing and development activities and will likely continue to rely on foreign CROs and CDMOs in the future. Foreign CDMOs may be subject to U.S. legislation, sanctions, trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies.

For example, if enacted, legislation pending in Congress known as the BIOSECURE Act would prohibit U.S. federal agencies from entering into or renewing a contract with any company that uses biotechnology equipment or services produced or provided by a “biotechnology company of concern” in the performance of that contract, which may impact one of our CDMOs. It would also prohibit loans or grant funding from U.S. federal agencies to entities that use any biotechnology equipment or services produced or provided by a “biotechnology company of concern” in the performance of the government grant or loan. The effects of this legislation, if enacted, is unknown; however, it could have the downstream effect of restricting the ability of pharmaceutical companies that enter into contracts with or receive funding from U.S. federal agencies from purchasing services or equipment from certain Chinese biotechnology companies, including those that are specifically named in the proposed BIOSECURE Act, as well as supply chain disruptions or delays. In addition to the BIOSECURE Act, any additional executive action, legislative action or potential sanctions with China could materially impact our

 

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work. U.S. executive agencies have the ability to designate entities and individuals on various governmental prohibited and restricted parties lists. Depending on the designation, potential consequences can range from a comprehensive prohibition on all transactions or dealings with designated parties or a limited prohibition on certain types of activities, such as exports and financing activities, with designated parties.

Furthermore, as product candidates progress through preclinical and clinical trials to marketing approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize yield and manufacturing batch size, minimize costs and achieve consistent quality and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of current or future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates, if approved, and generate revenue.

We rely, and expect to continue to rely, on third parties, including independent clinical investigators, contracted laboratories and CROs, to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators, contracted laboratories and third-party CROs, to conduct our preclinical studies and clinical trials in accordance with applicable regulatory requirements, to validate our assays and to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our third-party contractors and CROs are required to comply with good laboratory practices (“GLPs”), as applicable, and GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible, reproducible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these GLPs and GCPs through periodic inspections of laboratories conducting GLP studies, trial sponsors, principal investigators and trial sites. If we, our investigators or any of our CROs or contracted laboratories fail to comply with applicable GLPs and GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional preclinical studies or clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our preclinical studies or clinical trials comply with applicable GLP or GCP regulations. In addition, our clinical trials must be conducted with product, including biologic product, produced in compliance with applicable cGMP regulations. Our failure to comply with these regulations may require us to repeat preclinical studies or clinical trials, which would delay the regulatory approval process.

Further, these laboratories, investigators and CROs are not our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent laboratories, investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated.

 

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Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have an ability to terminate their respective agreements with us if we can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.

There is a limited number of third-party service providers that specialize or have the expertise required to achieve our business objectives. If any of our relationships with these third-party laboratories, CROs or clinical investigators terminate, we may not be able to enter into arrangements with alternative laboratories, CROs or investigators or to do so in a timely manner or on commercially reasonable terms. If laboratories, CROs or clinical investigators do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our preclinical or clinical protocols, regulatory requirements or for other reasons, our preclinical or clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Switching or adding additional laboratories or CROs (or investigators) involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new laboratory or CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our contracted laboratories and CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and results of operations.

In addition, clinical investigators may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest or the FDA concludes that the financial relationship may have affected the interpretation of the preclinical study or clinical trial, the integrity of the data generated at the applicable preclinical study or clinical trial site may be questioned and the utility of the preclinical study or clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA. Any such delay or rejection could prevent us from commercializing our clinical-stage product candidate or any future product candidates.

The manufacturing of our product candidates is complex, and our third-party manufacturers may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials, our ability to obtain marketing approval or our ability to provide supply of our products for patients, if approved, could be delayed or stopped.

The process of manufacturing pharmaceuticals is complex, time-consuming, highly regulated and subject to multiple risks. Our contract manufacturers must comply with legal requirements, cGMPs and guidelines for the manufacturing of pharmaceuticals used in clinical trials and, if approved, marketed products. Our contract manufacturers may have limited experience in the manufacturing of cGMP batches.

Manufacturing pharmaceuticals is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered at our third-party manufacturers’ facilities, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business.

 

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In addition, there are risks associated with large-scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency and timely availability of raw materials. Even if we or our future collaborators obtain regulatory approval for any of our product candidates, there is no assurance that manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand. If manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and prospects.

Scaling up a pharmaceutical manufacturing process is a difficult and uncertain task, and our third-party manufacturers may not have the necessary capabilities to complete the implementation, manufacturing and development process. If we are unable to adequately validate or scale-up the manufacturing process at our current manufacturers’ facilities, we will need to transfer to another manufacturer and complete the manufacturing validation process, which can be lengthy. If we are able to adequately validate and scale-up the manufacturing process for our product candidates with a contract manufacturer, we will still need to negotiate with such contract manufacturer an agreement for commercial supply and it is not certain we will be able to come to agreement on terms acceptable to us.

We cannot assure that any stability or other issues relating to the manufacture of any of our current or future product candidates will not occur in the future. If our third-party manufacturers were to encounter any of these difficulties, our ability to provide any product candidates to patients in planned clinical trials and products to patients, once approved, would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of planned clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely. Any adverse developments affecting clinical or commercial manufacturing of our product candidates or products may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the supply of our product candidates or products. We may also have to take inventory write-offs and incur other charges and expenses for product candidates or products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply chain could adversely affect our business and delay or impede the development and commercialization of any of our product candidates or products, if approved, and could have an adverse effect on our business, prospects, financial condition and results of operations.

As part of our process development efforts, we also may make changes to the manufacturing processes at various points during development, for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate or other reasons. Such changes carry the risk that they will not achieve their intended objectives, and any of these changes could cause our current or future product candidates to perform differently and affect the results of our current or future clinical trials. In some circumstances, changes in the manufacturing process may require us to perform ex vivo comparability studies and to collect additional data from patients prior to undertaking more advanced clinical trials. For instance, changes in our process during the course of clinical development may require us to show the comparability of the product used in earlier clinical phases or at earlier portions of a trial to the product used in later clinical phases or later portions of the trial.

Our existing collaborations are, and our future collaborations may be, important to our business. If we are unable to enter into new collaborations, or if our collaborations are not successful, our business could be adversely affected.

A part of our strategy is to systematically evaluate and, as deemed appropriate, enter into strategic collaborations when strategically attractive, including potentially with major biotechnology or pharmaceutical

 

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companies. We have limited capabilities for product development and do not yet have any capability for commercialization. Accordingly, we have entered into, and may enter into, collaborations with other companies to provide us with important technologies and funding for our programs and technology. If we fail to enter into or maintain collaborations on reasonable terms or at all, our ability to develop our existing or future research programs and product candidates could be delayed, the commercial potential of our product candidates could change and our costs of development and commercialization could increase. Furthermore, we may find that our programs require the use of intellectual property rights held by third parties, and the growth of our business may depend in part on our ability to acquire or in-license these intellectual property rights.

Our existing collaborations and any future collaborations we may enter into may pose a number of risks, including, but not limited to, the following:

 

  •  

collaborators have significant discretion in determining the efforts and resources that they will apply;

 

  •  

collaborators may not perform their obligations as expected;

 

  •  

collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs or license arrangements based on clinical trial results, changes in the collaborators’ strategic focus or available funding or external factors, such as a strategic transaction that may divert resources or create competing priorities;

 

  •  

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

 

  •  

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products, if approved, and product candidates if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

 

  •  

product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;

 

  •  

collaborators may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product;

 

  •  

collaborators with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;

 

  •  

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates or might result in litigation or arbitration, any of which would be time-consuming and expensive;

 

  •  

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

 

  •  

collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

 

  •  

if a collaborator of ours is involved in a business combination, the collaborator might de-emphasize or terminate the development or commercialization of any product candidate licensed to it by us; and

 

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  •  

collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

If our future collaborations do not result in the successful discovery, development and commercialization of product candidates or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under such collaboration. Additionally, if one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected.

We face significant competition in seeking appropriate collaborative partners. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon an assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors relating to our business. These factors may include the design or results of preclinical studies or clinical trials, the likelihood of regulatory approval, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of any uncertainty with respect to our ownership of technology (which can exist if there is a challenge to such ownership regardless of the merits of the challenge) and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization, reduce the scope of any sales or marketing activities or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

Reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Reliance on third parties to manufacture or commercialize our current or any future product candidates and on collaborations with additional third parties for the development of our current or any future product candidates, requires us to share trade secrets with these third parties. We may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, services agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure could have an adverse effect on our business and results of operations.

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets. Despite our efforts to protect our trade

 

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secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any third-party collaborators. A competitor’s discovery of our trade secrets could harm our business.

Risks Related to Intellectual Property

We have licensed intellectual property rights from third parties and may do so in the future. Such licenses may be subject to early termination if we fail to comply with our obligations in our licenses with third parties, which could result in the loss of rights or technology that are material to our business.

We are a party to licenses that give us rights to third-party intellectual property or technology that is necessary or useful for our business, and we may enter into additional licenses in the future. For example, we depend on licenses from Dermira and AprilBio for certain intellectual property relating to the development and commercialization of our clinical-stage product candidates, EVO756 and EVO301, respectively. Under these license agreements, we are or may become obligated to pay the licensor fees, which may include annual license fees, upstream license obligations, milestone payments, royalties, a percentage of revenues associated with the licensed technology and a percentage of sublicensing revenue. These fees may be significant, which could make it difficult for us to achieve or maintain profitability. In addition, under certain of such agreements, we are or may become required to diligently pursue the development of products using the licensed technology. If we fail to comply with these obligations, including due to our use of the intellectual property licensed to us in an unauthorized manner, and fail to cure our breach within a specified period of time, the licensor may have the right to terminate the applicable license, in which event we could lose valuable rights and technology that are material to our business, harming our ability to develop, manufacture and commercialize our product candidates.

In addition, the agreements under which we license intellectual property or technology to or from third-parties can be complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates that we may seek to acquire. The failure to obtain or in-license any compositions, methods of use, processes or other third-party intellectual property rights at a reasonable cost or on reasonable terms, could harm our business. If we fail to obtain licenses to necessary third-party intellectual property rights, we may need to cease use of the compositions or methods covered by such third-party intellectual property rights. Furthermore, we may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.

Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.

Our commercial success will depend in large part on obtaining and maintaining patent, trademark and trade secret protection of our proprietary technologies and our product candidates, their respective components,

 

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formulations, combination therapies, and methods used to manufacture them and methods of treatment, as well as successfully defending these patents against third-party challenges. Our ability to stop unauthorized third parties from making, using, selling, offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents that cover these activities. If we are unable to secure and maintain patent protection for any product or technology we develop, or if the scope of the patent protection secured is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize any product candidates we may develop may be adversely affected. The patenting process is expensive and time-consuming, and we may not be able to file, prosecute and maintain or in-license, all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue, obtain or maintain patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications or to maintain the patents, covering technology that we license from or license to third parties, and are reliant for such purposes on our licensors or licensees. In addition, we cannot guarantee that patent applications or patents that we initially believe to be owned by the company or a licensor will not be found to be encumbered by third party ownership or other third party rights that may not have been evident to us at the time of preparation, filing or in-licensing. For instance, such rights could arise from the intellectual contributions of company employees who were previously employed by third parties, such as universities or other biopharmaceutical or pharmaceutical companies, including our competitors or potential competitors, or from the intellectual contributions of company consultants, advisors or independent contractors with current or previous relationships with such third parties. Therefore, these patents and applications may not be prepared, filed, prosecuted or enforced in a manner consistent with the best interests of our business. Furthermore, licenses from such third parties may be required or desirable but may not be available on reasonable terms, or at all.

The strength of patents in the biotechnology field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries. Even if the patents are successfully issued, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around its claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our product candidates is threatened, this could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates.

We may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim, and we may be subject to a third-party submission of prior art to the United States Patent and Trademark Office (“USPTO”) in connection with pending patent applications, and any analogous procedures outside the United States. There also may be prior art of which we are aware, but which we believe does not affect the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that if challenged, our patents would be found by a court to be valid or enforceable or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our patents. We may analyze patents or patent applications of our competitors that we believe are relevant to our activities and conclude that we are free to operate in relation to our product candidates, but our competitors may ultimately obtain issued claims, including in patents we consider to be unrelated, which block our efforts or may potentially result in our product candidates or our activities infringing such claims. The possibility exists that others will develop products which compete with our

 

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products on an independent basis which do not infringe our patents or other intellectual property rights or will design around the claims of patents to which we have rights that cover our products.

The United States has enacted and implemented wide-ranging patent reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available or the availability of patent protection in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents that have already issued. Depending on actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. For example, recent decisions raise questions regarding the award of patent term adjustment (“PTA”) for patents in families where related patents have issued without PTA. Thus, it cannot be said with certainty how PTA will/will not be viewed in the future and whether patent expiration dates, or even patent validity, may be impacted. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future. For example, the complexity and uncertainty of European patent laws have also increased in recent years. In Europe, a new unitary patent system took effect June 1, 2023, which has significantly impacted European patents, including those granted before June 1, 2023. Under the unitary patent system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the Unitary Patent Court (“UPC”). Additionally, certain non-Unitary Patents that are European patents may also be subject to the jurisdiction of the UPC. As the UPC is a new court system, there is only a limited established body of substantive and procedural precedents, which increases the uncertainty of any litigation. Proprietors of certain European patents granted before the implementation of the UPC have the option of opting such patents out of the jurisdiction of the UPC and designating such patents as being subject to the jurisdiction of national courts. Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

 

  •  

others may be able to make or use compounds or proteins that are similar to our product candidates but that are not covered by the claims of patents to which we have rights;

 

  •  

biologic drugs that are among our current product candidates may eventually become commercially available in biosimilar drug products. Patent protection for our products may not be available at all or may only be available with regard to the formulation of such products or methods of using such products, which are considered to provide limited protection;

 

  •  

we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regards to any in-licensed patents and patent applications funded by U.S. government grants, leading to the loss of patent rights and exclusivity;

 

  •  

we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions and, as a result, may be unable to obtain any patent protection for such inventions;

 

  •  

others may independently develop similar or alternative technologies or duplicate any of our technologies;

 

  •  

it is possible that our pending patent applications will not result in issued patents;

 

  •  

it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of our patents or licensors’ patents;

 

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  •  

it is possible that others may circumvent our owned or in-licensed patents without infringing them;

 

  •  

it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to our own;

 

  •  

the laws of foreign countries may not protect ours or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the United States;

 

  •  

the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product candidates;

 

  •  

our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope or be held invalid or unenforceable as a result of legal challenges by third parties;

 

  •  

the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes which design around our patents or become hostile to us or the patents or patent applications on which they are named as inventors;

 

  •  

it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable;

 

  •  

we have engaged in scientific collaborations in the past and will continue to do so in the future. Such collaborators may develop adjacent or competing products to ours that are outside the scope of our patents;

 

  •  

we may not develop, or may not be able to develop, additional proprietary technologies for which we can obtain patent protection;

 

  •  

it is possible that product candidates we develop may be covered by third parties’ patents or other exclusive rights; and

 

  •  

the patents of others may have an adverse effect on our business.

If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

We rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements to protect the intellectual property related to our product candidates and technologies and to prevent third parties from copying and further developing our inventions and intellectual property, thus eroding our competitive position in our markets. Our success depends in large part on our ability to obtain and maintain patent protection for our product candidates and their intended uses, maintain trade secret protection of our product candidates, as well as our ability to operate without infringing the proprietary rights of others. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel inventions and technologies that are important to our business or by in-licensing such patent rights. Our pending and future patent applications, including in-licensed patent applications, may not result in patents being issued or may not result in issued patents that will afford sufficient protection of our product candidates or their intended uses nor can there be any assurance that any patents that issue will be infringed, not designed around and not invalidated by third parties, or that they will effectively prevent others from commercializing competitive technologies or products.

Obtaining and enforcing patents is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications or maintain or enforce patents that may issue based on our patent applications, or in-license any similar rights, at a reasonable cost or in a timely manner, including due

 

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to delays as a result of global pandemics impacting our or our licensors’ operations. Further, we may decide to not pursue or seek patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development results before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach these agreements and disclose such results before a patent application is filed, thereby jeopardizing our ability to seek and obtain patent protection. If we delay in filing a patent application, and a competitor files a patent application on the same or a similar technology before we do, we may face a limited ability to secure patent rights, or we may not be able to obtain a patent on such technology at all. Even if we are able to obtain a patent covering such technology, we may only be able to obtain a narrow scope of protection, and such narrow scope may be inadequate to protect our product candidates, or to block competitor products or product candidates that are similar to ours.

Composition of matter patents for pharmaceutical product candidates are considered to provide a strong form of intellectual property protection, because such patents provide protection for all uses of the product candidate. The claims in our pending patent applications, including in-licensed applications, that are directed to composition of matter coverage of our product candidates may not be found to be patentable by the USPTO or by patent offices in foreign countries. The courts in the United States or foreign countries may find that such patents are not valid and enforceable. Method of use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although products distributed pursuant to off-label prescriptions may infringe or contribute to the infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.

The patent position of biopharmaceutical companies generally is highly uncertain and involves complex legal and factual questions that are governed by laws and regulations that are subject to change. In recent years, patent rights have been the subject of much litigation, and such high rates of litigation may continue into the future. The issuance, scope, validity, enforceability and commercial value of our patent rights are subject to many factors including such litigation and, as a result, are subject to great uncertainty. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patent rights or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States, or vice versa.

We cannot ensure that patent rights relating to inventions described and claimed in our pending patent applications will issue or that patents based on our patent applications will not be challenged and rendered invalid or unenforceable.

The patent application process is subject to numerous risks and uncertainties, and we or any of our potential future collaborators may not be successful in protecting our product candidates by obtaining and successfully defending and enforcing patents. For example, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and, as a result, the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, including in-licensed patents and patent applications, as well as the impact of such third-party intellectual property upon our freedom to operate, is highly uncertain. Patent applications in the United States and other foreign jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in patents or pending patent applications to which we have rights or that we or our licensors were the first to file for patent protection of such inventions. As a result, the issuance, inventorship, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. We or any of our potential future collaborators may not be successful in protecting our product candidates by obtaining and defending patents. Although we have rights to U.S. and foreign patent applications, we cannot predict:

 

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if and when patents may issue based on our or our licensors’ patent applications;

 

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the scope of protection of any patent issuing based on our or our licensors’ patent applications;

 

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whether the claims of any patent issuing based on our or our licensors’ patent applications will provide protection against competitors;

 

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whether or not third parties will find ways to invalidate or circumvent our patent rights;

 

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whether or not others will obtain patents claiming aspects similar to those covered by our or our licensors’ patents and patent applications;

 

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whether we will need to initiate litigation or administrative proceedings to enforce or defend our patent rights which will be costly, time-consuming and require us to expend resources, whether we win or lose;

 

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whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries; and

 

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whether we may experience patent office interruption or delays to our ability to timely secure patent rights covering our product candidates.

The claims in our or our licensors’ pending patent applications directed to our product candidates or technologies may not be considered patentable by the USPTO or by patent offices in foreign countries. Any such patent applications may not be issued as granted patents. One aspect of the determination of patentability of our inventions depends on the scope and content of the “prior art,” which is information that was or is deemed available prior to the priority date of the claimed invention. There may be prior art of which we are not aware that may affect the patentability of our or our licensors’ patent application claims or, if issued, affect the validity or enforceability of a patent claim. There may be disallowed double patenting among patents to which we have rights, which the patent examiner(s) fail to raise during prosecution. Even if the patents do issue based on our or our licensors’ patent applications, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, patents in our portfolio (including in-licensed patents) may not adequately exclude third parties from practicing relevant technology or prevent others from designing around our claims. If the breadth or strength of our intellectual property position with respect to our product candidates is threatened, this could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates.

Our and our licensors’ pending patent applications may be challenged in the USPTO or in patent offices in foreign countries. Also, because the issuance of a patent is not conclusive as to its scope, validity or enforceability, even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. For example, our and our licensors’ pending patent applications may be subject to third-party pre-issuance submissions of prior art to the USPTO or patent offices in foreign countries, or our issued patents may be subject to post-grant review (“PGR”) proceedings, oppositions, derivations, reexaminations or inter partes review (“IPR”) proceedings, in the United States or elsewhere, challenging our patent rights. An adverse determination in any such challenges may result in loss of exclusivity or in our patent rights being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technologies and products or limit the duration of the patent protection of our technologies and product candidates. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, only limited protection may be available and our patent rights may not provide us with sufficient rights or permit us to gain or keep any competitive advantage. Any failure to obtain or maintain patent protection with respect to our product candidates or their uses could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

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We may rely on trade secret and proprietary know-how which can be difficult to trace and enforce and, if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent protection for our product candidates and technologies, we may rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents or that may alternatively be covered by trade secret protection or through measures of confidentiality. Elements of our product candidates, including processes for their preparation and manufacture, may involve proprietary know-how, information or technology that is not covered by patents, or that is more advantageously protected by trade secrets or confidentiality, and thus for these aspects we may consider trade secrets and know-how to be our primary intellectual property. We may also rely on trade secret protection as temporary protection for concepts that may be included in a future patent filing. We expect to rely on CROs and third parties to generate chemical molecules and important research data. Any disclosure, either intentional or unintentional, by our employees or third-party consultants and vendors or CROs that we engage to perform research, clinical trials or manufacturing activities or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Because we rely on third parties in the development and manufacture of our product candidates, we must, at times, share trade secrets with them. Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

However, trade secret protection will not protect us from innovations that a competitor develops independently of our proprietary know-how. If a competitor independently develops a technology that we protect as a trade secret and files a patent application on that technology, then we may not be able to patent that technology in the future, may require a license from the competitor to use our own technology or know-how, and if the license is not available on commercially viable terms, then we may not be able to complete development of, or commercialize, our products. Although we require all of our employees, consultants, collaborators, CROs, contract manufacturers, advisors and any third parties who have access to our proprietary know-how, information or technologies to enter into confidentiality agreements, we cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. We cannot be certain that our trade secrets and other confidential proprietary information may not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party unlawfully disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Furthermore, the laws of some foreign countries do not protect proprietary rights, such as trade secrets rights, to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. We may need to share our proprietary information, including trade secrets, with future business partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by state actors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, and this scenario could materially adversely affect our business, financial condition and results of operations.

 

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Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our current and any future product candidates.

Changes in either the patent laws or interpretation of the patent laws in the United States and other foreign countries could increase uncertainties and costs and may diminish our ability to protect our inventions, obtain, maintain and enforce our intellectual property rights and, more generally, could affect the value of our patent rights or narrow the scope of our patent rights. The Leahy-Smith America Invents Act of 2011 (the “Leahy-Smith Act”) included several significant changes to U.S. patent law that impacted how patent rights could be prosecuted, enforced and defended. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including PGR, IPR and derivation proceedings. Further, because of a lower evidentiary standard in these USPTO post-grant proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a patent claim invalid even though the same evidence would be insufficient to invalidate the patent claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our or our licensors’ patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, under the Leahy-Smith Act, the United States transitioned from a “first-to-invent” system to a “first-to-file” system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before we or our licensors file an application covering the same invention, could therefore be awarded a patent covering an invention to which we have rights even if we or our licensors made the invention before it was made by such third party. This will require us and our licensors to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our product candidates and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing the claimed invention where the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license.

These and future changes in patent law could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications and the enforcement or defense of our and our licensors’ issued patents, all of which could have a negative effect on our business.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, already obtained. Depending on actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our and our licensors’ ability to obtain new patents or to enforce patents that we have licensed or that we might obtain or license in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our and our licensors’ ability to obtain new patents or to enforce patents that we have licensed or that we may obtain or license in the future.

 

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We may be involved in lawsuits or proceedings to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

Competitors or other third parties may infringe or otherwise violate our patents, trademarks or other intellectual property or the patents of our licensors. To stop infringement or unauthorized use, we or our licensors may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our or licensors’ patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our or our licensors’ patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more patents to which we have rights at risk of being invalidated, held unenforceable or interpreted narrowly and could place patent applications to which we have rights under the risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

We may choose to challenge the patentability of claims in a third party’s U.S. patent by requesting that the USPTO review the patent claims in an ex-parte re-exam, inter partes review or post-grant review proceedings. These proceedings are expensive and may consume our time or other resources. We may choose to challenge a third party’s patent in patent opposition proceedings in the foreign patent offices. The costs of these opposition proceedings could be substantial and may consume our time or other resources. If we fail to obtain a favorable result at the USPTO or other patent office then we may be exposed to litigation by a third party alleging that the patent is infringed by our product candidates or proprietary technologies.

In addition, because (i) some patent applications in the United States may be maintained in secrecy until the patents are issued, (ii) other patent applications in the United States and patent applications in many foreign jurisdictions are typically not published until 18 months after filing and (iii) publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our owned or in-licensed issued patents or our owned or in-licensed pending applications, or that we or, if applicable, a licensor, was the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering products or technology similar to ours before we or our licensors do so. Any such patent application may have priority over our owned and in-licensed patent applications or patents, which could require us to eventually seek to obtain rights to issued patents covering such technologies from third parties. If another party has filed a U.S. patent application on inventions similar to those owned by or in-licensed to us, we or, in the case of in-licensed technology, the licensor, may have to participate in an interference proceeding declared by the USPTO to determine priority of invention in the United States. We or our licensors may lose patent rights as a result. If we or one of our licensors is a party to an interference proceeding involving a U.S. patent application on inventions owned by or in-licensed to us, we may incur substantial costs, unduly occupy our management’s time in connection with legal proceedings, divert management from its usual duties and substantially expend other resources, even if we are successful.

Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our or our licensors’ current patent rights and could require us to cease using the related technology or to attempt to license rights to it from a prevailing third party or other third party. Our business could be harmed if the prevailing party or the other third party does not offer us a license on commercially reasonable terms or at all. Litigation or interference proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our proprietary or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure

 

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during intellectual property litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.

Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our or our licensors’ issued patent, or any patents that may be issued as a result of our or our licensors’ pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our stockholders, or it may be otherwise impractical or undesirable to enforce our intellectual property. Our competitors or other third parties may be able to sustain the costs of complex patent litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, in- license needed technologies or other product candidates or enter into development partnerships that would help us bring our product candidates to market.

We may be subject to claims that our employees, consultants or advisors have wrongfully used or disclosed trade secrets or other confidential information of their current or former employers or claims asserting inventorship or ownership of what we regard as our own intellectual property.

Many of our employees, consultants and advisors are currently or were previously employed at universities or other healthcare, biotechnology or pharmaceutical companies, including our competitors or potential competitors and our licensors. Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer or client without authorization. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs, the expenditure of other resources and be a distraction to management.

We may be subject to claims that former employees, collaborators or other third parties have an interest in our or our licensors’ patents or other intellectual property as an inventor or co-inventor. The failure to name the proper inventors on a patent application can result in the patents issuing thereon being invalid or unenforceable. Inventorship disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties involved in developing our product candidates or as a result of questions regarding co-ownership of potential joint inventions. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. Alternatively, or additionally, we may enter into agreements to clarify the scope of our rights in such intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or rights to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs, the expenditure of other resources and be a distraction to our management and other employees.

Our licensors may have relied on third-party consultants or collaborators or on funds from third parties, such as the U.S. government, such that our licensors are not the sole and exclusive owners of the patents we

 

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in-licensed. If other third parties have ownership rights or other rights to our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing product candidates and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Our in-licensed intellectual property is also subject to such risks. Any claims that we may be forced to defend against or that we assert could have a material adverse effect on our business, financial condition, results of operations and prospects.

Rights to improvements to our product candidates may be held by third parties.

In the course of testing our current or future product candidates, we may enter into agreements with third parties to conduct clinical testing, which may provide that improvements to our product candidates may be owned solely by a third party or jointly between the parties. If we determine that rights to such improvements owned solely by a third party are necessary to commercialize our product candidates or maintain our competitive advantage, we may need to obtain a license from such third party in order to use the improvements and continue developing, manufacturing or marketing the product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain such a license, it could be granted on non-exclusive terms, thereby potentially giving our competitors and other third parties access to the same technologies licensed to us. Failure to obtain a license on commercially reasonable terms or at all, or to obtain an exclusive license, could prevent us from commercializing our current or future product candidates or force us to cease some of our business operations, which could materially harm our business. If we determine that rights to improvements jointly owned between us and a third party are necessary to commercialize our product candidates or maintain our competitive advantage, we may need to obtain an exclusive license from such third party. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such improvements, such co-owners may be able to license their rights to other parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our intellectual property in order to enforce such intellectual property against other parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration date of a third-party patent, which might adversely affect our ability to develop and market our products.

We cannot guarantee that any patent searches or analyses that are performed, including the identification of relevant patents, the scope of patent claims or the expiration dates of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our current or future product candidates in any jurisdiction. The scope of a patent claim is determined by an interpretation of the law, the language of the claim, the written disclosure in the relevant patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our future products. We may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third-party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our product candidates. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our future products.

 

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We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

Because our programs may in the future require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use these third-party proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

While we seek to obtain the right to control prosecution, maintenance and enforcement of the patents relating to our product candidates, there may be times when the filing and prosecution activities for patents and patent applications relating to our product candidates are controlled by our future licensors or collaboration partners. If any of our future licensors or collaboration partners fail to prosecute, maintain and enforce such patents and patent applications in a manner consistent with the best interests of our business, including by payment of all applicable fees for patents covering our product candidates, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensees, our future licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.

We may enter into license agreements in the future with others to advance our existing or future research or allow commercialization of our current or future product candidates. These licenses may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our product candidates in the future.

In addition, subject to the terms of any such license agreements, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patent applications covering the technology that we license from third parties. In such an event, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced and defended in a manner consistent with the best interests of our business. If our future licensors fail to prosecute, maintain, enforce and defend such patents or patent applications or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our current or future product candidates that are subject of such licensed rights could be adversely affected.

Our future licensors may rely on third-party consultants or collaborators or on funds from third parties such that our future licensors are not the sole and exclusive owners of the patents we in-license. If other third parties have ownership rights to our future in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

 

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It is possible that we may be unable to obtain necessary licenses at a reasonable cost or on reasonable terms, if at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business, financial condition, results of operations and prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, manufacturing methods, product candidates or future methods or products resulting in either an injunction prohibiting our manufacture or future sales or, with respect to our future sales, an obligation on our part to pay royalties or other forms of compensation to third parties, which could be significant.

Disputes may arise between us and our future licensors regarding intellectual property subject to a license agreement, including:

 

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the scope of rights granted under the license agreement and other interpretation-related issues;

 

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whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

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our right to sublicense patents and other rights to third parties;

 

  •  

our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

 

  •  

our right to transfer or assign the license;

 

  •  

when and under what conditions the license agreement may be terminated and the consequences thereof;

 

  •  

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our future licensors and us and our partners; and

 

  •  

the priority of invention of patented technology.

In addition, the agreements under which we license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we license in the future prevent or impair our ability to maintain our licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.

In spite of our best efforts, our future licensors might conclude that we materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors might have the freedom to seek regulatory approval of, and to market, products identical to ours. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.

From time to time, we may be required to license technologies relating to our programs from additional third parties to further develop or commercialize our current or future product candidates. Should we be required to obtain licenses to any third-party technology, including any such patents required to manufacture, use or sell

 

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our product candidates, such licenses may not be available to us on commercially reasonable terms, or at all. The inability to obtain any third-party license required to develop or commercialize any of our product candidates could cause us to abandon any related efforts, which could seriously harm our business and operations.

Third-party claims of intellectual property infringement may prevent or delay our product discovery, development and commercialization efforts.

Our commercial success depends in part on our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, inter partes review, post grant review and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our product candidates and proprietary technologies infringe their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to our product candidates and programs. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of drugs, products or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields, there may be a risk that third parties may allege they have patent rights encompassing our product candidates, technologies or methods.

If a third-party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to:

 

  •  

infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;

 

  •  

substantial damages for infringement, which we may have to pay if a court decides that the product candidate or technology at issue infringes on or violates the third party’s rights, and, if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;

 

  •  

a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using our proprietary technologies, unless the third party licenses its product rights to us, which it is not required to do;

 

  •  

if a license is available from a third party, we may have to pay substantial royalties, upfront fees and other amounts or grant cross-licenses to intellectual property rights for its products; and

 

  •  

redesigning our product candidates or processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.

Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting clinical trials and other development activities in the United States is protected under the

 

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Safe Harbor exemption as set forth in 35 U.S.C. § 271, and there are similar laws in some foreign jurisdictions. If any of our product candidates are approved by the FDA, that certain third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. Even if we believe that any claims of such patent that could otherwise materially adversely affect commercialization of our product candidates, if approved, are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in a litigation. In this regard, patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a heightened standard of proof. There may be third-party patents of which we are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign its infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Even if such a license is available, it may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.

Lastly, we may need to indemnify our customers and distributors against claims relating to the infringement of intellectual property rights of third parties related to our product candidates, including EVO756 and EVO301. Third parties may assert infringement claims against our customers or distributors. Our agreements with our customers or distributers may require us to initiate or defend protracted and costly litigation on behalf of our customers or distributors, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers, suppliers or distributors or may be required to obtain licenses for the product candidates or services they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products or services.

 

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Our intellectual property licensed from third parties may be subject to retained rights.

Our future licensors may retain certain rights under their agreements with us, including the right to use the underlying technology for noncommercial academic and research use, to publish general scientific findings from research related to the technology and to make customary scientific and scholarly disclosures of information relating to the technology. It is difficult to monitor whether our licensors limit their use of the technology to these uses, and we could incur substantial expenses to enforce our rights to our licensed technology in the event of misuse.

Government agencies may provide funding, facilities, personnel or other assistance in connection with the development of the intellectual property rights owned by or licensed to us. Such government agencies may have retained rights in such intellectual property. The United States federal government retains certain rights in inventions produced with its financial assistance under the Patent and Trademark Law Amendments Act (the “Bayh-Dole Act”), including the right to grant or require us to grant mandatory licenses or sublicenses to such intellectual property to third parties under certain specified circumstances, including if it is necessary to meet health and safety needs that we are not reasonably satisfying or if it is necessary to meet requirements for public use specified by federal regulations, or to manufacture products in the United States. Any exercise of such rights, including with respect to any such required sublicense of these licenses could result in the loss of significant rights and could harm our ability to commercialize licensed products. While we currently are not engaging with university partners, we cannot be sure that any co-developed intellectual property will be free from government rights pursuant to the Bayh-Dole Act. If, in the future, we co-own or license in technology which is critical to our business that is developed in whole or in part with federal funds subject to the Bayh-Dole Act, our ability to enforce or otherwise exploit patents covering such technology may be adversely affected.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent offices in several stages over the lifetime of the patent. Certain foreign jurisdictions also require the payment of periodic annuity payments to maintain patent applications and avoid their abandonment. The USPTO and various foreign governmental patent agencies require compliance with a number of other procedural, documentary, fee payment and other provisions during the patent application process and following the issuance of a patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, we or our licensors may fail to obtain patent protection, and our competitors might be able to enter the market, which would have a material adverse effect on our business.

Intellectual property rights do not necessarily address all potential threats to our business.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. The following examples are illustrative:

 

  •  

others may be able to make compounds or formulations that are similar to our product candidates but that are not covered by the claims of any patents that we own or control;

 

  •  

we or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or control, which may cause such patents to be invalidated;

 

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  •  

we or our licensors might not have been the first to file patent applications covering certain of the inventions we own or control, which may prevent the patent applications from being granted or, if already granted, might cause them to be invalidated;

 

  •  

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

 

  •  

it is possible that noncompliance with the USPTO and foreign governmental agencies requirement for a number of procedural, documentary, fee payment and other provisions during the patent process or technology export can result in abandonment or lapse of a patent or patent application and partial or complete loss of patent rights in the relevant jurisdiction;

 

  •  

pending patent applications that we own or control may not lead to issued patents;

 

  •  

issued patents that we own or control may be held invalid or unenforceable as a result of legal challenges;

 

  •  

our competitors might conduct research and development activities in the United States and other foreign countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive product candidates for sale in our major commercial markets;

 

  •  

we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own or in-license will result in issued patents with claims directed to our product candidates or uses thereof in the United States or in other foreign countries;

 

  •  

there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public health policy;

 

  •  

countries other than the United States may have patent laws that are less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing product candidates;

 

  •  

the claims of any patent issuing based on our patent applications may not provide protection against competitors or any competitive advantages or may be challenged by third parties;

 

  •  

if enforced, a court may find that our patents are invalid, unenforceable or not infringed;

 

  •  

we may not develop additional proprietary technologies that are patentable; and

 

  •  

the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications.

We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.

Filing, prosecuting and defending patents covering our current and any future product candidates throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can have a different scope and strength than do those in the United States. Consequently, we may not be able to prevent third parties from practicing our or our licensors’ inventions in all countries outside the United States or from selling or importing products made using our or our licensors’ inventions in and into the United States or other countries. Competitors may use our or our licensors’ technologies in jurisdictions where we have not obtained patent protection to develop their own product candidates and, further, may export otherwise infringing product candidates to territories where we or our licensors may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These product candidates may compete

 

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with our product candidates in jurisdictions where we and our licensors do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to biopharmaceutical products, which could make it difficult in those jurisdictions for us to stop the infringement or misappropriation of our patent rights or other intellectual property rights, or the marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent and other intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Furthermore, such proceedings could put our patent rights at risk of being invalidated, held unenforceable or interpreted narrowly, could put our or our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims of infringement or misappropriation against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Similarly, if our trade secrets are disclosed in a foreign jurisdiction, competitors worldwide could have access to our proprietary information and we may be without satisfactory recourse.

Such disclosure could have a material adverse effect on our business. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. In addition, certain developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. In addition, many countries limit the enforceability of patents against government agencies or government contractors. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our current or future trademarks or trade names may be challenged, opposed, infringed, circumvented, invalidated, cancelled, declared generic, determined to be not entitled to registration or determined to be infringing on other marks. During trademark registration proceedings, we may receive rejections of our applications by the USPTO or in foreign jurisdictions. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Any trademark litigation could be expensive. In addition, we could be found liable for significant monetary damages, including treble damages, disgorgement of profits and attorneys’ fees, if we are found to have willfully infringed a trademark. We may not be able to protect our exclusive right to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential collaborators or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected. We may license our trademarks and trade names to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.

Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. Similar

 

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requirements exist in Europe and other jurisdictions. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA (or an equivalent administrative body in a foreign jurisdiction) objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark. Trademark-related risks similar to those present in the United States may also be present in foreign jurisdictions.

We may seek additional in-licenses from third parties. If we are unable to acquire these rights, our business may be materially adversely affected, and if disputes arise with future licensors, we may be subject to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technologies covered by these license agreements.

The growth of our business may depend in part on our ability to acquire or in-license additional proprietary rights. We may be unable to acquire or in-license any relevant third-party intellectual property rights that we identify as necessary or important to our business operations at a reasonable cost or on reasonable terms, if at all, which would adversely affect our business. We may need to cease use of the technology covered by such third-party intellectual property rights and may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license under such intellectual property rights, any such license may be non-exclusive and may allow our competitors access to the same technologies licensed to us. The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive for commercializing our product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities. We may not be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates and technology that we may seek to acquire.

Even if we successfully enter into license agreements with third parties under which we receive rights to intellectual property that are important to our business, our continued rights to use the technology we license would be subject to the continuation of and compliance with the terms of those agreements. These intellectual property license agreements may require of us various development, regulatory or commercial diligence obligations, payment of milestones or royalties and other obligations. If we fail to comply with our obligations under these agreements, we use the licensed intellectual property in an unauthorized manner or we are subject to bankruptcy-related proceedings, the terms of the license agreements may be materially modified, such as by rendering currently exclusive licenses non-exclusive, or it may give our licensors the right to terminate their respective agreement with us, which could limit our ability to implement our current business plan and materially adversely affect our business, financial condition, results of operations and prospects.

We may also in the future enter into license agreements with third parties under which we are a sublicensee. If our sublicensor fails to comply with its obligations under its upstream license agreement with its licensor, the licensor may have the right to terminate the upstream license, which may terminate our sublicense. If this were to occur, we would no longer have rights to the applicable intellectual property unless we are able to secure our own direct license with the owner of the relevant rights, which we may not be able to do on reasonable terms, or at all, which may impact our ability to continue to develop and commercialize our product candidates incorporating the relevant intellectual property.

In some cases, we may not control the prosecution, maintenance or filing of the patents to which we hold licenses, or the enforcement of those patents against third parties. Hence, our success will depend in part on the

 

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ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications to which we are licensed in a manner consistent with the best interests of our business. Even if patents are issued in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects. Further, we may have limited control over these activities or any other intellectual property that may be in-licensed. For example, we cannot be certain that such activities by licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We may have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights or defend certain of the intellectual property that is licensed to us. It is possible that the licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves. In the event our licensors fail to adequately pursue and maintain patent protection for patents and applications they control and to timely cede control of such prosecution to us, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Moreover, disputes may arise with respect to our licensing or other upstream agreements, including:

 

  •  

the scope of rights granted under the agreements and other interpretation-related issues;

 

  •  

whether and the extent to which our systems and consumables, technologies and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

  •  

the sublicensing of patent and other rights under any collaborative development relationships;

 

  •  

our diligence obligations under the license and sub-license agreements and what activities satisfy those diligence obligations;

 

  •  

our right to transfer or assign the sublicense;

 

  •  

when and under what conditions the sublicense agreement may be terminated and the consequences thereof;

 

  •  

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our upstream licensors and us and our partners; and

 

  •  

the priority of invention of patented technology.

In spite of our efforts to comply with our obligations under our in-license agreements, our licensors might conclude that we have materially breached our obligations under our license agreements and might therefore terminate the relevant license agreement, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If any such in-license is terminated, or if the licensed patents fail to provide the intended exclusivity, competitors or other third parties might have the freedom to market or develop products similar to ours. In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and, if such litigation by the licensor is successful, we may be required to pay damages to such licensor, or we may be required to cease our development and commercialization activities which are deemed infringing, and, in such event, we may ultimately need to modify our activities or products to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, certain of our future agreements with third parties may limit or delay our ability to consummate certain transactions, may impact the value of those transactions or may limit our ability to pursue certain

 

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activities. For example, we may in the future enter into license agreements that are not assignable or transferable or that require the licensor’s express consent in order for an assignment or transfer to take place.

Risks Related to Ownership of Our Common Stock

We do not know whether an active, liquid and orderly trading market will develop for our common stock or what the market price of our common stock will be, and, as a result, it may be difficult for you to sell your shares of our common stock.

Prior to this offering, there was no public trading market for our common stock. If a liquid market for our common stock does not develop or is not sustained, it may be difficult for you to sell your shares of our common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations may be below the expectations of public market analysts and investors, and, as a result of these and other factors, the price of our common stock may fall. An inactive market may also impair our ability to raise capital by selling our common stock and our ability to acquire other companies, products or technologies by using our common stock as consideration.

You will incur immediate and substantial dilution as a result of this offering.

If you purchase common stock in this offering, you will incur immediate and substantial dilution of approximately $   per share, representing the difference between the assumed initial public offering price of $   per share, the midpoint of the estimated offering price range on the cover of the prospectus, and our pro forma as adjusted net tangible book value per share as of June 30, 2025 and assuming the automatic conversion of all outstanding shares of our convertible preferred stock upon the closing of this offering. That is because the price that you pay will be substantially greater than the pro forma as adjusted net tangible book value per share of the common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution if the underwriters exercise their over-allotment option, when those holding stock options exercise their right to purchase common stock under our equity incentive plans, upon the vesting of outstanding restricted stock awards or when we otherwise issue additional shares of our common stock. See the section titled “Dilution” for a further description of the dilution you will experience immediately after this offering.

The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.

The initial public offering price for our common stock was determined through negotiations with the underwriters. This initial public offering price may vary from the market price of our common stock at any time following the closing of the offering. The stock market in general, and the market for pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The market price for our common stock may be influenced by those factors discussed in this “Risk Factors” section and many others, some of which may include:

 

  •  

results of clinical trials and preclinical studies of our product candidates or those of our competitors or existing or future collaborators;

 

  •  

failure to meet or exceed financial and development projections we may provide to the public;

 

  •  

failure to meet or exceed the financial and development projections of the investment community;

 

  •  

announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by us or our competitors;

 

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  •  

actions taken by regulatory agencies with respect to our product candidates, clinical studies, manufacturing process or sales and marketing terms;

 

  •  

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

 

  •  

additions or departures of key personnel;

 

  •  

significant lawsuits, including patent or stockholder litigation;

 

  •  

if securities or industry analysts do not publish research or reports about our business or if they issue adverse or misleading opinions regarding our business and stock;

 

  •  

changes in the market valuations of similar companies;

 

  •  

general market or macroeconomic conditions or market conditions in the pharmaceutical and biotechnology sectors;

 

  •  

sales of our securities by us or other securityholders in the future;

 

  •  

if we fail to raise an adequate amount of capital to fund our operations or continued development of our product candidates;

 

  •  

trading volume of our common stock;

 

  •  

announcements by competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;

 

  •  

the introduction of technological innovations or new therapies that compete with our product candidates;

 

  •  

period-to-period fluctuations in our financial results; and

 

  •  

the other factors described in this “Risk Factors” section.

If the market price of our common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

The number of shares being registered for sale is significant in relation to the number of outstanding shares of our common stock. Additionally, future sales of shares, or perception of such sales, by existing stockholders could cause our stock price to decline.

Our stock price could decline as a result of sales of a large number of shares of our common stock after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon the closing of this offering,     shares of our common stock will be outstanding (or       shares of common stock assuming exercise in full of the underwriters’ over-allotment option), based on our shares outstanding as of June 30, 2025. All shares of our common stock expected to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), unless held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The resale of the remaining     shares, or % of our outstanding shares after this offering, is currently prohibited or otherwise restricted as a result of securities law provisions, market standoff agreements entered into by our stockholders with us or lock-up agreements entered into by our stockholders with

 

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the underwriters. However, subject to applicable securities law restrictions and excluding shares of our restricted stock that will remain unvested, these shares will be able to be sold in the public market beginning 180 days after the date of this prospectus. Shares of our unvested restricted stock subject to repurchase or forfeiture that were issued and outstanding as of the date of this prospectus will become available for sale immediately upon the vesting of such shares, as applicable, and the expiration of any applicable market stand-off or lock-up agreements. Shares issued upon the exercise of stock options pursuant to future awards that may be granted under our equity incentive plans or pursuant to future awards granted under those plans will become available for sale in the public market to the extent permitted by the provisions of applicable vesting schedules, any applicable market stand-off and lock-up agreements and Rule 144 and Rule 701 under the Securities Act. For more information see the section titled “Shares Eligible for Future Sale” included elsewhere in this prospectus.

Upon the closing of this offering, the holders of approximately     shares, or %, of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering the resale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register the offer and sale of all shares of our common stock that we may issue under our equity compensation plans. Once we register the offer and resale of shares for the holders of registration rights and shares to be issued under our equity incentive plans, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in the section titled “Underwriting” included elsewhere in this prospectus.

In addition, in the future, we may issue additional shares of our common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

Our executive officers, directors and principal stockholders have the ability to control or significantly influence all matters submitted to our stockholders for approval.

As of June 30, 2025, our executive officers, directors and stockholders beneficially owning 5% or greater of our common stock, in the aggregate, beneficially own approximately 76.7% of our outstanding shares of common stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

We do not expect to pay any dividends for the foreseeable future. Investors in this offering may never obtain a return on their investment.

We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock may be influenced by the research and reports that equity research analysts publish about us and our business. Equity research analysts may elect not to provide research coverage of our common stock and such lack of research coverage may adversely affect the market price of our common

 

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stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our common stock could decline if one or more equity research analysts downgrade our stock or issue unfavorable commentary or research. If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn could cause our stock price or trading volume to decline.

We have broad discretion in the use of our cash, cash equivalents and short-term investments and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

We have broad discretion over the use of our cash, cash equivalents and short-term investments. You may not agree with our decisions, and our use of the proceeds may not yield any return on your investment. Our failure to apply these resources effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of these net proceeds. You will not have the opportunity to influence our decisions on how to our cash resources.

Provisions in our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, and amended and restated bylaws, which will become effective upon the effectiveness of the registration statement of which this prospectus forms a part, and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

Our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, and amended and restated bylaws, which will become effective upon the effectiveness of the registration statement of which this prospectus forms a part, and Delaware law contain provisions that may have the effect of discouraging, delaying or preventing a change in control of us or changes in our management that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. The provisions of our amended and restated certificate of incorporation and amended and restated bylaws:

 

  •  

authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

 

  •  

create a classified board of directors whose members serve staggered three-year terms;

 

  •  

specify that special meetings of our stockholders can be called only by our board of directors;

 

  •  

prohibit stockholder action by written consent;

 

  •  

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

 

  •  

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

 

  •  

provide that our directors may be removed only for cause;

 

  •  

do not permit stockholders to cumulate votes at any election of directors;

 

  •  

expressly authorize our board of directors to make, alter, amend or repeal our amended and restated bylaws; and

 

  •  

require majority votes of all the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated bylaws.

 

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These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.

In addition, because we are incorporated in the State of Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated certificate of incorporation to be effective upon the closing of this offering will contain exclusive forum provisions, which may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable and may discourage lawsuits with respect to such claims.

Our amended and restated certificate of incorporation to be effective upon the closing of this offering will provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of or based on a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (3) any action asserting a claim against us or any of our current or former directors, officers, employees or stockholders arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; or (4) any action asserting a claim governed by the internal affairs doctrine. In addition, our amended and restated certificate of incorporation will designate the federal district courts of the United States as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act; however, such exclusive forum provision does not apply to claims brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The validity and enforceability of such provision is uncertain in a number of courts other than Delaware Supreme Court and certain other state courts.

We recognize that these provisions may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, these forum selection clauses in our amended and restated certificate of incorporation may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. Section 22 of the Securities Act creates a concurrent jurisdiction for state and federal courts over all suits brought concerning a duty or liability created by the securities laws, rules and regulations thereunder. While the Delaware Supreme Court and other state courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts will enforce our federal selection provision. The federal selection provision may also impose additional litigation costs on stockholders who assert the provision is unenforceable, and, if the provision is found to be unenforceable, we may incur additional costs with resolving such matters. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

 

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General Risk Factors

We will incur significantly increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as well as rules subsequently adopted by the SEC and NYSE to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, the Dodd-Frank Wall Street Reform and Consumer Protection Act includes significant corporate governance and executive compensation related provisions that require the SEC to adopt additional rules and regulations in these areas, such as “say on pay” and proxy access. Emerging growth companies (“EGCs”) and smaller reporting companies are exempted from certain of these requirements, but we may be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

We are an EGC and a smaller reporting company, and the reduced reporting requirements applicable to EGCs and smaller reporting companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we continue to be an EGC, we may take advantage of certain exemptions from various public company reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, being required to provide only two years of audited financial statements and two years of selected financial data, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until the last day of the fiscal year ending after the fifth anniversary of our IPO or until we are no longer an emerging growth company, whichever is earlier. We will cease to be an EGC prior to the end of such five-year period if certain earlier events occur, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues equal or exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period prior to such time. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

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In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with certain new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and therefore we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

If we experience material weaknesses in our internal control over financial reporting in the future or otherwise fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

We may in the future discover material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

We, and our independent registered public accounting firm, were not required to perform an evaluation of our internal control over financial reporting as of December 31, 2024 in accordance with the provisions of the Sarbanes-Oxley Act. Accordingly, we cannot assure you that we will not in the future identify material weaknesses. Material weaknesses may exist when we become required to report on the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act after the closing of this offering.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our stock could decline, and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably ensure that information we must disclose in reports we file or submit pursuant to the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make any related person

 

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transaction disclosures. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

We may not be able to satisfy listing requirements of NYSE or obtain or maintain a listing of our common stock on the NYSE.

If, after listing, we fail to satisfy NYSE’s continued listing requirements, such as the corporate governance requirements or the minimum closing bid price requirement, the NYSE may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again on the NYSE or any other securities exchange, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with NYSE’s listing requirements.

Our insurance policies are expensive and only protect us from some business risks, which will leave us exposed to significant uninsured liabilities.

While we maintain commercial insurance at a level we believe is appropriate against certain risks commonly insured in the industry in which we operate, there is no guarantee that our insurer will cover costs or that we will be able to obtain the desired level of coverage on acceptable terms in the future. Some of the policies we currently maintain include general liability, crime insurance, products liability, workers’ compensation, cyber, directors’ and officers’, employment practices and fiduciary liability insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Changes in the market conditions and our business operations may necessitate the addition of new insurance policies or change of our existing insurance policies. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our financial position and results of operations.

We also expect that operating as a U.S. public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, on our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would negatively affect our business, financial condition and results of operations.

We may become involved in litigation that could divert management’s attention and harm our business, and insurance coverage may not be sufficient to cover all costs and damages.

From time to time we may be subject to litigation claims through the ordinary course of our business operations regarding, but not limited to, securities litigation, employment matters, security of patient and employee personal data, contractual relations with collaborators and licensors and intellectual property rights. We may be exposed to such litigation or investigation even if no wrongdoing occurred. Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect our business and cash resources.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:

 

  •  

the success, cost and timing of our product development activities and clinical trials of our most-advanced product candidates, EVO756 and EVO301, and any future product candidates;

 

  •  

the characteristics and potential advantages of our product candidates;

 

  •  

our need to raise additional funding before we can expect to generate any revenues from product sales;

 

  •  

our ability to obtain regulatory approval for our current or future product candidates that we may identify or develop;

 

  •  

our ability to ensure adequate supply of our current or future product candidates;

 

  •  

our ability to maintain third-party relationships necessary to conduct our business;

 

  •  

our heavy dependence upon the success of our research to generate and advance additional product candidates;

 

  •  

our ability to establish an adequate safety or efficacy profile for our current or future product candidates;

 

  •  

the implementation of our strategic plans for our business, our current or future product candidates we may develop and our technology;

 

  •  

our intellectual property position, including the scope of protection and contractual rights that we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

 

  •  

estimates of the number of patients with certain diseases, market sizes for certain diseases, conditions we intend to treat and the number of subjects that we intend to enroll in our clinical trials;

 

  •  

our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue;

 

  •  

the rate and degree of clinical utility for our current or future product candidates and their acceptance by physicians, patients, third-party payors and others in the medical community;

 

  •  

our estimates about the size of market opportunities relating to our product candidates;

 

  •  

our ability to use the proceeds of this offering in ways that increase the value of your investment;

 

  •  

our expectations related to the use of proceeds from this offering and estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

 

  •  

our ability to maintain and establish collaborations, licensing or other arrangements, including our ability to comply with our obligations pursuant to the terms of such agreements;

 

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  •  

our financial performance and liquidity;

 

  •  

our ability to effectively manage our potential growth;

 

  •  

developments relating to our competitors and our industry, including the impact of government regulation and policy;

 

  •  

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

 

  •  

our ability to maintain adequate internal controls over financial reporting and to manage the business of the Company in accordance with applicable laws and the highly regulated industry in which we participate; and

 

  •  

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement, of which this prospectus is a part, in their entirety and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we assume no obligation to update or revise any forward-looking statements except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to rely unduly upon these statements.

 

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MARKET AND INDUSTRY DATA AND FORECASTS

We obtained the industry, market and competitive position data used throughout this prospectus from our own internal estimates and research, as well as from independent market research, industry and general publications and surveys, governmental agencies and publicly available information, in addition to research, surveys and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience and are based on assumptions made by us based on such data and our knowledge of our industry and market, which we believe to be reasonable. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires. In addition, while we believe the industry, market and competitive position data included in this prospectus are reliable and based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed in the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates included in this prospectus.

 

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USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of shares of our common stock in this offering will be approximately $   million, or approximately $   million if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $   per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $   per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $   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 underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease), the net proceeds to us from this offering by approximately $   million, assuming the assumed initial public offering price of $   per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the initial price to the public or the number of shares by these amounts would have a material effect on the uses of the proceeds from this offering, although it may accelerate the time at which we will need to seek additional capital.

The principal purposes of this offering are to increase our financial flexibility, create a public market for our common stock and facilitate our future access to the public capital markets.

We currently intend to use the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments of $86.8 million, as of June 30, 2025, as follows:

 

  •  

approximately $   million to fund the clinical development of our most advanced clinical-stage product candidate, EVO756, including to conduct our Phase 2/3 trials in chronic spontaneous urticaria (“CSU”) and atopic dermatitis (“AD”);

 

  •  

approximately $    million to fund the Phase 2 clinical development of our product candidate, EVO301, in AD; and

 

  •  

the remainder, if any, for additional research and development activities, business development activities, working capital and other general corporate purposes.

Based on our current plans, we believe such existing cash, cash equivalents and short-term investments, together with the net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements     .

We may also use a portion of the net proceeds to in-license, acquire or invest in new businesses, technology or assets. Although we have no current agreements, commitments or understandings with respect to any such in-license, acquisition or investment, we evaluate such opportunities and engage in related discussions with third parties from time to time.

The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering. Due to uncertainties inherent in the product development process, it is difficult to estimate the exact amounts of the net proceeds that will be used for any particular purpose. We may use our existing cash, cash equivalents and short-term investments and the future payments, if any, generated from any future collaboration agreements to fund our operations, either of which may alter the amount of net proceeds used for a particular purpose. In addition, the amount, allocation and timing of our actual expenditures

 

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will depend upon numerous factors, including the results of our research and development efforts, the timing and success of clinical trials and the timing of regulatory submissions. Accordingly, our management will have broad discretion in the application of the net proceeds and investors will be relying on the judgment of our management regarding the application of the net proceeds.

Pending the uses described above, we plan to invest the net proceeds of this offering in interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government of various durations.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We do not anticipate paying any dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects and any other factors deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.

In addition, our ability to pay cash dividends on our capital stock in the future may be limited by the terms of any future debt or preferred securities we issue or any credit facilities we enter into.

 

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and short-term investments and our capitalization as of June 30, 2025:

 

  •  

on an actual basis;

 

  •  

on a pro forma basis to give effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 163,099,487 shares of our common stock upon the closing of this offering and (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the closing of this offering; and

 

  •  

on a pro forma as adjusted basis to give effect to (i) the pro forma adjustments described above and (ii) the issuance and sale of    shares of our common stock in this offering at an assumed initial public offering price of $    per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, for proceeds of $    million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma as adjusted information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of the offering determined at pricing. You should read this information together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

    June 30, 2025  
     Actual      Pro Forma     Pro forma As
Adjusted
 
    (in thousands, except for share and per share data)  

Cash, cash equivalents and short-term investments

  $ 86,795     $          $       
 

 

 

   

 

 

   

 

 

 

Convertible preferred stock:

     

Convertible preferred stock, $0.0001 par value — 157,657,729 shares authorized, issued and outstanding, actual;    shares authorized, issued and outstanding, pro forma; no shares authorized, issued and outstanding, pro forma as adjusted

    257,004      

Common stock, $0.0001 par value; 223,593,879 shares authorized and 13,245,339 shares issued and outstanding, actual; shares    authorized,    shares issued and outstanding, pro forma; shares authorized,    shares issued and outstanding, pro forma as adjusted

    1      

Additional paid-in capital

    9,107      

Accumulated deficit

    (180,341 )     
 

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

    (171,233 )     
 

 

 

   

 

 

   

 

 

 

Total capitalization

    85,771      
 

 

 

   

 

 

   

 

 

 
 
(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $    per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease), each of pro forma as adjusted cash, cash equivalents and short-term investments, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $    million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase (decrease) the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) each of pro forma as adjusted cash, cash equivalents and short-term investments, additional paid-in capital, total stockholders’ (deficit) equity and total capitalization by approximately $    million, assuming the assumed initial public offering price of $   per share remains the same. The pro forma as adjusted

 

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information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

The number of shares of common stock issued and outstanding pro forma and pro forma as adjusted in the table above is based on     shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into     shares of common stock upon the closing of this offering and excludes:

 

  •  

31,741,410 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2025 under the 2020 Stock Plan (the “2020 Plan”) at a weighted-average exercise price of $0.36 per share;

 

  •  

3,728,809 shares of our common stock issuable upon the vesting of unvested restricted stock units outstanding as of June 30, 2025 under the 2020 Plan;

 

  •  

3,790,449 shares of our common stock underlying stock appreciation rights outstanding as of June 30, 2025;

 

  •  

    shares of our common stock issuable upon the exercise of options granted after June 30, 2025 pursuant to the 2020 Plan at a weighted-average exercise price of $    per share;

 

  •  

1,131,506 shares of our common stock reserved for future issuance under the 2020 Plan as of June 30, 2025;

 

  •  

    shares of our common stock reserved for future issuance under the 2025 Equity Incentive Plan (the “2025 Plan”), which will become effective in connection with this offering; and

 

  •  

    shares of our common stock reserved for future issuance under the 2025 Employee Stock Purchase Plan (the “ESPP”), which will become effective in connection with this offering.

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value (deficit) per share of our common stock immediately after this offering.

Our historical net tangible book value (deficit) was $(172.7) million, or $(13.04) per share as of June 30, 2025. Our historical net tangible book value (deficit) per share is determined by dividing our total tangible assets less our total liabilities and deferred offering costs of $1.5 million and convertible preferred stock, which are not included within stockholders’ equity (deficit), by the number of shares of common stock outstanding.

Our pro forma net tangible book value as of June 30, 2025 was $    million, or $   per share. Our pro forma net tangible book value (deficit) per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of June 30, 2025, assuming the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 163,099,487 shares of our common stock immediately prior to the closing of this offering.

After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $   per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2025 would have been $    million, or $   per share. This represents an immediate increase in net tangible book value of $   per share to existing stockholders and an immediate dilution in net tangible book value of $   per share to purchasers of common stock in this offering. Dilution per share to investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. The following table illustrates this dilution on a per-share basis:

 

Assumed initial public offering price per share

     $       

Historical net tangible book value (deficit) per share as of June 30, 2025

   $ (13.04 )   

Increase in net tangible book value per share attributable to the conversion of our convertible preferred stock immediately prior to the closing of this offering

    
  

 

 

   

Pro forma net tangible book value per share as of June 30, 2025

    

Increase in net tangible book value per share attributable to investors participating in this offering

    
  

 

 

   

Pro forma as adjusted net tangible book value per share after this offering

    
    

 

 

 

Dilution per share to investors participating in this offering

     $    
    

 

 

 

Each $1.00 increase (decrease) in the assumed public offering price of $   per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by $    million, or $   per share, and dilution per share to investors in this offering by $   per share, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value by approximately $   million, or approximately $   per share and would increase (decrease) dilution per share to investors in this offering by approximately $   per share, assuming the assumed initial public offering price of $ per share remains the same, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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If the underwriters’ over-allotment option is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $   per share; the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $   per share; and the dilution to investors purchasing shares in this offering would be $   per share.

The following table shows, as of June 30, 2025, on a pro forma as adjusted basis described above (but before deducting underwriting discounts and commissions and estimated offering expenses payable by us), the differences between the existing stockholders and the purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from the exercise of stock options and the value of any stock issued for services and the average price paid per share (in thousands, except per share amounts and percentages):

 

     Shares
Purchased
    Total Consideration        
     Number      Percent     Amount      Percent     Weighted-
Average Price
Per Share
 

Existing stockholders before this offering

            

Investors participating in this offering(1)

            
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

                100 %                 100.0 %    $        
  

 

 

    

 

 

   

 

 

    

 

 

   
 
(1)

The presentation in this table regarding ownership by existing stockholders does not give effect to any purchases that existing stockholders may make through our directed share program or otherwise in this offering.

The table above assumes no exercise of the underwriters’ over-allotment option in this offering. If the underwriters’ over-allotment option is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by investors participating in the offering would be increased to  % of the total number of shares of our common stock outstanding after this offering.

The foregoing tables and calculations (other than the historical net tangible book value (deficit) calculations) are based on     shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 163,099,487 shares of common stock upon the closing of this offering and exclude:

 

  •  

31,741,410 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2025 under the 2020 Plan at a weighted-average exercise price of $0.36 per share;

 

  •  

3,728,809 shares of our common stock issuable upon the vesting of unvested restricted stock units outstanding as of June 30, 2025 under the 2020 Plan;

 

  •  

3,790,449 shares of our common stock underlying stock appreciation rights outstanding as of June 30, 2025;

 

  •  

   shares of our common stock issuable upon the exercise of options granted after June 30, 2025 pursuant to the 2020 Plan at a weighted-average exercise price of $   per share;

 

  •  

1,131,506 shares of our common stock reserved for future issuance under the 2020 Plan as of June 30, 2025;

 

  •  

   shares of our common stock reserved for future issuance under the 2025 Plan, which will become effective in connection with this offering; and

 

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  •  

   shares of our common stock reserved for future issuance under the ESPP, which will become effective in connection with this offering.

To the extent that any outstanding options are exercised, restricted stock units settle, new options are issued under our stock-based compensation plans or we issue additional shares of common stock or securities convertible into common stock in the future, there will be further dilution to investors participating in this offering.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, assumptions and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

Overview

Evommune is a clinical-stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases, with initial clinical development programs focusing on chronic spontaneous urticaria (“CSU”), atopic dermatitis (“AD”) and ulcerative colitis (“UC”). Chronic inflammation is a significant healthcare problem in the world, substantially impacting patients’ quality of life and leading to life-threatening conditions. These conditions, if not prevented, ultimately lead to fatal diseases, such as cardiovascular diseases, diabetes and cancer, which contribute to three out of every five deaths worldwide and result in an estimated $90 billion of annual cost to the healthcare system in the United States.

Our mission is to improve patients’ daily lives and prevent the long-term effects of uncontrolled inflammation that are a consequence of the limitations of existing therapies. To achieve this, we are advancing a portfolio of differentiated product candidates that target key drivers of chronic inflammation.

Our management team’s proven drug development expertise and experience in the field of immunology and inflammation, combined with advanced scientific tools, enable us to identify and advance potent, highly selective molecules with distinctive mechanisms of action. By identifying treatment gaps of chronic inflammatory diseases, we strive to transform the treatment landscape, developing therapies that have the potential to offer rapid symptom relief and provide safe, durable resolution of the underlying disease. Among our portfolio of programs, we currently have two product candidates, EVO756 and EVO301, in Phase 2 trials. We are initially developing EVO756 for the treatment of CSU and AD, and EVO301 for the treatment of AD and UC. We see broad expansion potential for both programs across additional chronic inflammatory diseases. We also intend to advance additional preclinical programs into clinical development.

We were incorporated under the laws of the State of Delaware in April 2020 under the name “Evommune, Inc.” We have two wholly owned subsidiaries: Evommune Research, LLC and Evommune Biologics, LLC.

We have incurred significant operating losses in each year since our inception. For the years ended December 31, 2024 and 2023, we had net losses of $66.8 million and $34.1 million, respectively, and for the six months ended June 30, 2025, we had a net loss of $28.1 million. As of June 30, 2025, we had an accumulated deficit of $180.3 million. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants and incur other increased costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

 

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We expect to continue to incur significant and increasing net operating losses for the next several years as we:

 

  •  

continue the research and development of our clinical- and preclinical-stage product candidates and discovery-stage programs, including the continued development of our most advanced product candidates, EVO756 and EVO301;

 

  •  

increase the amount of research and development activities to identify and develop product candidates;

 

  •  

make milestone, royalty or other payments under in-license or collaboration agreements;

 

  •  

maintain, expand and protect our intellectual property portfolio;

 

  •  

expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts;

 

  •  

establish sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval and intend to commercialize on our own or jointly with third parties;

 

  •  

address any competing therapies and market developments;

 

  •  

incur additional costs associated with operating as a public company following the closing of this offering;

 

  •  

invest in or in-license other technologies; and

 

  •  

experience any delays or encounter any issues with any of the above, including but not limited to failed studies or trials, complex results, manufacturing challenges, safety issues or other regulatory challenges.

As a result, we will require substantial additional funding to further develop our product candidates and support our continuing operations. To date, we have not had any products approved for sale and, therefore, have not generated any approved product-related revenue. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which will not be for at least the next several years, if ever. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash requirements through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on commercially acceptable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Based upon our current operating plan, we believe that the estimated net proceeds from this offering together with our existing cash, cash equivalents and short-term investments of $86.8 million as of June 30, 2025 will be sufficient to fund our operations and capital requirements   . We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. See the subsection titled “—Liquidity and Capital Resources” below.

Strategic Collaborations and License Agreements

Dermira, Inc.

In December 2020, we entered into a License, Development and Commercialization Agreement with Dermira, pursuant to which Dermira granted us an exclusive, worldwide license to develop and commercialize certain compounds, including the compound in development by us known as EVO756 (the “Dermira License Agreement”).

 

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The Dermira License Agreement remains in effect on a product-by-product and a country-by-country basis until the expiration of the royalty term for such product in such country. The Dermira License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy. Additionally, we may terminate the Dermira License Agreement for convenience upon a set number of days’ prior notice.

In consideration for the licenses granted to us under the Dermira License Agreement, we paid to Dermira a $7.5 million upfront license fee. Additionally, in connection with our entry into the Dermira License Agreement, we issued to Dermira 3,227,805 shares of Series A Preferred Stock which was equal to approximately 5% of our fully diluted equity at the time of grant and was calculated by reference to the same per-share purchase price paid by the lead investor in the Series A Preferred Stock financing (as a completed qualified financing).

We are also obligated to pay to Dermira up to $45.0 million in development milestones for the development of EVO756 (or up to $135.0 million for the development of all licensed products), and up to $240.0 million in sales milestones for the development of EVO756 (or up to $720.0 million for the development of all licensed products) as well as tiered royalty payments in mid-single digit to low-tens percentages on worldwide sales of the licensed products.

As of June 30, 2025, we have paid a total of $11.0 million in upfront payments and development milestones under the Dermira License Agreement, which was recognized as research and development expense for the year in which they occurred. No milestones were achieved under the Dermira License Agreement during the year ended December 31, 2024. For the six months ended June 30, 2025, we recorded $2.5 million as research and development expense upon achievement of a development milestone under the Dermira License Agreement. Milestones and royalties are contingent upon future events and will be recorded when the milestones are achieved and when payments are due.

Under the Dermira License Agreement, we may sublicense EVO756 to third parties. Dermira has consented to our sublicense of EVO756 to Maruho in Japan and certain Asian countries as described below. For additional information related to For additional information related to or any other agreements described below, see the section entitled “Business—Strategic Collaborations and License Agreements.”

Maruho Co., Ltd.

Maruho Japan Agreement

In September 2023, we entered into a strategic collaboration with Maruho and granted Maruho an exclusive license to develop and commercialize EVO756 in Japan (the “Maruho Japan Agreement”). Under the Maruho Japan Agreement, we are eligible to receive up to $60.0 million in upfront and customary milestone payments and royalty payments on future sales of EVO756 in Japan.

Maruho Greater Asia Agreement

In March 2024, we entered into a second strategic collaboration with Maruho (the “Maruho Greater Asia Agreement”) and granted Maruho the exclusive license to develop and commercialize EVO756 in Greater China and certain other Asian countries. Under the Maruho Greater Asia Agreement, we are eligible to receive up to $62.0 million in upfront and customary milestone payments.

AprilBio Co., Ltd.

In June 2024, we entered into a license agreement with AprilBio under which AprilBio granted us an exclusive worldwide license to develop and commercialize EVO301 (the “AprilBio License Agreement”). Under the AprilBio License Agreement, we paid an upfront payment of $15.0 million and may be required to pay milestone payments up to $460.0 million upon achievement of future milestones and royalties on future sales of EVO301. For the six months ended June 30, 2025, we recorded $1.5 million as research and development expense upon achievement of a development milestone under the AprilBio License Agreement. No development

 

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milestones were recorded as research and development expenses for the six months ended June 30, 2024. No other development or sales milestones have been achieved as of June 30, 2025.

Components of Operating Results

Revenue

Our revenue since inception has consisted exclusively of license revenue. We have not generated any revenue from the sale of products and do not expect to generate any revenue from the sale of products in the foreseeable future, if at all. If our development efforts for our current product candidates and any future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales, payments from existing or potential future collaboration or license agreements with third parties or any combination thereof.

Operating Expenses

Our operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.

Research and Development

Our research and development expenses consist primarily of external and internal costs incurred for the development of our product candidates and our drug discovery efforts, which include:

 

  •  

personnel costs, which include salaries, benefits and equity-based compensation expense;

 

  •  

expenses incurred under agreements with consultants and third-party contract organizations that conduct research and development activities on our behalf, such as CROs;

 

  •  

costs related to research and license agreements;

 

  •  

costs related to production of preclinical and clinical materials, including fees paid to contract development and manufacturing organizations (“CDMOs”);

 

  •  

costs related to compliance with regulatory requirements;

 

  •  

laboratory and vendor expenses related to the execution of preclinical studies and planned clinical trials; and

 

  •  

laboratory supplies and equipment used for internal research and development activities.

We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers. Non-refundable advance payments for goods and services that will be used over time for research and development are deferred and capitalized as prepaid expenses on our consolidated balance sheets. The capitalized amounts are recognized as an expense as the goods are delivered or as the related services are performed. Since our inception, substantially all of our external costs were related to the development of product candidates. We use internal resources for platform development, early pipeline discovery, preclinical development, management of clinical development activities, technical operations and oversight of manufacturing partners. We do not track our research and development expenses on a program-by-program basis. Our third-party research and development expenses consist primarily of fees paid to outside consultants, CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our other research and development costs are internal costs primarily associated with our discovery efforts, laboratory supplies and facilities, including depreciation, that are deployed across multiple programs.

 

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We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in conducting clinical trials, manufacturing and otherwise advancing our programs. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.

Because of the numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when or to what extent we will obtain regulatory approval and generate revenues from the commercialization and sale of our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

 

  •  

enrollment in our Phase 2b dose-ranging trials for EVO756 in CSU and AD, any future clinical trials of EVO756, our ongoing Phase 2 trial for EVO301 and any clinical trials for future product candidates;

 

  •  

data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended patient populations;

 

  •  

acceptance by the FDA or other comparable foreign regulatory authorities, of the Investigational New Drug (“IND”) applications, clinical trial applications and other regulatory filings for EVO756, EVO301, our other current product candidates and any future product candidates;

 

  •  

expansion and maintenance of a workforce of experienced scientists and others to continue to develop our product candidates;

 

  •  

successful application for and receipt of marketing approvals from applicable regulatory authorities;

 

  •  

obtainment and maintenance of intellectual property protection and regulatory exclusivity for our product candidates;

 

  •  

arrangements with third-party manufacturers for, or establishment of, manufacturing capabilities;

 

  •  

maintenance, enforcement, defense and protection of our rights in our intellectual property portfolio; and

 

  •  

avoidance of infringement, misappropriation or other violations with respect to others’ intellectual property or proprietary rights.

We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

Research and development activities account for a significant portion of our operating expenses. We expect our research and development expenses to increase for the foreseeable future as we continue to implement our business strategy, which includes advancing EVO756 and EVO301 through clinical development and other product candidates further into clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts and seeking regulatory approvals for our product candidates that successfully complete clinical trials. In addition, product candidates in later stages of

 

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clinical development generally incur higher development costs than those in earlier stages of clinical development. As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be predicted.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel costs, depreciation expense and other expenses for outside professional services, including legal, human resources, audit and accounting services and facility-related fees. Personnel costs consist of salaries, benefits and equity-based compensation expense for our personnel in executive, finance and accounting, business operations and other administrative functions. We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of expanding our operations and operating as a public company. These increases will likely include increases related to the hiring of additional personnel and legal, regulatory and other fees and services associated with maintaining compliance with NYSE listing rules and SEC requirements, director and officer insurance premiums and investor relations costs associated with being a public company.

Other Income, Net

Our other income, net consists primarily of interest earned on our invested cash, cash equivalents and short-term investment balances, interest expense, foreign exchange gains and losses and other insignificant amounts. We expect our interest income may increase as we invest the cash received from the net proceeds from this offering.

Results of Operations

Comparison of the Six Months Ended June 30, 2025 and 2024

The following sets forth our results of operations:

 

     Six Months Ended     Change  
     June 30,
2025
    June 30,
2024
    Amount     Percent  

Revenue

   $ 3,000     $ 7,000     $ (4,000 )      (57 )% 

Operating Expenses:

        

Research and development

     34,000       33,125       875       3 % 

General and administrative

     7,026       5,918       1,108       19 % 
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     41,026       39,043       1,983       5 % 
  

 

 

   

 

 

   

 

 

   

Loss from Operations

     (38,026 )      (32,043 )      (5,983 )      19 % 

Other income, net

     9,904       1,877       8,027       428 % 
  

 

 

   

 

 

   

 

 

   

Net Loss

   $ (28,122 )    $ (30,166 )    $ 2,044       (7 )% 
  

 

 

   

 

 

   

 

 

   

Revenue

For the six months ended June 30, 2025 and 2024, we recognized $3.0 million and $7.0 million, respectively, in revenue through our license agreements. The decrease was due to lower license revenue recognized under the Maruho Japan Agreement than the Maruho Greater Asia Agreement. License revenue of $3.0 million was recognized upon the satisfaction of the performance obligation under the Maruho Japan Agreement for the six months ended June 30, 2025 compared to $7.0 million recognized under the Maruho Greater Asia Agreement for the six months ended June 30, 2024.

 

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Operating Expenses

Research and Development

The following table summarizes our research and development expenses for each of the periods indicated:

 

     Six Months Ended         
     June 30,
2025
     June 30,
2024
     Change  
     (in thousands)  

EVO756

   $ 14,859      $ 9,685      $ 5,174  

EVO301

     4,402        15,006        (10,604 ) 

Discovery research

     9,512        3,897        5,615  

Personnel costs

     5,227        4,537        689  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 34,000      $ 33,125      $ 875  
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $34.0 million and $33.1 million for the six months ended June 30, 2025 and 2024, respectively. The increase was primarily due to an increase of $5.2 million related to our clinical development of EVO756. We also had an increase of $5.6 million related to additional preclinical research expenses for three undisclosed discovery programs, which is classified as discovery research expense in the table above. There was an increase of $0.7 million in unallocated research and development expenses primarily related to personnel costs for additional hiring to support our EVO756 and EVO301 clinical programs, which was partially offset by a decrease of $10.6 million related to our in-licensing and subsequent clinical development of EVO301 following a $15.0 million upfront payment to AprilBio in June 2024.

General and Administrative

The following table summarizes our general and administrative expenses for each of the periods indicated:

 

     Six Months Ended         
     June 30,
2025
     June 30,
2024
     Change  
     (in thousands)  

Personnel costs

   $ 3,366      $ 2,763      $ 603  

Stock-based compensation

     674        482        192  

Professional fees

     1,177        1,163        14  

Other general and administrative expenses

     1,809        1,510        299  
  

 

 

    

 

 

    

 

 

 

Total general and administrative expenses

   $ 7,026      $ 5,918      $ 1,108  
  

 

 

    

 

 

    

 

 

 

General and administrative expenses were $7.0 million and $5.9 million for the six months ended June 30, 2025 and 2024, respectively. The increase was primarily due to an increase in personnel costs of $0.6 million due to increased headcount and an increase in other general and administrative expenses of $0.3 million.

Other income, net

Other income, net was $9.9 million and $1.9 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $8.0 million was primarily due to an increase in the fair value of convertible preferred stock forward of $8.9 million and a decrease in interest income of $0.9 million.

 

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Comparison of the Years Ended December 31, 2024 and 2023

The following sets forth our results of operations:

 

     Years Ended
December 31,
    Change  
     2024     2023     Amount     Percent  
     (in thousands)  

Revenue

   $ 7,000     $ 5,000     $ 2,000       40.0 % 

Operating expenses

        

Research and development

     64,244       31,997       32,247       100.8 % 

General and administrative

     12,769       10,853       1,916       17.7 % 
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     77,013       42,850       34,163       79.7 % 
  

 

 

   

 

 

   

 

 

   

Loss from operations

     (70,013 )      (37,850 )      (32,163 )      85.0 % 

Other income, net

     3,205       3,797       (592 )      (15.6 )% 
  

 

 

   

 

 

   

 

 

   

Net loss

   $ (66,808 )    $ (34,053 )    $ (32,755 )      96.2 % 
  

 

 

   

 

 

   

 

 

   

Revenue

For the years ended December 31, 2024 and 2023, we recognized $7.0 million and $5.0 million, respectively, in revenue through our license agreements. The increase was due to a larger upfront payment under the Maruho Greater Asia Agreement than under the Maruho Japan Agreement.

Operating Expenses

Research and Development

The following table summarizes our research and development expenses for each of the periods indicated:

 

     Years Ended
December 31,
    

 

 
     2024      2023      Change  
     (in thousands)  

EVO756

   $ 24,662      $ 7,589        17,073  

EVO301

     19,669        —      $ 19,669  

Other programs

     10,314        18,051        (7,737 ) 

Personnel costs

     9,599        6,357        3,242  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 64,244      $ 31,997      $ 32,247  
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $64.2 million and $32.0 million for the years ended December 31, 2024 and 2023, respectively. The increase was primarily due to an increase of $19.7 million related to our in-licensing and subsequent clinical development of EVO301 from AprilBio, which included an upfront license fee payment of $15.0 million, which was expensed as incurred. We also incurred $4.7 million in Phase 2 development costs. We had an increase of $17.1 million related to our clinical development of EVO756 driven by our Phase 1 healthy volunteer trial costs as well as the ramp up of our Phase 2a trial costs. We also had an increase of $3.2 million in unallocated research and development expenses primarily related to personnel costs for additional hiring to support our clinical and preclinical discovery programs, partially offset by a decrease of $7.7 million in expenses related to other programs driven by the de-prioritization of a program no longer in development.

 

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General and Administrative

The following table summarizes our general and administrative expenses for each of the periods indicated:

 

     Years Ended
December 31,
        
     2024      2023      Change  
     (in thousands)  

Personnel costs

   $ 5,958      $ 4,344      $ 1,614  

Stock-based compensation

     1,017        851        166  

Professional fees

     2,496        2,703        (207 ) 

Other general and administrative expenses

     3,298        2,955        343  
  

 

 

    

 

 

    

 

 

 

Total general and administrative expenses

   $ 12,769      $ 10,853      $ 1,916  
  

 

 

    

 

 

    

 

 

 

General and administrative expenses were $12.8 million and $10.9 million for the years ended December 31, 2024 and 2023, respectively. The increase was primarily due to an increase in personnel costs of $1.6 million due to increased headcount.

Other income, net

Other income, net was $3.2 million and $3.8 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $0.6 million was due to a decrease in interest income.

Liquidity and Capital Resources

Sources of Liquidity

Our operations to date have been financed primarily by aggregate net proceeds of $267.3 million from the issuance of convertible preferred stock and common stock. Since inception, we have had significant operating losses. Our net losses were $66.8 million and $34.1 million for the years ended December 31, 2024 and 2023, respectively, and $28.1 million for the six months ended June 30, 2025. As of June 30, 2025, we had an accumulated deficit of $180.3 million and $86.8 million in cash, cash equivalents and short-term investments. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We currently expect that the estimated net proceeds from this offering, together with our cash, cash equivalents and short-term investments of $    million as of     , 2025 will be sufficient to fund our operating expenses and capital requirements   . However, additional funding will be necessary to fund our future clinical and preclinical activities, and we do not currently have any committed source of external funding. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate our research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our business prospects and our ability to continue operations.

 

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Cash Flows

The following table summarizes our cash flows for the periods indicated:

 

     Six Months Ended     Years Ended  
     June 30,
2025
    June 30,
2024
    December 31,
2024
    December 31,
2023
 

Net cash used in operating activities

   $ (50,107 )    $ (13,456 )    $ (58,195 )    $ (29,970 ) 

Net cash provided by (used in) investing activities

     31,500       19,675       (3,993 )      (48,433 ) 

Net cash provided by (used in) financing activities

     64,189       (168 )      49,419       63,753  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

   $ 45,582     $ 6,051     $ (12,769 )    $ (14,650 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Cash used in operating activities of $50.1 million during the six months ended June 30, 2025 was attributable to our net loss of $28.1 million, and a net decrease of $14.2 million in our working capital, and a non-cash decrease upon settlement of preferred stock forward of $8.9 million, partially offset by non-cash items, including stock-based compensation, accretion of discount on short-term investments and depreciation and amortization expense totaling $1.2 million.

Cash used in operating activities of $13.5 million during the six months ended June 30, 2024 was attributable to our net loss of $30.2 million, partially offset by non-cash items, including stock-based compensation, accretion of discount on short-term investments and depreciation and amortization expense totaling $0.4 million, and a net increase of $16.4 million in our working capital.

Cash used in operating activities of $58.2 million during the year ended December 31, 2024 was attributable to our net loss of $66.8 million, partially offset by non-cash items, including stock-based compensation, accretion of discount on short-term investments and depreciation and amortization expense totaling $1.2 million and a net increase of $7.4 million in our working capital.

Cash used in operating activities of $30.0 million during the year ended December 31, 2023 was attributable to our net loss of $34.1 million, partially offset by non-cash items, including stock-based compensation, accretion of discount on short-term investments and depreciation and amortization expense totaling $0.7 million and a net decrease of $3.3 million in our working capital.

Investing Activities

Cash provided by investing activities in the six months ended June 30, 2025 comprised maturities of short-term investments of $31.5 million.

Cash provided by investing activities in the six months ended June 30, 2024 comprised maturities of short-term investments of $48.8 million, partially offset by purchases of short-term investments of $29.0 million and property and equipment of $0.1 million.

Cash used in investing activities in the year ended December 31, 2024 comprised purchases of short-term investments of $90.3 million and property and equipment of $0.1 million, partially offset by maturities of short-term investments of $86.4 million.

Cash used in investing activities in the year ended December 31, 2023 comprised purchases of short-term investments of $91.3 million and property and equipment of $0.1 million, partially offset by maturities of short-term investments of $43.0 million.

 

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Financing Activities

Cash provided by financing activities for the six months ended June 30, 2025 was $64.2 million, which comprised net proceeds from the sale and issuance of our Series C Preferred Stock, in June 2025 of $65.2 million, partially offset by payments of deferred offering costs of $0.7 million and principal payments on finance leases and financing obligations of $0.3 million.

Cash used in financing activities for the six months ended June 30, 2024 was $0.2 million, which comprised principal payments on finance leases and financing obligations of $0.2 million.

Cash provided by financing activities for the year ended December 31, 2024 was $49.4 million, which comprised net proceeds from the sale and issuance of our Series C Preferred Stock in October 2024 of $49.8 million, partially offset by principal payments on finance leases and financing obligations of $0.4 million.

Cash provided by financing activities for the year ended December 31, 2023 was $63.8 million, which comprised net proceeds from the sale and issuance of our Series A Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), in January 2023 of $6.6 million and the net proceeds from the sale and issuance of our Series B Preferred Stock, par value $0.0001 per share (“Series B Preferred Stock”), throughout 2023 of $57.4 million, partially offset by principal payments on financing obligations of $0.2 million.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses; costs related to third-party clinical research, manufacturing and development services; costs relating to the build-out of our headquarters and other offices, our laboratories and our manufacturing facility; license payments or milestone obligations that may arise; laboratory expenses and costs for related supplies; clinical costs; manufacturing costs; legal and other regulatory expenses and general overhead costs. We expect that our research and development expenses, general and administrative expenses and capital expenditures will continue to increase. Any product candidates we may develop may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future.

Based upon our current operating plan, we believe that the estimated net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments of $86.8 million as of June 30, 2025 will be sufficient to fund our operating expenses and capital requirements   . To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future. We will continue to seek funds, which may be through equity offerings, debt financings or other capital sources, including potential collaborations, out-licenses or dispositions and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we do raise additional capital through offerings of equity or equity-linked securities, the ownership interest of our existing stockholders, including investors in this offering, may be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect our stockholders’ rights. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

 

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Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

 

  •  

the progress, timing and completion of preclinical studies and clinical trials for our current or any future product candidates, as well as the associated costs, including any unforeseen costs we may incur as a result of preclinical study or clinical trial delays due to disease outbreaks, epidemics and pandemics or other causes;

 

  •  

the timing and amount of milestone and royalty payments we are required to make or are eligible to receive under our license agreements with Dermira, Maruho, AprilBio and any future license or collaboration agreements;

 

  •  

the number and characteristics of potential new product candidates we identify and decide to develop;

 

  •  

the need for additional or expanded preclinical studies and clinical trials beyond those that we plan to conduct with respect to our current and future product candidates;

 

  •  

the cost involved in growing the organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates;

 

  •  

the costs involved in filing patent applications, maintaining and enforcing patents or defending against infringement or other claims raised by third parties;

 

  •  

the maintenance of our existing license and collaboration agreements and the entry into new license and collaboration agreements;

 

  •  

the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates;

 

  •  

the effect of competing technological and market developments;

 

  •  

the cost and timing of completion of commercial-scale outsourced manufacturing activities;

 

  •  

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own;

 

  •  

the cost associated with manufacturing and supply of our product candidates;

 

  •  

the cost associated with operating as a public company;

 

  •  

the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our product candidates, if approved; and

 

  •  

market acceptance of any approved product candidates.

A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities.

Contractual Obligations and Commitments

As of June 30, 2025, we had commitments of $0.1 million related to our operating leases with non-cancelable terms of less than 12 months. In June 2025, we executed a sixty-three month lease agreement to lease approximately 32,016 square feet of office space in Palo Alto, California. The lease is expected to commence in January 2026 and includes annual lease payments during each of the first three years of approximately $1.5 million, with increases of approximately 3% each year thereafter for the remainder of the

 

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lease. In August 2025, we executed a sixty-month lease agreement to lease approximately 4,686 square feet of office space in New York, New York. The lease is expected to commence in October 2025 and includes annual lease payments of approximately $0.4 million.

We enter into contracts in the normal course of business with third-party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. We may also enter into additional research, manufacturing, supplier and other agreements in the future, which may require up-front payments and even long-term commitments of cash.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to accrued research and development costs, the fair value of common stock and stock-based compensation expense and other fair value measurements. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

As discussed in Note 2 to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus, we recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Our revenue is generated through research collaboration and license agreements with pharmaceutical partners. The terms of these agreements contain multiple goods and services which may include (i) licenses, (ii) research and development activities and (iii) participation in joint research and development steering committees. The terms of these agreements may include non-refundable upfront license or option fees, payments for research and development activities, milestone payments and royalty payments based on product sales derived from the collaboration. Under ASC 606, we evaluate whether the license agreement, research and development services and participation in research and development steering committees represent separate or combined performance obligations. We have determined that these services within our existing contracts represent multiple performance obligations.

The research collaboration and license agreements typically include contingent milestone payments related to specified preclinical and clinical development milestones and regulatory milestones. These milestone payments represent variable consideration that are not initially recognized within the transaction price as they are

 

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fully constrained under the guidance in ASC 606. We will continue to assess the probability of significant reversals for any amounts that become likely to be realized prior to recognizing the variable consideration associated with these payments within the transaction price.

Revenue is recognized ratably over our expected performance period or as these performance obligations are fulfilled under each respective arrangement. We make our best estimate of the period over which we expect to fulfill our performance obligations, which includes access to technology through the license agreement and research activities. Given the uncertainties of these collaboration arrangements, significant judgment is required to estimate the duration of the performance period.

For the years ended December 31, 2024 and 2023 and six months ended June 30, 2025, transaction price allocated to the performance obligations identified under the agreements was recognized as these performance obligations were fulfilled under each respective arrangement.

Our contracts may also call for certain sales-based milestone and royalty payments upon successful commercialization of a target. In accordance with ASC 606-10-55-65, we recognize revenues from sales-based milestone and royalty payments at the later of (i) the occurrence of the subsequent sale or (ii) the performance obligation to which some or all of the sales-based milestone or royalty payments has been allocated has been satisfied (or partially satisfied). We anticipate recognizing these milestone and royalty payments if and when subsequent sales are generated by the customer from the use of the technology. To date, no revenue from these sales-based milestone and royalty payments has been recognized for any periods.

Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.

Research and Development Costs

Research and development expenses are recognized as services are performed and as costs occur. As part of our process of preparing our consolidated financial statements, we are required to estimate our research and development expenses as of each balance sheet date. Research and development expense accruals are estimated based on the level of services performed, progress of the work orders, including the phase or completion of events, and contracted costs. This process involves reviewing open contracts and purchase orders along with preparation of financial models taking into account communications with our key personnel to identify the level of services that have been performed. We then make estimates of levels of service performed when we have not yet been invoiced or otherwise notified of actual costs incurred as of the balance sheet date. We make significant judgments and estimates in determining the accrual balance at each reporting period based on the facts and circumstances known to us at that time.

There may be instances in which vendors will require nonrefundable advance payments for goods or services to be received in the future. Such advance payments for use in research and development activities are capitalized and recorded in prepaid expenses and other current assets and then expensed as the related goods are delivered or the services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the level of services and timing of services performed differ from actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular reporting period. To date, there have been no material differences between estimates of such expenses and the amounts actually incurred.

 

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Equity-Based Compensation

Equity-based compensation expense represents the cost of the grant date fair value of equity awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of all stock option grants using the Black-Scholes option pricing model and recognize forfeitures as they occur. Estimating the fair value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant. Changes in the assumptions can materially affect the fair value and ultimately how much equity-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. See Note 9 to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus for information concerning the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted for the years ended December 31, 2024 and 2023 and see Note 9 to our unaudited financial statements for the quarter ended June 30, 2025. Certain of our stock option awards allow for early exercise of granted options, before vesting requirements have been satisfied. Shares acquired through the early exercise of options which have not vested at the time of any employee’s termination may be purchased by us at the lower of the original exercise price or the then current fair market value. As of June 30, 2025, unrecognized stock-based compensation expense related to stock options was $4.5 million and is expected to be recognized as expense over a weighted-average period of approximately 2.6 years. The intrinsic value of all outstanding stock options as of June 30, 2025 was approximately $    million, based on the assumed initial public offering price of $    per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, of which approximately $    million related to vested options and approximately $    million related to unvested options.

Convertible Preferred Stock Forward

Certain provisions of the Series C Preferred Stock Purchase Agreement (“Series C SPA”) obligate us to sell, and the investors to purchase, an additional tranche of shares of Series C Preferred Stock, par value $0.0001 per share (“Series C Preferred Stock”), at a future date and specified price (the “tranche closings forward”) if certain clinical performance milestones are met. The tranche closings forward represent freestanding instruments as they are legally detachable and separately exercisable and, therefore, are accounted for separately from Series C Preferred Stock as convertible preferred stock forwards (liability or asset).

These derivatives were recorded at fair value at inception and are subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in change in the fair value of convertible preferred stock forward in the statements of operations (see Note 3 and Note 7 to our audited consolidated financial statements and unaudited condensed consolidated financial statements included elsewhere in this prospectus).

Determination of the Fair Value of Common Stock

We are required to estimate the fair value of the common stock underlying our stock-based awards when performing fair value calculations. Historically, for all periods prior to this offering, the grant-date fair market value of our common stock underlying stock options has been determined by our board of directors with assistance of unrelated third-party valuation specialists. Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including: our stage of development and material risks related to our business; the progress of our research and development programs; sales of our preferred stock; the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; the lack of marketability of our securities; our financial condition and operating

 

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results, including our levels of available capital resources; the likelihood of achieving a liquidity event such as an initial public offering in light of prevailing market conditions; equity market conditions affecting comparable public companies; the trends, developments and conditions in the life sciences and biotechnology industry sectors; and general U.S. market and economic conditions. Valuations of our common stock were prepared by an independent third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, referred to as the “Practice Aid.”

In accordance with the Practice Aid, we generally considered the following methods:

 

  •  

Option Pricing Method (“OPM”): Under the OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the convertible preferred stock and common stock are inferred by analyzing these options. This method is appropriate to use when the range of possible future outcomes is so difficult to predict that estimates would be highly speculative, and dissolution or liquidation is not imminent.

 

  •  

Probability-Weighted Expected Return Method (“PWERM”): The PWERM is a scenario-based analysis that estimates value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

 

  •  

Hybrid Method: The Hybrid Method is a hybrid between PWERM and OPM, where the equity value is estimated based on probability-weighted value across multiple scenarios where the OPM is used to estimate the allocation of value within one or more of those scenarios.

For grants of options made in January 2023, we employed the Hybrid Method as of September 30, 2022 estimating the probability-weighted value across multiple scenarios including with the back-solve method for inferring the equity value predicated on the closing of the final tranche of our Series A Preferred Stock in December 2022 and January 2023. A discount for lack of marketability (“DLOM”) of the common stock was then applied to arrive at an indication of value for the common stock. With the aid of a third-party valuation as of September 30, 2022, our board of directors, with input from management, determined the fair market value of our common stock to be $0.42 per share for the options granted on January 13, 2023.

For grants of options made in May 2023, we employed the Hybrid Method as of March 31, 2023 estimating the probability-weighted value across multiple scenarios including with the back-solve method for inferring the equity value predicated on receiving Phase 2 data readouts for our lead product at the time and having an exit event by selling the lead product. A DLOM of the common stock was then applied to arrive at an indication of value for the common stock. With the aid of a third-party valuation as of March 31, 2023, our board of directors, with input from management, determined the fair market value of our common stock to be $0.45 per share for the options granted on May 12, 2023.

For grants of options made in January, March and April 2024, we employed the Hybrid Method as of September 30, 2023 estimating the probability-weighted value across multiple scenarios including with the back-solve method for inferring the equity value predicated on low optionality of our preclinical stage product candidates. A DLOM of the common stock was then applied to arrive at an indication of value for the common stock. With the aid of a third-party valuation as of September 30, 2023, our board of directors, with input from management, determined the fair market value of our common stock to be $0.20 per share for the options granted on January 6, 2024, March 13, 2024, March 22, 2024 and April 23, 2024.

For grants of options and restricted stock units (“RSUs”) made in December 2024, we employed the Hybrid Method as of September 30, 2024 estimating the probability-weighted value across multiple scenarios including with the Pari Passu back-solve method for inferring the equity value. A DLOM of the common stock was then

 

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applied to arrive at an indication of value for the common stock. With the aid of a third-party valuation as of September 30, 2024, our board of directors, with input from management, determined the fair market value of our common stock to be $0.35 per share for the options granted on December 9, 2024 and March 20, 2025.

For grants of options made in June and September 2025, we employed the Hybrid Method as of May 31, 2025 estimating the probability-weighted value across multiple scenarios including with the back-solve method for inferring the equity value predicated on low optionality of our preclinical stage product candidates. A DLOM of the common stock was then applied to arrive at an indication of value for the common stock. With the aid of a third-party valuation as of May 31, 2025, our board of directors, with input from management, determined the fair market value of our common stock to be $0.58 per share for the options granted on June 26, 2025 and September 17, 2025.

The estimates of fair value of our common stock are highly complex and subjective. There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an initial public offering, or other liquidity event, the related valuations associated with these events, and the determinations of the appropriate valuation methods at each valuation date. The assumptions underlying these valuations represent our best estimates, which involve inherent uncertainties and the application of management judgment. If we had made different assumptions, our equity-based compensation expense, net loss and net loss per share applicable to common stockholders could have been materially different.

Once a public trading market for our common stock has been established in connection with the closing of this offering, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.

The following table summarizes by grant date the number of shares of common stock subject to stock options and RSUs granted from January 1, 2023 through the date of this prospectus, as well as the associated per-share exercise price and the estimated fair value per share of our common stock as of the grant date:

 

Grant Date

   Type of
Award
     Number of
shares subject to
awards granted
     Per share
exercise price
     Estimate of fair
value of common
stock per share on
grant date
 

January 2023

     Options        2,740,966      $ 0.42      $ 0.42  

May 2023

     Options        6,225,656      $ 0.45      $ 0.45  

January to April 2024

     Options        3,544,401      $ 0.20      $ 0.20  

December 2024

     Options        9,046,628      $ 0.35      $ 0.35  

December 2024

     RSU        3,728,809      $ 0.35      $ 0.35  

March 2025

     Options        30,000      $ 0.35      $ 0.35  

June 2025

     Options        145,000      $ 0.58      $ 0.58  

September 2025

     Options        170,000      $ 0.58      $ 0.58  

For grants of stock appreciation rights (“SARs”) made in December 2024, we utilized a Monte Carlo simulation. With the aid of a third-party valuation as of December 9, 2024, our board of directors, with input from management, determined the fair market value of these awards to be $1.44 per share for the SARs granted on December 9, 2024. If a SAR vests, we will issue one share of common stock, or deliver the cash equivalent, for an amount equal to the fair market value of a share of common stock on the settlement date less the exercise price for each vested SAR.

Recently Adopted Accounting Pronouncements

Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to our audited consolidated financial statements for the years ended December 31, 2024 and 2023 and unaudited condensed consolidated financial statements included elsewhere in this prospectus for the six months ended June 30, 2025 appearing elsewhere in this prospectus for a discussion of recent accounting pronouncements.

 

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Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

Emerging Growth Company and Smaller Reporting Company Status

As an EGC under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited consolidated financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of this offering or such earlier time that we are no longer an EGC. If the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of June 30 of any year, or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.

We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an EGC. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures until the fiscal year following the determination that (i) our voting and non-voting common stock held by non-affiliates is at least $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is at least $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is at least $700.0 million measured on the last business day of our second fiscal quarter.

 

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BUSINESS

Overview

Evommune is a clinical-stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases, with initial clinical development programs focusing on chronic spontaneous urticaria (“CSU”), atopic dermatitis (“AD”) and ulcerative colitis (“UC”). Chronic inflammation is a significant healthcare problem in the world, substantially impacting patients’ quality of life and leading to life-threatening conditions. These conditions, if not prevented, ultimately lead to fatal diseases, such as cardiovascular diseases, diabetes and cancer, which contribute to three out of every five deaths worldwide and result in an estimated $90 billion of annual cost to the healthcare system in the United States.

Our mission is to improve patients’ daily lives and prevent the long-term effects of uncontrolled inflammation that are a consequence of the limitations of existing therapies. To achieve this, we are advancing a portfolio of differentiated product candidates that target key drivers of chronic inflammation.

Our management team’s proven drug development expertise and experience in the field of immunology and inflammation, combined with advanced scientific tools, enable us to identify and advance potent, highly selective molecules with distinctive mechanisms of action. By identifying treatment gaps of chronic inflammatory diseases, we strive to transform the treatment landscape, developing therapies that have the potential to offer rapid symptom relief and provide safe, durable resolution of the underlying disease. Among our portfolio of programs, we currently have two product candidates, EVO756 and EVO301, in Phase 2 trials. We are initially developing EVO756 for the treatment of CSU and AD, and EVO301 for the treatment of AD and UC. We see broad expansion potential for both programs across additional chronic inflammatory diseases. We also intend to advance additional preclinical programs into clinical development.

Our most advanced clinical-stage product candidate, EVO756, is a potent and highly selective oral small molecule antagonist of MRGPRX2, a receptor predominantly found on mast cells and peripheral sensory neurons. Dysregulated MRGPRX2 activity can play a key role as both a catalyst and perpetuator of disease pathogenesis across a multitude of systemic chronic inflammatory diseases. By targeting MRGPRX2, we believe EVO756 is the only dual mechanism clinical approach that modulates both mast cells and peripheral sensory neurons, representing a new potential therapeutic option to reduce inflammation and provide rapid relief of itch (pruritus). Mast cells are critical regulators of immune response and can be found in most vascularized tissues including skin, lung and the digestive tract. These cells tend to be distributed in close proximity to peripheral sensory neurons, where the activation of the neurons can trigger the inflammatory cascade and mast cells are implicated in further perpetuating neuroinflammation and its related symptoms. We believe MRGPRX2 is the only clinical approach aimed at inhibiting this neuroimmune interaction.

We previously announced the topline results from a Phase 1 proof-of-concept trial in 132 healthy volunteers designed to assess the safety, tolerability, pharmacokinetic (“PK”) properties and pharmacodynamic (“PD”) properties of orally administered EVO756. Comprehensive trial results were presented at the UCARE Global Urticaria Forum meeting in December 2024. EVO756 was observed to be well-tolerated at all doses tested, with no serious adverse events (“SAEs”), and PK results supporting daily dosing. A skin challenge test was also conducted in the multiple ascending dose (“MAD”) portion of the trial in which icatibant, a known MRGPRX2 ligand, representative of a broad class of disease relevant ligands, was administered via intradermal injection to healthy volunteers creating measurable wheals on their skin. EVO756 was observed to robustly decrease the healthy volunteers’ wheals induced by icatibant, evidencing meaningful target engagement at all doses tested. We are currently conducting a Phase 2b trial of EVO756 in CSU and have completed a Phase 2 trial of EVO756 in chronic inducible urticaria (“CIndU” and together with CSU, chronic urticarias or “CU”).

 

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In May 2025, we reported topline results from our U.S. multicenter Phase 2 trial of EVO756 in CIndU that demonstrated clinical activity (including improvement in FricTest score and pruritus numerical rating score (“pruritus-NRS”), as described below) in a patient population with symptomatic dermographism. The trial was designed to generate additional patient data in a population with symptomatic dermographism, which we believe is highly translatable to the CSU patient population due to overlapping disease biology and shared pathophysiology. Third party trials have demonstrated that symptomatic dermographism affects approximately 25% of the CSU patient population; similarly, we believe EVO756’s clinical activity in symptomatic dermographism patients strongly supports the role of MRGPRX2 in neurogenic inflammation, which plays a crucial role in AD.

A total of 30 patients were enrolled in the trial, with 11 patients enrolled in the 300 mg once daily (“QD”) cohort and 19 patients enrolled in the 50 mg twice daily (“BID”) cohort. Rapid clinical activity was observed in both dosing regimens, with some patients demonstrating responses by week one in both FricTest score (a clinician-rated measure of symptomatic dermographism severity ranging from 0 to 4, with higher scores indicating greater severity) and pruritus-NRS. 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients achieving a complete response (achieving a FricTest score of zero), of which 50% were immunoglobulin E (“IgE”) high (as defined by a serum IgE level of ≥100 IU/mL). An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score. The population of subjects observed at four weeks does not include three patients who were unevaluable or lost to follow-up. Observed patients in the 300 mg QD cohort saw an average reduction of 1.4 points in FricTest score after four weeks and observed patients in the 50 mg BID cohort saw an average reduction of 1.5 points. By comparison, in separate, independent trials conducted by third parties, patients treated with 300 mg omalizumab saw a reduction of 1.4 points and patients treated with 300 mg barzolvolimab saw a reduction of 1.6 points in FricTest score after four weeks. EVO756 was observed to be well-tolerated at both dose levels, including the higher 300 mg QD dose. No SAEs were observed and there were no discontinuations due to adverse events (“AEs”).

We initiated a Phase 2b dose-ranging trial in CSU in April 2025 and expect to report initial results in the first half of 2026. We also initiated a Phase 2b dose-ranging trial in moderate-to-severe AD patients in August 2025 and expect to report initial results in the second half of 2026. We plan to evaluate EVO756 in additional indications in which mast cell degranulation and neuroinflammation are key drivers of disease.

Our second clinical-stage product candidate, EVO301, is a long-acting fusion protein consisting of an IL-18 binding protein (“BP”) and an anti-serum albumin Fab-associated (“SAFA”) domain. IL-18 is a pro-inflammatory cytokine of the IL-1 family that regulates various immune processes that drive inflammation and is a potent modulator of ongoing inflammation. The IL-18 pathway is believed to play a key role in the severity and progression of several large, highly prevalent chronic inflammatory disease populations with a significant number of uncontrolled patients, including AD and UC. The SAFA domain incorporated into EVO301 utilizes neonatal fragment crystallizable receptor (“FcRn”)-mediated recycling of serum albumin to extend half-life. We believe EVO301’s optimized approach to IL-18 binding and neutralization could enable significant advantages and differentiated clinical outcomes for patients, including with respect to efficacy, tissue distribution, dosing profile and reduced immunogenicity risk. In addition, EVO301’s distinct mechanism and modality complement those of EVO756, providing us with multiple potential avenues to bring innovative therapeutics to the large, underserved and rapidly expanding population of patients suffering from chronic inflammatory diseases. We initiated a Phase 2 trial of EVO301 in adult patients with moderate-to-severe AD in March 2025 and expect to report initial results in the first half of 2026. Beyond AD, we plan to initiate a Phase 2 trial in moderate-to-severe UC patients in 2026. After completion of this UC trial, we may also intend to evaluate

 

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EVO301 in Crohn’s disease and other additional indications, for which regulating the IL-18 pathway may reduce pro-inflammatory mediators driving tissue damage and chronic inflammation. The figure below provides an overview of our current clinical pipeline:

Figure 1: Our Clinical Pipeline

 

 

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Notes:

(1) Other potential indications for EVO756 include asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus. To date, based on our data from the successful completion of our Phase 1 proof-of-concept trial of EVO756 in healthy volunteers, we believe there is a path to proceed to Phase 2 clinical development for these other indications, similar to our initiation of our Phase 2b trial in AD, subject to standard regulatory requirements. (2) We are currently prioritizing development in other indications ahead of CIndU and may conduct additional CIndU trials in the future.

In addition to our clinical programs, we are advancing a pipeline of preclinical candidates for immunology and inflammation indications and aim to deliver a steady cadence of data for our new programs.

Our Approach to Drug Development and Chronic Inflammation

Collectively, our team members have held leadership roles at over 25 companies and have played key roles in the discovery and development of nearly 30 approved small molecules and biologics, primarily in immunology and inflammation, including Ebglyss (lebrikizumab), Cimzia (certolizumab pegol) and Rezurock (belumosudil). These therapies have significantly impacted patient outcomes, generated billions of dollars in sales and have led to multiple company acquisitions. This experience has informed our approach to drug development and commercialization to become one focused on identifying the areas of highest unmet need in chronic inflammatory diseases, identifying the molecules with the highest probability of improving patient outcomes in those diseases and then advancing our molecules through rigorous and thoughtful development programs.

Our deep knowledge of immunology and inflammation enables us to focus our efforts on key drivers of disease in which a single therapeutic could treat a broad range of indications and address areas of significant unmet need. We prioritize targets with high potential for meaningful patient outcomes and commercial value.

As we discover or in-license product candidates and advance them into the clinic, we design development strategies to rapidly establish proof-of-concept and apply stringent criteria to decide which product candidates should move forward. At every stage, we focus on advancing differentiated candidates that we believe have the highest potential for clinical advancement, guided by regulatory, clinical and commercial considerations.

EVO756, Targeting MRGPRX2 for Chronic Inflammatory Diseases

Our most advanced clinical-stage product candidate, EVO756, is a potent and highly selective oral small molecule antagonist of MRGPRX2, a receptor predominantly found on mast cells and peripheral sensory

 

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neurons. Dysregulated MRGPRX2 activity can play a key role as both a catalyst and perpetuator of disease pathogenesis across a multitude of systemic chronic inflammatory diseases. By targeting MRGPRX2, we believe EVO756 is the only dual mechanism clinical approach that modulates both mast cells and peripheral sensory neurons, representing a new potential therapeutic option to reduce inflammation and provide rapid relief of itch (pruritus).

Mast cells are critical regulators of immune response and can be found in most vascularized tissues including skin, lung and the digestive tract. These cells tend to be distributed in close proximity to peripheral sensory neurons, where the activation of the neurons can trigger the inflammatory cascade and mast cells are implicated in further perpetuating neuroinflammation and its related symptoms. We believe MRGPRX2 is the only clinical approach aimed at inhibiting this neuroimmune interaction. In addition, the cytoplasm of mast cells contains numerous membrane-bound granules that are filled with inflammatory mediators such as histamine and tryptase. When activated under normal conditions, mast cells degranulate, releasing their inflammatory mediators to protect against infections and toxins. They also may play a role in wound healing, angiogenesis (formation of new blood vessels) and initiating adaptive immune responses. However, aberrant activation of MRGPRX2 triggers excessive inflammation, resulting in symptoms such as hives (urticarial wheals), itch, pain, swelling and redness in a multitude of systemic chronic inflammatory diseases across organ systems. We are initially developing EVO756 for the treatment of CSU and AD, but we see broad expansion potential across additional chronic inflammatory diseases as illustrated in the figure below.

Figure 2: EVO756 Proof-of-Concept Roadmap

 

 

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Notes:

(1) Proof-of-concept based on skin challenge test in healthy volunteers.

EVO756 for the Treatment of Chronic Spontaneous Urticaria

We are progressing the development of EVO756 for CSU, our current lead indication, and have completed an exploratory trial in CIndU. Many patients with CSU are known to also suffer from CIndU. Given the overlapping patient populations and shared underlying biology, we believe aspects of clinical development in CIndU can meaningfully inform that of CSU. In the United States, there are currently an estimated 3,000,000 patients with CSU and 850,000 patients with CIndU. CSU is a chronic inflammatory disease characterized by spontaneous and recurrent hives and angioedema without a known environmental trigger. In contrast, CIndU is triggered by specific physical stimuli such as cold, pressure, friction or heat.

The current landscape of approved and investigational therapeutics for CSU and CIndU lacks a safe, convenient and efficacious treatment option that could be utilized by a broad range of prescribers as a first-line treatment post-antihistamines. While initial treatment for these patients consists of over-the-counter oral antihistamines, it is estimated that greater than half of these patients do not achieve adequate symptom or disease control. There are currently only three available treatments for antihistamine-refractory patients, Xolair

 

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(omalizumab), a once monthly subcutaneous IgE mAb, Dupixent (dupilumab), a twice monthly subcutaneous mAb modulating the IL-4 and IL-13 signaling cascade, and Rhapsido (remibrutinib), a twice daily oral Bruton’s tyrosine kinase (“BTK”) inhibitor approved September 2025, all of which have significant limitations. Xolair has been on-market since 2004 and was approved for use in CSU in 2014; however, its use in CSU has been constrained by safety concerns and limited efficacy, as well as barriers related to monitoring requirements after in-office administration. Dupixent was first approved in 2017 for AD and was subsequently approved for CSU in 2025. Nonetheless, Dupixent has failed in multiple CIndU trials and has failed to show statistically significant improvements in efficacy over the standard of care in omalizumab-refractory or intolerant CSU patients. Early efficacy and itch improvement remains a concern for CSU patients, with approximately 55% to 66% of patients treated with Xolair experiencing itch and hives at 12 weeks and approximately 70% of Xolair-naïve patients treated with Dupixent experiencing itch and hives at 24 weeks. Rhapsido has side effects on its label including nasopharyngitis, bleeding, headache, nausea and abdominal pain, along with drug interactions recommending against its use with multiple classes of drugs. We believe these limitations play a role in these treatments only being utilized by an estimated 10% of antihistamine-refractory patients. Given there are currently over 3,000,000 patients living with CSU and more than 850,000 patients living with CIndU, we estimate that over 500,000 CU patients who are antihistamine-refractory are untreated and have uncontrolled disease.

We conducted a Phase 1 proof-of-concept randomized, placebo-controlled trial in 132 healthy volunteers designed to assess the safety, tolerability, PK properties and PD properties of orally administered EVO756. Comprehensive trial results were presented at the UCARE Global Urticaria Forum meeting in December 2024. The Phase 1 trial enrolled 55 healthy adults in a single ascending dose (“SAD”) portion and 77 healthy adults in a MAD portion in which participants were treated for 14 days. EVO756 was observed to have an encouraging tolerability profile at all doses tested, including the highest QD dose of 500 mg, with no SAEs observed. A skin challenge test was also conducted in the MAD portion of the trial in which icatibant, representative of a broad class of disease relevant ligands, was administered via intradermal injection to healthy volunteers creating measurable wheals on their skin. EVO756 was observed to robustly decrease the healthy volunteers’ wheals induced by icatibant, evidencing meaningful target engagement at all doses tested. We believe this proof-of-concept portion of the trial supports the potential benefits of EVO756 in CSU.

In May 2025, we reported topline results from our U.S. multicenter Phase 2 trial of EVO756 in CIndU that demonstrated clinical activity (including improvement in FricTest score and pruritus-NRS, as described below) in a patient population with symptomatic dermographism. CIndU is a form of urticaria that has known environmental triggers, including pressure or exposure to cold and has underlying disease pathogenesis similar to CSU. The trial was designed to generate additional patient data in a population with symptomatic dermographism, which we believe will be highly translatable to the CSU patient population given the shared pathologies. Third party trials have demonstrated that symptomatic dermographism affects approximately 25% of the CSU patient population; similarly, we believe EVO756’s clinical activity in symptomatic dermographism patients strongly supports the role of MRGPRX2 in neurogenic inflammation, which plays a crucial role in AD.

A total of 30 patients were enrolled in the trial, with 11 patients enrolled in the 300 mg QD cohort and 19 patients enrolled in the 50 mg BID cohort. Rapid clinical activity was observed in both dosing regimens, with some patients demonstrating responses by week one in both FricTest score (complete response score of zero) and pruritus-NRS (≥2-point decrease). 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients achieving a complete response (achieving a FricTest score of zero (a clinician rated measure of symptomatic dermographism severity ranging from 0 to 4, with higher scores indicating greater severity)), of which 50% were IgE high (as defined by a serum IgE level of ≥100 IU/mL). An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score. The population of subjects observed at four weeks does not include three patients who were unevaluable or lost to follow-up. Observed patients in the 300 mg QD cohort saw an average reduction of 1.4 points in FricTest score after four weeks and observed patients in the 50 mg BID cohort saw an average reduction of 1.5 points. By comparison, in separate, independent trials conducted by third parties, patients treated with 300 mg omalizumab saw a reduction of 1.4

 

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points and patients treated with 300 mg barzolvolimab saw a reduction of 1.6 points in FricTest score after four weeks as shown in Figures 4 and 5 below.

Both the QD and BID regimens were observed to result in rapid and meaningful itch relief. Observed patients in the 300 mg QD cohort experienced an average reduction of 2.4 in pruritus-NRS, while those in the 50 mg BID cohort saw an average reduction of 2.1 points. Importantly, 93% (n=25) of observed patients demonstrated improvement at just four weeks in either FricTest or pruritus-NRS. Further, 75% (n=6) of those who did not achieve a decrease in FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response. EVO756 was observed to be well-tolerated at both dose levels, including the higher 300 mg QD dose. No SAEs were observed and there were no discontinuations due to AEs. The figure below illustrates the clinical data, including FricTest improvement at four weeks, generated in our Phase 2 CIndU trial of EVO756:

Figure 3: EVO756 FricTest Score Improvements and Other Observed Data

 

 

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The figures below illustrate the clinical improvements over time for omalizumab and barzolvolimab:

Figure 4: Omalizumab Clinical Activity Improved Over Time

 

 

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Notes:

Direct comparisons cannot be made in the absence of head-to-head trials because of differences in trial design, patient population and other factors.

 

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Figure 5: Barzolvolimab Clinical Activity Improved Over Time

 

 

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Notes:

Direct comparisons cannot be made in the absence of head-to-head trials because of differences in trial design, patient population and other factors.

Examining historical trial data from mast cell targeting therapeutic agents that have been evaluated in CSU and CIndU suggests that CIndU response rate may correlate with clinical response in treating CSU. Our Phase 2 trial of EVO756 in CIndU was designed to generate additional patient data in a population with symptomatic dermographism, which we believe will be highly translatable to the CSU patient population given the shared pathologies. Figure 6 below details selected competitor therapeutic agents that have entered clinical development in CU, highlighting that targeting mast cells potentially indicates translatability from CIndU to CSU:

Figure 6: CIndU Response as a Potential Indicator of Future CSU Profile

 

 

LOGO

 
Notes:

Direct comparisons cannot be made in the absence of head-to-head trials because of differences in trial design, patient population and other factors. Data is presented for information only and does not account for difference in enrollment populations or other cross-trial variabilities.

In CSU, we initiated a Phase 2b dose-ranging trial in approximately 160 moderate-to-severe antihistamine-refractory CSU patients and expect initial data from that trial in the first half of 2026. This is a randomized, double-blind, placebo-controlled trial in which participants will receive one of three active dose regimens or placebo. The primary endpoint of the trial is change in a patient’s Urticaria Activity Score over seven days

 

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(“UAS7”) at 12 weeks. Beyond the primary endpoint, we are also evaluating other measures of disease, including itch, hive severity and angioedema.

EVO756 for the Treatment of Atopic Dermatitis

Atopic dermatitis, commonly referred to as eczema, is one of the most prevalent chronic inflammatory diseases and is characterized by acute flares of itchy, red, exudative papules and persistently dry, scaly skin. The hallmark feature of AD is intense inflammatory itch, known as pruritus, with episodic flares of rash and underlying chronic inflammation. For most moderate-to-severe AD patients, the disease significantly impacts patients’ quality of life, driven primarily by relentless itch, sleep disruption and visible skin symptoms. The intense itch associated with AD often triggers an itch-scratch cycle, further compromising the epidermal barrier and exacerbating disease. While AD commonly begins in childhood, it is also highly and increasingly prevalent in adults, with about 15% to 20% of children and 1% to 3% of adults impacted, significantly disrupting their quality of life.

Research indicates that mast cells and peripheral sensory neurons play a key role in the pathogenesis of AD. One known driver of AD is the chronic and cyclical release of pro-inflammatory mediators associated with mast cell degranulation. Heightened mast cell activity promotes inflammation and drives itch, while activation of peripheral sensory neurons amplifies the sensation of itch. Third party studies have shown increased mast cell density, elevated MRGPRX2 expression and neuroinflammation correlate with disease severity in lesional AD skin. For example, a third-party study examined the number of mast cells from lesional and non-lesional skin of AD patients and skin of healthy volunteers. The biopsies showed that in AD lesional skin, more mast cells were found as compared to non-lesional skin. In addition, in a third-party preclinical mouse study, AD severity was shown to be specifically associated with MRGPRX2 expression. Internal research conducted by us identified key MRGPRX2 ligands and MRGPRX2 as more abundant in lesional skin. Additionally, our internal research has verified MRGPRX2 expression in sensory neurons and that EVO756 robustly decreased sensory neuron activation when stimulated. Collectively, we believe these findings highlight the MRGPRX2 activation pathway in AD and support the rationale for targeting MRGPRX2 to resolve both skin lesions and itch by modulating mast cells and peripheral sensory neurons.

The current standard of care for first-line treatment of AD are primarily topical corticosteroids and targeted treatments (for example, topical Janus kinase (“JAK”) inhibitor). However, approximately 40% to 50% of AD patients have a moderate-to-severe form of the disease and thus are uncontrolled by topical therapies. For these patients, new systemic agents have emerged as the preferred advanced treatments that target several different inflammatory mediators that contribute to underlying inflammation and flare-ups, including Dupixent (dupilumab), Rinvoq (upadacitinib) and Cibinqo (abrocitinib). Despite the effectiveness of these therapies, some of them are associated with serious risk of life-threatening side effects and carry boxed warnings.

We are developing EVO756 for the treatment of moderate-to-severe AD in adult and pediatric patients whose disease remains uncontrolled with prescription topical therapies. We initiated a Phase 2b dose-ranging trial in moderate-to-severe AD patients in August 2025 and expect to report initial results in the second half of 2026. The primary endpoint is change in Eczema Area and Severity Index (“EASI”) score at 12 weeks, and we also plan on assessing Investigator Global Assessment (“IGA”) and pruritus-NRS. In addition, should EVO756 demonstrate a positive treatment effect on itch in the Phase 2b dose-ranging trial, we may subsequently evaluate its potential in other forms of inflammatory itch (pruritus).

Additional Development Opportunities for EVO756

Beyond CSU and AD, there are a number of other systemic chronic inflammatory diseases in which mast cell degranulation and neuroinflammation are implicated, including areas where we believe EVO756 could fulfill significant unmet patient needs. Additional diseases in which we are exploring the potential of MRGPRX2 inhibition include asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus. Initiation of a Phase 2 trial in any of these additional indications will be determined based on ongoing trials and corporate resources. To date, based on our data from the successful completion of our Phase 1 proof-of-concept trial of EVO756 in healthy volunteers, we believe there is a path to proceed to Phase 2 clinical development for these other indications, similar to our initiation of our Phase 2b trial in AD, subject to standard regulatory requirements.

 

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EVO301, Our SAFA IL-18BP Product Candidate

Our second clinical-stage product candidate, EVO301, is currently in Phase 2 development for the treatment of moderate-to-severe AD. In June 2024, we secured exclusive global rights to develop and commercialize EVO301 from AprilBio Co. Ltd. (“AprilBio”) (Kosdaq: 397030), a biopharmaceutical company based in South Korea dedicated to developing specialized biologics and antibody drugs, after they progressed EVO301 through a Phase 1 trial.

IL-18 is a pro-inflammatory cytokine of the IL-1 family that not only regulates various immune processes that drive inflammation, but also acts as a potent modulator of ongoing inflammation. The IL-18 pathway is believed to play a role in the severity and progression of several large, highly prevalent chronic inflammatory disease populations with a significant number of uncontrolled patients, including AD and UC. We believe EVO301 has the potential to improve upon prior efforts by others to therapeutically neutralize IL-18.

EVO301 is a long-acting injectable SAFA-IL-18BP fusion protein consisting of a native human IL-18BP domain linked to a human Fab antibody fragment-targeting albumin, designed to neutralize the IL-18 inflammatory pathway. We believe this design, differentiated from mAbs targeting IL-18, potentially confers several advantages including improved activity, decreased immunogenicity and better distribution to sites of inflammation. Based on learnings from biologics targeting other inflammatory targets, we believe these benefits may provide faster onset of action and deliver comparable or better efficacy results to commercially available biologics while potentially offering better tolerability, durability, safety and more convenient dosing.

In a Phase 1 randomized, placebo-controlled SAD trial conducted in 31 healthy volunteers, EVO301 was observed to be well-tolerated at all doses tested, with no SAEs or discontinuations due to AEs. PK observations were favorable and support monthly dosing. We are conducting a Phase 2 randomized, double-blind, parallel group, placebo-controlled trial of EVO301 in approximately 60 adult patients with moderate-to-severe AD dosed on day 1 and day 29. The primary endpoint is percent change in EASI score at week 12 and secondary endpoints are IGA, Body Surface Area (“BSA”) and pruritus-NRS.

Beyond AD, we plan to initiate a Phase 2 trial in moderate-to-severe UC patients in 2026. After completion of this UC trial, we may also evaluate EVO301 in Crohn’s disease and additional indications for which regulating the IL-18 pathway may reduce pro-inflammatory mediators driving tissue damage and chronic inflammation. To date, based on the data from the successful completion of the Phase 1 trial of EVO301, we believe there is a path to proceed to Phase 2 clinical development for these other indications, subject to standard regulatory requirements.

We believe EVO301’s distinct mechanism and modality complement those of EVO756, providing us with multiple potential avenues to bring innovative therapeutics to the large, underserved and rapidly expanding patient population suffering from chronic inflammatory diseases.

Other Drug Discovery and Development

Beyond our clinical-stage product candidates, we are advancing a suite of discovery-stage programs to broaden and diversify our portfolio. We aim to deliver a steady cadence of clinical data, in line with our vision of addressing chronic inflammatory diseases across multiple pathways and indications.

Founding Members, Management Team and Investors

We were co-founded in 2020 by our Chief Executive Officer, Luis Peña, our Chief Medical Officer, Eugene A. Bauer, M.D., both highly experienced entrepreneurs and company builders in the biopharmaceutical industry, and Hans Hofland, Ph.D., our former Senior Vice President of Research. Prior to founding Evommune, Mr. Peña and Dr. Bauer were co-founders and executives at Dermira, Inc. (“Dermira”), until Dermira was acquired by Eli

 

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Lilly and Company (“Lilly”) for $1.1 billion in January 2020. At Dermira, Mr. Peña and Dr. Bauer were integral to lebrikizumab’s clinical development, redesigning and executing the Phase 2b and designing the Phase 3 clinical trials, ultimately culminating in its FDA approval and its launch as Ebglyss. They also conducted initial discovery work on MRGPRX2 together at Dermira, which was licensed back to us from Lilly following the Dermira acquisition.

 

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Luis Peña, Co-Founder, President and Chief Executive Officer, is a highly experienced drug development executive who has more than 30 years of experience in the biopharmaceutical industry. Mr. Peña has overseen multiple global clinical programs through regulatory approvals and subsequent commercialization, including programs in dermatology, cardiology and immunology. Prior to co-founding Evommune, Mr. Peña co-founded Dermira and served as its Chief Development Officer, where he headed the research and development group from inception through to Dermira’s public company sale to Lilly. Mr. Peña also held leadership roles in portfolio management and product development at Connetics Corporation (“Connetics,” acquired by Stiefel Laboratories, Inc. and now part of GSK plc) and Theravance Biopharma, Inc., as well as various leadership positions at Genentech, Inc. where he played an instrumental role in the development of various commercialized drugs, including Xolair (omalizumab).

 

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Eugene A. Bauer, M.D., Co-Founder and Chief Medical Officer, is a recognized leader, physician and researcher in the field of dermatology and brings over 50 years of experience founding new companies and driving the clinical development of novel biopharmaceuticals. He previously co-founded and served as Chief Medical Officer for several companies that successfully developed novel therapeutics including Dermira, Peplin, Inc. (acquired by LEO Pharma A/S) and Connetics. He is Professor Emeritus in the School of Medicine at Stanford University and past Dean of the School of Medicine of Stanford University and Vice President for the Medical Affairs.

We have built a seasoned leadership team that complements Mr. Peña’s and Dr. Bauer’s experience and skills and that has played critical roles in the successful discovery, development and commercialization of novel therapies. Importantly, our leadership team includes highly experienced and accomplished drug developers and biotech operators with significant depth of knowledge in immunology and inflammation. Collectively, our team members have held leadership roles at over 25 companies and have played key roles in the discovery and development of nearly 30 approved small molecules and biologics.

Our senior leadership team includes:

 

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Jeegar Patel, Ph.D., Chief Scientific Officer, brings 20 years of therapeutic discovery and development experience, including in his prior role at Kadmon Holdings, Inc. (“Kadmon”) at which he led the research and development organization and spearheaded obtaining FDA approval of Rezurock (belumosudil).

 

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Kyle Carver, M.B.A, C.P.A., Chief Financial Officer, has over 15 years of experience in strategic finance and private and public company operations. He previously served as the Chief Accounting Officer at Kadmon, where he helped lead capital-raising transactions, totaling more than $500 million through follow-on and convertible note offerings, and significantly contributed to Kadmon’s $1.9 billion acquisition by Sanofi S.A. (“Sanofi”) in 2021.

 

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Gregory S. Moss, Esq., Chief Business and Legal Officer, Corporate Secretary and Chief Compliance Officer, has nearly 20 years of experience in legal and compliance, business development, corporate strategy and private and public company operations, including over 10 years at Kadmon where he served as Executive Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer. At Kadmon, Mr. Moss led the transaction that resulted in the company’s $1.9 billion dollar acquisition by Sanofi in 2021 following the FDA approval of Rezurock (belumosudil).

 

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Janice Drew, M.P.H., Executive Vice President, Operations, has over 30 years of experience in clinical development, commercialization and life-cycle management. She previously served as Senior Vice President, Portfolio Planning and Management at Dermira.

We are supported by leading life science investors with significant industry experience and expertise including Andera Partners, EQT Life Sciences, Pivotal bioVenture Partners, RA Capital Management and SymBiosis. Prospective investors should not rely on the investment decisions of our existing investors, as these investors may have different risk tolerances and in certain cases received their shares in prior offerings at prices lower than the price offered to the public in this offering. See the sections titled “Certain Relationships and Related Person Transactions” and “Principal Stockholders” for more information.

Our Mission and Strategy

Chronic inflammation is a significant healthcare problem in the world, substantially impacting patients’ quality of life, and if not prevented, ultimately leads to fatal diseases, such as cardiovascular diseases, diabetes and cancer, which contribute to three out of every five deaths worldwide. Our mission is to improve patients’ daily lives and prevent the long-term consequences of uncontrolled inflammation, which often persist due to the limitations of existing therapies. By identifying and targeting critical gaps in treatment, we strive to transform the treatment landscape, developing therapies that have the potential to offer rapid symptom relief and provide safe, durable resolution of the underlying disease. We aim to achieve this by utilizing the following strategies:

 

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Maximize potential of EVO756 and EVO301 in a broad range of chronic inflammatory disease indications: Many chronic inflammatory diseases remain inadequately treated and are in need of improved patient outcomes. We intend to systematically evaluate and prioritize indications for EVO756 and EVO301 based on their potential to meaningfully improve patient outcomes, guided by a rigorous assessment of clinical need, regulatory feasibility and commercial opportunity. We are initially focused on CSU, AD and UC indications, but there are many additional therapeutic areas where MRGPRX2-driven mast cell degranulation and neuroinflammation may be implicated and where elevated levels of IL-18 are present, including respiratory, digestive, cutaneous, multi-organ and other diseases. The potential expansion indications we are currently evaluating for EVO756 include asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus (itch) and for EVO301 include Crohn’s disease and additional indications for which regulating the IL-18 pathway may reduce pro-inflammatory mediators driving tissue damage and chronic inflammation. We intend to continue to conduct clinical trials to validate our approach and then expand into indications based on our rigorous standards, advancing only those programs that meet our high criteria for scientific, clinical and commercial potential.

 

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Advance clinical development of EVO756 for the treatment of CSU and AD: EVO756 is a MRGPRX2 inhibitor with the potential to establish multiple franchises in chronic inflammatory diseases, designed for convenient oral dosing and supported by encouraging preclinical and clinical data. We believe EVO756 can be a first-line therapy for CSU and AD and is currently the most advanced program in clinical development targeting MRGPRX2. We have initiated a Phase 2b trial in CSU with data expected in the first half of 2026. In addition, we initiated a Phase 2b dose-ranging trial in AD in August 2025 and expect to report initial results in the second half of 2026. Our Phase 2 CIndU trial was completed in May 2025 and generated clinical data that demonstrated clinical activity (including improvement in FricTest score and pruritus-NRS at four weeks as described below) in a patient population with symptomatic dermographism. Given significant overlap between the diseases and patient populations along with the contribution of neurogenic inflammation, we believe this further supports the continued advancement of our CSU program as well as the initiation of our AD program.

 

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Advance clinical development of EVO301 for the treatment of AD and UC: EVO301 is a long-acting IL-18BP designed specifically to neutralize aberrantly upregulated IL-18 activity, and we see several potential advantages of the SAFA IL-18BP fusion protein over other molecules for the treatment of chronic inflammatory and autoimmune diseases. We are conducting a Phase 2 trial in AD

 

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patients with initial results expected in the first half of 2026. In addition, we plan to initiate a Phase 2 trial in moderate-to-severe UC patients in 2026.

 

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Expand our pipeline through internal drug discovery and development as well as selective in-licensing opportunities and strategic collaborations: We aim to deliver a steady cadence of clinical proof-of-concept data for new programs over time, expanding our portfolio in line with our vision of addressing chronic inflammatory diseases across multiple pathways and indications. To accomplish this, we plan to advance our internal discovery candidates into clinical development, including our next-generation MRGPRX2 molecules and other preclinical programs. In addition, we plan to continue to evaluate opportunities to bolster our pipeline through selective in-licensing opportunities and collaborations that could complement our innovative immunology pipeline, prioritizing assets targeting significant unmet medical needs with strong commercial potential, favorable risk profiles and global rights. We believe our successful in-licensing transactions from Lilly and AprilBio and our team’s business development and drug development history demonstrate our ability to identify and execute meaningful pipeline expansion and deliver sustained value to patients, clinicians and stockholders.

 

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Commercialize our product candidates, if approved, to revolutionize the immunology and inflammation treatment paradigm: We believe our team’s proven history of success in overseeing multiple late-stage clinical development programs and ultimately commercializing leading medicines, positions us well to bring forward paradigm-shifting treatments with the goal of revolutionizing the treatment landscape and redefining the standard of care for inflammatory diseases. We aspire to replicate the proven history of success of our management team in biotech development and commercialization by exploring all commercial opportunities for our product candidates, beginning with EVO756 and EVO301.

EVO756: Our MRGPRX2 Antagonist

Overview

Our most advanced clinical-stage product candidate, EVO756, is a potent and highly selective oral small molecule antagonist of MRGPRX2. Dysregulated MRGPRX2 activity is implicated in a range of systemic chronic inflammatory diseases, acting both as a catalyst and perpetuator of disease pathology. The blockade of MRGPRX2 represents an innovative, targeted, dual mechanism approach for the treatment of multiple systemic chronic inflammatory diseases across different organs by inhibiting both mast cell degranulation and neuroinflammation mediated via peripheral sensory neurons.

EVO756 represents a differentiated strategy with the potential to deliver a safe, effective and convenient daily oral treatment. We believe this approach could address significant unmet need in chronic inflammation, align with the preferences of both patients and prescribers, enable broader prescribing beyond specialists and expand the reach of treatment to millions of underserved patients.

Clinical and preclinical data from our team and third parties suggest that blocking MRGPRX2 activation can selectively prevent mast cell degranulation and the release of pro-inflammatory mediators. By selectively inhibiting MRGPRX2, we aim to avoid the safety risks of therapies that deplete mast cells or cause broad immunosuppression.

We are initially developing EVO756 in CSU and AD, two diseases with well-established MRGPRX2 biology and high unmet need, while also planning to expand into additional chronic inflammatory indications.

We conducted a Phase 1 proof-of-concept trial in 132 healthy volunteers designed to assess the safety, tolerability, PK and PD properties of orally administered EVO756. Comprehensive trial results were presented at the UCARE Global Urticaria Forum meeting in December 2024. A skin challenge test was conducted in the

 

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MAD portion of the trial in which icatibant, representative of a broad class of disease relevant ligands, was administered via intradermal injection to healthy volunteers creating measurable wheals on their skin. EVO756 was observed to robustly decrease the healthy volunteers’ wheals induced by icatibant, evidencing meaningful target engagement at all doses tested.

We are currently conducting a Phase 2b trial of EVO756 in CSU and have completed a Phase 2 trial of EVO756 in CIndU. In May 2025, we reported topline results from our U.S. multicenter Phase 2 trial of EVO756 in CIndU that demonstrated clinical activity (including improvement in FricTest score and pruritus-NRS, as described below) in a patient population with symptomatic dermographism. Rapid clinical activity was observed in both dosing regimens, with some patients demonstrating responses by week one in both FricTest score (complete response score of zero) and pruritus-NRS (≥2-point decrease). 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients (n=8) achieving a complete response (achieving a FricTest score of zero), of which 50% were IgE high. An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score. The population of subjects observed at four weeks does not include three patients who were unevaluable or lost to follow-up. Both observed dosing levels were observed to result in rapid and meaningful itch relief to patients, with observed patients in the 300 mg QD cohort experiencing an average reduction of 2.4 in pruritus-NRS while observed patients in the 50 mg BID cohort saw an average reduction of 2.1 points. Importantly, 93% (n=25) of observed patients demonstrated improvement at just four weeks in either FricTest or pruritus-NRS. Further, 75% (n=6) of those who did not achieve a decrease in FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response. EVO756 was observed to be well-tolerated at both dose levels, including the higher 300 mg QD dose. No SAEs were observed and there were no discontinuations due to AEs. We expect to report initial data from the Phase 2b trial of EVO756 in CSU in the first half of 2026. We also initiated a Phase 2b dose-ranging trial in AD in August 2025 and expect to report initial results in the second half of 2026.

MRGPRX2 as an Ideal Target for Chronic Inflammatory Disease

MRGPRX2 is highly expressed on mast cells and peripheral sensory neurons and is activated by multiple ligands that are elevated in inflamed tissues, including neuropeptides, host defense peptides, proteases and cytokines. Such ligands have been found to be upregulated in a range of chronic inflammatory diseases including CSU, AD, asthma, migraine, interstitial cystitis and irritable bowel syndrome. Our management team has deep expertise with MRGPRX2, having worked with the target for over a decade, which we believe provides us with powerful insight into the biology, patient needs and treatment landscape in this space.

 

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Mast cells are critical regulators of the immune response and can be found in most vascularized tissues, including skin, lung and the digestive tract. When ligands activate MRGPRX2 on mast cells, they trigger a signaling cascade that induces degranulation, which initiates the release of inflammatory mediators including histamine, chemokines, leukotrienes, prostaglandins, tryptase and chymase. Activation of MRGPRX2 also drives neuroinflammation on peripheral sensory neurons, located in various tissues including skin and lung. Aberrant activation of mast cells and peripheral sensory neurons via the MRGPRX2 receptor can lead to a variety of disease pathologies depending on the affected tissue, resulting in uncontrolled symptoms that are characteristic of many chronic inflammatory diseases such as hives, itch, pain, swelling and redness. Disease pathology is further amplified by the observation that mast cells and peripheral sensory neurons are concurrently activated in certain diseases, such as CSU and AD, which creates upregulated MRGPRX2-dependent feedback loops and intensified symptoms. The following figures illustrate MRGPRX2’s role in mast cell activation and neuroinflammation and as a nexus for mast cell and neuron activation by multiple ligands:

Figure 7: MRGPRX2 in Mast Cell Activation and Neuroinflammation

 

 

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Figure 8: MRGPRX2, A Nexus for Mast Cell/Neuron Activation by Multiple Ligands

 

 

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Based on MRGPRX2’s concentrated expression on these two cell types, we believe there is potential for synergistic mast cell and peripheral sensory neuron activation by disease-relevant ligands. We believe MRGPRX2 is the only clinical approach aimed at inhibiting this neuroimmune interaction.

We also believe MRGPRX2 antagonism presents a differentiated and compelling safety profile. Existing methods of modulating mast cells include anti-IgE therapies and targeting the receptor tyrosine kinase KIT.

Anti-IgE therapies block mast cell activation but are associated with the risk of anaphylaxis and KIT inhibition, which depletes mast cells, affects many biological processes and has demonstrated a heightened potential for on-target toxicity in clinical trials. Similarly, downstream inhibitors like JAK or Bruton’s tyrosine kinase (“BTK”) reduce inflammation by broadly suppressing immune pathways, leading to potential systemic side effects and safety concerns. In contrast, MRGPRX2 is selectively expressed in mast cells and sensory neurons, which we believe leads to a narrower range of inflammatory outcomes and ultimately lowers the potential for on-target toxicity.

Market Opportunity

We believe EVO756 has the potential to be used for the treatment of a broad spectrum of highly prevalent and debilitating chronic inflammatory diseases in which mast cell and peripheral sensory neuron regulation is central to disease pathogenesis, including cutaneous diseases (such as CU and AD), respiratory conditions (such as asthma), neurologic conditions (such as migraine) and other diseases (such as interstitial cystitis). Standards of care for these diseases, particularly for patients with refractory or moderate-to-severe forms of their disease, are often limited by suboptimal safety or efficacy, as well as barriers related to administration or monitoring, which result in low utilization.

Our initial focus for EVO756 development is CSU and AD, where we see clear paths to create benefits based on high unmet patient need, well-defined clinical endpoints and the potential for both rapid symptom relief and disease-modifying effects through targeted mast cell and peripheral sensory neuron modulation. We also plan to explore additional indications in which mast cell degranulation and neuroinflammation are key drivers of disease, expanding the potential reach of EVO756 across a broad range of chronic inflammatory diseases. The following illustration depicts the broad universe of conditions where we believe targeting MRGPRX2 could potentially provide meaningful clinical benefit:

Figure 9: Targeting MRGPRX2 Creates Broad Opportunity

 

 

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The prevalence in the United States of certain diseases of interest in which mast cell degranulation and neuroinflammation are believed to play a role is significant, as shown in the table below:

Figure 10: Prevalence of Select Chronic Inflammatory Diseases

 

 

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Notes: 

(1) Estimated adult AD prevalence.

Our Solution: EVO756, Our MRGPRX2 Antagonist

We are developing EVO756 as an oral therapy targeting MRGPRX2 to address a broad spectrum of inflammatory indications. We believe EVO756 can be a first-line therapy for CSU and AD and is currently the most advanced program in clinical development targeting MRGPRX2. EVO756’s molecular properties, measured in our in vivo studies, are consistent with Lipinski’s Rule of Five, a set of guidelines used in drug discovery to predict oral bioavailability and avoid off-target effects. Its low molecular weight, low lipophilicity reflected by a favorable cLogP, as well as a high rate of free fraction, make us confident that EVO756 is designed and optimized for oral delivery. We believe EVO756’s carefully designed molecular and PK profile, with high bioavailability and limited off-target potential, differentiates it from other known attempts to mechanistically target MRGPRX2 in chronic inflammatory diseases. The following table depicts select characteristics of EVO756:

Figure 11: Select Characteristics of EVO756

 

 

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Notes: 

ADME = Absorption, Distribution, Metabolism, and Excretion; MW = Molecular Weight; PPB = Plasma Protein Binding; DDI = Drug-Drug Interaction.

 

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We have observed that EVO756 exhibits potent activity across a broad and representative panel of inflammatory ligands known to act through MRGPRX2. Because chronic inflammation in individual patients may be driven by varying combinations of disease-associated ligands, we evaluated multiple known ligand classes (as shown in Figure 12 below). Based on preclinical studies and the MAD portion of our Phase 1 proof-of-concept trial, EVO756 was observed to consistently and robustly inhibit degranulation across all tested ligands—both endogenous and exogenous—as shown in Figure 12 below:

Figure 12: EVO756 Is a Highly Potent Oral Small Molecule

 

 

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Notes: 

(1) Icatibant used as agonist for PD challenge.

In our completed Phase 1 trial, EVO756 was observed to cause decreases in skin response as measured by changes in icatibant-induced wheals, which we believe confirms target engagement and suggests the potential of EVO756 to block disease relevant ligands in CSU. EVO756 was observed to be well-tolerated at all doses tested, with no SAEs observed, and PK results supporting daily oral dosing.

Chronic Urticaria Background

Urticaria, also known as hives, is a disease characterized by the presence of wheals, itching and angioedema, which is swelling in subcutaneous tissue, often in the lips, face and extremities. This disease is characterized as CU when lasting for a period of more than six weeks. The two forms of CU are CSU and CIndU. CSU is a chronic inflammatory skin disease characterized by spontaneous and recurrent hives and angioedema without a known environmental trigger. In contrast, CIndU is triggered by specific physical stimuli such as pressure, cold, friction or heat. Both are driven by aberrant mast cell activation, leading to the repeated release of histamine and other pro-inflammatory mediators. This activation causes vasodilation, immune cell recruitment, swelling and stimulation of peripheral sensory neurons, resulting in intense, persistent itch. Uncontrolled CU can last months or even years and significantly impact patients through the disruption of daily living and reduction in quality of life.

 

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Currently, in the United States, we estimate that there are more than 3,000,000 patients living with CSU and over 850,000 patients living with CIndU. The current range of existing and potential therapeutics for CU collectively lacks a safe, convenient, efficacious treatment option that could be prescribed by a broad range of prescribers.

Current Treatment Paradigm

Antihistamines are generally the initial treatment for CU due to their availability over-the-counter, low price and benign safety profile. However, approximately 50% of patients treated with antihistamines experience inadequate symptom control. There are only three approved therapeutics available as a therapy for antihistamine-refractory CSU patients: (i) Xolair (omalizumab), a once monthly injectable anti-IgE mAb which contains a black box warning for anaphylaxis, (ii) Dupixent (dupilumab), a twice monthly subcutaneous mAb modulating the IL-4 and IL-13 signaling cascade and (iii) Rhapsido (remibrutinib), a twice daily oral BTK inhibitor.

Approximately two-thirds of the CSU patients treated with Xolair do not experience complete symptom control. In addition, Xolair has safety concerns regarding its black box warning for anaphylaxis and has burdensome monitoring requirements including in-office administration for three consecutive months. We believe these concerns have limited adoption predominantly to allergists and has led to Xolair being significantly underutilized by dermatologists, primary care physicians and pediatricians, with approximately 10% penetration in the antihistamine-refractory CSU market. Overall, we estimate that approximately 450,000 CSU patients in the United States are either untreated or have uncontrolled disease and are not well served by the existing treatment paradigm, as illustrated in the figure below:

Figure 13: CSU Is an Underserved Market

 

 

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Notes:   

(1) In the United States, “Eligible” defined as CSU patients with incomplete response to over-the-counter H1-antihistamines and eligible for targeted therapy; (2) Approximately 50,000 patients currently treated with a biologic.

Dupixent was approved for CSU in April 2025. Despite having shown success in other immunology indications, Dupixent has more limited efficacy in CSU compared with Xolair, with less than a third of Xolair-naïve patients dosed reaching a complete response (as defined by UAS7=0) at week 24 (and notably only a 16% complete response rate at week 12, the common endpoint for competitor CSU trials). Furthermore, Dupixent failed to meet the primary endpoint of ISS7 reduction in a Phase 3 trial in omalizumab-refractory or intolerant patients. Additionally, Dupixent has been associated with conjunctivitis and injection site reactions. Due to these limitations, we estimate there is a significant number of patients who either remain untreated or untreatable with current treatment options. We believe EVO756 may ultimately be a first line treatment option across prescriber types, if approved.

 

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Beyond Xolair and Dupixent, the next most advanced product candidate is Rhapsido, an orally administered BTK inhibitor approved for the treatment of CSU in September 2025. While Rhapsido has been observed in clinical trials to have greater clinical activity than Dupixent, Rhapsido has adverse reactions on its label including nasopharyngitis, bleeding, headache, nausea and abdominal pain, along with drug interactions recommending against its use with multiple classes of drugs. Furthermore, we believe BTK inhibitors as a class have a more concerning safety profile with multiple labeled warnings and precautions. We are also aware of KIT inhibitor programs in development for the treatment of CSU. KIT inhibitors have a proven ability to limit mast cell development and therefore significantly reduce hives for urticaria patients. However, KIT inhibitors also impact the development of a range of other cells, resulting in a variety of side effects, including neutropenia, changes in taste and hair color and spermatogenesis. We believe these challenges could limit KIT inhibitors to a later-line treatment option. The following graphic compares MRGPRX2 to other mechanisms of action being evaluated in CSU:

Figure 14: Potential for EVO756 to Address an Urticaria Market With Significant Therapeutic Opportunity

 

 

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We believe that MRGPRX2-targeted therapies have the potential to show a superior safety and comparable efficacy profile to Xolair, Dupixent, Rhapsido, and other therapeutic candidates in development, thus having the potential to become the first-line treatment for antihistamine-refractory patients. Nonclinical and clinical data generated internally and by third parties support the potential for MRGPRX2-targeted therapies to emerge with an attractive class profile with efficacy in the range of approved treatments while delivering improved safety, faster symptom relief through direct modulation of peripheral sensory neurons and the convenience of a daily oral. Furthermore, we believe the safety results observed to-date and convenient oral dosing of EVO756 may not only position it to become the backbone therapy for CSU, if approved, but it also has the potential to be used in combination treatment with existing approved biologics, such as Xolair and Dupixent.

 

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Clinical Data

Our Completed Phase 1 Trial

In July 2024, we announced the topline results from a Phase 1 proof-of-concept trial in 132 healthy volunteers designed to assess the safety, tolerability, PK properties and PD properties of orally administered EVO756. Comprehensive trial results were presented at the UCARE Global Urticaria Forum meeting in December 2024. The Phase 1 trial was a SAD and MAD trial in healthy volunteers and was conducted in the United States. The figure below depicts the design of this trial:

Figure 15: Phase 1 Proof-of-Concept Trial Design and Summary

 

 

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Notes:

ECG = electrocardiogram

In the trial, 55 individuals (including placebo) were administered a single dose in the SAD portion and 77 individuals (including placebo) were dosed once or twice daily for 14 days in the MAD portion. In the SAD portion, doses from 1 mg to 500 mg were administered in ascending order across seven cohorts of approximately eight participants each (six active and two placebo). In the MAD cohorts, ascending doses of 10 mg, 30 mg, 100 mg and 240 mg twice daily were administered across four cohorts of 16 subjects each (12 active and four placebo) and a fifth cohort of approximately 16 subjects (12 active and four placebo) were administered 500 mg once daily. A skin challenge test was also conducted in the MAD portion of the trial in which icatibant, representative of a broad class of disease relevant ligands, was administered via intradermal injection to create measurable wheals on their skin.

 

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Safety Results

EVO756 was observed to be well-tolerated at all doses administered in both the SAD and MAD portions of the trial, including up to the 500 mg QD dose. No SAEs were observed and all AEs were reported were considered mild or moderate and included headache, dizziness, catheter site pain, diarrhea and lymphadenopathy. There was one discontinuation, which was not considered treatment-related, as the patient withdrew consent prior to completion of treatment. In addition, there were no clinically significant electrocardiogram (“ECG”) or lab abnormalities. The following table summarizes the safety results of this trial:

Figure 16: Safety Results of Phase 1 Trial

 

 

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PK Results and Trial Dosing

In the MAD portion of the trial, increased dosing from 10 mg twice daily to 240 mg twice daily, and 500 mg once daily, resulted in approximately dose-proportional increases in serum concentrations of EVO756, with about a two-fold accumulation observed from day 1 through to day 14. In this trial, serum concentrations of EVO756 were above the IC90 for MRGPRX2 inhibition at trough at all dosing levels 30 mg twice daily and higher.

Phase 1 Proof-of-Concept Skin Challenge Test

The Phase 1 trial included a skin challenge test based on work published out of Johns Hopkins University. In a clinical setting, MRGPRX2 ligands, administered intradermally in a skin challenge test, have been shown to produce functional and measurable skin responses (wheals) in healthy individuals and a heightened response in individuals with CU.

 

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We assessed the PD potential of EVO756 in the MAD portion of the trial in which icatibant, whose pharmacology effectively represents typical characteristics of MRGPRX2 ligands, was administered intradermally. Figure 17 below outlines the mechanism and design of this skin challenge test:

Figure 17: Skin Challenge Test: Proof-of-Concept and Target Engagement for Chronic Urticaria

 

 

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In the skin challenge test, intradermal administration of 10 and 100 µg/mL icatibant-induced wheals consistent with those observed previously in the work performed by Johns Hopkins (Shtessel et al.) resulted in measurable skin responses in a highly controlled setting.

We believe this PD assessment provides proof-of-concept for EVO756 in the treatment of CU as EVO756 was observed to engage MRGPRX2, block the impact of a known MRGPRX2 ligand and robustly reduce the mean size of icatibant-induced wheals (10 µg/mL (7.6 µM) icatibant), as shown in the following chart:

Figure 18: EVO756 Robustly Decreased Icatibant-Induced Wheals

 

 

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Notes:

Error bars represent standard deviation; *p < 0.001; **p < 0.0001; p-value from LS-means change from baseline in wheal size in a Mixed Model Repeated Measures analysis. Bonferroni adjustment made for multiple comparisons – only comparisons which reached statistical significance of p < 0.001 are noted.

 

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At 10 µg/mL of icatibant, which we believe to be the most appropriate comparison for real-world ligand concentrations in humans based on quantitative evaluation of ligand concentrations from biopsies, we observed statistically significant decreases in mean wheal size by EVO756 after two weeks of dosing, as compared to wheal size at baseline after intradermal icatibant injection. Thus, the above results suggest EVO756 may have activity at low dosage levels in what we believe is the most pharmacologically relevant model for a diseased patient. In addition, in our PK research, we have observed high human PK interstitial fluid concentrations (“ISF”), with average ISF compared to plasma PK concentrations ranging from approximately 55–70% over a 24-hour period following a 200 mg dose of EVO756, supporting robust exposure at target site. Further, EVO756 showed dose-dependent response at 100 µg/mL of icatibant, which we believe is a supraphysiological concentration.

Figure 19: PK Modeling of EVO756 Based on Clinical Data Generated to Date

 

 

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Notes:

IC90 Primary Mast Cells = 180 ng/mL.

Based on the PK profile generated in this study, we were able to create a model that predicts various once- and twice-daily doses that maintain serum concentrations above the IC90, as illustrated in Figure 19 above. Additionally, mass spectrometry identified MRGPRX2 ligands upregulated in disease tissue, confirming the relevance of ligands used in in vitro mast cell assays and the icatibant skin challenge test.

To further explore the translatability of our PK modeling, we overlayed our modeled human EVO756 drug exposures (skin level-adjusted Ctrough and Cmax, respectively) at the expected Phase 2 dose levels on the concentration plots from our in vitro mast cell degranulation assays. The figure below depicts EVO756’s dose response to 10 µg/mL icatibant in vitro (blue plotted dots) as well as the modeled in vivo tissue concentrations (at both Ctrough (left) and Cmax (right)) at planned Phase 2 dose levels and previously conducted Phase 1 dose levels (grey) where activity has been observed.

 

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Figure 20: EVO756 Target Coverage and Dosing Response

 

 

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Notes: (1)

Mast cell degranulation was determined via CD63 externalization on mast cells by flow cytometry. CD63 externalization was normalized to 100% of max (e.g., icatibant stimulation alone); (2) Ctrough is the modeled drug level in serum at 12 or 24 hours post last BID or QD dose, respectively; (3) Assumes 70% skin distribution and 16% free drug.

Following analysis of our Phase 1 trial results, we initiated our Phase 2 clinical development program and enrolled the first patient in a multi-center CIndU trial in September 2024 and the first patient in a global CSU trial in April 2025, with both trials designed to evaluate the safety and efficacy of EVO756 in CU.

 

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Our Phase 2 Trial in CIndU

In May 2025, we reported topline results from our U.S. multicenter Phase 2 trial of EVO756 in CIndU that demonstrated FricTest score improvement at four weeks, as described below. CIndU is a form of urticaria that has known environmental triggers, including pressure or exposure to cold and has underlying disease pathogenesis similar to CSU. The trial was designed to generate additional patient data in a population with symptomatic dermographism, which we believe will be highly translatable to the CSU patient population, given the shared pathologies. Third party studies have demonstrated that symptomatic dermographism affects approximately 25% of the CSU patient population; similarly, we believe EVO756’s clinical activity in symptomatic dermographism patients strongly supports the role of MRGPRX2 in neurogenic inflammation, which plays a crucial role in AD. Efficacy endpoints included changes from baseline in disease specific provocation thresholds that are used as objective markers to quantify disease severity and response to treatment. EVO756 was administered orally for four weeks with either a once or twice daily dose and was evaluated for safety and efficacy at weekly visits during treatment, with patients serving as their own control. Figure 21 below depicts the trial design of our Phase 2 CIndU trial:

Figure 21: Phase 2 CIndU Trial Design

 

 

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Notes:

SD = symptomatic dermographism; TEAE = Treatment Emergent Adverse Events; BL = Baseline.

 

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A total of 30 patients were enrolled in the Phase 2 trial, with 11 patients assigned to the 300 mg QD cohort and 19 patients to the 50 mg BID cohort. Duration of disease at baseline in the 300 mg QD and 50 mg BID cohorts was 6.3 years and 6.4 years, respectively. A total of 28 patients completed the trial and 27 evaluable patients contributed to the four week data. Baseline characteristics and patient dispositions for enrolled patients are detailed in Figure 22 below:

Figure 22: Phase 2 CIndU Trial Disposition

 

 

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Notes:

LTFU = Lost-to-Follow-Up

 

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Efficacy Results

To evaluate the efficacy of EVO756, we used a provocation challenge known as FricTest to assess each patient’s threshold for wheal formation. An instrument with four calibrated tines was applied to the patients’ skin to determine the minimum pressure required to elicit a wheal response. 70% (n=19) of the 27 observed patients demonstrated improvement at just four weeks, with 30% (n=8) of the observed patients achieving a complete response (achieving a FricTest score of zero), of which 50% were IgE high. An additional 11% (n=3) achieved a partial response as defined by a ≥2-point decrease in FricTest score and a further 30% (n=8) demonstrated a one-point decrease in FricTest score. The population of subjects observed at four weeks does not include three patients who were unevaluable or lost to follow-up. The following figures summarize observed patient FricTest response at four weeks in the Phase 2 trial:

Figure 23: FricTest Response at Week 4

 

 

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Notes: 

(1) Four of the complete responders were IgE high. (2) 75% (N = 6) of those who did not achieve a decrease in FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response.

Figure 24: FricTest Scores by Subject at Week 4

 

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Observed patients within both cohorts of the Phase 2 trial experienced meaningful reductions in total FricTest score during the duration of the trial, with observed patients in the 300 mg QD cohort experiencing an average reduction in total FricTest score of 1.4 points and observed patients in the 50 mg BID cohort experiencing an average reduction in total FricTest score of 1.5 points. The figure below illustrates total reduction in observed patient FricTest scores over time from week zero to week four in both cohorts of the Phase 2 trial:

Figure 25: Average FricTest Score Over Time by Cohort

 

 

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Overall, topline results from the Phase 2 CIndU trial of EVO756 included, in both the 300 mg QD and the 50 mg BID cohorts, meaningful and rapid responses in FricTest scores at one week, with three patients achieving a complete response on FricTest at one week. Initial Phase 2 data of mean FricTest reduction from EVO756 in CIndU were similar to previously reported four week data generated by third-party competing agents used for the treatment of CIndU, including the biologics omalizumab (Phase 2 trial, n=37) and barzolvolimab (Phase 2 trial, n=66). In these clinical trials, which had patient populations with comparable baseline levels of disease severity as the EVO756 Phase 2 trial in CIndU, each of omalizumab and barzolvolimab was observed to result in deepening of clinical response beyond week four.

In addition to degree of change in FricTest scores, we also evaluated patients’ change from baseline pruritus-NRS at provocation site, a single-item, patient-reported outcome measure used to assess itch severity. Both the 300 mg QD and the 50 mg BID dose of EVO756 were observed to result in rapid itch relief to patients, with observed patients in the 300 mg QD cohort experiencing an average reduction in pruritus-NRS score of 2.4 points and observed patients in the 50 mg BID cohort experiencing an average reduction of 2.1 points.

 

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Importantly, 93% (n=25) of observed patients demonstrated improvement at just four weeks in either FricTest or pruritus-NRS. Further, 75% (n=6) of those who did not achieve a decrease in the FricTest score demonstrated a decrease in pruritus-NRS, evidencing the impact of EVO756 on itch at this early time-point, even in the absence of FricTest response. The figure below illustrates reduction in provoked itch over time from week zero to week four observed in both cohorts of the Phase 2 trial:

Figure 26: Average Provoked Itch Score Over Time by Cohort

 

 

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Additionally, both the 300 mg QD and the 50 mg BID dose of EVO756 demonstrated meaningful itch relief to patients with high baseline pruritus-NRS. The table below depicts the pruritus-NRS response at week four in subjects with baseline pruritus-NRS ≥4:

Figure 27: Pruritus-NRS Response at Week 4 in Subjects with Baseline Pruritus-NRS ≥4

 

 

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Safety Results

EVO756 was observed to be well-tolerated at both doses administered in the Phase 2 trial. No SAEs were observed and there were no discontinuations due to AEs. Figure 28 below shows all AEs that occurred in more than one subject in this trial. The two subjects in the 300 mg QD cohort with AEs of increased ALT and AST had asymptomatic transaminase elevations that were greater than ten times the upper limit of normal at four weeks, which were not present at baseline, week 1 or week 2 and later returned to baseline. Other liver tests, including bilirubin and alkaline phosphatase were within normal limits. Both of these subjects had confounding factors that may have contributed to these elevations. No AEs of ALT or AST elevation were reported in subjects in the 50 mg BID cohort.

 

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Figure 28: Phase 2 CIndU Trial Summary of Treatment Emergent Adverse Events in More than One Subject

 

 

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Notes:

(1) The two subjects in the 300 mg QD cohort with AEs of increased ALT and AST had asymptomatic transaminase elevations that were greater than ten times the upper limit of normal at four weeks, which were not present at baseline, week 1 or week 2 and later returned to baseline. Other liver tests, including bilirubin and alkaline phosphatase were within normal limits. Both of these subjects had confounding factors that may have contributed to these elevations.

In our ongoing Phase 2b clinical trials of EVO756 in CSU and AD, the current protocols include doses ranging up to 150 mg daily. As of September 30, 2025, we have enrolled over 130 patients in the aggregate across the two trials.

Clinical Development Plan and Status

Our Ongoing Phase 2b Dose-Ranging Clinical Trial in Chronic Spontaneous Urticaria

In April 2025, we initiated a Phase 2b dose-ranging trial in approximately 160 moderate-to-severe antihistamine-refractory CSU patients in the United States, Europe, Canada and Japan. The global, multi-center, randomized, double-blind, placebo-controlled trial will evaluate the safety, tolerability and efficacy of EVO756 at three doses compared to placebo. Patients will be treated for 12 weeks and evaluated at several pre-specified time points. The primary endpoint of the trial is change in a patient’s UAS7 at 12 weeks. Beyond the primary endpoint, we also intend to evaluate other measures of disease including itch, hive severity and angioedema. The results of the trial are expected to inform dose selection and other trial design considerations for Phase 3 EVO756 development. We anticipate reporting initial data from this trial in the first half of 2026. The following figure depicts the trial design of our Phase 2b CSU trial.

 

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Figure 29: Phase 2b CSU Trial Design

 

 

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Notes:  

UAS7 = Urticaria Activity Score over 7 days; ISS7 = Itch Severity Score component of UAS7; HSS7 = Hives Severity Score component of UAS7; AAS7 = Angioedema Activity Score; BL = Baseline; Mod-to-Sev = Moderate-to-Severe

Nonclinical Data

We have also been characterizing EVO756 through nonclinical studies on primary pharmacology, safety pharmacology, PK and toxicology. We conducted in vitro primary PD studies and observed the ability of EVO756 to inhibit the activation of MRGPRX2 and confirmed that EVO756 is human-specific and does not inhibit functional orthologue receptors to MRGPRX2 in animal species.

We included characterization of KO mice that lack the murine receptor functional orthologues of the human MRGPRX2 in the toxicology program to document the natural history of complete receptor ablation in target tissues as a proxy for traditional nonclinical on-target safety assessment.

Off-target safety assessment conducted in the good laboratory practice (“GLP”) repeat-dose toxicity studies in rats and dogs for up to 13 weeks identified no adverse histopathology findings and the corresponding No Observed Adverse Effect Levels identified support the current clinical development plan.

EVO756 was not observed to be genotoxic in the bacterial reverse mutation test, in vitro chromosome aberration test or in vivo micronucleus test in rats. EVO756 was not observed to be phototoxic in the 3T3 neutral red uptake phototoxicity test in vitro. Characterization of KO mice conducted to derive potential on-target effects of EVO756 suggested no noteworthy or adverse changes related to genetic alterations resulted from the absence of Mrgpra1 and Mrgprb2 through 26 weeks. Furthermore, no fetal malformations were observed in pregnant Mrgpra1 and Mrgprb2 KO mice in preliminary studies. Additionally, no impact on the central nervous system, cardiovascular or respiratory function was observed, and no fetal malformations were observed in the preliminary embryo-fetal toxicology studies.

EVO756 for the Treatment of Atopic Dermatitis

Atopic Dermatitis Background

Atopic dermatitis, commonly referred to as eczema, is one of the most prevalent chronic inflammatory diseases and is characterized by acute flares of itchy, red exudative papules (raised skin lesions that ooze fluid) and persistently dry, scaly skin. The hallmark of AD is intense inflammatory itch, known as pruritus, and episodic flares of rash and underlying chronic inflammation. For most moderate-to-severe AD patients, the disease significantly impacts patients’ quality of life, driven primarily by relentless itch, sleep disruption and visible skin symptoms. The intense itch associated with AD often triggers an itch-scratch cycle, further compromising the epidermal barrier and exacerbating disease. While AD commonly begins in childhood, it is also highly and increasingly prevalent in adults, with about 15% to 20% of children and 1% to 3% of adults impacted.

 

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Research indicates that mast cells and peripheral sensory neurons play key roles in the pathogenesis of AD. One known driver of AD is the chronic and cyclical release of pro-inflammatory mediators associated with mast cell degranulation. Heightened mast cell activity promotes inflammation and drives itch, while activation of peripheral sensory neurons amplifies the sensation of itch. Third party studies have shown increased mast cell density, elevated MRGPRX2 expression, neuroinflammation and disease severity in lesional AD skin, supporting the rationale for targeting MRGPRX2 to both resolve skin lesions and relieve symptoms. Mast cells are in close proximity and recruited to sensory neurons in inflamed tissue, primarily in response to neuronal release of substance P and other neuropeptides, as well as local production of pro-inflammatory cytokines that enhance mast cell-neuron interactions. We believe that MRGPRX2 is the only target currently being pursued clinically that impacts both mast cells and neuroinflammation, making it uniquely positioned as a potential therapy for AD as illustrated in the figure below:

Figure 30: Rationale for EVO756 in AD

 

 

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Current Treatment Paradigm

The current standard of care for first-line treatment of AD is primarily topical corticosteroids and targeted treatments (for example, topical JAK inhibitors). However, approximately 40% to 50% of AD patients have a moderate-to-severe form of the disease and thus are uncontrolled by topical therapies. For these patients, new systemic agents have emerged as advanced treatments that systemically target several different inflammatory mediators that contribute to underlying inflammation and flare-ups. Dupixent, an anti-IL-4 receptor alpha that modulates the signaling of IL-4 and IL-13 cytokines, is the preferred biologic for moderate-to-severe AD. The initial dose is two injections followed by one injection every two weeks and is considered to have category-high efficacy with 36% of patients reaching EASI-90 in 16 weeks. While treatment with Dupixent has also been shown to reduce itch (as measured by peak pruritus-NRS) by up to approximately 50%, it typically takes 16 weeks to achieve this level of efficacy and plateaus thereafter. Despite Dupixent’s efficacy, over 60% of AD patients remain uncontrolled and patients may be burdened with potential side effects, including conjunctivitis and injection site reactions, and the burden of twice-monthly injections. Two oral JAK inhibitors, Rinvoq and Cibinqo, have also been approved for the disease and offer improved efficacy with over 40% of patients exceeding EASI-90 at 16 weeks, but are reserved for later lines of treatment due to safety concerns including black box warnings on cardiac events and malignancies. Another biologic, Ebglyss (lebrikizumab), an IL-13 inhibitor, was recently approved by the FDA for the treatment of AD based on clinical results wherein between approximately 33% to 43% of patients were observed to achieve IGA 0/1 with ≥2-point improvement from baseline to week 16. Several biologics are in development with differing mechanisms of action including product candidates that target IL-13, OX-40 and IL-18, including our own EVO301. We believe the

 

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market for AD therapeutics is in a nascent stage, particularly when compared to the growth observed in the market for psoriasis, which has grown meaningfully since the launch of Enbrel in 2004 as illustrated in the figure below:

Figure 31: Expansion of AD Market Outpacing That of Psoriasis

 

 

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Notes: “Year  

1” for AD represents 2017 (year of Dupixent launch); “Year 1” for psoriasis represents 2004 (year of Enbrel launch in plaque psoriasis). May represent projections and not actual sales.

The following figure provides an illustration of the potential market opportunity for EVO756 in AD in the United States, if approved:

Figure 32: AD Is an Underserved Market

 

 

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Given a significant number of patients with AD remain uncontrolled, we see the need for a therapy with a meaningful efficacy profile, improved safety profile, a fast onset of itch relief and the convenience of daily oral therapy. We believe a treatment option with this product profile would have broad applicability, first-line potential in moderate-to-severe disease and could be utilized by a wider range of prescribers, expanding access. We believe MRGPRX2 is the only target impacting both mast cells and neuroinflammation, two key factors underlying AD.

 

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Clinical Development Plan and Status

Our Ongoing Phase 2b Dose-Ranging Trial in Atopic Dermatitis

Our atopic dermatitis development program is expected to target the treatment of adult and pediatric patients with moderate-to-severe AD, whose disease is not able to be controlled with topical prescription therapies. We initiated a Phase 2b dose-ranging trial in moderate-to-severe AD patients in August 2025 and are currently enrolling patients in the United States and plan to enroll patients in New Zealand. We expect to report initial results in the second half of 2026. The multi-center, randomized, double blind, placebo-controlled trial will evaluate the safety, tolerability and efficacy of EVO756 at three doses compared to placebo. Patients will be treated for 12 weeks and evaluated at several pre-specified time points. The primary endpoint will be percent change in EASI score and we also plan on assessing IGA, pruritus-NRS and safety. The results of the trial are expected to inform dose selection and other trial design considerations for Phase 3 EVO756 development in AD. The following figure depicts the trial design of our Phase 2b dose-ranging trial in AD:

Figure 33: Phase 2b Dose-Ranging Trial Design

 

 

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Notes:

EASI = Eczema Area and Severity Index; vIGA = Validated Investigator Global Assessment; Pruritus-NRS = Pruritus Numerical Rating Scale; BSA = Body Surface Area; BL = Baseline

In addition, if EVO756 demonstrates a positive treatment effect on itch associated with AD in the Phase 2b dose-ranging trial, we may pursue additional indications in which itch is a prominent feature in the future.

EVO756 for the Treatment of Other Potential Indications

Overview

We believe EVO756 has the potential to address several additional chronic inflammatory diseases. Building on our ongoing research and nonclinical studies, we are exploring the potential for EVO756 in asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus (itch) as potential expansion indications due to their large unmet patient needs along with the relevance of mast cells and sensory neurons in these diseases’ pathology.

 

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Background on Other Potential Indications

Asthma

Asthma is a chronic inflammatory disease of the airways characterized by variable airflow obstruction and bronchial hyperresponsiveness to triggers such as allergens, infections or environmental pollutants. It is one of the most common non-communicable respiratory diseases globally and in the United States, affecting both children and adults. The disease typically manifests through episodes of wheezing, coughing, chest tightness and shortness of breath, which may vary in frequency and severity. Asthma imposes a substantial burden on patients and health systems in terms of medical utilization (emergency department visits, hospitalizations), lost productivity and reduced quality of life. Current therapies, such as inhaled corticosteroids, bronchodilators and biologics, do not adequately control symptoms or prevent exacerbations in all patients, leaving a significant unmet need for new treatment modalities.

Migraine

Migraine is a neurological disorder often characterized by throbbing pain in one area of the head lasting four to 72 hours and is associated with symptoms such as sensitivity to light or sound, nausea and vomiting. It is estimated that migraine affects more than 10% of people worldwide and occurs most often among people aged 20 to 50 years. Migraine is a leading cause of years lived with disability worldwide, particularly among women, causing disruptions to daily living and productivity. Existing preventative and acute treatments, such as pain relievers, triptans, dihydroergotamine and lasmiditan, are available for many, but are insufficient for others in terms of efficacy, side effects and tolerability, highlighting the need for additional mechanistic targets and therapeutic options.

Interstitial Cystitis

Interstitial cystitis is a chronic condition causing bladder pressure, bladder pain and sometimes pelvic pain. The pain can range from mild discomfort to severe pain. The condition is a part of a spectrum of diseases known as painful bladder syndrome. The symptoms may vary over time, periodically flaring in response to common triggers, such as menstruation, sitting for a long time, stress, exercise and sexual activity. Epidemiological data in the United States suggest interstitial cystitis may affect approximately three to eight million women and one to four million men. Treatment options are limited, frequently palliative, and even if symptoms disappear, may return later. There is a substantial unmet need for therapies that address underlying pathophysiology, relieve pain, reduce urinary symptoms, improve function and offer durable benefit.

Irritable Bowel Syndrome

Irritable bowel syndrome is a common condition characterized by abdominal discomfort associated with altered bowel movement. Recent research has shown that many symptoms of irritable bowel syndrome are related to hypersensitivity of the nerves found in the wall of the gastrointestinal tract. Prevalence estimates vary depending on diagnostic criteria, but some experts estimate that approximately 10% to 15% of adults in the United States have irritable bowel syndrome, and only about 5% to 7% of them see a provider and receive a diagnosis. This syndrome has a large impact on quality of life, psychological well-being and work productivity. Current treatments include dietary modification, cognitive behavioral therapy, laxatives and anti-diarrheals, which only often provide partial relief, creating an unmet need for novel agents targeting symptoms, visceral hypersensitivity and motility.

Pruritus (Itch)

Pruritus, commonly referred to as itch, is an unpleasant sensory sensation that provokes the desire to scratch. When pruritus persists for more than six weeks, it is defined as chronic pruritus. Pruritus can be painful or irritating and could be localized to one area of the body or spread throughout several areas. It is estimated that

 

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pruritus leads to more than seven million ambulatory visits annually in the United States and is among the 50 most prevalent conditions worldwide. Existing therapies, such as hydrocortisone, antihistamines, topical steroids and immunosuppressants, are often only partially effective, underscoring the need for treatments that more directly target itch sensory pathways and underlying immunologic or neuronal drivers.

Ongoing Nonclinical Translation Research

Our ongoing nonclinical translational research efforts are focused on elucidating the role of MRGPRX2 in human disease through a multifaceted approach. These activities include the characterization of MRGPRX2-expressing mast cells and the identification of MRGPRX2 agonists in human patient samples across relevant disease states. In parallel, we are also conducting functional studies in human-derived cell types and tissues to further define the biology of MRGPRX2 signaling. These include in vitro studies using primary human mast cells and neurons, as well as ex vivo studies in disease-relevant human tissues such as precision-cut lung slices for asthma and trigeminal neurons and meningeal mast cells for migraine.

Additionally, in vivo studies are underway using multiple genetically modified mouse models, including Mrgprb2 knock-out and MRGPRX2 knock-in mice. These studies are complemented by established disease models, such as Pituitary Adenylate Cyclase-Activating Polypeptide-induced migraine, to further assess the therapeutic potential of targeting MRGPRX2.Collectively, these nonclinical investigations are intended to support indication prioritization and inform our clinical development strategy of EVO756 in other potential indications.

We believe that continued interrogation of MRGPRX2’s role across asthma, migraine, interstitial cystitis, irritable bowel syndrome and pruritus will provide critical insights into its role as a key neuronal mediator. These findings will guide our near-term indication expansion efforts and support the initiation of additional clinical trials in the future.

Clinical Development Plan

Initiation of a Phase 2 trial in any of these additional indications will be determined based on ongoing trials and corporate resources. To date, based on our data from the successful completion of our Phase 1 proof-of-concept trial of EVO756 in healthy volunteers, we believe there is a path to proceed to Phase 2 clinical development for these other indications, similar to our initiation of our Phase 2b trial in AD, subject to standard regulatory requirements. We are also currently exploring development of next-generation MRGPRX2 molecules that we believe can be optimized for select indications to bolster our intellectual property portfolio and potentially complement our product candidates to better manage the life cycle management of our development programs.

EVO301: Our SAFA IL-18BP Fusion Protein

Overview

Our second clinical-stage product candidate, EVO301, which is in Phase 2 development for the treatment of atopic dermatitis, is a long-acting biologic designed to neutralize the IL-18 inflammatory pathway, which plays a key role in various immune processes and is thought to be a key driver of immune dysregulation associated with chronic inflammatory diseases. In June 2024, we secured exclusive global rights to develop and commercialize EVO301 from AprilBio, which previously progressed EVO301 through a Phase 1 trial. In the initial Phase 1 data from healthy volunteers, EVO301 was well-tolerated at all doses tested, with no severe AEs observed or discontinuations due to AEs, with a favorable PK profile. We believe EVO301’s profile may enable it to become a leading therapy for a broad range of chronic inflammatory diseases.

 

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We selected AD for our lead Phase 2 indication, considering both the sizable market opportunity and the significant unmet patient need. Beyond AD, we plan to initiate a Phase 2 trial in UC patients in 2026 and intend to evaluate EVO301 in Crohn’s disease and additional indications where IL-18 plays a key role in inflammatory response.

Although we are pursuing AD for both EVO301 and EVO756, we believe these approaches are sufficiently differentiated and complementary to each other given their different modalities and potential to be used together. In addition, based on the clinical data observed to-date, we believe each has the potential to transform the immunology and inflammation treatment landscape as monotherapy or in combination with existing therapies.

IL-18 Mechanism of Action

IL-18, a pro-inflammatory cytokine of the IL-1 family, regulates various immune processes that drive inflammation. It plays an important role in the T-cell-helper type 1 inflammatory response and is a potent modulator of ongoing inflammation. An upregulated IL-18 pathway cyclically activates inflammatory mediators in an aberrant manner, resulting in tissue damage and other inflammatory and sensory disease pathology. We believe that targeting the IL-18 pathway differs from existing treatment options because this pathway impacts both innate and adaptive immune processes, a distinguishing feature that allows for broad applicability across multiple chronic inflammatory diseases. There are several large, heterogenous chronic inflammatory diseases with significant numbers of uncontrolled patients including AD and inflammatory bowel diseases (“IBD”) in which the IL-18 pathway is believed to play a key role. The following figures illustrate IL-18’s role in both innate and adaptive immune processes, the IL-18BP therapeutic approach, a landscape of diseases that are regulated by the IL-18 pathway and the key role of IL-18 signaling in AD:

Figure 34: IL-18 Drives Various Innate and Adaptive Immune Processes Related to Infection, Inflammation and Autoimmunity

 

 

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Notes:

PAMPs: Pathogen-associated molecular patterns; DAMPs: Damage-associated molecular patterns.

 

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Figure 35: IL-18 Pathways Regulate Many Diseases

 

 

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Figure 36: IL-18 Signaling in AD

 

 

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We are aware of two other IL-18 programs in development for chronic inflammatory conditions, both of which involve mAb approaches. As a result of its design, we see several potential advantages of the SAFA IL-18BP fusion protein relative to IL-18 mAbs, including tissue penetration and binding affinity. Thus, we believe there is substantial untapped therapeutic opportunity in AD and significant potential for improvement in the treatment landscape with our SAFA IL-18BP fusion protein, EVO301.

 

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Third-Party Clinical Experience Targeting IL-18

We remain encouraged by positive clinical trial results suggesting the potency of IL-18 in immunology and inflammation. For example, a conventional mAb product candidate targeting IL-18 was observed in a Phase 2 trial to have compelling efficacy in AD after only a single dose, comparable to approved AD biologics. Another third-party clinical trial of an unmodified recombinant human IL-18BP produced promising proof-of-concept data in multiple rare inflammatory disorders, including responses in patients with life-threatening conditions. However, its therapeutic potential is constrained by a relatively short half-life of less than 40 hours. Additionally, Apollo Therapeutics recently reported that in a 32-week Phase 2a trial, camoteskimab—an anti-IL-18 monoclonal antibody—achieved a statistically significant and clinically meaningful reduction in mean EASI score at week 16 versus placebo in patients with moderate-to-severe atopic dermatitis. Responses separated from placebo as early as week 4, and, notably, even among a subgroup of patients who had previously failed anti-IL-4/IL-13 biologics. These data suggest IL-18 blockade may offer a promising therapeutic option in AD, including for refractory patients for whom Th2-pathway targeted therapeutics (such as those targeting IL-4Ra, IL-13, or IL-31) have not yielded sufficient benefit. We believe EVO301’s optimized approach to IL-18 antagonism could enable significant advantages and differentiated clinical outcomes for patients with chronic inflammatory diseases, including with respect to efficacy, tissue distribution, dosing profile and reduced immunogenicity risk. The figure below illustrates the 12-week EASI-90 score of a competitor’s mAb targeting IL-18 after a single dose, along with the 16-week EASI-90 scores of other approved and developmental AD therapeutics after multiple doses:

Figure 37: Optimized and Repeat Dosing of IL-18BP Monotherapy is Designed to Achieve Best in Class EASI 90

 

 

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Notes:

All data based on 16 week data except for GSK1070806. Not included: nemolizumab (IL-31) and tezepelumab (TSLP) did not capture EASI-90. Amlitelimab is pursuing Q12W in Ph3. Rocatinlimab data includes loading dose at 2w.

 

 

DUPIXENT® is a registered trademark of Sanofi Biotechnology, EBGLYSS™ is a trademark owned of Eli Lilly and Company, Adbry® is a registered trademark of LEO Pharma A/S. (1) GSK1070806 no longer in development. (2) At Week 16 versus placebo.

 

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Our Solution: EVO301, our IL-18BP Fusion Protein

EVO301 is a long-acting injectable SAFA-IL-18BP fusion protein designed to neutralize aberrantly upregulated IL-18 activity. We believe this approach facilitates more efficient tissue distribution and improved binding affinity and specificity which presents an advantage over existing attempts to antagonize or inhibit the IL-18 pathway, including traditional mAbs. The following graphic depicts the molecular design of EVO301:

Figure 38: EVO301 Molecular Design

 

 

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Notes:

SAFA = Anti-Serum Albumin Fab-Associated.

EVO301 is designed specifically to neutralize upregulated IL-18 activity. Key distinguishing features of EVO301 include:

 

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selective and high binding affinity of native human IL-18BP and binding to serum albumin, allowing for specific inhibition of IL-18 pro-inflammatory activity and deeper penetration to inflamed tissues;

 

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smaller molecular weight, enabling improved targeting at the site of inflammation as EVO301 is only a fraction of the molecular weight compared to traditional antibodies;

 

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extended half-life for the neutralization of IL-18, conveyed by the SAFA, utilizing a body peptide linker which supports FcRn-mediated recycling of serum albumin; and

 

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lower potential for immunogenicity, as the use of native human IL-18BP, a naturally occurring inhibitor of IL-18, is expected to reduce immunogenicity risk and enhance durability of response.

Further, we believe the distinct mechanism and modality of EVO301 complement those of EVO756, providing us with multiple, potentially synergistic avenues to bring innovative therapeutics to the large, underserved and rapidly expanding population of patients suffering from chronic inflammatory diseases.

 

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Figure 39: Potential for EVO756 and EVO301 Mechanism of Action Synergy in AD

 

 

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Clinical Data

Completed Phase 1 Trial

EVO301 was observed to be well-tolerated at all doses, with no SAEs nor discontinuations due to AEs, in a Phase 1 randomized, placebo-controlled SAD trial in 31 healthy volunteers conducted by our licensor, AprilBio, with five cohorts that consisted of SAD ranging from 0.1 mg/kg up to 10 mg/kg administered intravenously. The design of this Phase 1 trial is shown in the figure below.

Figure 40: EVO301 Phase 1 Trial Design

 

 

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The majority of reported AEs were determined to be mild in severity and included headache, nausea and reactions at the infusion site. No discontinuations were attributed to AEs, and there were no SAEs. In addition, there were no clinically significant ECG or lab abnormalities. No measurable impact on PK due to anti-drug antibody formation was observed.

The pharmacokinetic profile of EVO301 supports the potential for monthly dosing. Serum concentrations exceeded the IC90 for more than four weeks after a single administration at dose levels of 0.3 mg/kg or greater as shown in the graph below:

Figure 41: Mean Serum Concentrations in EVO301 Phase 1 Trial

 

 

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Notes:

Mean Serum Concentrations of APB-R3 – Semi Log Scale (PK Patient Population).

 

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Clinical Development Plan and Status

Our Ongoing Phase 2 Trial for Moderate-to-Severe Atopic Dermatitis

We are conducting a Phase 2 randomized, double-blind, parallel-group, placebo-controlled trial of EVO301 in approximately 60 adult patients with moderate-to-severe AD dosed on day 1 and day 29. Trial sites are located in Australia and New Zealand and enrolled patients are 18 years or older who have moderate-to-severe AD (as defined by EASI score of at least 16, Validated IGA scale of at least 3 and BSA of AD of at least 10%) for at least six months. The primary endpoint is percent change in EASI score at week 12 and secondary endpoints include IGA, BSA and pruritus-NRS. We expect to report initial data from this trial in the first half of 2026. The following figure shows the Phase 2 trial design:

Figure 42: EVO301 Phase 2 Trial Design

 

 

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Notes:

EASI = Eczema Area and Severity Index; vIGA = Validated Investigator Global Assessment; Pruritus-NRS = Pruritus Numerical Rating Scale; BSA = Body Surface Area; BL = Baseline.

EVO301 for the Treatment of Inflammatory Bowel Diseases

In the United States, over 2.2 million people live with inflammatory bowel diseases, which include UC and Crohn’s disease. These diseases are characterized by relapsing and remitting inflammation of the gastrointestinal tract, leading to symptoms such as abdominal pain, diarrhea, bleeding and significant impacts on quality of life. Initial treatments often include aminosalicylates, corticosteroids or immunomodulators, yet a substantial portion of the patients require escalation to advanced therapies due to inadequate symptom control or adverse effects. Despite the availability of several advanced therapies including anti-TNF agents, anti-integrins, IL-12/23 inhibitors and JAK inhibitors, the landscape for IBD has no consistent treatment paradigm and continues to be marked by limitations, with up to 50% of patients failing to achieve or maintain meaningful clinical remission. As a result, many IBD patients cycle through multiple therapies without achieving durable disease control, leaving hundreds of thousands of patients in the United States inadequately managed, underscoring the need for new effective mechanisms of action.

 

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Our Planned Phase 2 Trial for Moderate-to-Severe Ulcerative Colitis

We intend to begin our IBD development program with a Phase 2 proof-of-concept trial in moderate-to-severe UC patients in 2026. The results of the trial are expected to inform dose selection and other trial design considerations for further clinical development in IBD. We believe that IL-18 signaling plays a key role in UC, as illustrated in the figure below:

Figure 43: Role of IL-18 in Ulcerative Colitis

 

 

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Discovery Stage Programs

We are also selectively advancing discovery-stage programs to enable us to consistently deliver data on new product candidates. We are currently evaluating multiple preclinical molecules across various targets for possible nomination as lead development candidates for IND-enabling studies in 2026 and beyond.

We also intend to continue evaluating potential preclinical assets, including through in-licensing or partnerships, that we believe can be optimized for priority indications to broaden our portfolio.

Competition

The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, the expertise of our management team, clinical capabilities, research and development experience and scientific knowledge provide us with competitive advantages, we face increasing competition from many different sources, including biotechnology and biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

There are several large biotechnology and biopharmaceutical companies that are currently pursuing the development of products for the treatment of chronic inflammation. Companies that we are aware of that are targeting the treatment of chronic inflammation and related diseases include large companies with revenues and significant financial resources. However, we know of no other companies currently in clinical development with an MRGPRX2 antagonist or a serum albumin Fab-associated IL-18BP fusion protein.

 

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Many of our competitors, either alone or with their collaborators, have significantly greater resources, established presence in the market and greater expertise across research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals, reimbursement and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific, sales, marketing and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.

The commercial potential of our product candidates could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive. Our competitors also may obtain FDA or regulatory approval from comparable foreign regulatory authorities for their product candidates more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market or make our development more complicated. The key competitive factors affecting the success of our product candidates are likely to be efficacy, safety, cost and convenience.

Intellectual Property

Our owned and exclusively licensed patents and patent applications relate to our compounds for treating certain chronic inflammation indications and include patents and patent applications directed to new compositions of matter and to methods of treating a variety of disorders. As we continue to develop our product candidates, we intend to seek additional patent protection in the United States, EU and in other key commercial markets worldwide.

EVO756

As of April 21, 2025, we exclusively license one patent family that includes two pending U.S. patent applications and issued and pending foreign counterpart patents and patent applications, relating to compositions of matter and methods of use for our product candidate, EVO756. If we continue to pursue patent protection, and if any patents issue based on our pending applications, we expect such patents to expire in November 2040, without taking into account possible patent term adjustments or extensions.

EVO301

As of April 21, 2025, we exclusively license three patent families that include two issued U.S. patents, two pending U.S. patent applications and issued and pending foreign counterpart patents and patent applications, relating to our product candidate, EVO301. One of these patent families includes U.S. Patent No. 9,879,077, relating to compositions of matter, and U.S. Patent No. 10,618,953, relating to methods of use, both of which are expected to expire in August 2034, absent any patent term extension. The second patent family includes two pending U.S. patent applications that are directed to, among others, compositions of matter and methods of use relating to EVO301. If we continue to pursue patent protection, and if any patents issue based on our pending applications in this patent family, we expect such patents to expire in September 2041 in the United States, absent any patent term adjustment and patent term extension. The third patent family includes one pending PCT application directed to methods of use. If we continue to pursue patent protection, and if any patents issue based on our pending applications in this patent family, we expect such patents to expire in June 2044 in the United States, without taking into account possible patent term adjustments or extensions.

The term of individual patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the basic patent term is 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term

 

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may, in certain cases, be extended by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date, or shortened due to an express disclaimer or abandonment. Additionally, the Drug Price Competition and Patent Term Restoration Act of 1984, permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory review. Patent extensions of up to five years are also available in certain countries under certain circumstances as partial compensation for the regulatory review period in the respective jurisdictions.

For a discussion of the risks associated with our intellectual property, see “Risk Factors—Risks Related to Intellectual Property.”

Strategic Collaborations and License Agreements

Dermira, Inc.

In December 2020, we entered into a License, Development and Commercialization Agreement with Dermira, pursuant to which Dermira granted us an exclusive, worldwide license to develop and commercialize certain compounds, including the compound in development by us known as EVO756 (the “Dermira License Agreement”).

The Dermira License Agreement remains in effect on a product-by-product and a country-by-country basis until the expiration of the royalty term for such product in such country. The Dermira License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy. Additionally, we may terminate the Dermira License Agreement for convenience upon a set number of days’ prior notice.

In consideration for the licenses granted to us under the Dermira License Agreement, we paid to Dermira a $7.5 million upfront license fee. Additionally, in connection with our entry into the Dermira License Agreement, we issued to Dermira 3,227,805 shares of Series A Preferred Stock which was equal to approximately 5% of our fully diluted equity at the time of grant and was calculated by reference to the same per-share purchase price paid by the lead investor in the Series A Preferred Stock financing (as a completed qualified financing).

We are also obligated to pay to Dermira up to $45.0 million in development milestones for the development of EVO756 (or up to $135.0 million for the development of all licensed products), and up to $240.0 million in sales milestones for the development of EVO756 (or up to $720.0 million for the development of all licensed products) as well as tiered royalty payments in mid-single digit to low-tens percentages on worldwide sales of the licensed products.

As of June 30, 2025, we have paid a total of $11.0 million in upfront payments and development milestones under the Dermira License Agreement, which was recognized as research and development expense for the year in which they occurred. No milestones were achieved under the Dermira License Agreement during the year ended December 31, 2024. For the six months ended June 30, 2025, we recorded $2.5 million as research and development expense upon achievement of a development milestone under the Dermira License Agreement. Milestones and royalties are contingent upon future events and will be recorded when the milestones are achieved and when payments are due.

Under the Dermira License Agreement, we may sublicense EVO756 to third parties. Dermira has consented to our sublicense of EVO756 to Maruho in Japan and certain Asian countries as described below.

 

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Maruho Co., Ltd.

Maruho Japan Agreement

In September 2023, we entered into a sublicense agreement with Maruho and granted Maruho the exclusive license to develop and commercialize EVO756 in Japan (the “Maruho Japan Agreement”). Under the Maruho Japan Agreement, Maruho is responsible for the development and commercialization of EVO756 in Japan, except that we are required to use commercially reasonable efforts to develop EVO756 in CSU and to include a Japanese cohort in our Phase 1 clinical trial of EVO756.

Under the terms of the Maruho Japan Agreement, we received an upfront payment of $8.0 million in September 2023 and are eligible to receive up to $52.0 million in development, regulatory and commercial milestone payments upon the occurrence of specified events over the term of the agreement. In addition, we are eligible to receive low single digit royalty payments on future sales of EVO756 in Japan, on top of the royalty payments due to Dermira on such sales under the Dermira License Agreement. As of June 30, 2025, we have received a total of $8.0 million under the Maruho Japan Agreement.

The Maruho Japan Agreement remains in effect until the expiration of the royalty term for all licensed products in Japan, which continues until the expiration of all relevant patents and regulatory exclusivities and 10 years from the first commercial sale of the licensed product in Japan, whichever is the latest. The Maruho Japan Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy. In addition, we may terminate the agreement if Maruho challenges any licensed patent. Maruho may also terminate the agreement for convenience upon prior written notice to us.

Maruho Greater Asia Agreement

In March 2024, we entered into a separate sublicense agreement with Maruho (the “Maruho Greater Asia Agreement”) and granted Maruho the exclusive license to develop and commercialize EVO756 in China, Taiwan, South Korea and the member states of the Association of Southeast Asian Nations (ASEAN) (the “Territory”). Under the Maruho Greater Asia Agreement, Maruho is responsible for the development and commercialization of EVO756 in the Territory, except that we are required to use commercially reasonable efforts to develop EVO756 in CSU.

Under the terms of the Maruho Greater Asia Agreement, we received an upfront payment of $7.0 million in March 2024 and are eligible to receive up to $54.5 million in development, regulatory and commercial milestone payments upon the occurrence of specified events over the term of the agreement. In addition, we are eligible to receive low single-digit royalty payments on future sales of EVO756 in the Territory, on top of the royalty payments due to Dermira on such sales under the Dermira License Agreement. As of June 30, 2025, we have received a total of $7.0 million under the Maruho Greater Asia Agreement.

The Maruho Greater Asia Agreement remains in effect until the expiration of the royalty term for all licensed products in the Territory, which continues until the expiration of all relevant patents and regulatory exclusivities and 10 years from the first commercial sale of the licensed product in the relevant country in the Territory, whichever is the latest. The Maruho Greater Asia Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy. In addition, we may terminate the agreement if Maruho challenges any licensed patent. Maruho may also terminate the agreement for convenience upon prior written notice to us.

 

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AprilBio Co., Ltd.

In June 2024, we entered into a license agreement with AprilBio upon which AprilBio granted us an exclusive worldwide license to develop and commercialize EVO301 (the “AprilBio License Agreement”). Under the AprilBio License Agreement, we are responsible for the development and commercialization of the licensed product, except that AprilBio was responsible for completing the then ongoing Phase 1 clinical trial. We are required to use commercially reasonable efforts to develop and commercialize the licensed product in certain major market countries and to meet certain specified diligence milestones. In addition, AprilBio also granted us a right of first negotiation to license or acquire rights to other IL-18 products that may be developed by AprilBio if AprilBio completes certain development work for such product within a specified time period.

Under the AprilBio License Agreement, we paid an upfront payment of $15.0 million and are required to pay, upon achievement of specified milestones and the sale of the licensed product, development milestones of up to $82.5 million, sales milestones of up to $377.5 million, and tiered royalty payments in the mid to high-single digit percentage on worldwide sales of the licensed product. In addition, if we sublicense the licensed product, we are required to pay AprilBio a percentage of the sublicense revenue we received, which percentage depends on the timing of the sublicense grant. For the six months ended June 30, 2025, we recorded $1.5 million as research and development expense upon achievement of a development milestone under the AprilBio License Agreement. No development milestones were recorded as research and development expenses for the six months ended June 30, 2024. No other development or sales milestones have been achieved as of June 30, 2025. As of June 30, 2025, we have paid a total of $16.5 million under the AprilBio License Agreement.

The AprilBio License Agreement remains in effect on a product-by-product and country-by-country basis until the expiration of the royalty term for such product in such country, which continues until the expiration of all relevant patents and regulatory exclusivities and 12 years from the first commercial sale of such product in such country, whichever is the latest. The AprilBio License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy. In addition, AprilBio may terminate the agreement if we challenge any licensed patent or if we cease active development of the licensed product. We may also terminate the agreement for convenience upon prior written notice to AprilBio.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing. These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling, export and import and record-keeping associated with all these functions, of our product candidates.

U.S. Government Regulation of Drug Products

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), and its implementing regulations. The FDA also regulates biological products under the FDCA and the Public Health Service Act. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending New Drug Applications (“NDAs”) or Biologics License Applications (“BLAs”), withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

 

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

 

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Completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s GLP regulations;

 

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Submission to the FDA of an IND application, which must become effective before human clinical trials may begin;

 

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Approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated;

 

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Performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to establish the safety and efficacy of the proposed drug product for each indication;

 

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Submission to the FDA of an NDA or BLA, including payment of application user fees;

 

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A determination by the FDA within 60 days of its receipt to accept the marketing application for review;

 

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Satisfactory completion of an FDA advisory committee review, if applicable;

 

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Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice (“cGMP”) requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;

 

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Satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; and

 

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FDA review and approval of the NDA or BLA.

Preclinical Studies

Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as in vitro and animal studies to assess potential safety and efficacy. The conduct of preclinical studies is subject to federal regulations and requirements, including good laboratory practice regulations for safety/toxicology studies.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. Some preclinical testing, such as animal tests of reproductive AEs and carcinogenicity, may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to initiate.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial

 

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conducted in the United States and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it is initiated at that institution. The IRB also must review and approve the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completion.

Information about certain clinical trials must be submitted within specific timeframes to the Institutes of Health (“NIH”) for public dissemination on their www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, trial sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Although sponsors are obligated to disclose the results of their clinical trials after completion, disclosure of the results can be delayed in some cases for up to two years after the date of completion of the trial. Failure to timely register a covered clinical trial or to submit trial results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

 

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Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

 

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Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

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Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval on an NDA or BLA.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if SAEs occur. Written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information.

Phase 1, Phase 2 and Phase 3 trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from the trial.

 

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Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of product and, among other things, companies must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug does not undergo unacceptable deterioration over its shelf life.

NDA or BLA Submission and Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications. In most cases, the submission of an application is subject to a substantial user fee.

The FDA conducts a preliminary review of all applications within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an application to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

Under the Prescription Drug User Fee Act (“PDUFA”) guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA or BLA to review and act on the submission and six months from the filing date of an application with priority review. Accordingly, this review process typically takes 12 months and eight months, respectively from the date the application is submitted to the FDA. The FDA does not always meet its PDUFA goal dates for standard or priority review, and the review process is often extended by FDA requests for additional information or clarification. The FDA reviews an NDA or BLA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

In addition, under the Pediatric Research Equity Act of 2003, as amended, certain applications or supplements to an approved application must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements. A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan (“PSP”), within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials or other clinical development programs.

 

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The FDA may refer an application for a novel drug or a drug that presents difficult questions of safety or efficacy to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, which reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

The FDA also may require the submission of a risk evaluation and mitigation strategy (“REMS”) if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the drug. A REMS may include one or more elements, including medication guides, physician communication plans, patient package insert or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor must submit a proposed REMS. The FDA will not approve the application without a REMS, if required.

Before approving an NDA or BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

After evaluating the application and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter or, in some cases, a Complete Response Letter. A Complete Response Letter generally contains a statement of specific conditions that must be met in order to secure final approval of the application and may require additional clinical or preclinical testing in order for FDA to reconsider the application. If a Complete Response Letter is issued, the applicant may either resubmit the application within a year, addressing all of the deficiencies identified in the letter, or withdraw the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Expedited Development and Priority Review Programs

The FDA maintains several programs intended to facilitate and expedite development and review of new drugs to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions. These programs include Fast Track designation, Breakthrough Therapy designation, Priority Review and Accelerated Approval, and the purpose of these programs is to either expedite the development or review of important new drugs to get them to patients earlier than under standard FDA development and review procedures.

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are

 

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intended to treat a serious or life threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to both the product and the specific indication for which it is being studied. Fast Track designation provides increased opportunities for sponsor interactions with the FDA during preclinical and clinical development, in addition to the potential for rolling review once a marketing application is filed, meaning that the agency may review portions of the marketing application before the sponsor submits the complete application, as well as priority review, discussed below.

Additionally, a drug may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of Breakthrough Therapy designation include the same benefits as Fast Track designation, plus intensive guidance from the FDA to ensure an efficient drug development program. A product may also be eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA determines at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed drug represents a significant improvement in treatment, prevention or diagnosis of disease when compared with other available therapies. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review and to shorten the FDA’s goal for taking action from ten months to six months from the date of filing of a marketing application.

A product may also be eligible for accelerated approval if it treats a serious or life-threatening disease or condition, generally provides a meaningful advantage over available therapies and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (“IMM”), that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of accelerated approval, the FDA requires that a sponsor perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug shown to be effective can be safely used only if distribution or use is restricted, it will require such post-marketing restrictions, as it deems necessary to assure safe use of the product.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Fast Track designation, Breakthrough Therapy designation and Priority Review designation do not change the standards for approval, but may expedite the development or review process. Drugs granted accelerated approval also must meet the same statutory standards for safety and effectiveness as those granted traditional approval. Based on current operating plans, we do not intend to pursue any expedited development and priority review programs.

U.S. Marketing Exclusivity

Market exclusivity provisions under the FDCA can delay the submission or the approval of certain follow-on applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an Abbreviated New Drug Application for a generic version of the drug or a 505(b)(2) NDA for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, such a follow-on application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of market exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical

 

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investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity period covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving follow-on applications that do not reference the protected clinical data. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing regulatory exclusivity periods or listed patents. This six-month exclusivity may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

A seven-year period of orphan exclusivity is available for products (i) intended to treat a disease that affects fewer than 200,000 people in the U.S. or (ii) intended to treat a disease that affects more than 200,000 people, but for which there is no reasonable expectation that costs of research and development of the drug for the indication can be recovered by sales of the drug in the United States. A sponsor may request an orphan designation at any time before it submits a marketing application; if the designation is granted and the orphan-designated product is approved, the FDA will not approve another sponsor’s marketing application for the same drug for the same use or indication before the expiration of seven years from the date of such approval, unless the orphan designation is revoked, the approval of the underlying application is revoked or the sponsor is unable to supply sufficient product to meet market demand.

For biologics, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic without such alteration or switch. Upon licensure by the FDA, an interchangeable biosimilar may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product. A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product. In addition, the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There are continuing, annual user fee requirements for any marketed products.

The FDA may impose a number of post-approval requirements as a condition of approval. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

 

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FDA regulations require that products be manufactured in specific facilities (identified in the approved NDA or BLA) and in accordance with cGMP regulations which require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval of a drug is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with manufacturing processes or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Other potential consequences include, among other things:

 

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Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

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Fines, warning letters or holds on post-approval clinical trials;

 

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Refusal of the FDA to approve pending applications or supplements to approved applications or suspension or withdrawal of product approvals;

 

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Product seizure or detention or refusal to permit the import or export of products; and

 

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Injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted by a manufacturer and any third parties acting on behalf of a manufacturer only for the approved indications and in a manner consistent with the approved label for the product. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Other Healthcare Laws

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of drug products for which we obtain marketing approval. Arrangements with third-party payors, healthcare providers and physicians, in connection with the clinical research, sales, marketing and promotion of products, once approved, and related activities, may expose a pharmaceutical manufacturer to broadly applicable fraud and abuse and other healthcare laws and regulations. In the United States, these laws include, without limitation, state and federal anti-kickback, false claims, physician transparency and patient data privacy and security laws and regulations, including but not limited to those described below:

 

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the Anti-Kickback Statute (“AKS”), which makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer or pay any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, that is intended to induce or reward, referrals including the purchase, recommendation, order or prescription of a particular drug for which payment may be made

 

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under a federal healthcare program, such as the Medicare and Medicaid programs. The AKS has been interpreted to apply to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers and formulary managers on the other. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the AKS is violated. In addition, the government may assert that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal FCA;

 

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the federal civil and criminal false claims laws, including the FCA, which can be enforced by private citizens through “qui tam” or “whistleblower” actions, and civil monetary penalty laws, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other federal health care programs that are false or fraudulent; knowingly making or causing a false statement material to a false or fraudulent claim or an obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing such an obligation. Pharmaceutical and other healthcare companies have been, and continue to be, prosecuted under these laws, among other things, for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product and for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, off-label, and thus generally non-reimbursable, uses. Similar to the AKS, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.

 

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the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal criminal provisions that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (for example, public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Like the AKS, the Patient Protection and Affordable Care Act (the “ACA”) amended the intent standard for certain healthcare fraud provisions under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

 

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans and healthcare clearinghouses as well as their respective business associates and covered subcontractors that perform services for them that involve the creation, use, receipt, maintenance or disclosure of individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions;

 

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the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the Centers for Medicare and Medicaid Services, under the Open Payments Program, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and

 

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analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer protection and unfair competition laws which may apply to pharmaceutical business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensations and other remuneration and items of value provided to healthcare professionals and entities; state and local laws requiring the registration of pharmaceutical sales representatives; and state, national and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of a pharmaceutical manufacturer’s business activities could be subject to challenge under one or more of such laws. Efforts to ensure that business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental and enforcement authorities will conclude that a pharmaceutical manufacturer’s business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions, which are costly to defend, are instituted against a pharmaceutical manufacturer, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, imprisonment, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reporting obligations and oversight if we become subject to integrity and oversight agreements to resolve allegations of non-compliance, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which could adversely affect a pharmaceutical manufacturer’s ability to operate its business and the results of operations. In addition, commercialization of any drug product outside the United States will also likely be subject to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Current and Future Healthcare Reform Legislation

In both the United States and certain foreign jurisdictions, there have been, and continue to be, a number of legislative and regulatory changes to the health care system. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In particular, in 2010, the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs and provided incentives to programs that increase the federal government’s comparative effectiveness research.

There have been judicial, administrative, executive and legislative challenges and amendments to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. For example, on August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a

 

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newly established manufacturer discount program. It is possible that the ACA will be subject to additional challenges in the future. It is unclear whether the ACA will be overturned, repealed, replaced or further amended. We cannot predict what affect further changes to the ACA would have on our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, will remain in effect until 2032 unless additional Congressional action is taken.

Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. For example, the IRA, among other things, (1) directs the U.S. Department of Health and Human Services (“HHS”), to negotiate the price of certain high-expenditure single-source drugs that have been on the market for at least seven years and biologics that have been on the market for at least 11 years covered under Medicare (the “Medicare Drug Price Negotiation Program”) and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. Further, under the IRA, orphan drugs are exempted from the Medicare Drug Price Negotiation Program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition. If a product receives multiple orphan designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. These provisions began to take effect progressively starting in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon reimbursement price of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional products covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. In December 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

The current administration is pursuing policies to reduce regulations and expenditures across government including at HHS, the FDA, CMS and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management and Budget, may propose policy and personnel changes that create additional uncertainty for our business. These actions include, for example, (1) directives to reduce agency workforce program cuts, (2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation to consider new payment and healthcare models to limit drug spending, (3) eliminating the Biden administration’s executive order that directed HHS to establish an AI task force and develop a strategic plan, (4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products and (5) directing certain federal agencies to enforce existing law regarding hospital and plan price transparency and by standardizing prices across hospitals and health plans. Additionally, in its June 2024 decision in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court overturned the longstanding Chevron doctrine, under which courts were required to give deference to regulatory agencies’ reasonable interpretations of ambiguous federal statutes. The Loper Bright decision could result in additional legal challenges to current regulations and guidance issued by federal agencies applicable to our operations, including those issued by the FDA.

HHS has revoked the Richardson Waiver, which required HHS and its subagencies to provide notice and an opportunity to comment on certain matters relating to agency management or personnel or to public property, loans, grants, benefits or contracts. This could result in modifications to HHS policies in these areas that could

 

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adversely affect our business. In addition, the Trump administration has issued an executive order directing agencies to examine all regulations, to repeal regulations that do not comply with statutes or are otherwise burdensome and to consider repealing such regulations without notice and comment, which may result in repeal or modification of regulations without significant advance notice. Congress may introduce and ultimately pass health care related legislation that could, among others, impact the drug approval process, modify the Medicare Drug Price Negotiation Program, expand the orphan drug exclusion under the IRA and reduce Medicaid enrollment and funding.

In addition, individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Legislative and regulatory proposals and enactment of laws, at the foreign federal and state levels, directed at containing or lowering the cost of healthcare, will continue into the future. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare or impose price controls may adversely affect:

 

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the demand for our product candidates, if we obtain regulatory approval;

 

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our ability to set a price that we believe is fair for our products;

 

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our ability to obtain coverage and reimbursement approval for a product;

 

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our ability to generate revenue and achieve or maintain profitability;

 

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the level of taxes that we are required to pay; and

 

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the availability of capital.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.

Regulation Outside the United States

In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products. The cost of establishing a regulatory compliance system for numerous varying jurisdictions can be very significant. Although many of the issues discussed above with respect to the United States apply similarly in the context of the EU and in other jurisdictions, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the EU, for example, a clinical trial authorization application (“CTA”), must be submitted for each clinical protocol to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is accepted in accordance with a country’s requirements, the clinical trial may proceed.

 

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The requirements and processes governing the conduct of clinical trials vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP, the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

To obtain regulatory approval of an investigational medicinal product under EU regulatory systems, we must submit a marketing authorization application. The content of the application submitted in the United States is similar to that required in the EU, with the exception of, among other things, country-specific document requirements.

For other countries outside of the EU and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements governing product development, the conduct of clinical trials, manufacturing, distribution, marketing approval, product licensing, pricing and reimbursement vary from country to country.

Countries that are part of the EU, as well as countries outside of the EU, have their own governing bodies, requirements and processes with respect to the approval of drug products. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Additionally, to the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

Authorization Procedures in the EU

In the U.K. and the EEA (the 27 EU member states plus Iceland, Liechtenstein and Norway), medicinal products must be authorized for marketing by using either the centralized authorization procedure or national authorization procedures.

 

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Centralized procedure—If pursuing marketing authorization of a product candidate for a therapeutic indication under the centralized procedure, following the opining of the EMA’s Committee for Medicinal Products for Human Use (“CHMP”), the European Commission issues a single marketing authorization valid across the EEA. The centralized procedure is compulsory for human medicines derived from biotechnology processes or advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), products that contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions, viral diseases and officially designated orphan medicines. For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the medicine concerned contains a new active substance not yet authorized in the EEA, or is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health in the EEA. Under the centralized procedure, the maximum timeframe for the evaluation of a marketing authorization application (“MAA”), by the EMA is 210 days, excluding “clock stops,” when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP, and which can add materially to the timeframe. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment procedure is 150 days, excluding clock stops.

 

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National authorization procedures—There are also two other possible routes to authorize products for therapeutic indications in several countries, which are available for products that fall outside the scope of the centralized procedure:

 

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Decentralized procedure—Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized procedure.

 

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Mutual recognition procedure—In the mutual recognition procedure, a medicine is first authorized in one EU member state, in accordance with the national procedures of that country. Following this, additional marketing authorizations can be sought from other EU countries in a procedure whereby the countries concerned recognize the validity of the original, national marketing authorization.

In the EEA, new products for therapeutic indications that are authorized for marketing (that is, reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU. The ten-year market exclusivity period can be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

The criteria for designating an “orphan medicinal product” in the EEA are similar in principle to those in the United States. In the EEA, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. During this ten-year orphan market exclusivity period, no marketing authorization application shall be accepted, and no marketing authorization shall be granted for a similar medicinal product for the same indication. An orphan product can also obtain an additional two years of market exclusivity in the EU for pediatric studies.

The ten-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant consents to a second orphan medicinal product application; or (iii) the applicant cannot supply enough orphan medicinal product.

As in the United States, the various phases of non-clinical and clinical research in the EU are subject to significant regulatory controls.

The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP and the related national implementing provisions of the individual EU member states govern the system for the approval of clinical trials in the EU. Under this system, an applicant must obtain prior approval from the competent national authority of the EU member states in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific trial site after the competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by, among other documents, an investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC,

 

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Directive 2005/28/EC and, where relevant, the implementing national provisions of the individual EU member states and further detailed in applicable guidance documents.

In April 2014, the new Clinical Trials Regulation (EU) No 536/2014 or Clinical Trials Regulation, was adopted. It is expected that the Clinical Trials Regulation will apply following confirmation of full functionality of the Clinical Trials Information System, the centralized EU portal and database for clinical trials foreseen by the regulation, through an independent audit. The regulation becomes applicable six months after the European Commission publishes notice of this confirmation. The Clinical Trials Regulation will be directly applicable in all the EU member states, repealing the current Clinical Trials Directive 2001/20/EC. Conduct of all clinical trials performed in the EU will continue to be bound by currently applicable provisions until the Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable, the Clinical Trials Regulation will at that time begin to apply to the clinical trial. The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the EU.

The main characteristics of the regulation include (i) a streamlined application procedure via a single-entry point, the “EU portal,” a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and (ii) a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is jointly assessed by the competent authorities of all EU member states in which an application for authorization of a clinical trial has been submitted (member states concerned). Part II is assessed separately by each member state concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU member state. However, overall related timelines will be defined by the Clinical Trials Regulation.

Should we utilize third-party distributors, compliance with such foreign governmental regulations would generally be the responsibility of such distributors, who may be independent contractors over whom we have limited control.

Coverage and Reimbursement

Successful commercialization of new drug products depends in part on the extent to which reimbursement for those drug products will be available from government health administration authorities, private health insurers and other organizations. In the United States, government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drug products they will pay for and establish reimbursement levels. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford a drug product. Sales of drug products depend substantially, both domestically and abroad, on the extent to which the costs of drugs products are paid for by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular drug products. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our

 

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product candidates may not be considered medically necessary or cost-effective. Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our product on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on its investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.

In many countries, the prices of drug products are subject to varying price control mechanisms as part of national health systems. In general, the prices of drug products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for drug products, but monitor and control company profits. Accordingly, in markets outside the United States, the reimbursement for drug products may be reduced compared with the United States.

In the United States, the principal decisions about reimbursement for new drug products are typically made by CMS, an agency within HHS. CMS decides whether and to what extent a new drug product will be covered and reimbursed under Medicare, and private payors tend to follow CMS to a substantial degree. However, no uniform policy of coverage and reimbursement for drug products exists among third-party payors and coverage and reimbursement levels for drug products can differ significantly from payor to payor. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a drug product is:

 

  •  

a covered benefit under its health plan;

 

  •  

safe, effective and medically necessary;

 

  •  

appropriate for the specific patient;

 

  •  

cost-effective; and

 

  •  

neither experimental nor investigational.

It is uncertain whether coverage or reimbursement will be available for any product that we commercialize and, if coverage and reimbursement are available, what the level of reimbursement will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities. Reimbursement may impact the demand for, or the price of, any product for which we obtain regulatory approval.

These laws and future state and federal healthcare reform measures may be adopted in the future, any of which may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Outside of the United States, the pricing of pharmaceutical products and medical devices is subject to governmental control in many countries. For example, in the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost effectiveness of a particular therapy to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval. Other countries may allow companies to fix their own prices for products, but monitor and control product volumes and issue guidance to physicians to limit prescriptions. Efforts to control prices and utilization of pharmaceutical products and medical devices will likely continue as countries attempt to manage healthcare expenditures.

 

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Data Privacy and Security

In the ordinary course of business, we collect, receive, generate, make accessible, protect, secure, dispose, transmit, store, use, disclose, transfer, maintain and otherwise process sensitive information, including personal data. Accordingly, we are, or may become, subject to various foreign, federal, state and local laws, rules, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements and other obligations related to data privacy and security.

These data privacy and security obligations are evolving and may impose potentially conflicting obligations. Such obligations may include, without limitation, federal health information privacy laws, state information security and data breach notification laws, state health information privacy laws and federal and state consumer protection laws (for example, the Federal Trade Commission Act). In addition, in the past few years, numerous U.S. states have enacted comprehensive privacy laws, rules and regulations that impose certain obligations on covered businesses (including providing specific disclosures in privacy notices and affording individuals with certain rights concerning their personal data) and similar laws are being considered in several other states, as well as at the federal level. While certain of these laws do or may exempt some data processed in the context of clinical trials, these developments may further complicate compliance efforts and are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing, as more fully discussed in the section titled “Risk Factors” included elsewhere in this prospectus.

Additionally, to the extent we collect personal data from individuals outside of the United States, through clinical trials or otherwise, we are, or may become, subject to foreign data privacy and security laws, such as Australia’s Privacy Act, New Zealand’s Privacy Act, Canada’s Privacy Act, Japan’s Act on the Protection of Personal Information and the European Union’s General Data Protection Regulation. Such foreign data privacy and security laws impose significant and complex compliance obligations on entities that are subject to those laws, as more fully discussed in the section titled “Risk Factors” included elsewhere in this prospectus.

In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure and protection of health-related and other personal information. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which came into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which may increase our compliance costs and potential liability. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. While there is currently an exception for protected health information that is subject to HIPAA and clinical trial regulations, as currently written, the CCPA may impact certain of our business activities. The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the United States, which could increase our potential liability and adversely affect our business.

In December, 2024, the U.S. Department of Justice finalized a rule that prohibits or restricts certain types of transactions that could lead to foreign access to bulk U.S. personal data. This regulation could restrict our ability to submit clinical trial data to ex-U.S. regulators; failure to comply with the regulation could lead to civil or criminal enforcement.

In the event we decide to conduct clinical trials or continue to enroll subjects in our ongoing or future clinical trials, we may be subject to additional privacy restrictions. The collection, use, storage, disclosure, transfer or other processing of personal data regarding individuals in the EEA, including personal health data, is subject to the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”) (collectively, “GDPR”), which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including

 

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requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR includes restrictions on cross-border data transfers. The GDPR may increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Compliance with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm in connection with our European activities. Further, the U.K.’s decision to leave the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the U.K. In particular, it is unclear how data transfers to and from the U.K. will be regulated now that the U.K. has left the EU.

Employees

As of July 31, 2025, we had 45 full-time employees, who together hold 19 Ph.D. or M.D. degrees and 24 of whom are engaged in research and development activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of equity-based compensation awards in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Facilities

We lease a facility containing 10,665 square feet of laboratory and office space, which is located in Palo Alto, California. The lease expired in July 2025 and has been extended until December 2025. In June 2025, we entered into a new lease agreement for our Palo Alto facility, which will include approximately 32,016 square feet and is expected to commence in January 2026 and expire in April 2031. We also lease offices in New York. We believe that our current facilities are sufficient to meet our current and near-term needs and that, should it be needed, suitable additional space will be available.

Legal Proceedings

From time to time, we may become involved in or be subject to legal proceedings, claims and litigation arising from the ordinary course of business. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information about our executive officers and directors, including their ages, as of June 30, 2025.

 

Name

  

Age

    

Position(s)

Executive Officers:

     

Luis Peña(3)

     63     

President & Chief Executive Officer and Director

Kyle Carver, M.B.A., C.P.A.

     38     

Chief Financial Officer

Eugene A. Bauer, M.D.(4)

     83     

Chief Medical Officer and Director

Gregory S. Moss, Esq.

     42     

Chief Business and Legal Officer, Corporate Secretary and Chief Compliance Officer

Jeegar Patel, Ph.D.

     48     

Chief Scientific Officer

Janice Drew, M.P.H.

     63     

Executive Vice President, Operations

Non-Employee Directors:

     

Benjamin F. McGraw, III,
Pharma. D.(1)(2)(3)(4)

    


76

    


Director, Chairman of the Board

Francois Beaubien, Ph.D., C.F.A.(5)

     42     

Director

David E. Cohen, M.D., M.P.H.(2)(3)(4)

     60     

Director

Derek DiRocco, Ph.D.(1)(4)

     45     

Director

Rob Hopfner, R.Ph., Ph.D.(2)(4)

     52     

Director

Felice Verduyn-van Weegen(3)(4)

     38     

Director

Yuexin Yu(5)

     36     

Director

Arthur Kirsch(1)(2)(6)

     73     

Director Nominee

 
(1)

Member of the Audit Committee

(2)

Member of the Compensation Committee

(3)

Member of the Nominating and Corporate Governance Committee

(4)

Member of the Science and Technology Committee

(5)

Dr. Beaubien and Mr. Yu will resign from our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part.

(6)

Mr. Kirsch has been appointed as a member of our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part.

Executive Officers

Luis Peña has served as our President and Chief Executive Officer and as a member of our board of directors since inception in April 2020. Prior to joining us, Mr. Peña co-founded Dermira and served as its Chief Development Officer, where he headed the R&D group from inception through to Dermira’s 2020 sale to Eli Lilly & Company (“Lilly”) for $1.1 billion. Before Dermira, Mr. Peña served as Vice President, Head of Global Prescription Development, at Stiefel, a GSK company, and was Senior Vice President, Portfolio Planning and Management, at Stiefel Laboratories Inc. prior to its acquisition by GSK plc. He also held leadership roles in portfolio management and product development at Connetics and Theravance, as well as various leadership positions in manufacturing and research and development at Genentech. Mr. Peña holds a B.S. in biochemistry

 

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from San Francisco State University. We believe Mr. Peña is qualified to serve on our board of directors because of his extensive experience in executive leadership and drug development roles in the biopharmaceutical industry.

Kyle Carver, M.B.A., C.P.A. has served as our Chief Financial Officer since March 2022. Prior to joining us, Mr. Carver served as Chief Accounting Officer at Kadmon Holdings, Inc., a Sanofi Company (“Kadmon”), where he oversaw all aspects of financial and accounting operations, including Kadmon’s transition to a public company in its 2016 initial public offering through the approval and commercialization of Rezurock (belumosudil) in 2021. Mr. Carver drove significant improvement in accounting operations and internal controls, helped raise more than $500 million through follow-on and convertible note offerings and contributed to deal-making activities, including the acquisition of Kadmon by Sanofi for $1.9 billion in November 2021. Prior to Kadmon, Mr. Carver held a senior role at KPMG, serving a broad base of life sciences clients. Mr. Carver earned an M.B.A. from the Stern School of Business at New York University and a B.S. in accounting from Villanova University. Mr. Carver is a Certified Public Accountant.

Eugene A. Bauer, M.D. has served as our Chief Medical Officer and as a member of our board of directors since inception in April 2020. Prior to joining us, Dr. Bauer was Founder, Chief Medical Officer and a member of the board of directors of Dermira from 2010 to 2020. Prior to Dermira, Dr. Bauer was President and Chief Medical Officer of Peplin, a position he held from 2008 through 2009 when Peplin was acquired by LEO Pharma. Peplin focused on an innovative product (Picato) that was approved by the FDA for use in the treatment of actinic keratosis. Prior to Peplin, he was CEO of Neosil, a development stage dermatology pharmaceutical company acquired by Peplin in 2008. Dr. Bauer is Professor Emeritus in the School of Medicine at Stanford University and past Vice President for the Medical Affairs (1997-2001) and Dean of the School of Medicine (1995-2001) of Stanford University. Dr. Bauer received his M.D. from Northwestern University. We believe Dr. Bauer is qualified to serve on our board of directors because of his extensive experience managing biopharmaceutical and life science companies and his vast medical background.

Gregory S. Moss, Esq. has served as our Chief Business and Legal Officer, Corporate Secretary and Chief Compliance Officer since June 2022. Prior to joining us, Mr. Moss served as Executive Vice President, General Counsel and Corporate Secretary, Chief Compliance Officer at Kadmon, where he led legal, compliance and business development operations, culminating in Kadmon’s successful $1.9 billion acquisition in 2021. Prior to joining Kadmon in 2012, Mr. Moss served as a solicitor in the corporate risk department of a large Australian law firm and as an associate at a boutique law firm and hedge fund in New York, where he focused on complex litigation and event-driven outcomes. Mr. Moss has been serving on the board of Anteris Technologies Global Corp. since June 2025, and currently serves on the board of Vitls, Inc. Mr. Moss earned a B.A. and an L.L.B. from Macquarie University, Australia, and is a member of the Bar Associations of New York, and New South Wales, Australia, with admissions before the Supreme Court of the United States of America; Southern District of New York; Supreme Court of New South Wales, Australia; and High Court of Australia.

Jeegar Patel, Ph.D. has served as our Chief Scientific Officer since October 2022. Prior to joining us, Dr. Patel served as Senior Vice President, Research and Nonclinical Development at Kadmon, where he led the research and development organization with a therapeutic focus in fibrosis, immunology and immuno-oncology. He has directly contributed to multiple IND and NDA filings across therapeutic areas, including the development and approval of Rezurock. The FDA approval of Rezurock in July 2021 led to Sanofi’s $1.9 billion acquisition of Kadmon in late 2021, with Dr. Patel leading Kadmon’s R&D activity integration into Sanofi. Prior to joining Kadmon in 2014, Dr. Patel was a Nonclinical Development Project Leader at ImClone Systems (acquired by Lilly in 2008) and led nonclinical development activities resulting in the approval of Cyramza (aVEGFR2 Mab), Portrazza (aEGFR Mab) and Lartruvo (aPDGFb Mab). Dr. Patel began his career as a Nonclinical Development Project Toxicologist at Abbott Laboratories and Hoechst Marion Roussel. Dr. Patel received his B.S. in pharmacology and toxicology from the University of the Sciences in Philadelphia and his Ph.D. in pharmacology and physiology from Drexel University College of Medicine.

 

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Janice Drew, M.P.H. has served as our Executive Vice President, Operations since July 2020. Prior to joining us, Ms. Drew served as Senior Vice President, Portfolio Planning and Management at Dermira where she supported clinical strategy, clinical program development and protocol development for topical and biologic products targeting acne, rosacea, psoriasis, hyperhidrosis and atopic dermatitis. While at Dermira, Ms. Drew supported Phase 3 development and the BLA for Cimziane for plaque psoriasis, the NDA for Qbrexza for axillary hyperhidrosis and the global Phase 3 program for lebrikizumab for atopic dermatitis. Ms. Drew has had direct responsibility for five NDAs/BLAs, multiple INDs and end-of-Phase 2 and pre-NDA/BLA meetings, including oversight for four global clinical development programs. Prior to joining Dermira in 2011, Ms. Drew was at Peplin, where she led the Phase 3 program, NDA and global regulatory submissions for Picato, a topical treatment for actinic keratosis. Prior to Peplin, Ms. Drew worked at Allergan, building the Phase 3 development team for Botox® for the treatment of neurogenic and idiopathic overactive bladder. Ms. Drew also spent eight years at Roche in Palo Alto, California and Basel, Switzerland, leading the global clinical operations team working on CellCept® and Zenapax®, both indicated for solid organ transplantation. Ms. Drew received her B.S. from the University of California, Irvine, and a M.P.H. from California State University, Fullerton.

Non-Employee Directors

Benjamin F. McGraw, III, Pharma. D. has served as Chairman of our board of directors since October 2020. Dr. McGraw is the Executive Chairman of Perfuse Therapeutics, a clinical-stage biopharmaceutical company committed to reducing the incidence of blindness. He is also a director at TheraVida, a private pharmaceutical company focused on therapies for dermatologic diseases. Dr. McGraw has served as Executive Chairman of Auration Biotech, a private biotechnology company focused on a regenerative protein and other therapies for ear, nose and throat diseases since 2014. Dr. McGraw is the Lead Independent Director for the board of directors of Aerie Pharmaceuticals, a public pharmaceutical company focused on new treatments for glaucoma and other diseases of the front and back of the eye. He is also Executive Chairman of Trefoil Therapeutics, a private biopharmaceutical company focused on developing an engineered protein as a regenerative treatment for corneal endothelial dystrophies and epithelial disorders. Previously, Dr. McGraw served as the Managing Member of Long Shadows Asset Management, LLC, an investment advisory company; Chairman, President and CEO of Valentis, a public gene therapy company; Vice President of Corporate Development at Allergan, a public pharmaceutical company; and Vice President of Development at Marion Laboratories and Marion Merrell Dow, both public pharmaceutical companies. Dr. McGraw received his B.S. and his Pharm.D. from the University of Tennessee Health Science Center, where he also completed a clinical practice residency. We believe Dr. McGraw is qualified to serve on our board of directors because of his distinguished scientific background, experience in leadership roles in the biopharmaceutical industry as well as his service on the boards of directors of numerous companies.

François Beaubien, Ph.D., C.F.A. has served as a member of our board of directors since October 2024. Dr. Beaubien joined Sectoral Asset Management in 2014 and now serves as a Partner on the New Emerging Medical Opportunities team. He is primarily responsible for managing deal flow and conducting in depth due diligence on private biotech companies. Dr. Beaubien is a director on the board of directors of Apnimed. Dr. Beaubien graduated in 2012 from McGill University with a Ph.D. in Neuroscience and in 2013 from the University of British Columbia in Vancouver with an M.B.A. He obtained his C.F.A. charter in 2018. We believe Dr. Beaubien is qualified to serve on our board of directors because of his extensive experience and expertise in operations management and leadership at various venture capital firms.

David E. Cohen, M.D., M.P.H. has served as a member of our board of directors since May 2020. Dr. Cohen has held various positions at the New York University School of Medicine since 1994, including Charles C. and Dorothea E. Harris Professor of Dermatology, Vice Chairman of Clinical Affairs, Chief of Allergy and Contact Dermatitis and Director of Occupational and Environmental Dermatology. He has served as a Lecturer of Environmental Sciences at the Columbia University School of Public Health. He has been an Attending Physician at the Ronald O. Perelman Department of Dermatology at the Tisch Hospital at New York University Medical Center and Bellevue Hospital Center. Dr. Cohen has served as a clinical consultant to

 

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numerous companies and on the boards and committees of many professional organizations, including President of the American Dermatological Association, American Contact Dermatitis Society, Dermatology Section of the New York Academy of Medicine. He is also a founding board member of the American Acne and Rosacea Society and served on several committees of the American Academy of Dermatology and the American College of Allergy, Asthma and Immunology. He is also a member of the editorial board of the Journal of Drugs in Dermatology and the editorial advisory boards of Dermatitis and Skin and Allergy News. He also served on the boards of directors of Timber, Connetics, Vyteris, Kadmon and Dermira. Dr. Cohen earned a B.S. in biomedical science from the City University of New York, an M.D. from Stony Brook School of Medicine at SUNY and an M.P.H. in environmental science from Columbia University School of Public Health. We believe Dr. Cohen is qualified to serve on our board of directors because of his education and experience in the life sciences and dermatology fields, as well as his service on the boards of directors of numerous companies.

Derek DiRocco, Ph.D. has served as a member of our board of directors since October 2024. Dr. DiRocco has been a partner at RA Capital Management since December 2020. Dr. DiRocco works on both public and private investments and serves as a board director for 89Bio, Mineralys, Werewolf Therapeutics, Acrivon Therapeutics, Rivus Pharmaceuticals, Forward Therapeutics and Sera Medicines. Dr. DiRocco joined RA Capital Management in July 2013 and initially covered solid tumor oncology landscapes, later broadening coverage to multiple therapeutic areas. Dr. DiRocco holds a B.A. in Biology from Holy Cross College and a Ph.D. in Pharmacology from the University of Washington. He conducted his postdoctoral research at Brigham and Women’s Hospital/Harvard Medical School, where he researched signaling pathways responsible for chronic and acute kidney disease, as well as cellular mechanisms underlying fibrotic disease. We believe Dr. DiRocco is qualified to serve on our board of directors because of his education and experience in the life sciences industry, venture capital experience, as well as his service on the boards of directors of numerous companies.

Rob Hopfner, R.Ph., Ph.D. has served as a member of our board of directors since July 2020. Dr. Hopfner has been a Managing Partner at Pivotal bioVenture Partners since October 2017, where he focuses on drug discovery and development investments. Dr. Hopfner has a long track record of working successfully with entrepreneurs to progress novel, important medicines through development and onto the market. Prior to joining Pivotal in 2017, Dr. Hopfner was previously a Managing Director at Bay City Capital and prior to that worked in business development and investment roles at DuPont Pharmaceuticals and at Ag-West Biotech. Dr. Hopfner holds a Ph.D. in pharmacology from the University of Saskatchewan and an M.B.A. from the University of Chicago Booth School of Business. Dr. Hopfner completed his postdoctoral work at Harvard Medical School and started his career as a pharmacist. We believe Dr. Hopfner is qualified to serve on our board of directors because of his education and experience in drug development and venture capital experience.

Felice Verduyn-van Weegen has served as a member of our board of directors since September 2021. Ms. Weegen currently serves as a Partner at EQT. Ms. Weegen worked for LSP from 2015 until March 2022, when LSP joined forces with EQT and became EQT Life Sciences. Prior to joining LSP, Ms. Weegen worked as a Consultant at McKinsey & Company in Amsterdam. Prior to working at McKinsey, Ms. Weegen was a Neuroscientist and Statistical Geneticist, working with the prestigious Complex-Traits Genetics Group at the Broad Institute and Harvard Medical School in Cambridge, Massachusetts. Ms. Weegen holds an M.S. (cum laude) in neuroscience from Vrije Universiteit Amsterdam and an M.B.A. (with distinction) from Columbia Business School in New York. We believe Ms. Weegen is qualified to serve on our board of directors because of her education and experience in the life sciences industry and venture capital experience.

Yuexin Yu has served as a member of our board of directors since July 2024. Mr. Yu is a Director at Andera Partners. Mr. Yu has been involved in life sciences portfolio companies including Amolyt (acquired by AZ), ReViral (acquired by Pfizer), LogicBio (acquired by Alexion), Mineralys (MLYS), Artios, Tubulis, TargED and JenaValve. Before joining Andera in 2021, Mr. Yu worked at 3H Health Investment from 2016 until 2021, where he led investments in InnoCare (HK.9969, SH.688428), KeyMed (HK.2162), RareStone and EdiGen, and participated in investments in CanSino (HK.6185), HeMo Bioengineering and Imperative Care. Prior to that, Mr. Yu was in the life cycle management team of Remicade and Keytruda at Merck. Mr. Yu started his career as

 

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a venture analyst at Mérieux Développement. Mr. Yu received a B.Sc. in Pharmacy at Shanghai Jiao Tong University and an M.Sc. in Management at HEC Paris. We believe Mr. Yu is qualified to serve on our board of directors because of his significant industry experience as an investor in the biopharmaceutical industry and educational background.

Non-Employee Director Nominee

Arthur Kirsch has been appointed as a member of our board of directors effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. Mr. Kirsch currently serves as a board member of Liquidia Corporation. Mr. Kirsch has served as a director on the board of a private company, Anavasi Diagnostics, since August 2022, and has served as a director on the board and as a member of the audit, nominating and governance committees for Atea Pharmaceuticals, Inc. (Nasdaq: AVIR) since February 2025. Mr. Kirsch previously served as a director of POZEN Inc. (Nasdaq: POZN) from May 2004 until May 2015, as a director of Aralez Pharmaceuticals, Inc. (Nasdaq: ARLZ) from February 2016 until May 2019, as a director of Kadmon Corporation (NYSE: KDMN) from May 2019 to November 2021 and as a director of Immunomedics, Inc. (Nasdaq: IMMU) from August 2015 until October 2016. Mr. Kirsch has served as a consultant at Alvarez & Marsal since 2019. From June 2005 until June 2019, Mr. Kirsch served as a managing director and senior advisor for GCA Global, LLC, a global investment banking firm. From May 1994 to May 2004, he served as executive vice president, head of research at Vector Securities, LLC, a brokerage firm. From February 1990 to May 1993, Mr. Kirsch served as president of Natwest Securities Limited, a brokerage firm. From June 1979 to February 1990, Mr. Kirsch worked at Drexel Burnham Lambert, Inc., an investment banking firm, where he held the position of executive vice president, head of equity division. Mr. Kirsch graduated from the University of Rhode Island with a Bachelor of Science and also holds a Master of Business Administration from Baruch College. We believe Mr. Kirsch is qualified to serve on our board of directors because of his business and financial expertise and his experience serving on the boards of directors of several public pharmaceutical and life sciences companies.

Family Relationships

There are no family relationships among any of our executive officers or directors.

Composition of Our Board of Directors

The authorized number of our board of directors is set at nine and currently consists of nine members with no vacancy. Each of the members of our board of directors serves pursuant to the board composition provisions of our certificate of incorporation and agreements with our stockholders. These board composition provisions will terminate upon the completion of this offering. Upon the termination of these provisions, there will be no further contractual obligations regarding the election of our directors. Our nominating and corporate governance committee and our board of directors may consider a broad range of factors relating to the qualifications and background of nominees. Our nominating and corporate governance committee’s and our board of directors’ priority in selecting board members is to identify persons who will further the interests of our stockholders through his or her established record of professional accomplishments, the ability to contribute positively to the collaborative culture among board members, knowledge of our business, understanding of the competitive landscape, diversity of background and perspective and professional and personal experiences and expertise relevant to our growth strategy. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least a majority of the votes that all our stockholders would be entitled to cast in an annual election of directors and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.

 

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Director Independence

We have applied to list our common stock on the NYSE. Applicable NYSE rules require a majority of a listed company’s board of directors consist of independent directors within one year of listing. In addition, the NYSE rules require that (i) on the date of the initial listing, at least one member of each of a listed company’s audit, compensation and nominating and corporate governance committees be independent, (ii) within 90 days of the date of the initial listing, a majority of the members of such committees be independent and (iii) within one year of the date of the initial listing, all the members of such committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under applicable NYSE rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries.

Our board of directors has determined that a majority of the members of the board of directors will be, upon completion of this offering, independent directors, including for purposes of the rules of the NYSE and the SEC. In making such independence determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of the directors listed above, our board of directors considered the association of our directors with the holders of more than 5% of our common stock. Upon the closing of this offering, we expect that the composition and function of our board of directors and each of our committees will comply with all applicable requirements of the NYSE and the rules and regulations of the SEC.

Staggered Board

In accordance with the terms of our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering, our board of directors will be divided into three staggered classes of directors and each will be assigned to one of the three classes. At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2026 for Class I directors, 2027 for Class II directors and 2028 for Class III directors.

 

  •  

Our Class I directors will be Luis Peña and Eugene A. Bauer, M.D.;

 

  •  

Our Class II directors will be Rob Hopfner, R.Ph., Ph.D., Derek DiRocco, Ph.D. and Felice Verduyn-van Weegen; and

 

  •  

Our Class III directors will be Benjamin F. McGraw, III, Pharma. D., David E. Cohen, M.D., M.P.H. and Arthur Kirsch

Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering will provide that the number of directors shall be fixed from time to time by a resolution of the majority of our board of directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of our board of directors or a change in control.

 

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Board Leadership Structure and Board’s Role in Risk Oversight

The roles of lead director or chairman and the chief executive officer (“CEO”) are separated. Benjamin F. McGraw, III, Pharma. D. is our current chairman of the board of directors and Luis Peña is our current CEO. We plan to keep these roles separated following the closing of this offering. We believe that separating these positions allows our CEO to focus on setting our overall strategic direction, expanding the organization to deliver on our strategy and overseeing our day-to-day business, while allowing a lead director of the board to lead the board of directors in its fundamental role of providing strategic advice. Our board of directors recognizes the time, effort and energy that the CEO is required to devote to his position in the current business environment, as well as the commitment required to serve as our chairman, particularly as the board of directors’ oversight responsibilities continue to grow. While our amended and restated bylaws and corporate governance guidelines do not require that our lead director and CEO positions be separate, our board of directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance.

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our financial condition, development and commercialization activities, operations, strategic direction and intellectual property as more fully discussed in the section entitled “Risk Factors” appearing elsewhere in this prospectus. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

The role of the board of directors in overseeing the management of our risks is conducted through our board of directors, including through its committees, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees. The full board of directors (or the appropriate board committee in the case of risks that are under the purview of a particular committee) discusses with management our major risk exposures, their potential impact on us and the steps we take to manage them. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairperson of the relevant committee reports on the discussion to the full board of directors during the committee reports portion of the next board meeting. This enables the board of directors and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

Committees of Our Board of Directors

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will operate pursuant to a charter adopted by our board of directors and will be effective upon the effectiveness of the registration statement of which this prospectus is a part. Upon the effectiveness of the registration statement of which this prospectus is a part, the composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act and with NYSE and SEC rules and regulations. Upon our listing on the NYSE, each committee’s charter will be posted on the investor relations section of our website, which is located at www.evommune.com. The inclusion of our website address in this prospectus does not incorporate by reference the information on or accessible through our website into this prospectus.

Audit Committee

Effective upon the effectiveness of the registration statement of which this prospectus is a part, Dr. McGraw, Dr. DiRocco and Mr. Kirsch will serve on the audit committee, which will be chaired by Mr. Kirsch. Our board of directors has determined that each of Dr. McGraw, Dr. DiRocco and Mr. Kirsch are “independent” for audit committee purposes as that term is defined in the rules of the SEC and the applicable NYSE rules and each has sufficient knowledge in financial and auditing matters to serve on the audit committee.

 

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Our board of directors has designated each of Dr. McGraw and Mr. Kirsch as an “audit committee financial expert,” as defined under the applicable NYSE rules. The audit committee’s responsibilities include:

 

  •  

appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm;

 

  •  

pre-approving auditing and permissible non-audit services and the terms of such services, to be provided by our independent registered public accounting firm;

 

  •  

reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;

 

  •  

coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;

 

  •  

establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

 

  •  

recommending based upon the audit committee’s review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our Annual Report on Form 10-K;

 

  •  

monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

 

  •  

preparing the audit committee report required by SEC rules to be included in our annual proxy statement;

 

  •  

reviewing material related person transactions for potential conflict of interest situations and approving such transactions; and

 

  •  

at least annually, reviewing and reassessing the adequacy of the audit committee charter and recommending to the board of directors any amendments or modifications to the charter that the audit committee deems appropriate.

Compensation Committee

Effective upon the effectiveness of the registration statement of which this prospectus is a part, Dr. Cohen, Dr. McGraw, Dr. Hopfner and Mr. Kirsch will serve on the compensation committee, which will be chaired by Dr. McGraw. Our board of directors has determined that each member of the compensation committee is “independent” as defined in the applicable NYSE rules. Each of the members of this committee is also a “nonemployee director” as that term is defined under Rule 16b-3 of the Exchange Act and an “outside director” as that term is defined in Treasury Regulation Section 1.162-27(3). The compensation committee’s responsibilities include:

 

  •  

reviewing on a periodic basis the operation of our executive compensation programs to determine whether they remain supportive of our business objectives;

 

  •  

reviewing the performance of our CEO and approving the compensation of our CEO;

 

  •  

reviewing the performance of our other executive officers and approving or recommending to the board of directors the compensation of our other executive officers;

 

  •  

overseeing and administering our compensation and similar plans;

 

  •  

reviewing and approving structures and guidelines for various incentive compensation and benefit plans;

 

  •  

approving and recommending to the board of directors the compensation of our outside directors;

 

  •  

preparing the compensation committee report required by SEC rules, if and when required, to be included in our annual proxy statement;

 

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  •  

reviewing and approving the retention, termination or compensation of any consulting firm or outside advisor to assist in the evaluation of compensation matters; and

 

  •  

at least annually, reviewing and reassessing the adequacy of the compensation committee charter and recommending to the board of directors any amendments or modifications to the charter that the compensation committee deems appropriate.

Nominating and Corporate Governance Committee

Effective upon the effectiveness of the registration statement of which this prospectus is a part, Dr. McGraw, Dr. Cohen, Ms. Weegen and Mr. Peña will serve on the nominating and corporate governance committee, which will be chaired by Dr. Cohen. Our board of directors has determined that each member of the nominating and corporate governance committee, other than Mr. Peña, is “independent” as defined in the applicable NYSE rules and all applicable laws. Mr. Peña, by virtue of his position as our Chief Executive Officer, is not independent under applicable rules and regulations of the SEC and the NYSE listing rules. We are relying on the phase-in exemption provided under the NYSE listing rules with respect to the composition of our nominating and corporate governance committee. Mr. Peña will serve on our nominating and corporate governance committee under the phase-in exemption referenced above. In accordance with the phase-in exemption, a majority of the members of our nominating and corporate governance committee will satisfy the independence standards under applicable rules and regulations of the SEC and the NYSE listing rules within 90 days of the date of effectiveness of the registration statement of which this prospectus forms a part and all members of our nominating and corporate governance committee will satisfy the independence standards under applicable rules and regulations of the SEC and the NYSE listing rules within one year from the date of listing. The nominating and corporate governance committee’s responsibilities include:

 

  •  

establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by stockholders;

 

  •  

reviewing the composition of the board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us;

 

  •  

identifying individuals qualified to become members of the board of directors;

 

  •  

recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees;

 

  •  

developing and recommending to the board of directors a code of business conduct and ethics and a set of corporate governance guidelines;

 

  •  

overseeing the evaluation of our board of directors; and

 

  •  

at least annually, reviewing and reassessing the adequacy of the nominating and corporate governance committee charter and recommending to the board of directors any amendments or modifications to the charter that the nominating and corporate governance committee deems appropriate.

Science and Technology Committee

We also maintain a science and technology committee to primarily assist our board of directors in its oversight of our research and development strategies, programs, priorities and opportunities. Dr. Bauer, Dr. McGraw, Dr. Cohen, Dr. DiRocco, Dr. Hopfner and Ms. Weegen serve on the science and technology committee, which is chaired by Dr. Cohen. The science and technology committee’s responsibilities include:

 

  •  

reviewing, articulating, translating and contextualizing our scientific data for the general board discussion;

 

  •  

reviewing, evaluating and advising our board of directors and management regarding the long-term strategic goals and objectives and the quality and direction of our research and development programs;

 

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  •  

considering trends in research and development, and recommending to our board of directors and management emerging technologies for building our technological strength;

 

  •  

advising our board of directors and management on the scientific aspects of potential business development transactions and market opportunities;

 

  •  

as needed, acting as a liaison between the medical community and our board of directors and/or management; and

 

  •  

periodically reviewing our overall intellectual property strategies.

Our board of directors may from time to time establish other committees.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee has been one of our officers or employees at any time during the prior three years. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Corporate Governance

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Following the effectiveness of the registration statement of which this prospectus is a part, a current copy of the code of business conduct and ethics will be posted on the investor relations section of our website, which is located at www.evommune.com. The inclusion of our website address in this prospectus does not incorporate by reference the information on or accessible through our website into this prospectus. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Limitation on Liability and Indemnification Matters

Our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, will contain provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

 

  •  

any breach of the director’s duty of loyalty to us or our stockholders;

 

  •  

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

  •  

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or

 

  •  

any transaction from which the director derived an improper personal benefit.

Our amended and restated bylaws, which will become effective immediately prior to the closing of this offering, will provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws will also obligate us to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We expect to enter into agreements to indemnify our directors, executive officers and other

 

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officers as determined by our board of directors or our compensation committee. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in certain actions or proceedings.

We believe that these certificate of incorporation and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage.

 

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EXECUTIVE COMPENSATION

Our named executive officers for the year ended December 31, 2024, consisting of our principal executive officer and the next two most highly compensated executive officers who were serving in such capacity as of December 31, 2024, were:

 

  •  

Luis Peña, our CEO;

 

  •  

Gregory S. Moss, our Chief Business and Legal Officer; and

 

  •  

Kyle Carver, our Chief Financial Officer.

Prior to this offering, our board of directors was responsible for determining the compensation of our CEO and the compensation committee of our board of directors (the “Compensation Committee”) made recommendations to our board of directors regarding such compensation and was responsible for determining the compensation of our other executive officers. Our CEO made recommendations to the Compensation Committee about the compensation of his direct reports, including Messrs. Moss and Carver.

Summary Compensation Table

The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the year ended December 31, 2024.

 

Name and Principal Position

   Salary
($)
     Bonus
($)(1)
     Stock
Awards
($)(2)
     Option
Awards
($)(2)
     All Other
Compensation
($)(3)
     Total
($)
 

Luis Peña

     546,083        382,200        563,476        5,950,489        714        7,442,962  

CEO

                 

Gregory S. Moss

     480,500        269,080        221,985        382,548        714        1,354,827  

Chief Business and Legal Officer

                 

Kyle Carver

     470,000        263,200        216,518        286,008        714        1,236,440  

Chief Financial Officer

                 
 
(1)

The amounts reported in this column represent discretionary bonuses paid with respect to 2024 performance.

(2)

The amounts in these columns reflect the aggregate grant date fair value of the shares underlying restricted stock unit, option and stock appreciation right awards granted in the applicable year, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718 for stock-based compensation transactions. The assumptions used in calculating the grant date fair value of the awards reported in these columns are set forth in Note 9 to our audited consolidated financial statements included elsewhere in this prospectus.

(3)

Amounts reported include life insurance premiums paid for the benefit of Messrs. Peña, Moss and Carver, respectively.

Narrative Disclosure to Summary Compensation Table

Annual Base Salary

Our named executive officers receive a base salary to compensate them for services rendered to us. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. The base salary of our named executive officers is generally determined and approved by our board of directors in connection with the commencement of employment of our named executive officer and may be adjusted from time to time thereafter as the board of directors determines appropriate. The 2024 annual base salaries for our named executive officers were as follows: $546,500 for Mr. Peña, $480,500 for Mr. Moss and $470,000 for Mr. Carver.

 

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Annual Bonus

In addition to base salaries, each of our named executive officers is eligible to receive a discretionary annual bonus of up to a percentage of the executive’s gross base salary based on individual performance, Company performance or as otherwise determined appropriate by our board of directors. For the year ended December 31, 2024, cash bonus targets, as a percentage of base salary, were 50% for Mr. Peña, 40% for Mr. Moss and 40% for Mr. Carver. The amount of any annual discretionary annual bonus is determined at the end of the year for which the bonus relates.

Equity-Based Incentive Awards

Our equity-based incentive awards are designed to align our named executive officers’ interests with those of our stockholders and to retain and incentivize our named executive officers over the long-term. Our Compensation Committee is responsible for approving equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Additional grants may occur periodically in order to specifically incentivize our named executive officers with respect to achieving certain corporate goals or to reward our named executive officers for exceptional performance.

To date, we have granted stock options, RSUs and SARs to our named executive officers. Prior to this offering, we have granted all equity awards pursuant to our 2020 Plan, with the exception of the SAR award granted to Mr. Peña in December 2024, which is described in further detail below. Following this offering, we anticipate that we will grant equity incentive awards under our 2025 Plan (as described below under “—Equity Compensation Plans—2025 Equity Incentive Plan”). All options and SARs have a maximum term of 10 years measured from the date of grant and are granted with a per-share exercise or strike price, as applicable, equal to no less than the fair market value of a share of our common stock on the date of the grant of such award.

Our named executive officers received the following stock option awards in 2024:

 

  •  

On January 6, 2024, our Compensation Committee granted a stock option award to each of Messrs. Peña, Moss and Carver, covering 202,703, 68,919 and 60,811 shares of our common stock, respectively. These awards have an exercise price of $0.20 per share and vest over a period of four years, with 25% of the shares underlying each option vesting on the one-year anniversary of grant date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to the named executive officer’s continued service with us through each vesting date.

 

  •  

On March 22, 2024, our Compensation Committee granted a stock option award to Mr. Moss covering 528,702 shares of our common stock. This award has an exercise price of $0.20 per share and vests over a period of four years, with 25% of the shares underlying the option vesting on the one-year anniversary of grant date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to Mr. Moss’s continued service with us through each vesting date.

 

  •  

On December 9, 2024, our Compensation Committee granted a stock option award to each of Messrs. Peña, Moss and Carver, covering 2,476,815, 975,758 and 951,728 shares of our common stock, respectively. These awards have an exercise price of $0.35 per share and vest over a period of four years, with 25% of the shares underlying the option vesting on the one-year anniversary of grant date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to their continued service with us through each vesting date.

On December 9, 2024, our Compensation Committee also granted a SAR award to Mr. Peña, outside of the 2020 Plan, covering 3,790,449 shares of our common stock, with a strike price of $0.35 per share. The SARs vest upon the satisfaction of all of the following: (i) a liquidity event requirement, which will be satisfied upon the first to occur of: (a) a Change in Control (as defined in the applicable SAR award agreement) or (b) upon completion of this offering, at such time as the 30-day volume-weighted average price of our common stock is greater than $4.78359 and (ii) a continued service requirement, which will be satisfied as to 25% of the shares subject to the SAR award on each of the first four anniversaries of the vesting commencement date, subject to Mr. Peña’s continued service with us through each such date. In addition to both the liquidity event and

 

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continued service requirements, 2,142,428 shares underlying such SAR award are subject to a Series C Preferred Stock requirement, which will be satisfied as to 0.0523 of one share of our common stock subject to the SAR award for each share of Series C Preferred Stock that is issued subsequent to October 30, 2024. All unvested SARs are forfeited upon termination or resignation for any reason. When all vesting requirements applicable to a SAR have been satisfied, the SAR will be settled in the form of shares of our common stock or the cash equivalent, in either case, with respect to an amount equal to the fair market value of a share of our common stock on the settlement date minus the exercise price of such SAR.

On December 9, 2024, our Compensation Committee also granted RSU awards to our named executive officers covering the following number of shares of our common stock: 1,609,930 for Mr. Peña, 634,243 for Mr. Moss and 618,623 for Mr. Carver. The RSUs vest based on the satisfaction of all of the following: (i) a liquidity event requirement, which will be satisfied upon completion of this offering or a Change in Control (as defined in the applicable RSU grant notice); (ii) a Series C Preferred Stock requirement, which will be satisfied as to 0.0911 of one share of our common stock subject to the RSU award for each share of Series C Preferred Stock that is issued subsequent to October 30, 2024; and (iii) a continued service requirement, which will be satisfied as to 25% of the shares subject to the RSU award on each of the first four anniversaries of the grant date, subject to the named executive officer’s continued service with us through each such date.

Outstanding Equity Awards as of December 31, 2024

The following table sets forth information regarding outstanding stock options held by our named executive officers as of December 31, 2024.

 

                Option Awards(1)     Stock Awards(1)  

Name

  Grant
Date
    Vesting
Commencement
Date
    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number
of Shares
or Units
of Stock
that
Have
Not
Vested
(#)
    Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)(2)
 

Luis Peña

    5/11/2022 (3)      5/11/2022       2,172,044       1,191,121     $ 0.36       5/10/2032       —       —  
    1/13/2023 (3)      1/13/2023       419,143       455,592     $ 0.42       1/12/2033       —       —  
    5/12/2023 (3)      5/12/2023       647,752       988,676     $ 0.45       5/11/2033       —       —  
    1/6/2024 (3)      1/6/2024       —       202,703     $ 0.20       1/5/2034       —       —  
    12/9/2024 (3)      12/9/2024       —       2,476,815     $ 0.35       12/8/2034       —       —  
    12/9/2024 (4)      12/9/2024       —       —       —       —       1,609,930       563,476  
    12/9/2024 (5)      12/9/2024       —       3,790,449     $ 0.35       12/9/2034       —       —  

Gregory S. Moss

    7/15/2022 (3)      6/27/2022       712,500       427,500     $ 0.36       7/14/2032       —       —  
    1/13/2023 (3)      1/13/2023       144,174       156,712     $ 0.42       1/12/2033       —       —  
    5/12/2023 (3)      5/12/2023       220,235       336,150     $ 0.45       5/11/2033       —       —  
    1/6/2024 (3)      1/6/2024       —       68,919     $ 0.20       1/5/2034       —       —  
    3/22/2024 (3)      3/22/2024       —       528,702     $ 0.20       3/21/2034       —       —  
    12/9/2024 (3)      12/9/2024       —       975,758     $ 0.35       12/8/2034       —       —  
    12/9/2024 (4)      12/9/2024       —       —       —       —       634,243       221,985  

Kyle Carver

    5/11/2022 (3)      3/2/2022       693,653       315,297     $ 0.36       5/10/2032       —       —  
    1/13/2023 (3)      1/13/2023       125,742       136,678     $ 0.42       1/12/2033       —       —  
    5/12/2023 (3)      5/12/2023       194,325       296,603     $ 0.45       5/11/2033       —       —  
    1/6/2024 (3)      12/11/2023       15,202       45,609     $ 0.20       1/5/2034       —       —  
    12/9/2024 (3)      12/9/2024       —       951,728     $ 0.35       12/8/2034       —       —  
    12/9/2024 (4)      12/9/2024       —       —       —       —       618,623       216,518  
 
(1)

All of the equity awards shown in the table above were granted under our 2020 Plan, except for the SARs awarded to Mr. Peña on December 9, 2024, which were granted outside of our 2020 Plan. The terms of our 2020 Plan are described below under the section titled “—Equity Compensation Plans—2020 Stock Plan.”

 

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(2)

This column represents the fair market value of a share of our common stock of $0.35 as of December 31, 2024 as determined by our board of directors, multiplied by the amount shown in the column “Stock Awards—Number of Shares or Units of Stock that Have Not Vested.

(3)

This stock option vests over a period of four years, with 25% of the shares underlying the option vesting on the one year anniversary of the vesting commencement date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(4)

The RSUs vest based on the satisfaction of all of the following: (i) a liquidity event requirement; (ii) a Series C Preferred Stock requirement; and (iii) a four-year continued service requirement, each as described in greater detail above under the section titled “—Equity-Based Incentive Awards.”

(5)

The SARs vest upon the satisfaction all of the following: (i) a liquidity event requirement; (ii) a four-year continued service requirement; and (iii) for 2,142,428 of the shares underlying the SAR award, a Series C Preferred Stock requirement, each as described in greater detail above under the section titled “—Equity-Based Incentive Awards.” All unvested SARs are forfeited upon termination or resignation for any reason.

Employment Arrangements

We are party to employment agreements with each of our named executive officers. The employment agreements set forth the named executive officer’s base salary, eligibility for employee benefits and severance benefits upon a qualifying termination of employment or change in control of us and provide for at-will employment. Each of our named executive officers has executed our standard confidential information, inventions assignment and arbitration agreement. The key terms of the employment agreements with our named executive officers, including potential payments upon termination or change in control, are described below.

Employment Agreement with Luis Peña

Effective November 1, 2024, we entered into an employment agreement with Mr. Peña (the “Peña Employment Agreement”). Under the Peña Employment Agreement, Mr. Peña’s employment with us can be terminated at any time and for any reason by him or us. The Peña Employment Agreement provides that Mr. Peña is entitled to an annualized base salary of $546,500, subject to adjustment in accordance with normal business practices and at our sole discretion, during his employment with us and that he is eligible, at our sole discretion, to earn an annual bonus targeted at up to 50% of his base salary. In 2024, we paid Mr. Peña an annualized base salary of $546,500, and we awarded him a bonus of $382,200, which bonus amount was determined by the board of directors in its discretion based on the achievement of predetermined Company performance metrics. Mr. Peña is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Employment Agreement with Gregory S. Moss

Effective November 1, 2024, we entered into an employment agreement with Mr. Moss (the “Moss Employment Agreement”). Under the Moss Employment Agreement, Mr. Moss’s employment with us can be terminated at any time and for any reason by him or us. The Moss Employment Agreement provides that Mr. Moss is entitled to an annualized base salary of $480,500, subject to adjustment in accordance with normal business practices and at our sole discretion, during his employment with us and that he is eligible, at our sole discretion, to earn an annual bonus targeted at up to 40% of his base salary. In 2024, we paid Mr. Moss an annualized base salary of $480,500, and we awarded him a bonus of $269,080, which bonus amount was determined by the board of directors in its discretion based on the achievement of predetermined Company performance metrics. Mr. Moss is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Employment Agreement with Kyle Carver

Effective November 1, 2024, we entered into an employment agreement with Mr. Carver (the “Carver Employment Agreement”). Under the Carver Employment Agreement, Mr. Carver’s employment with us can be

 

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terminated at any time and for any reason by him or us. The Carver Employment Agreement provides that Mr. Carver is entitled to an annualized base salary of $470,000, subject to adjustment in accordance with normal business practices and at our sole discretion, during his employment with us and that he is eligible, at our sole discretion, to earn an annual bonus targeted at up to 40% of his base salary. In 2024, we paid Mr. Carver an annualized base salary of $470,000, and we awarded him a bonus of $263,200, which bonus amount was determined by the board of directors in its discretion based on the achievement of predetermined Company performance metrics. Mr. Carver is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

Regardless of the manner in which a named executive officer’s service terminates, each of our named executive officers is entitled to receive amounts earned during his term of service, including unpaid salary and any vested benefits. In the event of certain termination scenarios, each named executive officer will be entitled to receive the additional benefits summarized below pursuant to his employment agreement, subject to the timely execution and non-revocation of a separation agreement and general release of claims.

Termination for Cause or Resignation Without Good Reason

Pursuant to the terms of their respective employment agreements, if we terminate any of our named executive officer’s employment for cause or the named executive officer resigns without good reason (each of “cause” and “good reason” as defined in the applicable employment agreement), then the named executive officer will be entitled to receive (i) base salary through the date of termination and (ii) any vested benefits under our employee benefit plan through the date of termination.

Termination Without Cause or for Good Reason not in Connection with a Change in Control

Pursuant to the terms of their respective employment agreements, if we terminate any of our named executive officer’s employment without cause or the named executive officer resigns for good reason not in connection with a change in control (as defined in the applicable employment agreement), then the named executive officer will be entitled to receive (i) base salary continuation for 12 months following termination, (ii) an amount equal to the greater of (A) the full amount of his target bonus for the calendar year in which the termination of employment occurs and (B) the average annual bonus paid to him over the three calendar years ending prior to the year in which such termination of employment occurs and (iii) monthly payments of the portion of the premiums equal to the amounts that the Company would have paid to provide health insurance to the named executive officer had he remained employed with the Company until the earliest of (A) 12 months following termination or (B) the named executive officer becoming eligible for group medical plan benefits under any other employer’s group health plan. Each equity incentive award granted by the Company to the named executive officer that is then outstanding or any other then outstanding equity incentive award granted to the named executive officer under any successor plan or otherwise (each an “Equity Award” and, collectively the “Equity Awards”), including Equity Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Equity Awards subject to vesting based on satisfaction of performance criteria vesting at target).

Termination Without Cause or for Good Reason in Connection with a Change in Control

Pursuant to the terms of their respective employment agreements, if we terminate a named executive officer’s employment without cause or the named executive officer resigns for good reason within three months prior to or twelve months following a change in control, the named executive officer will be entitled to receive (i) a lump sum cash payment equal to two times, in the case of Mr. Peña, or one-and-a-half times, in the case of Messrs. Moss and Carver, the sum of (x) the then-current base salary plus (y) the greater of (A) the full amount of his target bonus for the calendar year in which the termination of employment occurs and (B) the average

 

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annual bonus paid to him over the three calendar years ending prior to the year in which such termination of employment occurs and (ii) monthly payments of the portion of the premiums equal to the amounts that the Company would have paid to provide health insurance to the named executive officer had he remained employed with the Company until the earliest of (x) 24 months following termination or (y) the named executive officer becoming eligible for group medical plan benefits under any other employer’s group health plan. Each Equity Award that is then outstanding, including Equity Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Equity Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a change in control in which an outstanding Equity Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such change in control transaction, then such Equity Award will become fully vested and exercisable on or immediately prior to the closing date of the change in control, whether the named executive officer terminates employment or not.

Other Compensation and Benefits

Each of our named executive officers is eligible to participate in our employee benefit plans, including our medical, dental, vision, life and long-term disability plans, in each case on the same basis as all of our other employees. We pay a majority of the premiums for the medical, dental, vision and life insurance for all of our employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. In addition, we provide the opportunity to participate in a 401(k) plan to our employees, including each of our named executive officers, as discussed in the section below entitled “—401(k) Plan.”

401(k) Plan

Our named executive officers are eligible to participate in a defined contribution retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees may defer eligible compensation on a pre-tax or after-tax (Roth) basis, up to the statutorily prescribed annual limits on contributions under the Code. Individual contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan (except for Roth contributions) and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. We may elect, at our discretion, to make matching employee contributions.

Equity Compensation Plans

2025 Equity Incentive Plan

Our board of directors intends to adopt the 2025 Plan, which will become effective on the date of the underwriting agreement related to this offering. Our 2025 Plan will come into existence upon its adoption by our board of directors, but no grants will be made under our 2025 Plan prior to its effectiveness. Once our 2025 Plan becomes effective, no further grants will be made under our 2020 Plan.

Types of Awards. Our 2025 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards and other awards (collectively, “awards”). ISOs may be granted only to our employees, including our officers, and the employees of our affiliates. All other awards may be granted to our employees, including our officers, our non-employee directors and consultants and the employees and consultants of our affiliates.

 

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Authorized Shares. The maximum number of shares of our common stock that may be issued under our 2025 Plan is      shares. The number of shares of our common stock reserved for issuance under our 2025 Plan will automatically increase on January 1 of each year, beginning on January 1, 2026, and continuing through and including January 1, 2035, by 5% of the number of shares of our common stock equal to the sum of (i) the number of shares of our common stock issued and outstanding, (ii) the total number of shares of our common stock subject to pre-funded warrants (if any), and (iii) the total number of shares of our common stock issuable upon the conversion of preferred stock (if any), in each case on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors prior to the applicable January 1.

The maximum number of shares of our common stock that may be issued upon the exercise of ISOs under our 2025 Plan is      shares.

Shares issued under our 2025 Plan will be authorized but unissued or reacquired shares of our common stock. Shares subject to awards granted under our 2025 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our 2025 Plan. Additionally, shares issued pursuant to awards under our 2025 Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of an award or to satisfy the tax withholding obligations to an award, will become available for future grant under our 2025 Plan.

Plan Administration. Our board of directors, or a duly authorized committee of our board, may administer our 2025 Plan. Our board of directors has delegated concurrent authority to administer our 2025 Plan to the Compensation Committee under the terms of the Compensation Committee’s charter. We sometimes refer to the board of directors, or the applicable committee with the power to administer our equity incentive plans, as the “administrator.” The administrator may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified awards and (2) determine the number of shares subject to such awards.

The administrator has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of awards, if any, the number of shares subject to each award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2025 Plan.

In addition, subject to the terms of our 2025 Plan, the administrator also has the power to modify outstanding awards under our 2025 Plan, including the authority to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any materially adversely affected participant.

Stock Options. ISOs and NSOs are granted pursuant to stock option agreements adopted by the administrator. The administrator determines the exercise price for a stock option, within the terms and conditions of our 2025 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under our 2025 Plan vest at the rate specified in the stock option agreement as specified in the stock option agreement by the administrator.

The administrator determines the term of stock options granted under our 2025 Plan, which may be up to a maximum of ten years. Unless the terms of an optionholder’s stock option agreement provide otherwise, if an optionholder’s service relationship with us, or any of our affiliates, ceases for any reason other than disability, death or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. The option term may be extended in the event that either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholder’s service

 

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relationship with us or any of our affiliates ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, options generally terminate immediately upon the termination of the individual for cause. In no event may an option be exercised beyond the expiration of its term.

Acceptable consideration for the purchase of our common stock issued upon the exercise of a stock option will be determined by the administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of our common stock previously owned by the optionholder, (4) a net exercise of the option if it is an NSO and (5) other legal consideration approved by the administrator.

Options may not be transferred to third-party financial institutions for value. Unless the administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order. An optionholder may designate a beneficiary, however, who may exercise the option following the optionholder’s death.

Tax Limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an option holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will be treated as NSOs. No ISOs may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our parent or subsidiary corporations, unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and (2) the term of the ISO does not exceed five years from the date of grant.

Restricted Stock Awards. Restricted stock awards are granted pursuant to restricted stock award agreements adopted by the administrator. Restricted stock awards may be granted in consideration for cash, check, bank draft or money order, services rendered to us or our affiliates or any other form of legal consideration. Shares of our common stock acquired under a restricted stock award may, but need not, be subject to a share repurchase option in our favor in accordance with a vesting schedule to be determined by the administrator. A restricted stock award may be transferred only upon such terms and conditions as set by the administrator. Except as otherwise provided in the applicable award agreement, restricted stock awards that have not vested may be forfeited or repurchased by us upon the participant’s cessation of continuous service for any reason.

Restricted Stock Unit Awards. Restricted stock unit awards are granted pursuant to restricted stock unit award agreements adopted by the administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the administrator or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participant’s cessation of continuous service for any reason.

Stock Appreciation Rights. Stock appreciation rights are granted pursuant to stock appreciation right grant agreements adopted by the administrator. The administrator determines the strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Upon the exercise of a stock appreciation right, we will pay the participant an amount equal to the product of (1) the excess of the per share fair market value of our common stock on the date of exercise over the strike price, multiplied by (2) the number of shares of our common stock with respect to which the stock appreciation right is exercised. A stock appreciation right granted under our 2025 Plan vests at the rate specified in the stock appreciation right agreement as determined by the administrator.

 

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The administrator determines the term of stock appreciation rights granted under our 2025 Plan, up to a maximum of 10 years. Unless the terms of a participant’s stock appreciation right agreement provide otherwise, if a participant’s service relationship with us or any of our affiliates ceases for any reason other than cause, disability or death, the participant may generally exercise any vested stock appreciation right for a period of three months following the cessation of service. The stock appreciation right term may be further extended in the event that exercise of the stock appreciation right following such a termination of service is prohibited by applicable securities laws. If a participant’s service relationship with us, or any of our affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested stock appreciation right for a period of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, stock appreciation rights generally terminate immediately upon the occurrence of the event giving rise to the termination of the individual for cause. In no event may a stock appreciation right be exercised beyond the expiration of its term.

Performance Awards. Our 2025 Plan permits the grant of performance-based stock and cash awards. The administrator can structure such awards so that the stock or cash will be issued or paid pursuant to such awards only following the achievement of certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, our common stock.

The performance goals may be based on any measure of performance selected by the administrator. The administrator may establish performance goals on a company-wide basis, with respect to one or more business units, divisions, affiliates or business segments and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the goals are established, the administrator will appropriately make adjustments in the method of calculating the attainment of the performance goals as follows: (1) to exclude restructuring or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by us achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock-based compensation and the award of bonuses under our bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.

Other Awards. The administrator may grant other awards based in whole or in part by reference to our common stock. The administrator will set the number of shares under the award and all other terms and conditions of such awards.

Changes to Capital Structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split or recapitalization, appropriate adjustments will be made to (1) the classes and maximum number of shares reserved for issuance under our 2025 Plan; (2) the classes and maximum number of shares by which the share reserve may increase automatically each year; (3) the classes and maximum number of shares that may be issued upon the exercise of ISOs and (4) the classes and number of shares and exercise price, strike price or purchase price, if applicable, of all outstanding awards.

Corporate Transactions. The following applies to stock awards under our 2025 Plan in the event of a corporate transaction, unless otherwise provided in a participant’s stock award agreement or other written

 

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agreement with us or one of our affiliates or unless otherwise expressly provided by the administrator at the time of grant. Under our 2025 Plan, a corporate transaction is generally the consummation of (1) a sale or other disposition of all or substantially all of our assets, (2) a sale or other disposition of at least 50% of our outstanding securities, (3) a merger, consolidation or similar transaction following which we are not the surviving corporation or (4) a merger, consolidation or similar transaction following which we are the surviving corporation but the shares of common stock of all classes issued and outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.

In the event of a corporate transaction, any stock awards outstanding under our 2025 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company) and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the corporate transaction (the “current participants”), the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the corporate transaction (contingent upon the effectiveness of the corporate transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the corporate transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the corporate transaction) and (ii) any such stock awards that are held by persons other than current participants will terminate if not exercised (if applicable) prior to the effective time of the corporate transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the corporate transaction. In addition, the administrator may also provide, in its sole discretion, that the holder of a stock award that will terminate upon the occurrence of a corporate transaction if not previously exercised will receive a payment, if any, equal to the excess of the value of the property the participant would have received upon exercise of the stock award over the exercise price otherwise payable in connection with the stock award.

A stock award may be subject to additional acceleration of vesting and exercisability upon or after a change in control as may be provided in an applicable award agreement or other written agreement, but in the absence of such provision, no such acceleration will occur.

Transferability. A participant may not transfer awards under our 2025 Plan other than by will, the laws of descent and distribution or as otherwise provided under our 2025 Plan.

Plan Amendment or Termination. Our board of directors has the authority to amend, suspend or terminate our 2025 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No ISOs may be granted after the tenth anniversary of the date our board of directors adopts our 2025 Plan. No awards may be granted under our 2025 Plan while it is suspended or after it is terminated.

2025 Employee Stock Purchase Plan

Our board of directors intends to adopt the ESPP, which will become effective immediately prior to and contingent upon the date of the underwriting agreement related to this offering. The purpose of our ESPP will be to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. Our ESPP will include two components. One component will be designed to allow eligible U.S. employees to purchase our common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. The other component will permit the grant of purchase rights that do not qualify for such favorable tax treatment in order to allow deviations necessary to permit participation by eligible employees who are foreign nationals or employed outside of the United States. while complying with applicable foreign laws.

 

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Authorized Shares. The maximum aggregate number of shares of our common stock that may be issued under our ESPP is      shares. The number of shares of our common stock reserved for issuance under our ESPP will automatically increase on January 1 of each calendar year, beginning on January 1, 2026 and continuing through and including January 1, 2035, by the lesser of (1)   % of the aggregate number of shares of common stock of all classes issued and outstanding on December 31 of the preceding calendar year, (2)      shares and (3) a number of shares determined by our board of directors. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our ESPP.

Plan Administration. Our board of directors, or a duly authorized committee thereof, will administer our ESPP. Our board of directors has delegated concurrent authority to administer our ESPP to the compensation committee under the terms of the compensation committee’s charter. Our ESPP is implemented through a series of offerings with specific terms approved by the administrator and under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under our ESPP, we may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for our eligible employees participating in the offering. An offering under our ESPP may be terminated under certain circumstances.

Payroll Deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in our ESPP and may contribute, normally through payroll deductions, with a maximum dollar amount as designated by the administrator. Unless otherwise determined by the administrator, our common stock will be purchased for the accounts of employees participating in our ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of our common stock on the first date of an offering or (b) 85% of the fair market value of a share of our common stock on the date of purchase. For the initial offering, which we expect will commence upon the execution and delivery of the underwriting agreement relating to this offering, the fair market value on the first day of the initial offering will be the price at which shares are first sold to the public.

Limitations. Our employees, including executive officers, or any of our designated affiliates may have to satisfy one or more of the following service requirements before participating in our ESPP, as determined by the administrator: (1) customary employment with us or one of our affiliates for more than 20 hours per week and more than five months per calendar year or (2) continuous employment with us or one of our affiliates for a minimum period of time, not to exceed two years, prior to the first date of an offering. An employee may not be granted rights to purchase stock under our ESPP if such employee (1) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of common stock or (2) holds rights to purchase stock under our ESPP that would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year that the rights remain outstanding.

Changes to Capital Structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or similar transaction, the board of directors will make appropriate adjustments to (1) the number of shares reserved under our ESPP, (2) the maximum number of shares by which the share reserve may increase automatically each year, (3) the number of shares and purchase price of all outstanding purchase rights and (4) the number of shares that are subject to purchase limits under ongoing offerings.

Corporate Transactions. In the event of certain corporate transactions, including: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of 50% of our outstanding securities, (3) the consummation of a merger or consolidation where we do not survive the transaction and (4) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding

 

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immediately before such transaction are converted or exchanged into other property by virtue of the transaction, any then-outstanding rights to purchase our stock under our ESPP may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such purchase rights, then the participants’ accumulated payroll contributions will be used to purchase shares of our common stock within 10 business days (or such other period specified by the administrator) prior to such corporate transaction, and such purchase rights will terminate immediately.

Under our ESPP, a corporate transaction is generally the consummation of: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of more than 50% of our outstanding securities, (3) a merger or consolidation where we do not survive the transaction and (4) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.

ESPP Amendment or Termination. The administrator has the authority to amend or terminate our ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder’s consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or listing requirements.

2020 Stock Plan

Our board of directors adopted, and our stockholders approved, our 2020 Plan on May 6, 2020. As of December 31, 2024, there were 1,256,089 shares of common stock remaining available for the future grant of awards under our 2020 Plan. As of December 31, 2024, stock options covering 31,647,035 shares of our common stock and RSU awards covering 3,728,809 shares of our common stock were outstanding under our 2020 Plan. No new awards will be granted under our 2020 Plan on or after the effectiveness of our 2025 Plan; however, awards outstanding under our 2020 Plan will continue to be governed by their existing terms. We expect that any shares of common stock remaining available for issuance under our 2020 Plan immediately prior to the effectiveness of the registration statement of which this prospectus forms a part will become shares of common stock available for issuance under our 2025 Plan.

Awards. Our 2020 Plan provides for the grant of ISOs to our employees and for the grant of NSOs, restricted or unrestricted stock awards and RSU awards to employees, directors and consultants of the Company or a parent or subsidiary of the Company.

Eligibility. Employees, directors and consultants of the Company or a parent or subsidiary of the Company are eligible to participate in our 2020 Plan, although, a grant of ISOs may only be made to a person who, on the effective date of the grant, is an employee.

Plan Administration. Our board of directors administers and interprets the provisions of our 2020 Plan. The board of directors may delegate its administrative authority under the 2020 Plan to one or more committees of our board of directors. Each such committee shall consist, as required by applicable law, of one or more members of our board of directors who have been appointed by the board of directors and shall have such authority and be responsible for such functions as our board of directors has assigned to it. If no committee has been appointed, the entire board of directors shall administer the 2020 Plan. Any reference to the board of directors in the 2020 Plan or an award agreement thereunder shall be construed as a reference to the committee (if any) to whom the board of directors has assigned a particular function. Subject to the provisions of the 2020 Plan, the board of directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the 2020 Plan. Notwithstanding anything to the contrary in the 2020 Plan, with respect to the terms and conditions of awards granted to participants outside the United States, the board of directors may vary from the provisions of the 2020 Plan to the extent it determines it necessary and appropriate to do so; provided that it may not vary from those 2020 Plan terms requiring stockholder approval.

 

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Changes to Capital Structure. In the event of any stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend or other change in our corporate or capital structure that results in (i) our common stock or any securities exchanged therefor or received in their place being exchanged for a different number or kind of securities or (ii) new, different or additional securities being received by the holders of shares of our common stock, the administrator will adjust the number and kind of securities available for issuance, the maximum number and kind of securities issuable upon exercise of ISOs, the number and kind of securities subject to outstanding awards and the purchase price of such securities.

Corporate Transactions. Upon the occurrence of a corporate transaction (as defined in our 2020 Plan), all shares of our common stock acquired under the 2020 Plan and all awards granted under the 2020 Plan that are outstanding on the effective date of such corporate transaction shall be treated in the manner described in the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which the Company is party, in the manner determined by our board of directors in its capacity as administrator of the 2020 Plan, with such determination having final and binding effect on all parties), which agreement or determination need not treat all awards (or all portions of an award) in an identical manner.

Plan Amendment or Termination. The administrator may at any time amend, suspend or terminate our 2020 Plan, provided that such action does not materially adversely affect any rights under any award without the participant’s consent. Certain amendments or the suspension or termination of our 2020 Plan may require the consent of holders of outstanding awards. Certain amendments also require the approval of our stockholders.

Policies and Practices Related to the Grant of Certain Equity Awards

From time to time, we grant stock options and stock appreciation right awards to our employees, including the named executive officers, and to our non-employee directors. Historically, we have granted new-hire option awards on or soon after a new hire’s employment start date and refresh, promotion or retention option grants when and as determined by our Compensation Committee. We do not maintain any written policies on the timing of awards of stock options, stock appreciation rights or similar instruments with option-like features. Following the effective date of the registration statement of which this prospectus forms a part, we expect that (i) the Compensation Committee will consider whether there is any material nonpublic information (“MNPI”) about us when determining the timing of stock option grants and will not seek to time the award of stock options in relation to our public disclosure of MNPI and (ii) we will not time the public release of MNPI for the purpose of affecting the value of executive compensation.

 

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Director Compensation

The following table sets forth the compensation paid to, received by or earned during fiscal year ended December 31, 2024 by the non-employee directors of our board of directors. We have historically reimbursed our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of directors and committee meetings.

 

     Fees Earned
or

Paid in Cash
($)
     Option
Awards

($)(1)
     Total
($)
 

Benjamin F. McGraw, III, Pharma. D.

   $ 40,000      $ 30,084      $ 70,084  

Francois Beaubien, Ph.D., C.F.A.

     —        —        —  

David E. Cohen, M.D., M.P.H.

   $ 40,000      $ 37,355      $ 77,355  

Derek DiRocco, Ph.D.

     —        —        —  

Rob Hopfner, R.Ph., Ph.D.

     —        —        —  

Felice Verduyn-van Weegen

     —        —        —  

Yuexin Yu

     —        —        —  
 
(1)

The amounts reported in this column represent the aggregate grant date fair value of the stock options granted to our non-employee directors, computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in Note 9 to our audited financial statements included elsewhere in this prospectus. As of December 31, 2024, our non-employee directors held outstanding options to purchase the following numbers of shares of our common stock: Dr. McGraw, 847,633 shares and Dr. Cohen, 722,633 shares.

No compensation was paid or earned by any other directors.

We also expect to continue to reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending meetings of our board of directors and any committee of our board of directors on which he or she serves.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Other than the compensation arrangements, including employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections entitled “Management” and “Executive and Director Compensation” and the registration rights described in the section entitled “Description of Capital Stock—Registration Rights,” the following is a description of each transaction since January 1, 2023 and each currently proposed transaction in which:

 

  •  

we have been or are to be a participant;

 

  •  

the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years; and

 

  •  

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 the foregoing persons, had or will have a direct or indirect material interest.

Private Placements of Securities

Series A Preferred Stock Financing

In January 2023, we sold 3,434,385 shares of our Series A Preferred Stock at a purchase price of $1.9363 per share and an additional 180,756 shares of our Series A Preferred Stock in February 2023 at a purchase price of $1.9363 per share for gross proceeds of approximately $6.7 million in the aggregate. The following table summarizes purchases of shares of our Series A Preferred Stock by related persons:

 

Stockholder

   Shares of
Series A Preferred
Stock
     Total
Purchase Price
 

BioDiscovery 6 FPCI(1)

     3,434,385      $ 6,650,000  
 
(1)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Yuexin Yu, a member of our board of directors, is affiliated with BioDiscovery 6 FPCI. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

Series B Preferred Stock Financing

In March 2023, we sold 20,000,000 shares of our Series B Preferred Stock at a purchase price of $2.00 per share, in April 2023, we sold an additional 5,000,000 shares of our Series B Preferred Stock at a purchase price of $2.00 per share and, in June 2023, we sold an additional 3,750,000 shares of our Series B Preferred Stock at a purchase price of $2.00 per share for gross proceeds of approximately $57.5 million in the aggregate. The following table summarizes purchases of shares of our Series B Preferred Stock by related persons:

 

Stockholder

   Shares of
Series B Preferred
Stock
     Total
Purchase Price
 

LSP 7 Coöperatief UA(1)

     5,090,000      $ 10,180,000  

Entities affiliated with Pivotal bioVenture Partners Fund I, L.P. (“Pivotal bioVenture”)(2)

     4,000,000      $ 8,000,000  

SymBiosis II, LLC(3)

     3,813,000      $ 7,626,000  

BioDiscovery 6 FPCI(4)

     2,750,000      $ 5,500,000  

Gregory S. Moss, Esq.(5)

     25,000      $ 50,000  

Kyle Carver, M.B.A., C.P.A.(5)

     25,000      $ 50,000  

Jeegar Patel, Ph.D.(5)

     25,000      $ 50,000  

Eugene A. Bauer, M.D.(6)

     12,500      $ 25,000  

Janice Drew, M.P.H.(5)

     12,500      $ 25,000  

 

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(1)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Felice Verduyn-van Weegen, a member of our board of directors, is affiliated with LSP Coöperatief UA. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(2)

Beneficial owner of greater than 5% of our outstanding capital stock. Consists of shares purchased by Pivotal bioVenture Partners Fund I, L.P. and NFLS Delta III Limited. Additionally, Robert Hopfner, a member of our board of directors, is affiliated with Pivotal bioVenture. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(3)

Beneficial owner of greater than 5% of our outstanding capital stock. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(4)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Yuexin Yu, a member of our board of directors, is affiliated with BioDiscovery 6 FPCI. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(5)

An executive officer of ours.

(6)

An executive officer and director of ours.

Series C Preferred Stock Financing

In October 2024, we sold 31,493,523 shares of our Series C Preferred Stock at a purchase price of $1.59453 per share for gross proceeds of approximately $50.2 million. In June 2025, we sold an additional 40,941,587 shares of our Series C Preferred Stock at a purchase price of $1.59453 per share for gross proceeds of approximately $65.2 million. The following table summarizes purchases of shares of our Series C Preferred Stock by related persons:

 

Stockholder

   Shares of
Series C Preferred
Stock
     Total
Purchase Price
 

Entities affiliated with RA Capital(1)

     18,814,319      $ 29,999,997  

LSP 7 Coöperatief UA(2)

     6,585,011      $ 10,499,998  

New Emerging Medical Opportunities Fund V SCSP(3)

     5,017,151      $ 7,999,998  

Entities affiliated with Pivotal bioVenture(4)

     3,135,717      $ 4,999,995  

BioDiscovery 6 FPCI(5)

     1,881,431      $ 2,999,999  

SymBiosis II, LLC(6)

     1,254,287      $ 1,999,999  
 
(1)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Derek DiRocco, a member of our board of directors, is affiliated with RA Capital. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(2)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Felice Verduyn-van Weegen, a member of our board of directors, is affiliated with LSP Coöperatief UA. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(3)

Francois Beaubien, a member of our board of directors, is a Partner at Sectoral Asset Management, Inc., which is the manager of New Emerging Medical Opportunities Fund V SCSP.

(4)

Beneficial owner of greater than 5% of our outstanding capital stock. Consists of shares purchased by Pivotal bioVenture Partners Fund I, L.P., Pivotal bioVenture Partners Fund II, L.P. and NFLS Delta III Limited. Additionally, Robert Hopfner, a member of our board of directors, is affiliated with Pivotal bioVenture. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

(5)

Beneficial owner of greater than 5% of our outstanding capital stock. Additionally, Yuexin Yu, a member of our board of directors, is affiliated with BioDiscovery 6 FPCI. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

 

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(6)

Beneficial owner of greater than 5% of our outstanding capital stock. Additional details regarding this stockholder and its equity holdings are included elsewhere in this prospectus under the caption “Principal Stockholders.”

Agreements with Stockholders

In connection with our Series C Preferred Stock financing, we entered into investors’ rights, voting and right of first refusal and co-sale agreements containing registration rights, information rights, voting rights and rights of first refusal, among other things, with certain holders of our convertible preferred stock and certain holders of our common stock. These stockholder agreements will terminate upon the closing of this offering, except for the registration rights granted under the Third Amended and Restated Investors’ Rights Agreement dated as of October 30, 2024, by and among us and the investors party thereto (the “Investors’ Rights Agreement”), as more fully described in “Description of Capital Stock—Registration Rights.”

Executive Officer and Director Compensation

See the section entitled “Executive and Director Compensation” for information regarding compensation of our executive officers and directors.

Other Relationships

Other than as described above, since January 1, 2023, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related person where the amount involved exceeds, or would exceed, the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which any related person had or will have a direct or indirect material interest.

Indemnification Agreements

We have entered into agreements to indemnify our directors (and their affiliated funds), executive officers and other officers as determined from time to time by our board of directors or our compensation committee. These agreements do and our amended and restated bylaws will, among other things, require us to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in certain actions or proceeding, including any action, on account of any services undertaken by such person on behalf of us or that person’s status as a member of our board of directors to the maximum extent allowed under Delaware law. We are also required by these agreements to indemnify these individuals for certain expenses (including attorney’s fees) in certain actions or proceeding by or in our right.

Directed Share Program

At our request, the underwriters have reserved up to     shares of common stock offered by this prospectus for sale (approximately  %) at the initial public offering price to certain individuals through a directed share program, including our directors, officers, employees and certain other individuals identified by management. The directed share program will not limit the ability of our directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our common stock. We do not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our common stock. See the section titled “Underwriting—Directed Share Program.”

Policies for Approval of Related Person Transactions

We expect to adopt a written related person transaction policy, to be effective upon the effectiveness of the registration statement of which this prospectus is a part. This policy will set forth our procedures for the

 

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identification, review, consideration and approval or ratification of related person transactions. For purposes of this policy only, a related person transaction is any transaction in which we are a participant and a related person has a direct or indirect material interest. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related person is any executive officer, director, director nominee or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members.

Under this policy, we shall provide our audit committee with all material information regarding such related person transaction. Our audit committee will review the material facts of all related person transactions, taking into account, among other factors that it deems appropriate, whether the related person transaction is on terms no less favorable to us than terms generally available in a transaction with an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. To facilitate identification of related person transactions, we will compile a list of all related persons and related person affiliates, and update the list at least annually, based on questionnaires completed by our directors and officers. Each of our directors, officers and director nominees shall also be responsible for promptly notifying us of any change in the identity of relevant related person affiliates.

In addition, under our code of business conduct and ethics, our employees and directors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.

In considering related person transactions, our audit committee, or other independent body of our board of directors, will take into account the relevant available facts and circumstances including, but not limited to:

 

  •  

the risks, costs and benefits to us;

 

  •  

the impact on a director’s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

 

  •  

the availability of other sources for comparable services or products; and

 

  •  

the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

This policy requires that, in determining whether to approve, ratify or reject a related person transaction, our audit committee or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee or other independent body of our board of directors, determines in the good faith exercise of its discretion. All of the transactions described above were entered into prior to the adoption of the written policy, but all were approved by our board of directors considering similar factors to those described above.

 

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PRINCIPAL STOCKHOLDERS

The following table presents information concerning the beneficial ownership of the shares of our common stock as of June 30, 2025 by:

 

  •  

each person, or group of affiliated persons, we know to be the beneficial owner of 5% or more of our outstanding shares of our capital stock;

 

  •  

each of our directors;

 

  •  

each of our named executive officers; and

 

  •  

all of our current executive officers and directors as a group.

We have determined beneficial ownership in accordance with SEC rules. The information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, a person is deemed to be a beneficial owner of our common stock if that person has a right to acquire ownership of such common stock within 60 days, including through the exercise of options or the conversion of our redeemable convertible preferred stock. A person is also deemed to be a beneficial owner of our common stock if that person has or shares voting power, which includes the power to vote or direct the voting of our common stock, or investment power, which includes the power to dispose of or to direct the disposition of such capital stock. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.

Percentage of beneficial ownership in the table below is based on    shares of common stock deemed to be outstanding as of June 30, 2025, assuming the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 163,099,487 shares of our common stock immediately prior to the closing of this offering. The table below assumes that the underwriters do not exercise their over-allotment option and excludes any purchases that may be made through our directed share program and any potential purchases in this offering by the beneficial owners identified in the table below. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of June 30, 2025 are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, the address of each individual listed below is 1841 Page Mill Road, Suite 100, Palo Alto, CA 94304.

 

     Number of
Shares
Beneficially
Owned
     Percentage of Shares
Beneficially Owned
 

Name and Address of Beneficial Owner

   Before
Offering
    After
Offering
 

5% or Greater Stockholders:

       

Entities Affiliated with Pivotal bioVenture(1)

     28,688,496        16.3 %        % 

LSP 7 Coöperatief UA(2)

     28,681,257        16.3 %        % 

Entities Affiliated with RA Capital(3)

     18,814,319        10.7 %        % 

BioDiscovery 6 FPCI(4)

     15,363,187        8.7 %        % 

SymBiosis II, LLC(5)

     10,909,679        6.2 %        % 

Entities Affiliated with B Capital Group(6)

     9,407,158        5.3 %        % 

Named Executive Officers and Directors:

       

Luis Peña(7)

     8,504,585        4.7 %        % 

Eugene A. Bauer, M.D.(8)

     3,509,348        2.0 %        % 

Kyle Carver, M.B.A., C.P.A.(9)

     1,359,825        *         % 

Janice Drew, M.P.H.(10)

     1,416,759        *         % 

Gregory S. Moss, Esq.(11)

     1,651,367        *         % 

 

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     Number of
Shares
Beneficially
Owned
     Percentage of Shares
Beneficially Owned
 

Name and Address of Beneficial Owner

   Before
Offering
    After
Offering
 

Jeegar Patel, Ph.D.(12)

     908,390        *         % 

Benjamin F. McGraw, III, Pharma. D.(13)

     622,555        *         % 

Francois Beaubien, Ph.D., C.F.A.(14)

     5,017,151        2.8 %        % 

David E. Cohen, M.D., M.P.H.(15)

     674,143        *         % 

Derek DiRocco, Ph.D.

     —         *         % 

Rob Hopfner, R.Ph., Ph.D.(1)(16)

     28,714,286        16.3 %        % 

Felice Verduyn-van Weegen(2)

     28,681,257        16.3 %        % 

Yuexin Yu

     —         *         % 

All executive officers and directors as a group (13 persons)(17)

     81,059,666        43.12 %        % 
 
*

Represents beneficial ownership of less than one percent.

(1)

Consists of (i)(a) 3,572,816 shares of common stock issuable upon the conversion of Series Seed preferred stock, (b) 7,741,351 shares of common stock issuable upon the conversion of Series A preferred stock, (c) 2,277,433 shares of common stock issuable upon the conversion of Series B preferred stock, and (d) 313,571 shares of common stock issuable upon the conversion of Series C preferred stock in each case held by Pivotal bioVenture Partners Fund I, L.P. (“Pivotal I”), (ii) 2,508,575 shares of common stock issuable upon the conversion of Series C preferred stock held by Pivotal bioVenture Partners Fund II, L.P. (“Pivotal II”), and (iii)(a) 7,145,647 shares of common stock issuable upon the conversion of Series Seed preferred stock, (b) 2,764,767 shares of common stock issuable upon the conversion of Series A preferred stock, (c) 2,050,765 shares of common stock issuable upon the conversion of Series B preferred stock preferred stock, and (d) 313,571 shares of common stock issuable upon the conversion of Series C preferred stock preferred stock in each case held by NFLS Delta III Limited (“NFLS Delta”). NFLS Delta, Pivotal bioVenture Partners Fund I G.P., L.P., the general partner of Pivotal I, and Pivotal bioVenture Partners Fund II G.P. Ltd, the general partner of Pivotal II, are each wholly-owned indirect subsidiaries of Nan Fung Group Holdings Limited. Investment and voting decisions with respect to the securities held by NFLS Delta are made by the members of Nan Fung Group Holdings Limited’s Life Sciences Investment Committee, who are Mr. Kam Chung Leung, Mr. Vincent Sai Sing Cheung, Mr. Stephen Pui Kuen Cheung, Ms. Vanessa Tih Lin Cheung, Mr. Meng Gao, Ms. Anna Xintong Sun, Mr. Peter Bisgaard, and Dr. Robert Hopfner. Investment and voting decisions with respect to the securities held by Pivotal I and Pivotal II are made by the members of the Investment Committees of Pivotal bioVenture Partners Fund I G.P., L.P., and Pivotal bioVenture Partners Fund II, G.P. Ltd., who are Mr. Vincent Sai Sing Cheung, Mr. Peter Bisgaard, and Dr. Robert Hopfner. The address of NFLS Delta and the individual members of Nan Fung Group Holdings Limited’s Life Sciences Investment Committee other than Mr. Peter Bisgaard and Dr. Robert Hopfner is 17th Floor, Airside, 2 Concorde Road, Kai Tak, Hong Kong SAR. The address of all other entities and individuals referenced in this footnote is 501 2nd Street, Suite 200, San Francisco, California 94107.

(2)

Consists of (i) 16,588,613 shares of common stock issuable upon the conversion of Series A preferred stock, (ii) 5,507,633 shares of common stock issuable upon the conversion of Series B preferred stock, and (iii) 6,585,011 shares of common stock issuable upon the conversion of Series C preferred stock shares of common stock. As the sole director of LSP 7 Coöperatief UA, LSP 7 Management BV may be deemed to beneficially own these securities. As managing directors of LSP 7 Management BV, each of Martijn Kleijwegt, René Kuijten and Joachim Rothe may also be deemed to beneficially own these securities.

(3)

Consists of (i) 12,924,620 shares of common stock issuable upon the conversion of Series C preferred stock held by RA Capital Healthcare Fund, LP, and (ii) 5,889,699 shares of common stock issuable upon the conversion of Series C preferred stock held by RA Capital Nexus Fund III, L.P (the “RA Funds”). RA Capital Management, L.P. is the investment manager for the RA Funds. The general partner of RA Capital Management, L.P. is RA Capital Management GP, LLC, of which Peter Kolchinsky and Rajeev Shah are the managing members. Each of RA Capital Management, L.P., RA Capital Management GP, LLC, Mr. Kolchinsky and Mr. Shah may be deemed to have voting and investment power over the shares held by

 

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the RA Funds. RA Capital Management, L.P., RA Capital Management GP, LLC, Mr. Kolchinsky and Mr. Shah disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The principal business address of the persons and entities listed above is 200 Berkeley Street, 18th Floor, Boston, MA 02116.

(4)

Consists of (i) 10,506,120 shares of common stock issuable upon the conversion of Series A preferred stock, (ii) 2,975,636 shares of common stock issuable upon the conversion of Series B preferred stock, and (iii) 1,881,431 shares of common stock issuable upon the conversion of Series C preferred stock preferred stock. Voting and investment decisions by BioDiscovery 6 FPCI is exercised by its Management Company Andera Partners. The Managing Partners of Andera Partners are François-Xavier Mauron (Chairman) and Stéphane Bergez (Chief Executive Officer), neither of whom has individual voting or investment power with respect to the shares.

(5)

Consists of (i) 5,529,536 shares of common stock issuable upon the conversion of Series A preferred stock, (ii) 4,125,855 shares of common stock issuable upon the conversion of Series B preferred stock, and (iii) 1,254,287 shares of common stock issuable upon the conversion of Series C preferred stock preferred stock. The business address of Symbiosis II, LLC is 609 S.W. 8th Street, Suite 510, Bentonville, Arkansas 72712.

(6)

Consists of (i) 4,703,579 shares of common stock issuable upon the conversion of Series C preferred stock held by B Capital Global Growth III, L.P., and (ii) 4,703,579 shares of common stock issuable upon the conversion of Series C preferred stock held by B Capital Healthcare I, L.P. B Capital Group Management, LP is the manager of B Capital Global Growth III and B Capital Healthcare I, L.P. Hornet-Co-Invest Investors, Ltd. is the ultimate general partner of Hornet Co-Invest. The address of all entities affiliated with B Capital Group is c/o B Capital Group Management, LP, 1240 Rosecrans Avenue, Manhattan Beach, CA 90266.

(7)

Consists of (i) 4,000,000 shares of common stock beneficially owned by Mr. Peña, (ii) 206,355 shares of common stock issuable upon the conversion of Series Seed preferred stock, and (iii) 4,298,230 shares of common stock issuable upon the exercise of options held by Mr. Peña that are exercisable within 60 days of June 30, 2025.

(8)

Consists of (i) 2,000,000 shares of common stock beneficially owned by Dr. Bauer, (ii) 206,355 shares of common stock issuable upon the conversion of Series Seed preferred stock, (iii) 13,525 shares of common stock issuable upon the conversion of Series B preferred stock, and (iv) 1,289,468 shares of common stock issuable upon the exercise of options held by Dr. Bauer that are exercisable within 60 days of June 30, 2025.

(9)

Consists of (i) 27,051 shares of common stock issuable upon the conversion of Series B preferred stock, and (ii) 1,332,774 shares of common stock issuable upon the exercise of options held by Mr. Carver that are exercisable within 60 days of June 30, 2025.

(10)

Consists of (i) 300,000 shares of common stock beneficially owned by Ms. Drew, (ii) 13,525 shares of common stock issuable upon the conversion of Series B preferred stock, and (iii) 1,103,234 shares of common stock issuable upon the exercise of options held by Ms. Drew that are exercisable within 60 days of June 30, 2025.

(11)

Consists of (i) 27,051 shares of common stock issuable upon the conversion of Series B preferred stock beneficially held by Mr. Moss, and (ii) 1,624,316 shares of common stock issuable upon the exercise of options held by Mr. Moss that are exercisable within 60 days of June 30, 2025.

(12)

Consists of (i) 27,051 shares of common stock issuable upon the conversion of Series B preferred stock, and (ii) 881,339 shares of common stock issuable upon the exercise of options held by Dr. Patel that are exercisable within 60 days of June 30, 2025.

(13)

Consists of 622,555 shares of common stock issuable upon the exercise of options held by Dr. McGraw that are exercisable within 60 days of June 30, 2025.

(14)

Consists of 5,017,151 shares of common stock issuable upon the conversion of Series C preferred stock held by New Emerging Medical Opportunities Fund V SCSp. Dr. Beaubien, a member of our board of directors, is a partner of New Emerging Medical Opportunities Fund IV SCSp and may be deemed to be a beneficial owner of the securities held by New Emerging Medical Opportunities Fund IV SCSp. Dr. Beaubien disclaims beneficial ownership of these securities, except to the extent of his pecuniary interest therein. The

 

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address for New Emerging Medical Opportunities Fund V SCSp and Dr. Beaubien is c/o Sectoral Asset Management Inc., 1010 Sherbrooke St. West, Suite 1610, Montreal, QC, H3A 2R7, Canada.

(15)

Consists of (i) 150,000 shares of common stock beneficially owned by Dr. Cohen, (ii) 51,588 shares of common stock issuable upon the conversion of Series Seed preferred stock, and (iii) 472,555 shares of common stock issuable upon the exercise of options held by Dr. Cohen that are exercisable within 60 days of June 30, 2025.

(16)

Consists of 25,790 shares of common stock issuable upon the conversion of Series Seed preferred stock beneficially held by Dr. Hopfner.

(17)

Consists of (i) 6,450,000 shares of common stock beneficially owned by our current executive officers and directors, (ii) 11,208,551 shares of common stock issuable upon the conversion of Series Seed preferred stock, (iii) 27,094,731 shares of common stock issuable upon the conversion of Series A preferred stock, (iv) 9,944,034 shares of common stock issuable upon the conversion of Series B preferred stock, (v) 14,737,879 shares of common stock issuable upon the conversion of Series C preferred stock, and (vi) 11,624,471 shares of common stock issuable upon the exercise of options held by our current executive officers and directors within 60 days of June 30, 2025.

 

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DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated bylaws are summaries of the material terms and provisions of such documents and are qualified by reference to our amended and restated certificate of incorporation and amended and restated bylaws, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus is a part. The descriptions of our common stock and preferred stock reflect amendments to our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the completion of this offering.

General

Upon the closing of this offering, our authorized capital stock will consist of      shares of common stock, par value $0.0001 per share, and      shares of preferred stock, par value $0.0001 per share, all of which will be undesignated, and there will be      shares of common stock outstanding and no shares of preferred stock outstanding.

As of June 30, 2025, 13,245,339 shares of our common stock were outstanding and held of record by 18 stockholders. This amount does not take into account (i) the conversion of all outstanding shares of our convertible preferred stock into common stock upon the closing of this offering, (ii) the issuance by us of shares of our common stock in this offering and (iii) the exercise of any options or repurchase of restricted stock after June 30, 2025. In addition, upon the closing of this offering,     options to purchase shares of our common stock will be outstanding and      shares of our common stock will be reserved for future grants under our equity incentive plans.

As of June 30, 2025, (a) 12,858,517 shares of our Series Seed Preferred Stock, par value $0.0001 per share, were outstanding and held of record by 19 stockholders; (b) 43,614,102 shares of Series A Preferred Stock were outstanding and held of record by ten stockholders; (c) 28,750,000 shares of Series B Preferred Stock were outstanding and held of record by 17 stockholders; and (d) 72,435,110 shares of Series C Preferred Stock were outstanding and held of record by 25 stockholders.

Common Stock

Upon the completion of this offering, we will be authorized to issue one class of common stock. Holders of our common stock are entitled to one vote for each share of common stock held of record for the election of directors and on all matters submitted to a vote of stockholders. Except as described under “—Anti-takeover Effects of Delaware Law and Provisions of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws” below, a majority vote of the holders of common stock is generally required to take action under our amended and restated certificate of incorporation and amended and restated bylaws. Holders of our common stock are entitled to receive dividends ratably, if any, as may be declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then outstanding. Upon our dissolution, liquidation or winding up, holders of our common stock are entitled to share ratably in our net assets legally available after the payment of all our debts and other liabilities, subject to the preferential rights of any preferred stock then outstanding. Holders of our common stock have no preemptive, subscription, redemption or conversion rights and no sinking fund provisions are applicable to our common stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Immediately prior to closing of this offering, all outstanding shares of our convertible preferred stock will be converted into shares of our common stock.

 

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Upon the closing of this offering, our board of directors will be authorized, without action by the stockholders, to designate and issue up to an aggregate of shares of preferred stock in one or more series. Our board of directors can designate the rights, preferences and privileges of the shares of each series and any of its qualifications, limitations or restrictions. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The issuance of preferred stock, while providing flexibility in connection with possible future financings and acquisitions and other corporate purposes could, under certain circumstances, have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock or delaying, deferring or preventing a change in control of us, which might harm the market price of our common stock. See also “—Anti-Takeover Effects of Delaware Law and Provisions of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws—Provisions of our amended and restated certificate of incorporation and amended and restated bylaws—Undesignated preferred stock” below.

Our board of directors will make any determination to issue such shares based on its judgment as to our best interests and the best interests of our stockholders. Upon the completion of this offering, we will have no shares of preferred stock outstanding and we have no current plans to issue any shares of preferred stock following completion of this offering

Options

As of June 30, 2025, we had outstanding options to purchase 31,741,410 shares of our common stock, with a per-share weighted-average exercise price of $0.36 under the 2020 Plan.

Registration Rights

Upon the completion of this offering, the holders of      shares of our common stock, including 163,099,487 shares issuable upon the automatic conversion of our convertible preferred stock, or their permitted transferees, which we refer to as our registrable securities, are entitled to rights with respect to the registration of these securities under the Securities Act. These rights are provided under the terms of the Investors’ Rights Agreement. The Investors’ Rights Agreement includes demand registration rights, short-form registration rights and piggyback registration rights. All fees, costs and expenses incurred in connection with registrations under the Investors’ Rights Agreement, will be borne by us, and all selling expenses, including underwriting discounts and selling commissions, will be borne by the holders of the shares being registered.

Demand registration rights

Beginning 180 days after the effective date of this registration statement, the holders of our registrable securities are entitled to demand registration rights. Under the terms of the Investors’ Rights Agreement, we will be required, upon the request of holders of at least a majority of our outstanding registrable securities, to file a registration statement and effect the registration of these shares for public resale, unless our board of directors decides in good faith that such registration would be materially detrimental to us and our stockholders under the circumstances. We are required to effect up to two registrations pursuant to this provision of the Investors’ Rights Agreement.

Short form registration rights

Upon the completion of this offering, the holders of our registrable securities are also entitled to short form registration rights. Pursuant to the Investors’ Rights Agreement, if we are eligible to file a registration statement on Form S-3, upon the request of holders of at least 20% of our outstanding registrable securities to sell registrable securities with an anticipated aggregate offering amount of at least $5.0 million net of certain expenses related to the offering, we will be required to effect a registration of such shares, unless our board of

 

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directors decides in good faith that such registration would be materially detrimental to us and our stockholders under the circumstances. We are required to effect up to two registrations in any twelve-month period pursuant to this provision of the Investors’ Rights Agreement.

Piggyback registration rights

In connection with this offering, the holders of an aggregate of 163,099,487 shares of our common stock 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. After this offering, in the event that we propose to, subject to limited exceptions, register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the holders of our outstanding registrable securities are entitled to include their shares in the registration. Subject to certain exceptions contained in the Investors’ Rights Agreement, we and the underwriters may limit the number of shares included in the underwritten offering if the underwriters determine that marketing factors require a limitation of the number of shares to be underwritten.

Indemnification

The Investors’ Rights Agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to us, and such holders are obligated to indemnify us for material misstatements or omissions attributable to them.

Expenses of registration

We will pay the registration expenses, subject to certain limited exceptions contained in the Investors’ Rights Agreement, of the holders of the shares registered pursuant to the demand, short form and piggyback registration rights described above, including the expenses of one counsel for the selling holders.

Expiration of registration rights

The registration rights granted under the Investors’ Rights Agreement will terminate upon the earlier of (i) a deemed liquidation event, as defined in our restated certificate of incorporation (as in effect prior to the completion of this offering) or certain other events constituting our sale, (ii) at such time after our initial public offering when all registrable securities could be sold under Rule 144 of the Securities Act or a similar exemption without limitation during a three-month period without registration or (iii) the fifth anniversary of our initial public offering.

Anti-Takeover Effects of Delaware Law and Provisions of Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

Certain provisions of the DGCL and of our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the completion of this offering could have the effect of delaying, deferring or discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and, as a consequence, they might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions are also designed in part to encourage anyone seeking to acquire control of us to first negotiate with our board of directors. These provisions might also have the effect of preventing changes in our board of directors or management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests. However, we believe that the advantages gained by protecting our ability to negotiate with any unsolicited and potentially unfriendly acquirer outweigh the disadvantages of discouraging such proposals, including those priced above the then-current market value of our common stock, because, among other reasons, the negotiation of such proposals could improve their terms.

 

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Delaware takeover statute

Upon completion of this offering, we will be subject to the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

 

  •  

before the stockholder became interested, our board of directors 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 outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or

 

  •  

at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds 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, lease, pledge, exchange, mortgage 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; or

 

  •  

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.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws

Our amended and restated certificate of incorporation and amended and restated bylaws to be in effect immediately prior to the closing of this offering will include a number of provisions that may have the effect of delaying, deferring or discouraging another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include the items described below.

Board composition and filling vacancies. In accordance with our amended and restated certificate of incorporation, our board is divided into three classes serving staggered three-year terms, with one class being elected each year. Our amended and restated certificate of incorporation also provides that directors may be

 

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removed only for cause and then only by the affirmative vote of the holders of or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum.

No written consent of stockholders. Our amended and restated certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our bylaws or removal of directors by our stockholder without holding a meeting of stockholders.

Meetings of stockholders. Our amended and restated bylaws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our amended and restated bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

Advance notice requirements. Our amended and restated bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in our amended and restated bylaws.

Amendment to certificate of incorporation and bylaws. As required by the DGCL, any amendment of our amended and restated certificate of incorporation must first be approved by a majority of our board of directors and, if required by law or our amended and restated certificate of incorporation, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, directors, limitation of liability and the amendment of our amended and restated certificate of incorporation must be approved by at least a majority of all of the outstanding shares of each class entitled to vote thereon voting together as a single class. Our bylaws may be amended by the affirmative vote of a majority vote of the directors then in office, subject to any limitations set forth in the bylaws, and may also be amended by the affirmative vote of at least a majority of the outstanding shares entitled to vote on the amendment, voting together as a single class.

Undesignated preferred stock. Our amended and restated certificate of incorporation provides for 10,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of us or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation grants our board of directors’ broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.

Exclusive forum. Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any state law claims for: (i) any derivative

 

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action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws or (v) any action asserting a claim against us governed by the internal affairs doctrine. This exclusive forum provision will not apply to any causes of action arising under the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternate forum, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, as we are a Delaware corporation. Although our amended and restated bylaws contain the choice of forum provision described above, it is possible that a court could rule that such provisions are inapplicable for a particular claim or action or that such provisions are unenforceable.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. The transfer agent and registrar’s address is 150 Royall Street, Canton, Massachusetts 02021, and its telephone number is (781) 575-2000.

Listing

We have applied to list our common stock on the NYSE under the symbol “EVMN.”

Limitations of Liability and Indemnification Matters

For a discussion of liability and indemnification, see the section entitled “Management—Limitation on Liability and Indemnification Matters.”

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there was no public market for our common stock. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, since only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale, sales of substantial amounts of common stock in the public market after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Sale of Restricted Shares

Based on the number of shares of common stock outstanding as of June 30, 2025, upon the closing of this offering,      shares of common stock will be outstanding, assuming no exercise by the underwriters of their over-allotment option and no exercise of stock options. All of the shares sold in this offering will be freely tradable, except for any shares of common stock purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act or any shares, including any shares purchased by any of our affiliates pursuant to our directed share program, subject to lock-up agreements. The remaining shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements as described below. Following the expiration of the applicable restricted period, all shares will be eligible for resale in compliance with Rule 144 or Rule 701 under the Securities Act. “Restricted securities” as defined under Rule 144 under the Securities Act were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. These shares may be sold in the public market only if registered or qualified for an exemption from registration, such as under Rule 144 or Rule 701 under the Securities Act.

Rule 144

In general, a person who has beneficially owned restricted securities for at least six months would be entitled to sell such securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are, and have been for a period of at least 90 days prior to the sale, subject to the Exchange Act periodic reporting requirements. Persons who have beneficially owned restricted securities for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, including a restriction on the volume of securities that may be sold within any three-month period to the greater of the following:

 

  •  

1% of the number of shares then outstanding, which will equal approximately      shares immediately after this offering, assuming no exercise of the underwriters’ over-allotment option, based on the number of shares outstanding as of June 30, 2025; or

 

  •  

the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case, that we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the current public information requirements of Rule 144.

An “affiliate” is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with an issuer. Affiliate resales under Rule 144 must also be made in compliance with manner of sale requirements contained in Rule 144. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.

 

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Non-Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us (as well as the lock-up agreement referred to above, if applicable). If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.

Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.

Rule 701

Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.

Lock-up Agreements

In connection with this offering, we, each of our directors and executive officers and holders of substantially all of our securities have agreed with the underwriters that for a period of 180 days following the date of this prospectus, subject to certain exceptions, we and they will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for shares of our common stock. Morgan Stanley & Co. LLC, Leerink Partners LLC and Evercore Group L.L.C., on behalf of the underwriters may, in their sole discretion, at any time, release all or any portion of the shares from the restrictions in this agreement.

Rule 10b5-1 Trading Plans

Certain of our officers, directors and significant stockholders may adopt written plans, known as Rule 10b5-1 trading plans, in which they will contract with a broker to establish prespecified terms at which the broker may execute purchases or sales of our common stock without further direction from such officer, director or stockholder. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Such sales would not commence until the expiration of the applicable lock-up agreements entered into by such officer, director or stockholder in connection with this offering. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they do not possess material nonpublic information, subject to compliance with the terms of our insider trading policy and any applicable Rule 10b5-1 guidelines, following the expiration of the applicable lock-up agreement.

Registration Rights

We are party to the Investors’ Rights Agreement which provides that holders holding shares of our common stock, including shares issuable upon the automatic conversion of our convertible preferred stock, have the right to demand that we file a registration statement or request that their shares of our common stock be covered by a registration statement that we are otherwise filing. See the section entitled “Description of Capital Stock—Registration Rights” elsewhere in this prospectus. Except for any shares purchased by affiliates, registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of the registration statement, subject to the

 

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expiration of the lock-up period described above and in the section entitled “Underwriting” in this prospectus, and to the extent such shares have been released from any repurchase option that we may hold.

Equity Incentive Plans

As soon as practicable after the closing of this offering, we intend to file a Form S-8 registration statement under the Securities Act to register shares of our common stock subject to options and other equity awards outstanding or reserved for issuance under our equity incentive plans. This registration statement will become effective immediately upon filing, and      shares covered by this registration statement will thereupon be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates and any lock-up agreements. For a more complete discussion of our equity incentive plans, see “Executive Compensation—Equity Compensation Plans.”

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the acquisition, ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all potential U.S. federal income tax consequences relating thereto, does not address the potential application of the Medicare contribution tax on net investment income, the alternative minimum tax or the special tax accounting rules under Section 451(b) of the Code and does not address any estate or gift tax consequences or any tax consequences arising under any state, local or non-U.S. tax laws or any other U.S. federal tax laws. This discussion is based on the Code and applicable Treasury Regulations promulgated or proposed thereunder, published rulings and administrative pronouncements of the IRS and judicial decisions, all as in effect as of the date hereof. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.

This discussion is limited to non-U.S. holders who purchase our common stock pursuant to this offering and who hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to a particular holder in light of such holder’s particular circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under U.S. federal income tax laws, including but not limited to:

 

  •  

certain former citizens or long-term residents of the United States;

 

  •  

“controlled foreign corporations”;

 

  •  

“passive foreign investment companies”;

 

  •  

corporations that accumulate earnings to avoid U.S. federal income tax;

 

  •  

banks, financial institutions, investment funds, insurance companies, brokers, dealers or traders in securities or foreign currencies;

 

  •  

tax-exempt organizations and governmental organizations;

 

  •  

tax-qualified retirement plans;

 

  •  

persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

 

  •  

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

 

  •  

persons that own, or have owned, actually or constructively, more than 5% of our stock at any time;

 

  •  

persons who have elected to mark securities to market; and

 

  •  

persons holding our common stock as part of a hedging or conversion transaction or straddle, a constructive sale or other risk reduction strategy or integrated investment.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of the partnership and the partners thereof generally depend on the status of the partner and the activities of the partnership. Partnerships holding our common stock and the partners in such partnerships are urged to consult their tax advisors about the particular U.S. federal income tax consequences to them of holding and disposing of our common stock.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE

 

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PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS.

Definition of Non-U.S. Holder

For purposes of this discussion, the term “non-U.S. holder” means any beneficial owner of our common stock that is not a “U.S. person” or a partnership (including any entity or arrangement treated as a partnership) for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

  •  

an individual who is a citizen or resident of the United States;

 

  •  

a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

  •  

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

  •  

a trust (i) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

Distributions on Our Common Stock

We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock for the foreseeable future. However, if we make cash or other property distributions on our common stock (other than certain pro rata distributions of our stock), such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a holder’s tax basis in our common stock, but not below zero. Any excess will be treated as gain realized on the sale or other disposition of our common stock and will be treated as described under the subsection titled “—Gain on Disposition of Our Common Stock” below.

Subject to the discussions below regarding effectively connected income, backup withholding and Sections 1471 through 1474 of the Code (commonly referred to as the Foreign Account Tax Compliance Act (“FATCA”), dividends paid to a non-U.S. holder generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends or such lower rate specified by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish us or our paying agent with a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) and satisfy applicable certification and other requirements. This certification must be provided to us or our paying agent before the payment of dividends and must be updated periodically. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

If a non-U.S. holder holds our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on our common stock are effectively connected with such holder’s U.S. trade or business (and, if required by an applicable tax treaty, are attributable to such holder’s permanent establishment in the United States), the non-U.S. holder will be exempt from U.S. federal withholding tax. To claim the exemption, the non-U.S. holder generally must furnish a valid IRS Form W-8ECI (or applicable successor form) to us or our paying agent. However, any such effectively connected dividends paid on our common stock generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax

 

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rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.

Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules. Non-U.S. holders that do not provide the required certification on a timely basis, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

Gain on Disposition of Our Common Stock

Subject to the discussions below regarding backup withholding and FATCA, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized on the sale or other disposition of our common stock, unless:

 

  •  

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States;

 

  •  

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

 

  •  

our common stock constitutes a United States real property interest (“USRPI”) by reason of our status as a United States real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period for our common stock.

The determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of worldwide real property interests and our other assets used or held for use in a trade or business. We believe that we are not currently and do not anticipate becoming a USRPHC for U.S. federal income tax purposes although there can be no assurance we will not become a USRPHC in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition of our common stock by a non-U.S. holder will not be subject to U.S. federal income tax if our common stock is “regularly traded” (as defined by applicable Treasury Regulations) on an established securities market and such non-U.S. holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the non-U.S. holder’s holding period. Prospective investors are encouraged to consult their own tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (unless an applicable income tax treaty provides for different treatment) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), but may be offset by certain U.S.-source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Annual reports are required to be filed with the IRS and provided to each non-U.S. holder indicating the amount of distributions on our common stock paid to such holder and the amount of any tax withheld with

 

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respect to those distributions. These information reporting requirements apply regardless of whether such distributions constitute dividends and even if no withholding was required. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, currently at a 24% rate, generally will not apply to payments to a non-U.S. holder of dividends on or the gross proceeds of a disposition of our common stock provided the non-U.S. holder furnishes the required certification for its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or certain other requirements are met. Backup withholding may apply if the payor has actual knowledge, or reason to know, that the holder is a U.S. person who is not an exempt recipient.

Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Prospective investors should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them, including the availability of and procedure for obtaining an exemption from backup withholding.

Backup withholding is not an additional tax. If any amount is withheld under the backup withholding rules, the non-U.S. holder should consult with a U.S. tax advisor regarding the possibility of and procedure for obtaining a refund or a credit against the non-U.S. holder’s U.S. federal income tax liability, if any.

FATCA

FATCA imposes a U.S. federal withholding tax of 30% on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. FATCA currently applies to dividends paid on our common stock. Under applicable Treasury Regulations and administrative guidance, withholding under FATCA would have applied to payments of gross proceeds from the sale or other disposition of stock, but under proposed regulations (the preamble to which specifies that taxpayers are permitted to rely on such proposed regulations pending finalization), no withholding would apply with respect to payments of gross proceeds.

Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our common stock.

 

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UNDERWRITING

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, Leerink Partners LLC, Evercore Group L.L.C. and Cantor Fitzgerald & Co. are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:

 

Name

   Number of
Shares
 

Morgan Stanley & Co. LLC

  

Leerink Partners LLC

  

Evercore Group L.L.C.

  

Cantor Fitzgerald & Co.

  
  

 

 

 

Total:

          
  

 

 

 

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.

The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $    per share under the public offering price. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representative.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to      additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.

The following table shows the per share and total public offering price, underwriting discounts and commissions and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional      shares of common stock.

 

            Total  
     Per
Share
     No
Exercise
     Full
Exercise
 

Public offering price

   $           $           $       

Underwriting discounts and commissions to be paid by us

   $        $        $    

Proceeds, before expenses, to us

   $        $        $    

The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $   . We have agreed to reimburse the underwriters for expenses relating to clearance of

 

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this offering with the Financial Industry Regulatory Authority, Inc. (“FINRA”) up to $   . In accordance with FINRA Rule 5110 these reimbursed expenses are deemed underwriting compensation for this offering. The underwriters have agreed to reimburse us for certain immaterial expenses.

The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.

We have applied to list our common stock on the NYSE under the trading symbol “EVMN”.

We and all directors and officers and the holders of all of our outstanding stock and stock options have agreed that, without the prior written consent of Morgan Stanley & Co. LLC, Leerink Partners LLC and Evercore Group L.L.C. on behalf of the underwriters, we and they will not publicly disclose an intention to, during the period ending 180 days after the date of this prospectus (the “restricted period”), (1) 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, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clauses (1) or (2) above is to be settled by delivery of our common stock or such other securities, in cash or otherwise or (3) in the case of us, confidentially submit or file any registration statement with the Securities and Exchange Commission relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock.

In addition, we and each such person agree that, without the prior written consent of Morgan Stanley & Co. LLC, Leerink Partners LLC and Evercore Group L.L.C. on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock.

With respect to us, the restrictions described in the immediately preceding paragraph do not apply to:

 

  i.

the sale of shares to the underwriters; or

 

  ii.

the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing.

With respect to our directors, officers and securityholders, the restrictions described above do not apply to:

 

  i.

transactions relating to shares of common stock or other securities acquired in this offering or in open market transactions after the completion of this offering; provided that no filing under Section 16(a) of the Exchange Act or other public disclosure reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the restricted period in connection with subsequent sales of common stock or other securities acquired in this offering or in such open market transactions (other than a required filing on Schedule 13D, 13F or 13G or, in the case of the case of certain of our securityholders, any required filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of shares, which filing must clearly indicate in the footnotes thereto that such transfer is being made pursuant to the circumstances described in this clause (i));

 

  ii.

transfers of shares of common stock or any security convertible into common stock, or exercisable or exchangeable for, common stock (i) as a bona fide gift, including, without limitation, to a charitable organization or educational institution, (ii) to an immediate family member (as defined below) of the holder or to any trust or similar entity for the direct or indirect benefit of the holder or an immediate family member of the holder, (iii) to a corporation, partnership, limited liability company or other entity of which the holder or an immediate family member of the holder is the legal and beneficial

 

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owner of all of the outstanding equity securities or similar interests, (iv) by will, other testamentary document or intestate succession upon the death of the holder or (v) if the holder is a trust, to a trustor, trustee or beneficiary of the trust or to the estate of a beneficiary of such trust; provided that (1) in the case of any transfer or distribution pursuant to this clause (b), (A) such transfer shall not involve a disposition for value and (B) each donee, distributee or other transferee shall sign and deliver a lock-up agreement, (2) in the case of any transfer or distribution pursuant to clauses (b)(ii), (iii) and (v) above, no filing under Section 16(a) of the Exchange Act or other public disclosure reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the restricted period (other than a required filing on Schedule 13D, 13F or 13G) and (3) in the case of any transfer or distribution pursuant to clauses (b)(i) and (iv) above, no filing under Section 16(a) of the Exchange Act or other public disclosure shall be made voluntarily during the restricted period, and to the extent a filing under Section 16(a) of the Exchange Act is required during the restricted period as a result of transfers made pursuant to clauses (b)(i) or (iv), it shall clearly indicate that the filing relates to the circumstances described in clause (b)(i) or (iv), as applicable, including that the securities remain subject to the terms of the lock-up agreement;

 

  iii.

transfers of shares of common stock or any security convertible into common stock, or exercisable or exchangeable for, common stock (i) as a distribution to current or former general or limited partners, managers or members, stockholders or other equityholders of the holder or (ii) to direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933, as amended) of the holder or to the estates of the foregoing or to any investment fund or other entity that, directly or indirectly, controls or manages, is controlled or managed by, or is under common control or management with the holder or affiliates of the holder (including, for the avoidance of doubt, where the holder is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership); provided that, in the case of any transfer or distribution pursuant to this clause (c), (A) each transferee, donee or distributee shall sign and deliver a lock-up agreement, (B) no filing under Section 16(a) of the Exchange Act or other public disclosure reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the restricted period (other than a required filing on Schedule 13D, 13F or 13G) and (C) such transfer shall not involve a disposition for value;

 

  iv.

the exercise of options or other similar awards or the vesting or settlement of awards granted pursuant to a stock incentive plan or other equity award plan that is described in this prospectus (including the delivery and receipt of shares of common stock, other awards or any securities convertible into or exercisable or exchangeable for shares of common stock in connection with such exercise, vesting or settlement) and transfers of shares of common stock or any security convertible into, or exercisable or exchangeable for, common stock to us in connection with the vesting or settlement of restricted stock units or the exercise of options or other rights to acquire shares of common stock (including, in each case, by way of “net” or “cashless” exercise), including any transfer to us for the payment of tax withholdings or remittance payments due as a result of the vesting, settlement or exercise of such restricted stock units, options or other rights or sales of shares of common stock pursuant to a “sell-to-cover” arrangement upon the vesting, settlement or exercise of such restricted stock units, options or other rights solely to cover withholding tax obligations in connection with such transaction and any transfer to us for the payment of taxes as a result of such transaction, in all such cases, pursuant to equity awards granted under a stock incentive plan or other equity award plan that is described in this prospectus; provided that (i) any shares of common stock received upon such vesting, settlement or exercise that are not transferred to cover any such tax obligations shall be subject to the terms of the lock-up agreement and (ii) no filing under Section 16(a) of the Exchange Act or other public disclosure shall be voluntarily made during the restricted period and, to the extent a filing under Section 16(a) of the Exchange Act is required during the restricted period as a result of any transfer made pursuant to this clause (iv), it shall clearly indicate that the filing relates to the circumstances described in this clause (iv), including that the securities not otherwise transferred remain subject to the terms of the lock-up agreement;

 

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  v.

the conversion of our outstanding preferred stock into shares of common stock as described in this prospectus; provided that any such shares of common stock received upon such conversion shall remain subject to the terms of the lock-up agreement;

 

  vi.

transfers of shares of common stock or any security convertible into, or exercisable or exchangeable for, common stock by operation of law, including pursuant to a court or regulatory agency order, a settlement agreement, a qualified domestic order or in connection with a divorce settlement (including to any nominee or custodian of a person or entity to whom a transfer or disposition would be permissible); provided that (i) the transferee shall sign and deliver a lock-up agreement and (ii) no filing under Section 16(a) of the Exchange Act or other public disclosure shall be voluntarily made during the restricted period and, to the extent a filing under Section 16(a) of the Exchange Act is required during the restricted period as a result of a transfer made pursuant to this clause (vi), it shall clearly indicate that the filing relates to the circumstances described in this clause (vi), including that the securities are subject to the terms of a lock-up agreement;

 

  vii.

transfers of shares of common stock or any security convertible into, or exercisable or exchangeable for, common stock to us (i) in connection with the termination of the holder’s employment or (ii) pursuant to contractual agreements with us as in effect as of the date of this prospectus; provided that no filing under Section 16(a) of the Exchange Act or other public disclosure reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the restricted period (other than a required filing on Schedule 13D, 13F or 13G) shall be required or shall be voluntarily made during the restricted period;

 

  viii.

transfers of shares of common stock or any security convertible into, or exercisable or exchangeable for, common stock to a third party pursuant to a merger, consolidation, bona fide tender offer or other similar transaction that is approved by our board of directors, made to all holders of shares of the common stock and involves a change of control; provided that in the event that such merger, consolidation, bona fide tender offer or other similar transaction is not completed, such securities held by the holder shall remain subject to the provisions of the lock-up agreement; or

 

  ix.

facilitating the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock; provided that (i) such plan does not provide for the transfer of common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the holder or us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period.

Morgan Stanley & Co. LLC, Leerink Partners LLC and Evercore Group L.L.C., in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. 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 the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the

 

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underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representative may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representative to underwriters that may make Internet distributions on the same basis as other allocations.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

William Blair & Company, L.L.C. is acting as a financial adviser in connection with our preparation for this offering.

In addition, in the ordinary course of their various business activities, the underwriters and their respective 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 and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.

Pricing of the Offering

Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods and the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours.

Directed Share Program

At our request, the underwriters have reserved up to 5% of the shares of common stock to be issued by us and offered by this prospectus for sale, at the initial public offering price, to certain of our directors and officers and certain of our employees, business associates, investors and friends and family of our directors, officers, employees, business associates and investors. The sales will be made at our direction by Morgan Stanley & Co. LLC and its affiliates through a directed share program. Any shares sold in the directed share program to our directors or officers who have entered into lock-up agreements described above will be subject to the provisions of such lock-up agreements. The number of shares of common stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.

 

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Selling Restrictions

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.

European Economic Area

In relation to each Member State of the European Economic Area (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 Article 2 of the Prospectus Regulation;

 

(b)

to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the representatives 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 shall require us or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.

For the purposes of this provision, the expression an “offer to the public” in relation to the shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).

United Kingdom

No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which (i) has been approved by the Financial Conduct Authority or (ii) is to be treated as if it had been approved by the Financial Conduct Authority in accordance with the transitional provisions in Article 74 (transitional provisions) of the Prospectus Amendment etc (EU Exit) Regulations 2019/1234, except that offers of shares may be made to the public in the United Kingdom at any time under the following exemptions under the UK Prospectus Regulation:

 

(a)

to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;

 

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(b)

to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or

 

(c)

in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000 (“FSMA”),

provided that no such offer of shares shall require us or any representative to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation.

For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

Hong Kong

The shares of common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares of common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Japan

The shares of common stock have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person (as defined below) or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” means any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the shares of common stock were not offered or sold or caused to be made the subject of an invitation for subscription or purchase and will not be offered or sold or caused to be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of common stock, has not been circulated or distributed, nor will it be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore (as modified or amended from time to time, the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

 

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Where the shares of common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor;

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law; or

(4) as specified in Section 276(7) of the SFA.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (the “SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to us, the offering, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offering of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offering of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (the “CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.

Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, in relation to the offering. This prospectus

 

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does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”) and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the shares may only be made to persons (“Exempt Investors”)) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring the shares must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.

Israel

In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of common stock under the Israeli Securities Law, 5728—1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728—1968, including if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the “Addressed Investors”) or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728—1968, subject to certain conditions (the “Qualified Investors”). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase shares of common stock in addition to the 35 Addressed Investors. The Company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728—1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our common stock to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.

Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728—1968. In particular, we may request, as a condition to be offered common stock, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728—1968 and the regulations promulgated thereunder in connection with the offer to be issued common stock; (iv) that the shares of common stock that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728—1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728—1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.

 

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LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us by Cooley LLP, Boston, Massachusetts. Covington  & Burling LLP, New York, New York, is counsel to the underwriters in connection with this offering.

EXPERTS

The consolidated financial statements of Evommune, Inc. (the Company) as of December 31, 2024 and 2023 and for the years then ended included in this prospectus and in the registration statement have been so included in reliance on the report of BDO USA, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The report on the consolidated financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

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, which constitutes a part of the registration statement. 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.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov. Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available via the SEC’s website at www.sec.gov. We also maintain a website at www.evommune.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. However, the information contained in or accessible through our website is not part of this prospectus or the registration statement of which this prospectus forms a part, and investors should not rely on such information in making a decision to purchase our common stock in this offering.

 

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EVOMMUNE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Audited Financial Statements as of and for the Years Ended December 31, 2024 and 2023    Page  

Report of Independent Registered Public Accounting Firm

     F-2  

Consolidated Balance Sheets

     F-3  

Consolidated Statements of Operations

     F-4  

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

     F-5  

Consolidated Statements of Cash Flows

     F-6  

Notes to the Consolidated Financial Statements

     F-7  

 

Unaudited Condensed Financial Statements as of and for the Six Months Ended June 30, 2025 and
2024
   Page  

Condensed Consolidated Balance Sheets

     F-37  

Condensed Consolidated Statements of Operations

     F-38  

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

     F-39  

Condensed Consolidated Statements of Cash Flows

     F-40  

Notes to the Condensed Consolidated Financial Statements

     F-41  

 

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Table of Contents

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Evommune, Inc.

Palo Alto, CA

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Evommune, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, statements of convertible preferred stock and stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from operations and expects such losses to continue in the future. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2022.

New York, NY

May 14, 2025

 

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EVOMMUNE, INC.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

     December 31,  
     2024     2023  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 16,255     $ 29,024  

Short-term investments

     55,785       50,060  

Prepaid expenses and other current assets

     1,948       948  
  

 

 

   

 

 

 

Total current assets

     73,988       80,032  

Operating lease right-of-use assets

     472       1,231  

Property and equipment, net

     1,326       734  

Restricted cash

     208       208  

Other non-current assets

     61       44  
  

 

 

   

 

 

 

Total assets

   $ 76,055     $ 82,249  
  

 

 

   

 

 

 

Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit

    

Current liabilities:

    

Accounts payable

   $ 8,264     $ 1,758  

Accrued liabilities

     6,729       4,026  

Operating lease liability, current portion

     487       769  

Convertible preferred stock forward

     8,928       —  

Deferred revenue, current portion

     3,000       —  

Other current liabilities

     573       304  
  

 

 

   

 

 

 

Total current liabilities

     27,981       6,857  

Operating lease liability, non-current portion

     —       487  

Deferred revenue, non-current portion

     —       3,000  

Other non-current liabilities

     535       245  
  

 

 

   

 

 

 

Total liabilities

     28,516       10,589  
  

 

 

   

 

 

 

Commitments and contingencies (Note 6)

    

Convertible preferred stock, $0.0001 par value — 157,657,729 and 85,222,619 shares authorized at December 31, 2024 and 2023, respectively, and 116,716,142 and 85,222,619 shares issued and outstanding at December 31, 2024 and 2023, respectively, (Liquidation value $210,328 and $154,412 at December 31, 2024 and 2023, respectively)

     191,776       149,374  

Stockholders’ deficit:

    

Common stock, $0.0001 par value — 223,593,879 and 127,600,000 shares authorized at December 31, 2024 and 2023, respectively; 13,215,131 and 13,161,608 shares issued and outstanding at December 31, 2024 and 2023, respectively

     1       1  

Additional paid-in capital

     7,981       6,196  

Accumulated deficit

     (152,219 )      (83,911 ) 
  

 

 

   

 

 

 

Total stockholders’ deficit

     (144,237 )      (77,714 ) 
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 76,055     $ 82,249  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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EVOMMUNE, INC.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

     Years Ended December 31,  
     2024     2023  

Revenues:

    

License revenue

   $ 7,000     $ 5,000  
  

 

 

   

 

 

 

Total revenue

     7,000       5,000  

Operating expenses:

    

Research and development

     64,244       31,997  

General and administrative

     12,769       10,853  
  

 

 

   

 

 

 

Total operating expenses

     77,013       42,850  
  

 

 

   

 

 

 

Loss from operations

     (70,013 )      (37,850 ) 
  

 

 

   

 

 

 

Other income (expense):

    

Interest income

     3,242       3,856  

Other expense

     (37 )      (59 ) 
  

 

 

   

 

 

 

Total other income

     3,205       3,797  
  

 

 

   

 

 

 

Net loss

   $ (66,808 )    $ (34,053 ) 
  

 

 

   

 

 

 

Deemed dividend

     (1,500 )      —  

Net loss attributable to common stockholders

   $ (68,308 )    $ (34,053 ) 
  

 

 

   

 

 

 

Basic and diluted net loss per share of common stock

   $ (5.32 )    $ (3.19 ) 
  

 

 

   

 

 

 

Weighted average basic and diluted shares of common stock outstanding

     12,847,919       10,675,277  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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EVOMMUNE, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share amounts)

 

    Convertible Preferred
Stock
    Common Stock     Additional
Paid-in

Capital
    Accumulated
Deficit
    Total
Stockholders’

Deficit
 
    Shares     Amount     Shares     Amount  

Balance, January 1, 2023

    53,038,234     $ 86,619       12,944,707     $ 1     $ 4,279     $ (49,858 )    $ (45,578 ) 

Issuance of common stock on exercise of options

    —       —       36,145       —       5       —       5  

Issuance of Series A convertible preferred stock, net of transaction costs (Note 7)

    3,615,141       6,128       —       —       —       —       —  

Conversion of Series A convertible preferred stock to common stock (Note 7)

    (180,756 )      (351 )      180,756       —       351       —       351  

Issuance of Series B convertible preferred stock, net of transaction costs (Note 7)

    28,750,000       56,978       —       —       —       —       —  

Stock-based compensation expense

    —       —       —       —       1,484       —       1,484  

Vesting of early exercised options

    —       —       —       —       77       —       77  

Net loss

    —       —       —       —       —       (34,053 )      (34,053 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2023

    85,222,619       149,374       13,161,608       1       6,196       (83,911 )      (77,714 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of common stock on exercise of options

    —       —       53,523       —       13       —       13  

Issuance of Series C convertible preferred stock, net of transaction costs and tranche liability (Note 7)

    31,493,523       42,402       —       —       —       —       —  

Stock-based compensation expense

    —       —       —       —       1,722       —       1,722  

Vesting of early exercised options

    —       —       —       —       50       —       50  

Deemed dividend

    —       —       —       —       —       (1,500 )      (1,500 ) 

Net loss

    —       —       —       —       —       (66,808 )      (66,808 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2024

    116,716,142     $ 191,776       13,215,131     $ 1     $ 7,981     $ (152,219 )    $ (144,237 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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EVOMMUNE, INC.

Consolidated Statements of Cash Flows

(in thousands)

 

     Years Ended
December 31
 
     2024     2023  

Cash flows from operating activities:

    

Net loss

   $ (66,808 )    $ (34,053 ) 

Adjustments to reconcile net loss to net cash used in operating activities:

    

Stock-based compensation expense

     1,722       1,484  

Accretion of discount on short-term investments

     (1,820 )      (1,745 ) 

Depreciation and amortization

     1,287       1,000  

Changes in operating assets and liabilities:

    

Prepaid expenses and other assets

     (1,017 )      (285 ) 

Accounts payable

     6,506       125  

Accrued liabilities

     2,704       1,190  

Operating lease liabilities

     (769 )      (686 ) 

Deferred revenue

     —       3,000  
  

 

 

   

 

 

 

Net cash used in operating activities

     (58,195 )      (29,970 ) 
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of short-term investments

     (90,255 )      (91,314 ) 

Maturity of short-term investments

     86,350       42,999  

Purchase of property and equipment

     (88 )      (118 ) 
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,993 )      (48,433 ) 
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of convertible preferred stock, net of issuance costs

     49,829       63,978  

Proceeds from exercise of stock options

     13       5  

Principal payments of finance lease liability

     (208 )      (38 ) 

Principal payments of financing obligation

     (215 )      (192 ) 
  

 

 

   

 

 

 

Net cash provided by financing activities

     49,419       63,753  
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (12,769 )      (14,650 ) 

Cash, cash equivalents and restricted cash, beginning of year

     29,232       43,882  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of year

   $ 16,463     $ 29,232  
  

 

 

   

 

 

 

Components of cash, cash equivalents, and restricted cash

    

Cash and cash equivalents

   $ 16,255     $ 29,024  

Restricted cash

     208       208  
  

 

 

   

 

 

 

Total cash, cash equivalents, and restricted cash

   $ 16,463     $ 29,232  
  

 

 

   

 

 

 

Supplemental cash flow disclosures:

    

Cash paid for interest

   $ 34     $ 58  

Non-cash investing and financing activities:

    

Vesting of early exercised stock options

   $ 50     $ 77  

Assets acquired under finance leases

   $ 1,032     $ —  

Deemed dividend from trigger of anti-dilution provision (Note 7)

   $ 1,500     $ —  

Conversion of convertible preferred stock to common stock (Note 7)

   $ —     $ 351  

Issuance of convertible preferred stock upon settlement of derivative liability (Note 7)

   $ —     $ 872  

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

1. Organization and Description of the Business

Business and Organization

Evommune, Inc. and subsidiaries (“Evommune” or the “Company”) is a Delaware corporation headquartered in Palo Alto, California. Evommune is a clinical-stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases.

Liquidity

The Company has incurred significant operating losses since inception and has relied primarily on equity financing and license revenue to fund its operations. As of December 31, 2024, the Company had an accumulated deficit of $152.2 million. The Company expects to continue to incur substantial losses, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenue to support its cost structure. The Company may never achieve profitability and, unless and until it does, the Company will need to continue to raise additional capital.

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has been dependent on funding operations through the sale of equity and equity-linked securities. Since inception, the Company has experienced significant losses and incurred negative cash flows from operations. The Company expects to continue to incur further losses over the next several years as it develops its business. The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including its planned product development efforts, preparation for its planned clinical trials, performance of clinical trials and its research and discovery efforts.

The Company’s cash, cash equivalents and short-term investments as of December 31, 2024 will not be sufficient to enable the Company to meet its long-term expected plans, including initiation or completion of future registration studies. Following the completion of its ongoing and planned clinical trials, the Company will likely need to raise additional capital within one year of the issuance of this report to fund continued operations. The Company has no commitments for any additional financing and may not be successful in its efforts to raise additional funds when needed on commercially acceptable terms or at all or achieve profitable operations. Any amounts raised will be used for further development of the Company’s product candidates and for other working capital purposes.

If the Company is unable to obtain additional capital (which is not assured at this time), its long-term business plan may not be accomplished and the Company may be forced to curtail or cease operations. These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements. The accompanying consolidated financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

Significant Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

operations, or cash flows: its ability to continue research and development of its product candidates; payment obligations under license or collaboration agreements; litigation or claims against its intellectual property portfolio; operational, financial and management systems; sales, marketing and distribution infrastructure; competing therapies and marketing development; investment in or in-license other technologies.

Product candidates being developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a material adverse impact on the Company.

The Company has expended and expects to continue to expend substantial funds to complete the research, development and preclinical and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of product candidates that may receive regulatory approval. If adequate funds are unavailable from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and results of operations.

The Company is currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, a recessionary environment and high domestic and global inflation. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy, and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect the Company’s operating results. The Company continues to monitor these events and the potential impact on its business. Although the Company does not believe that inflation has had a material impact on its financial position or operations to date, it may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, and other factors, and such factors may lead to increases in the cost of manufacturing for and initiation of studies in the Company’s product candidates.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company operates in one segment considering the nature of the Company’s products and services, class of customers, methods used to distribute the products and the regulatory environment in which the Company operates. The accompanying consolidated financial statements, which include the accounts of Evommune, Inc. and its subsidiaries, all of which are wholly owned by Evommune, Inc., have been prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) as defined by the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, stock-based compensation, including the fair value of common stock and related assumptions, accrued expenses, and the valuation of convertible preferred stock forwards. Management bases its estimates on historical experience and on various other assumptions that it believes to be

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

Segments

The Company has a single operating segment. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, manages and allocates resources to the operations of the Company on a total company basis by assessing the overall level of resources available and how to best deploy these resources across functions and research and development projects that are in line with long-term Company-wide strategic goals. In making these decisions, the CODM uses consolidated financial information for purposes of evaluating performance, forecasting future period financial results, and allocating resources. The CODM performs this assessment based on the Company’s consolidated net loss. Through this analysis, the CODM assesses performance by comparing actual net loss versus the budget, and then decides how to allocate resources to invest in the Company’s research and development programs. The following is a breakdown of net loss by category as managed by the CODM (in thousands).

 

     Years Ended
December 31,
 
     2024     2023  

Revenue

   $ 7,000     $ 5,000  

Operating expenses:

    

EVO756

     24,662       7,589  

EVO301

     19,669       —  

Other research and development

     10,314       18,051  
  

 

 

   

 

 

 

Total external research and development

     54,645       25,640  

Research and development personnel costs

     9,599       6,357  
  

 

 

   

 

 

 

Total research and development operating expenses

     64,244       31,997  

General and administrative operating expenses

     6,811       6,509  

General and administrative personnel costs

     5,958       4,344  
  

 

 

   

 

 

 

Total general and administrative operating expenses

     12,769       10,853  
  

 

 

   

 

 

 

Total operating expenses

     77,013       42,850  

Interest income, net

     3,205       3,797  
  

 

 

   

 

 

 

Net loss

   $ (66,808 )    $ (34,053 ) 
  

 

 

   

 

 

 

Other research and development consists of discovery research, preclinical programs and other early stage development programs. The measure of segment assets, all of which are held in the United States, is reported on the consolidated balance sheets as total assets. Additionally, segment depreciation expense is consistent with amounts reported within the consolidated statements of cash flows.

Revenue Recognition

The Company recognizes revenue in accordance with FASB Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current portion. Since inception, the Company’s only revenues have been generated through license agreements.

License Revenue

The terms of the Company’s license agreements typically may include payment to the Company of one or more of the following: nonrefundable, up-front license fees; research, development and commercial milestone payments; royalties and other contingent payments due based on the activities of the counterparty. Each of these types of revenue are recorded as license revenues in the Company’s consolidated statements of operations (Note 5).

As part of the accounting for these arrangements, the Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling price may be, but is not presumed to be, the contract price. In determining the allocation, the Company maximizes the use of observable inputs. When the stand-alone selling price of a good or service is not directly observable, the Company estimates the stand-alone selling price for each performance obligation using assumptions that require judgment. Acceptable estimation methods include, but are not limited to: (i) the adjusted market assessment approach, (ii) the expected cost plus margin approach, and (iii) the residual approach (when the stand-alone selling price is not directly observable and is either highly variable or uncertain). In order for the residual approach to be used, the Company must demonstrate that (a) there are observable stand-alone selling prices for one or more of the performance obligations and (b) one of the two criteria in ASC 606-10- 32-34(c)(1) and (2) is met. The residual approach cannot be used if it would result in a stand-alone selling price of zero for a performance obligation as a performance obligation, by definition, has value on a stand-alone basis.

An option in a contract to acquire additional goods or services gives rise to a performance obligation only if the option provides a material right to the customer that it would not receive without entering into that contract. Factors that the Company considers in evaluating whether an option represents a material right include, but are not limited to: (i) the overall objective of the arrangement, (ii) the benefit the collaborator might obtain from the arrangement without exercising the option, (iii) the cost to exercise the option (for example, priced at a significant and incremental discount) and (iv) the likelihood that the option will be exercised. With respect to options determined to be performance obligations, the Company recognizes revenue when those future goods or services are transferred or when the options expire.

The Company’s revenue arrangements may include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes research and development milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license revenues and earnings in the period of adjustment.

Royalties: If the Company is entitled to receive sales-based royalties from its licensees, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its license arrangements.

The Company receives payments from its licensees based on schedules established in each contract. Upfront payments and fees are recorded as deferred revenue upon receipt, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.

Transaction Price Allocated to Future Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of December 31, 2024. The guidance provides certain practical expedients that limit this requirement. The Company has various contracts that meet the following practical expedients provided by ASC 606:

 

  1.  

The performance obligation is part of a contract that has an original expected duration of one year or less.

 

  2.  

Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer.

 

  3.  

The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

As of December 31, 2024 and 2023, the Company had one performance obligation that had not yet been satisfied related to that sublicense agreement with Maruho Co., Ltd. (“Maruho”), dated September 26, 2023 (the “Maruho Japan Agreement”), with $3.0 million of the transaction price allocated to future performance obligations under ASC 606 (Note 5). The Company completed the associated performance obligation in February 2025 and as such, recognized $3.0 million in license revenue in the first quarter of 2025.

Concentration of Credit Risk

Cash equivalents are financial instruments that potentially subject the Company to concentrations of credit risk. The Company maintains cash balances in federally insured financial institutions of $1.75 million in excess of insurable limits as of December 31, 2024. The Company has not experienced any losses on its cash and cash equivalents. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2024 and 2023, cash and cash equivalents consisted of cash and money market mutual funds.

The Company has invested its excess cash in U.S. government securities. The Company intends and has the ability to hold these investments to maturity. Securities with original maturity dates of more than three months are reported as held-to-maturity investments and are recorded at amortized cost, which approximates fair value due to the negligible risk of changes in value due to interest rates. The Company determines the appropriate classification of its investments at the time of purchase. All of the Company’s investments in U.S. government securities are classified as held to maturity and are reported as short-term or long-term based on maturity dates.

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if the Company experienced a credit loss and has the intent to sell the investment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period. There was no impairment of the Company’s short-term investments as of December 31, 2024 and 2023.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

The following tables summarize the Company’s cash, cash equivalents and short-term investments (in thousands):

 

     December 31, 2024  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
 

Cash and cash equivalents:

           

Cash and money market funds

   $ 16,255      $ —      $ —        16,255  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     16,255        —        —        16,255  
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments:

           

Held-to-maturity securities

     55,785        —        —        55,785  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

     55,785        —        —        55,785  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and short-term investments

   $ 72,040      $ —      $ —      $ 72,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2023  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
 

Cash and cash equivalents:

           

Cash and money market funds

   $ 29,024      $ —      $ —        29,024  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     29,024        —        —        29,024  
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments:

           

Held-to-maturity securities

     50,060        —        —        50,060  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

     50,060        —        —        50,060  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and short-term investments

   $ 79,084      $ —      $ —      $ 79,084  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted Cash

Restricted cash is defined as cash and cash equivalents that cannot be withdrawn or used for general operating activities. As of December 31, 2024 and 2023, the Company’s restricted cash was $0.2 million and was associated with a letter of credit issued in connection with an office lease.

Property and Equipment, Net

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years, and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property and equipment, are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheets and the resulting gain or loss is reflected in the consolidated statements of operations in the period realized.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

the carrying amount to the future undiscounted net cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows generated by the assets. There have been no such impairments of long-lived assets during the years ended December 31, 2024 and 2023.

Leases

Contractual arrangements that meet the definition of a lease are classified as operating or finance leases and are recorded on the consolidated balance sheets as both a right-of-use asset (“ROU asset”) and lease liability, calculated by discounting fixed lease payments over the lease term at the Company’s incremental borrowing rate (“IBR”). Lease ROU assets and lease obligations are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company currently has operating leases for office space and equipment and a finance lease related to lab and office equipment.

ROU assets are adjusted for (i) payments made at or before the commencement date, (ii) initial direct costs incurred, and (iii) tenant incentives under the lease. As the implicit rates for the operating leases are not determinable, the Company uses an IBR based on the information available at the respective lease commencement dates to determine the present value of future payments. IBR represents the interest rate that the Company would expect to incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located. The Company considers a lease term to be the noncancelable period that it has the right to use the underlying asset, including any periods where it is reasonably certain the Company will exercise any option to extend the contract.

Lease costs for minimum lease payments for operating leases are recognized on a straight-line basis over the lease term. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. Variable lease payments that do not depend on an index or rate are recognized as lease costs when incurred. In measuring the ROU assets and lease liabilities, the Company has elected to combine lease and non-lease components.

A finance lease ROU asset is recorded within property and equipment, net within the Company’s consolidated balance sheets, and is amortized on a straight-line basis over the shorter of estimated useful lives of the asset or the lease term. Finance lease liability is recorded within other current liabilities and other non-current liabilities within the Company’s consolidated balance sheets. Interest expense from fixed payments on finance leases is recognized using the effective interest method. Finance lease ROU asset amortization and interest expense are recorded within operating expenses and interest expense, respectively, within the Company’s consolidated statements of operations.

The Company does not recognize ROU assets or lease liabilities for short-term leases, if any, having initial terms of 12 months or less at lease commencement as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term for these types of leases.

Fair Value Measurements

The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). This pronouncement defines fair value, establishes a framework for measuring fair value under GAAP and requires expanded disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and defines fair value as the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. ASC 820 utilizes a fair value hierarchy that prioritizes inputs to fair value measurement techniques into three broad levels. The following is a brief description of those three levels:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, restricted cash, short-term investments, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

Convertible Preferred Stock

The convertible preferred stock is recorded outside of permanent equity because while it is not mandatorily redeemable, in certain events considered not solely within the Company’s control, such as a merger, acquisition, or sale of all or substantially all of the Company’s assets (each, a “deemed liquidation event”), the convertible preferred stock will become redeemable at the option of the holders of at least a majority of the then outstanding shares of convertible preferred stock. The Company has not adjusted the carrying values of the convertible preferred stock to its liquidation value because as of December 31, 2024, a deemed liquidation event obligating the Company to pay the liquidation preferences to holders of shares of convertible preferred stock is not probable. Subsequent adjustments to the carrying values to the liquidation value will be made only if it is probable that such a deemed liquidation event will occur.

Convertible Preferred Stock Forward

Certain provisions of the Series C Preferred Stock Purchase Agreement (“Series C SPA”) obligate the Company to sell, and the investors to purchase, an additional tranche of shares of Series C Preferred Stock, par value $0.0001 per share (“Series C Preferred Stock”), at a future date and specified price (the “tranche closings forward”) if certain clinical performance milestones are met. The tranche closings forward represent freestanding instruments as they are legally detachable and separately exercisable and, therefore, are accounted for separately from Series C Preferred Stock as convertible preferred stock forwards (liability or asset).

These derivatives were recorded at fair value at inception and are subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in change in the fair value of convertible preferred stock forward in the statements of operations (Note 3 and Note 7). The Company had $0.9 million of forward contracts related to Series A Preferred Stock which were settled in January 2023 and recorded to the Company’s consolidated balance sheets as convertible preferred stock. The Company had $8.9 million of forward contracts related to shares of Series C Preferred Stock outstanding as of December 31, 2024.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Research and Development

Research and development costs are expensed as incurred. Research and development costs include salaries and benefits, consultants’ fees, process development costs, stock-based compensation, laboratory supplies, preparation of regulatory submission expenses, and allocated facilities related expenses as well as fees paid to third parties that conduct certain preclinical research and development activities on the Company’s behalf. Payments made to third parties under these arrangements in advance of the performance of the related services by the third parties are recorded as prepaid expenses until the services are rendered.

The Company has entered into agreements with third parties to acquire technologies and product candidates for development (Note 5). Such agreements generally require an initial payment by the Company when the contract is executed, and additional payments upon the occurrence of certain events. Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the product candidate. In accordance with FASB ASC Topic 730-10-55, Research and Development, expenditures for research and development, including upfront licensing fees and milestone payments associated with products that have not yet been approved by the FDA and do not have alternative commercial use, are charged to research and development expense as incurred. Future contract milestone payments will be recognized as expense when achievement of the milestone is determined to be probable. Once a product candidate receives regulatory approval, subsequent license payments are recorded as an intangible asset.

The Company’s accruals for research and development activities performed by third parties are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the consolidated balance sheets. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company intends to adjust the accruals accordingly.

Stock-Based Compensation

The Company maintains a stock-based compensation plan as a long-term incentive for employees, certain consultants and advisors, and directors of the Company. Stock-based compensation is measured at the date of grant, based on the estimated fair value of the award, and recognized as an expense over the employee’s requisite service period (usually the vesting period) on a straight-line basis. The Company estimates the grant date fair value of restricted stock units (“RSUs”) using the common stock fair value as determined by the board of directors with the assistance of management and an independent third-party valuation specialist. The Company has issued RSUs and stock appreciation rights (“SARs”) with service and performance-based vesting conditions and records the expense for these awards if the Company concludes that it is probable that the performance condition will be achieved. The Company estimates the grant date fair value of the stock options, and the resulting stock-based compensation, using the Black-Scholes option pricing model. The Company accounts for forfeitures as they occur.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of each stock option that requires judgment. Changes in these variables and assumptions can materially affect the resulting estimates of fair value. These variables and assumptions include the per-unit fair value of the underlying common units, exercise price, expected term, risk-free interest rate, expected dividend rate, and the expected unit and stock price volatility over the expected term as follows:

 

  •  

Expected term. The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

  •  

Expected volatility. The Company derives the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Company does not have any trading history for its common stock. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

 

  •  

Risk-free interest rate. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equivalent to the expected term of a stock award.

 

  •  

Expected dividend rate. The Company has not paid and does not anticipate paying any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be zero.

 

  •  

Common stock fair value. The grant date fair value of the Company’s common stock has been determined by the board of directors with the assistance of management and an independent third-party valuation specialist. The grant date fair value of the Company’s common stock was determined using valuation methodologies that utilize certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability (Level 3 inputs). In determining the fair value of the Company’s common stock, the methodologies used to estimate the enterprise value of the Company were performed using methodologies, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

The fair values of SARs are estimated at the grant date using a Monte Carlo simulation model. Compensation expense is recognized for the number of SARs expected to be earned after assessing the probability that certain performance criteria will be met and the targeted payout level associated with the performance criteria expected to be achieved. Cumulative adjustments are recorded each quarter to reflect the estimated outcome of the performance-related conditions until the date results are determined and settled.

Income Taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax asset and liability accounts are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are for the year in which the differences are expected to affect taxable income (Note 10). Valuation allowances are established where necessary to reduce deferred tax assets to the amounts expected to be realized.

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and potentially dilutive securities outstanding. For purposes of the diluted net loss per share calculation, the convertible preferred stock, common stock subject to repurchase, stock options, RSUs, and SARs are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to common stockholders. Because the Company has reported a net loss for the reporting periods presented, the diluted net loss per common share is the same as basic net loss per common share for those periods.

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

 

     Years Ended December 31,  
     2024     2023  

Numerator:

    

Net loss

   $ (66,808 )    $ (34,053 ) 

Adjust: deemed dividend

     (1,500 )      —  
  

 

 

   

 

 

 

Net loss attributed to common stockholders

     (68,308 )      (34,053 ) 

Denominator:

    

Weighted average number of common shares outstanding

     13,172,949       13,129,223  

Less: weighted average unvested founders shares

     (85,269 )      (1,987,101 ) 

Less: weighted average unvested early unexercised options

     (239,761 )      (466,845 ) 
  

 

 

   

 

 

 

Weighted average number of common shares outstanding, basic and diluted

     12,847,919       10,675,277  
  

 

 

   

 

 

 

Net loss per common share

   $ (5.32 )    $ (3.19 ) 
  

 

 

   

 

 

 

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

 

     December 31,  
     2024      2023  

Convertible preferred stock

     119,617,963        85,222,619  

Stock options outstanding

     31,647,035        19,534,610  

Restricted stock units outstanding

     3,728,809        —  

Stock appreciation rights outstanding

     3,790,449        —  

Common stock subject to repurchase

     161,667        341,251  
  

 

 

    

 

 

 

Total

     158,945,923        105,098,480  
  

 

 

    

 

 

 

The amounts above represent common stock equivalents, where applicable.

JOBS Act Accounting Election

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07 “Segment Reporting—Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which updates reportable segment disclosure requirements, primarily

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

through enhanced disclosures about significant segment expenses and information used to assess segment performance. The Company adopted this ASU on January 1, 2024 and the adoption of this ASU resulted in expanded segment disclosures as shown in the Segments section of this footnote.

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require incremental income tax disclosures on an annual basis for all public entities. The amendments require that public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold. The amendments also require disclosure of income taxes paid to be disaggregated by jurisdiction, and disclosure of income tax expense disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual reporting beginning with the fiscal year ending December 31, 2025. The Company is currently evaluating the incremental disclosures that will be required in its future financial statements.

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024-03”), which will require additional expense disclosures for all public entities. The amendments require that at each interim and annual reporting period, an entity discloses certain disaggregated expenses included in each relevant expense caption, as well as the total amount of selling expenses and, in annual periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning with the fiscal year ending December 31, 2027, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the incremental disclosures that will be required in its future financial statements.

3. Fair Value Measurements and Fair Value of Financial Instruments

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

    Fair Value Measurements at December 31, 2024  
    Total     Level 1     Level 2     Level 3  

Assets

       

Cash Equivalents

       

Money market funds

  $  14,227     $  14,227     $ —     $ —  

Short-term investments

       

Held-to-maturity securities

    55,785       —       55,785       —  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fair value of assets

  $ 70,012     $ 14,227     $  55,785     $ —  
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Convertible preferred stock forward

  $ (8,928 )    $ —     $ —     $ (8,928 ) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fair value of liabilities

  $ (8,928 )    $ —     $ —     $ (8,928 ) 
 

 

 

   

 

 

   

 

 

   

 

 

 

 

    Fair Value Measurements at December 31, 2023  
     Total       Level 1       Level 2       Level 3   

Assets

       

Cash Equivalents

       

Money market funds

  $  27,821     $  27,821     $  —     $  —  

Short-term investments

       

Held-to-maturity securities

    50,060       —       50,060       —  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total fair value of assets

  $ 77,881     $ 27,821     $  50,060     $ —  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Items classified as Level 1 within the valuation hierarchy consist of the Company’s cash equivalents held in money market funds. The Company measures these investments at fair value determined based on Level 1 observable quoted price market inputs. The Company’s money market funds are included in cash and cash equivalents in the consolidated balance sheets.

Items classified as Level 2 within the valuation hierarchy consist of the Company’s excess cash invested in U.S. government securities, measured at fair value based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. The Company’s U.S. government securities are included in short-term investments in the consolidated balance sheets.

Items classified as Level 3 within the valuation hierarchy consist of the Company’s convertible preferred stock forward (Note 7). The fair value of the convertible preferred stock forward has been estimated at the date of inception, and re-measured at the end of each reporting period until the forwards expire. The Company used a standard forward pricing valuation model to estimate the fair value of the forward contracts with the following significant assumptions:

 

  •  

Current fair value per share of the Series C Tranche Two of $0.22;

 

  •  

Strike price equal to the original issuance price of the Series C Preferred Stock;

 

  •  

Expected term to raise the respective tranche of 0.58 years for Series C Preferred Stock;

 

  •  

Discount rate of 4.32%.

The following table is a roll-forward of Level 3 assets for the periods indicated (in thousands):

 

     Convertible
Preferred Stock
Forward
 

Balance at January 1, 2023

   $ (872 ) 

Forward settled upon issuance of preferred stock

     872  
  

 

 

 

Balance at December 31, 2023

     —  

Issuance of convertible preferred stock forward

     (8,928 ) 
  

 

 

 

Balance at December 31, 2024

   $ (8,928 ) 
  

 

 

 

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

     December 31,  
     2024      2023  

Accrued research and development

   $ 2,828      $ 1,222  

Accrued compensation

     3,634        2,442  

Other

     267        362  
  

 

 

    

 

 

 

Total

   $ 6,729      $ 4,026  
  

 

 

    

 

 

 

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

5. Strategic Collaborations and License Agreements

Dermira

In December 2020, the Company entered into an exclusive license agreement with Dermira, Inc., a wholly owned subsidiary of Eli Lilly and Company (“Dermira”) to develop and commercialize EVO756 and two other development programs for the treatment of various inflammatory diseases (the “Dermira License Agreement”).

The Dermira License Agreement remains in effect on a product-by-product and a country-by-country basis until the expiration of the royalty term for such product in such country. The Dermira License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy.

Milestones and royalties are contingent upon future events and will be recorded when the milestones are achieved and when payments are due. Under the Dermira License Agreement, the Company paid certain upfront and milestone fees that were recognized as research and development expense between 2020 and 2022, and may be required to pay up to $285.0 million upon achievement of specified development, regulatory and sales milestones, as well as tiered royalty payments in the mid-single digit to low-double digit percentage on worldwide sales of the licensed products. No milestones were achieved under the Dermira License Agreement during the years ended December 31, 2024 and 2023.

Maruho Co., Ltd.

Maruho Japan Agreement

In September 2023, the Company entered into a strategic collaboration with Maruho Co., Ltd. (“Maruho”) and granted Maruho an exclusive license to develop and commercialize EVO756 in Japan (the “Maruho Japan Agreement”).

Under the Maruho Japan Agreement, the Company received an upfront payment of $8.0 million in September 2023 and is eligible to receive up to $52.0 million in additional milestone payments and also eligible to receive low single-digit royalty payments on future sales of EVO756 in Japan.

The potential development, regulatory and commercial milestone payments and sales-based royalties that the Company is eligible to receive represent variable consideration under the Maruho Japan Agreement. The development and regulatory milestone amounts were excluded from the transaction price and were fully constrained based on their probability of achievement and the fact that the Company cannot reasonably conclude that a significant reversal of revenue related to these milestones would not occur. Any future sales-based royalties, including commercial milestone payments based on the level of sales, will be included in the transaction price and recognized as revenue when the related sales occur and the milestones are achieved. The Company will reevaluate the transaction price at the end of each reporting period as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

The recognition of revenue related to the Maruho Japan Agreement requires significant judgment and estimates. As discussed in Note 2, the Company is required to identify distinct performance obligations and subsequently allocate a portion of the transaction price to each performance obligation. The Company identified the following two performance obligations under the arrangement: (1) an exclusive license to develop and commercialize EVO756 in Japan (“Exclusive License 1”) and (2) to conduct a Phase 1 clinical trial including a Japanese cohort (the “R&D Activity Deliverable”). The Company will recognize such revenue or expense, as applicable, as these performance obligations are fulfilled. The Company allocated the transaction price to the two

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

performance obligations based on the estimated stand-alone selling price (R&D Activity Deliverable) and residual approach (Exclusive License 1) at contract inception. The Company determined the residual approach was appropriate, consistent with ASC 606-10-32-34(c)(1) and (2), as a standalone selling price has not previously been established for Exclusive License 1. Significant estimates were used in the determination of the stand-alone selling prices. The stand-alone selling price of the R&D Activity Deliverable was based on an expected cost approach, and considered several factors including, but not limited to, contract research organization costs and project management. The Company reevaluates the transaction price and the total estimated costs expected to be incurred to satisfy the performance obligations and adjust the deferred revenue at the end of each reporting period, if necessary. Such changes will result in a change to the amount of collaboration revenue recognized and deferred revenue.

The Company recognized $5.0 million in license revenue in September 2023 related to the Maruho Japan Agreement upon the satisfaction of the Exclusive License 1 performance obligation. No other milestone or royalty revenues related to the Maruho Japan Agreement have been earned as of December 31, 2024. As of December 31, 2024 and December 31, 2023, the Company has recorded short term deferred revenue of $3.0 million and long term deferred revenue of $3.0 million, respectively, attributable to the Company’s on-going performance obligations under the R&D Activity Deliverable. This deferred revenue was recognized in full in February 2025 upon completion of the R&D Activity Deliverable.

Maruho Greater Asia Agreement

In March 2024, the Company entered into a second strategic collaboration with Maruho (the “Maruho Greater Asia Agreement”) and granted Maruho an exclusive license to develop and commercialize EVO756 in Greater China and other Asian countries (the “Territory”). Under the Maruho Greater Asia Agreement, the Company received an upfront payment of $7.0 million in March 2024 and is eligible to receive up to $54.5 million in additional milestone payments and is also eligible to receive low single-digit royalty payments on future sales of EVO756 in the Territory.

The potential development, regulatory and commercial milestone payments and sales-based royalties that the Company is eligible to receive represent variable consideration under the Maruho Greater Asia Agreement. The development and regulatory milestone amounts were excluded from the transaction price and were fully constrained based on their probability of achievement and the fact that the Company cannot reasonably conclude that a significant reversal of revenue related to these milestones would not occur. Any future sales-based royalties, including commercial milestone payments based on the level of sales, will be included in the transaction price and recognized as revenue when the related sales occur and the milestones are achieved. The Company will reevaluate the transaction price at the end of each reporting period as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

The recognition of revenue related to the Maruho Greater Asia Agreement requires significant judgment and estimates. As discussed in Note 2, the Company is required to identify distinct performance obligations and subsequently allocate a portion of the transaction price to each performance obligation. The Company identified the following performance obligation under the arrangement: an exclusive license to develop and commercialize EVO756 in the Territory (“Exclusive License 2”). The Company recognized $7.0 million in license revenue in March 2024 related to the Maruho Greater Asia Agreement. No other milestone or royalty revenues related to Maruho Greater Asia Agreement have been earned as of December 31, 2024.

AprilBio

In June 2024, the Company entered into a license agreement with AprilBio Co., Ltd. (“AprilBio”) upon which AprilBio granted the Company an exclusive worldwide license to develop and commercialize EVO301

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

(the “AprilBio License Agreement”). Under the AprilBio License Agreement, the Company paid an upfront payment of $15.0 million, which was recognized as research and development expense during the year ended December 31, 2024, and may be required to pay additional milestone payments of up to $460.0 million and tiered royalty payments in the mid to high-single digit percentage on worldwide sales of the licensed product. No development or sales milestones have been achieved as of December 31, 2024.

Accutar Biotechnology, Inc.

In November 2023, the Company entered into a strategic partnership with Accutar Biotechnology, Inc. (“Accutar”) to discover novel small molecule drug candidates in chronic inflammatory diseases (the “Accutar Agreement”). The Accutar Agreement will leverage Accutar’s proprietary AI platform as well as the Company’s expertise in the design and development of novel oral small molecule treatments against targets that are the root cause of chronic immune-mediated inflammatory diseases.

Under the Accutar Agreement, the Company paid an upfront fee of $3.0 million to Accutar, which was recognized as research and development expense during the year ended December 31, 2023. On a target-by-target basis, if the Company selects the compounds for further development, the Company is required to pay, upon achievement of specific milestones, up to $155.5 million and royalty payments of mid-single digit percentage on worldwide sales of the licensed products.

6. Commitments and Contingencies

Leases

The Company has operating leases for office space and equipment as well as finance leases of certain lab and office equipment. The leases have the original lease terms of three years each. Generally, the Company’s leases are non-cancellable and do not include renewal options. The Company’s leases do not have any residual value guarantees or any restrictions or covenants imposed by leases.

As of December 31, 2024, future minimum lease payments included in the measurement of lease liabilities and financing obligations were as follows (in thousands):

 

     Operating
Lease
    Finance
Lease
    Financing
Obligation
 

2025

   $ 500     $ 429     $ 166  

2026

     —       400       —  

2027

     —       184       —  
  

 

 

   

 

 

   

 

 

 

Total undiscounted lease payments

     500       1,013       166  

Less: imputed interest

     (13 )      (122 )      (7 ) 
  

 

 

   

 

 

   

 

 

 

Total lease liability

     487       891       159  

Less: current portion

     487       372       159  
  

 

 

   

 

 

   

 

 

 

Total lease liability, net of current portion

   $ —     $ 519     $ —  
  

 

 

   

 

 

   

 

 

 

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases and finance leases (in thousands):

 

     Years Ended December 31,  
      2024        2023   

Operating lease:

     

Short-term lease cost

   $ 954      $ 602  

Variable lease cost

     285        244  

Operating lease cost

     832        832  
  

 

 

    

 

 

 

Total operating lease costs

     2,071        1,678  
  

 

 

    

 

 

 

Finance lease:

     

Amortization of right-of-use assets

   $ 208      $ 38  

Interest on lease liabilities

     59        11  

Financing obligation:

     

Interest expense

     34        58  
  

 

 

    

 

 

 

Total finance lease and financing obligation cost

     301        107  
  

 

 

    

 

 

 

Total lease cost

   $ 2,372      $ 1,785  
  

 

 

    

 

 

 

For the year ended December 31, 2024, payments were $0.8 million, $0.2 million and $0.2 million for operating leases, financing obligation and finance leases, respectively. For the year ended December 31, 2023, payments were $0.8 million, $0.2 million and less than $0.1 million for operating leases, financing obligation and finance leases, respectively. Interest expense is recorded within other expense within the Company’s consolidated statements of operations. The weighted average discount rate and remaining terms are as follows:

 

     As of December 31,  
      2024       2023   

Weighted-average remaining lease term (in years)

    

Operating leases

     0.50       1.50  

Finance leases

     2.43       1.75  

Financing obligation

     0.66       1.67  

Weighted-average discount rate (percent)

    

Operating leases

     8.00 %      8.00 % 

Finance leases

     10.61 %      12.68 % 

Financing obligation

     12.70 %      12.70 % 

Research and Development Agreements

The Company enters into contracts in the normal course of business with clinical research organizations, contract manufacturing organizations and other third-party vendors for clinical trials, manufacturing, testing and other research and development activities. These contracts generally provide for termination on notice, with varying termination fees, typically up to 50%, dependent on timing of notification in advance of planned activity timelines. As of December 31, 2024 and 2023, there were no amounts accrued related to termination and cancellation charges as these are not probable.

License Agreements

The Company has entered into various license agreements (Note 5), pursuant to which the Company is required to make payments contingent upon the occurrence of specified events. The Company is required to pay development and sales milestones and royalties on sales of products developed under these agreements. No such milestone events occurred in 2024 and 2023.

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Guarantees and Indemnifications

The Company accrues a liability for any contingent liabilities when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

Legal proceedings

The Company was not subject to any material legal proceedings during the years ended December 31, 2024 and 2023, and no material legal proceedings are currently pending or threatened.

7. Convertible Preferred Stock

Series Seed Convertible Preferred Stock Financing

From June 2020 through May 2021, the Company sold 12,858,517 shares of Series Seed Preferred Stock, par value $0.0001 per share (“Series Seed Preferred Stock”), at $0.9692 per share for aggregate gross proceeds of $12.5 million.

Series A Convertible Preferred Stock Financing

In August 2021, the Company entered into a Series A Preferred Stock Purchase Agreement (the “Series A SPA”) to issue up to an aggregate of 48,675,300 shares of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at a purchase price of $1.93634 per share. From August to November 2021, the Company sold 31,193,506 shares of Series A Preferred Stock. The Company also was obligated to sell, and the investors to purchase, up to 15,002,837 shares of Series A Preferred Stock at an original issuance price of $1.93634 (the “Series A Tranche Two Closing”). The Company called for Series A Tranche Two Closing in December 2022 and sold 10,664,668 shares of Series A Preferred Stock for total gross cash proceeds of $20.6 million in December 2022 and 3,434,385 shares of Series A Preferred Stock for total gross cash proceeds of $6.6 million in January 2023.

Certain investors, who had a purchase commitment to buy 903,784 shares, did not participate in the Series A Tranche Two Closing. In accordance with the Series A SPA and the Company’s then in effect certificate of incorporation, all shares of Series A Preferred Stock held by such investors were converted to shares of common stock at a one-for-one ratio. The Company converted 1,678,457 shares of Series A Preferred Stock held by the non-participating investors into shares of common stock on a one-for-one basis in December 2022. As the conversion occurred per the contractual terms, the Company reclassified the carrying value of shares of Series A Preferred Stock to additional paid-in-capital and common stock par value at the date of the conversion.

In February 2023, the non-participating investors that initially elected not to participate in the Series A Tranche Two Closing, purchased approximately 20 percent of the shares of Series A Preferred Stock initially forfeited in December 2022. The total number of shares purchased by these investors was 180,756. All of such shares of Series A Preferred Stock then immediately converted into shares of common stock on a one-for-one basis, in accordance with the conversion provisions of the Series A SPA.

Pursuant to the Series C SPA, the Company sold shares of Series C Preferred Stock at a purchase price of $1.59453 per share which triggered the anti-dilution protection provision under the Company’s then in effect certificate of incorporation. Due to these provisions, the conversion ratio of the Series A Preferred Stock was adjusted from 1.0 to 1.0378. The Company recognized a non-cash deemed dividend of $0.9 million in connection with this adjustment.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Series A Convertible Preferred Stock Tranche Closings Forward

The Company determined that its obligation to issue and the investors’ obligation to purchase additional shares of Series A Preferred Stock in the Series A Tranche Two Closing at a fixed price represented freestanding instruments and forward contracts that are accounted at fair value at the issuance date and re-measured at each reporting date until the expiration or the settlement of the obligation (the “Series A Tranche Two Forward”). Changes in the fair value of these derivatives are recorded in the consolidated statements of operations.

On December 15, 2022 (the “call date”), the Company exercised its call right under the Series A Tranche Two Forward to sell 15,002,837 additional shares of Series A Preferred Stock at the Series A Tranche Two Closing, when the total fair value of the Series A Tranche Two Forward was $4.3 million. The Company issued 10,664,668 shares of Series A Preferred Stock and settled the related forward contracts with an estimated fair value of $3.0 million in December 2022.

The Company had $0.9 million of forward contracts outstanding as of December 31, 2022, which were settled in January 2023, when the remaining 3,434,385 shares of Series A Preferred Stock related to the Series A Tranche Two Closing were issued, with the fair value of $0.9 million recorded to convertible preferred stock in the consolidated balance sheets.

Series B Convertible Preferred Stock Financing

Throughout 2023, the Company sold 28,750,000 shares of Series B Preferred Stock, par value $0.0001 per share (“Series B Preferred Stock”), at $2.00 per share for aggregate gross proceeds of $57.5 million.

Pursuant to the Series C SPA, the Company sold shares of Series C Preferred Stock at a purchase price of $1.59453 per share which triggered the anti-dilution protection provision under the Company’s then in effect certificate of incorporation. Due to this provision, the conversion ratio of the Series B Preferred Stock was adjusted from 1.0 to 1.0436. The Company recognized a non-cash deemed dividend of $0.6 million in connection with this adjustment.

Series C Convertible Preferred Stock Financing

In October 2024, the Company entered into the Series C SPA to issue up to an aggregate of 72,435,110 shares of Series C Preferred Stock at a purchase price of $1.59453 per share. In October 2024, the Company sold 31,493,523 shares of Series C Preferred Stock for gross proceeds of $50.2 million. The Company also was obligated to sell, and the investors to purchase, up to 40,941,587 shares of Series C Preferred Stock at an original issuance price of $1.59453 (the “Series C Tranche Two Closing”) upon the decision by the Company, and approval by the board of directors, to advance the development of EVO756 following the completion of the Phase 2 study in chronic inducible urticaria (the “Milestone Event”). The Series C Tranche Two Closing could be initiated either by the Company, upon the occurrence of the Milestone Event, or by the investors, but in no event was the Series C Tranche Two Closing to be held later than October 30, 2025.

Series C Convertible Preferred Stock Tranche Closings Forward

The Company determined that its obligation to issue and the investors’ obligation to purchase additional shares of Series C Preferred Stock in the Series C Tranche Two Closing at a fixed price represent freestanding instruments and forward contracts that are accounted for at fair value at the issuance date and re-measured at each reporting date until the expiration or the settlement of the obligation (the “Series C Tranche Two Forward”). The Company had $8.9 million of forward contracts outstanding as of December 31, 2024. As the Company

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

determined there was no change in value of the Series C Tranche Two Forward from the date of issuance in October 2024 through the year ended December 31, 2024, there was no gain or loss recorded for a change in fair value during the year ended December 31, 2024.

The authorized, issued, and outstanding shares of the Company’s convertible preferred stock and liquidation values as of December 31, 2024 were as follows (in thousands, except for share amounts):

 

     Authorized
Shares
     Outstanding
Shares
     Liquidation
Preference
     Carrying
Value
 

Series Seed

     12,858,517        12,858,517      $ 12,462      $ 14,240  

Series A

     43,614,102        43,614,102        87,640        79,056  

Series B

     28,750,000        28,750,000        60,009        57,578  

Series C

     72,435,110        31,493,523        50,217        40,902  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     157,657,729        116,716,142      $ 210,328      $ 191,776  
  

 

 

    

 

 

    

 

 

    

 

 

 

The authorized, issued, and outstanding shares of the Company’s convertible preferred stock and liquidation values as of December 31, 2023 were as follows (in thousands, except for share amounts):

 

     Authorized
Shares
     Outstanding
Shares
     Liquidation
Preference
     Carrying
Value
 

Series Seed

     12,858,517        12,858,517      $ 12,462      $ 14,240  

Series A

     43,614,102        43,614,102        84,450        78,156  

Series B

     28,750,000        28,750,000        57,500        56,978  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     85,222,619        85,222,619      $ 154,412      $ 149,374  
  

 

 

    

 

 

    

 

 

    

 

 

 

The significant rights and obligations of the Company’s Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively “Convertible Preferred Stock”) are as follows:

Voting Rights

The holders of Convertible Preferred Stock are entitled to vote on all matters on which the common stockholders are entitled to vote. Holders of Convertible Preferred Stock and common stock vote together as a single class not as separate classes, except with respect to the election of directors. Each holder of Convertible Preferred Stock is entitled to the number of votes equal to the number of common stock shares into which the shares held by such holder could be converted as of the record date. As long as a majority of the shares of Series C Preferred Stock originally issued remain outstanding, as adjusted for any anti-dilution adjustments, the holders of such shares of Series C Preferred Stock shall be entitled to elect two directors of the Company at any election of directors. As long as at least 24% of the shares of Series B Preferred Stock originally issued remain outstanding, the holders of such shares of Series B shall be entitled to elect one director of the Company at any election of directors. As long as a majority of the shares of Series A originally issued remain outstanding, the holders of Series A shall be entitled to elect two directors of the Company at any election of directors. The holders of outstanding common stock shall be entitled to two directors of the Company at any election of directors. The holders of Convertible Preferred Stock and common stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect any remaining directors of the Company.

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Dividends

Holders of Convertible Preferred Stock are entitled to receive dividends, when, as and if declared by the board of directors, at the annual rate of 8% of the original issue price, as adjusted for any anti-dilution adjustments, payable in preference and priority to any declaration or payment of any distribution on capital stock (other than dividends on shares of common stock payable in shares of common stock) of the Company. No distributions may be made with respect to the common stock unless the requisite dividends on the Convertible Preferred Stock have been declared and all declared dividends on the Convertible Preferred Stock have been paid to the holders of the Convertible Preferred Stock. Dividends are noncumulative, and the Company has never declared a dividend.

Liquidation Preference

In the event of any liquidation, dissolution, or winding up of the Company, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the proceeds or assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Series B Preferred Stock, Series A Preferred Stock, Series Seed Preferred Stock or common stock an amount per share equal to the liquidation preference amount, which is the original issue price per share of the Series C Preferred Stock, as adjusted for any anti-dilution adjustments, plus any dividends declared but unpaid thereon. If, upon the occurrence of such event, the proceeds are insufficient to permit the payment to holders of shares of Series C Preferred Stock of the full amounts, then the entire proceeds legally available for distribution shall be distributed ratably among the holders of shares of Series C Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

After the payment in full to the holders of shares of Series C Preferred Stock, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the proceeds or assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of shares of Series A Preferred Stock, Series Seed Preferred Stock or common stock an amount per share equal to the liquidation preference amount, which is the original issue price per share of Series B Preferred Stock, as adjusted for any anti-dilution adjustments, plus any dividends declared but unpaid thereon. If, upon the occurrence of such event, the proceeds are insufficient to permit the payment to holders of shares of Series B Preferred Stock of the full amounts, then the entire proceeds legally available for distribution shall be distributed ratably among the holders of shares of Series B Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

After the payment in full to the holders of shares of Series C Preferred Stock and Series B Preferred Stock, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of shares of Series Seed Preferred Stock or common stock, an amount per equal to the liquidation preference amount of respective original issue price per share, as adjusted for any anti-dilution adjustments, plus any dividends declared but unpaid. If, upon the occurrence of such event, the proceeds are insufficient to permit the payment to holders of shares of Series A Preferred Stock of the full amounts, then the entire proceeds legally available for distribution shall be distributed ratably among the holders of shares of Series A Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

After the payment in full to the holders of shares of Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of shares of common stock an amount per equal to the liquidation preference amount

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

of respective original issue price per share, as adjusted for any anti-dilution adjustments, plus any dividends declared but unpaid. If, upon the occurrence of such event, the proceeds thus distributed among the holders of the shares of Series Seed Preferred Stock shall be insufficient to permit the payment to such holders of the full preferential amounts, then the entire proceeds legally available for distribution to the Series Seed Preferred Stock shall be distributed ratably among the holders of the shares of Series Seed Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

After the payment to the holders of Convertible Preferred Stock of the full preferential amounts specified above, the entire remaining assets of the Company legally available for distribution by the Company shall be distributed with equal priority and pro rata among the holders of the common stock in proportion to the number of shares of common stock held by them.

Conversion

Each share of Convertible Preferred Stock is convertible, at the option of the holder at any time after the date of issuance of such share into such number of shares of common stock as is determined by dividing the original issue price for such series by the applicable conversion price for such series, in effect on the date of conversion. If, after the issuance date of Convertible Preferred Stock, the Company issues or sells, or is deemed to have sold, additional shares of capital stock at a price lower than the original issuance price of the Convertible Preferred Stock, except for certain exceptions allowed, the conversion price of such Convertible Preferred Stock would be adjusted. As of December 31, 2024, the Company’s Series Seed Preferred Stock and Series C Preferred Stock was convertible into the Company’s shares of common stock on a one-for-one basis. The Company’s Series A Preferred Stock was convertible into the Company’s shares of common stock at a conversion ratio of 1.0378 to one, and the Company’s Series B Preferred Stock was convertible into the Company’s shares of common stock at a conversion ratio of 1.0436 to one.

Each share of Convertible Preferred Stock is automatically converted into shares of common stock upon the earlier of (i) the closing of the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Securities Act”), the public offering price of which is at least one and two-tenths the original issue price per share of Series C Preferred Stock (as adjusted for any anti-dilution adjustments) and that results in greater than $80,000,000 of proceeds, net of underwriting discounts and commissions, to the Company or (ii) the date, or the occurrence of an event, specified by vote or written consent or agreement of a majority of holders of Convertible Preferred Stock, including a Series C major investor.

8. Common Stock

As of December 31, 2024, the Company is authorized to issue 223,593,879 shares of $0.0001 par value common stock. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to prior rights of the preferred stockholders.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

The Company had reserved common stock for future issuance as follows:

 

     December 31,  
     2024      2023  

Series Seed

     12,858,517        12,858,517  

Series A

     45,261,538        43,614,102  

Series B

     30,004,385        28,750,000  

Series C

     31,493,523        —  

Outstanding options under 2020 Plan

     31,647,035        19,534,610  

Outstanding restricted stock units under 2020 Plan

     3,728,809        —  

Options available for grants under the 2020 Plan

     1,256,089        3,621,773  
  

 

 

    

 

 

 

Total

     156,249,896        108,379,002  
  

 

 

    

 

 

 

Founders Common Shares Awards

In May 2020, the Company issued 10,000,000 shares of common stock to its founders and executives at a price per share of $0.001, which was determined to be the fair value of common stock at the issuance date (the “Founders’ Shares”). Founders’ Shares vested monthly over 48 months from the issuance date. The Company had a right to repurchase unvested Founders’ Shares at the price paid by the founders. The Company determined that the Founders’ Shares in substance were similar to early exercised options and estimated fair value at the grant date using the Black-Sholes model using the following assumptions:

 

Expected term

     3.2 years  

Expected volatility

     81.6%  

Risk-free interest rate

     0.31%  

Dividend yield

     0%  

The total fair value of the Founders’ Shares was estimated as $0.5 million and was recognized ratably over the vesting period. The Company recognized less than $0.1 million for each of the years ended December 31, 2024 and 2023 and recorded the expense as general and administrative expense in the consolidated statements of operations. As of December 31, 2024, all Founders’ Shares have fully vested and all expense has been recognized.

9. Stock Option Plan

Stock Options

In May 2020, the board of directors adopted the Evommune, Inc. 2020 Stock Plan (the “2020 Plan”) under which officers, employees, outside directors and consultants may be eligible for the grant of equity awards. The Plan provides for the direct award or sale of shares, the grant of Incentive Stock Options (“ISOs”) and Nonstatutory Stock Options (“NSOs”) to purchase shares and the grant of RSUs to acquire shares. The board of directors has authorized an aggregate number of 37,987,851 shares of the Company’s common stock to be issued under the 2020 Plan. Options under the 2020 Plan may be granted for periods of up to 10 years at exercise prices no less than 100% of the fair market value of the Company’s common stock on the date of grant with the exception of ISOs granted to a 10% holder which is no less than 110% of the fair market value of common stock on the date of grant. As of December 31, 2024, the Company had 1,256,089 shares available for issuance under the 2020 Plan.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Activity under the 2020 Plan is set forth below:

 

     Stock Options     Weighted
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term (years)
     Aggregate
Intrinsic Value
(in thousands)
 

Outstanding at January 1, 2023

     11,364,871     $ 0.35        9.36      $ 742  

Options granted

     8,966,622       0.44        

Options exercised

     (36,145 )      0.14        

Options forfeited

     (760,738 )      0.39        
  

 

 

         

Outstanding at December 31, 2023

     19,534,610       0.39        8.67      $ 27  

Options granted

     12,591,029       0.31        

Options exercised

     (53,523 )      0.24        

Options forfeited

     (425,081 )      0.27        
  

 

 

         

Outstanding at December 31, 2024

     31,647,035       0.36        8.52      $ 585  
  

 

 

         

Exercisable at December 31, 2024

     11,042,886       0.37        7.68      $ 150  
  

 

 

         

Vested and expected to vest at December 31, 2024

     31,808,702     $ 0.36        8.52      $ 585  
  

 

 

         

The weighted-average grant-date fair value of options granted during the years ended December 31, 2024 and 2023 was $0.26 and $0.32 per option, respectively. The aggregate intrinsic value of options exercised for the years ended December 31, 2024 and 2023 was less than $0.1 million, respectively. Intrinsic values are calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices lower than the fair value per share of the common stock on the date of exercise.

As of December 31, 2024, the total unrecognized stock-based compensation expense for stock options was $5.7 million, which is expected to be recognized over a weighted-average period of 2.9 years. The total fair value of options vested for the years ended December 31, 2024 and 2023 was $2.0 million and $1.3 million, respectively.

The fair value of the stock options granted was estimated using the following assumptions:

 

     Years Ended December 31,
     2024    2023

Expected term

   5.8 - 6.1 years    6.1 years

Expected volatility

   104.96% - 106.94%    79.48% - 83.09%

Risk-free interest rate

   4.03% - 4.63%    3.45% - 3.57%

Fair value of common stock

   $0.16 - $0.29    $0.30 - $0.33

Dividend yield

   0%    0%

Restricted Stock Units

In December 2024, certain employees were granted a total of 3,728,809 RSUs, expiring on the earlier of (i) the 10-year anniversary of the date of grant or (ii) the date of termination of the employees’ service for any reason. Each unit entitles the holder to one share of common stock upon vesting.

The RSUs vest as follows: (i) 25% on each anniversary of vest commencement date, (ii) 0.0911 share of common stock subject to the RSU upon issuance of each share of Series C Preferred Stock issued subsequent to

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

October 30, 2024, and (iii) upon the first to occur of: (a) immediately prior to the consummation of a Change in Control (as defined in the award agreement) or (b) the effective date of a registration statement of the Company filed under the Securities Act for the sale of the Company’s common stock (“IPO”), or (c) the settlement of the initial trade of shares of the Company’s common stock on a nationally recognized exchange. All unvested RSUs are forfeited upon termination or resignation for any reason.

If a RSU vests, the Company will issue one share of common stock for each vested RSU.

A summary of RSU activity during the year ended December 31, 2024, is as follows:

 

     Number of Units
Outstanding
     Grant Date Fair Value
per Share
 

Unvested balance at January 1, 2024

     —      $ —  

Granted

     3,728,809        0.35  
  

 

 

    

 

 

 

Unvested balance at December 31, 2024

     3,728,809      $ 0.35  
  

 

 

    

 

 

 

As of December 31, 2024, the total unrecognized stock-based compensation expense for unvested restricted stock was $1.3 million, which is expected to be recognized over a weighted-average period of 3.9 years. The Company did not record any stock-based compensation expenses for RSUs for the years ended December 31, 2024 and 2023.

Stock Appreciation Right

In December 2024, an executive officer was granted 3,790,449 SARs with a base price of $0.35 per unit. The SARs expire on the earlier of (i) the 10-year anniversary of the date of grant or (ii) the date of termination of the employee’s service for any reason (the “SAR Award”).

The SAR Award vests as follows: (i) 25% on each anniversary of vest commencement date, (ii) 0.0523 share of common stock subject to the SAR Award upon issuance of each share of Series C Preferred Stock issued subsequent to October 30, 2024, and (iii) upon the first to occur of: (a) immediately prior to the consummation of a Change in Control (as defined in the award agreement) or (b) after an IPO, at such time as the 30-day volume-weighted average price of a share of common stock is greater than $4.78359. All unvested SARs are forfeited upon termination or resignation for any reason.

If a SAR vests, the Company will issue one share of common stock, or deliver the cash equivalent, each as determined in the Company’s sole discretion, for an amount equal to the fair market value of a share of common stock on the settlement date less the exercise price.

The number of SARs that vest is dependent on achieving certain performance conditions (liquidity event) and market conditions (minimum stock price). The Company determined that the SAR Award is an equity classified award since although the SARs may be settled in cash or equity, the Company has no intention or history of settling awards in cash. The Company determined that the fair value of the SAR Award was $1.44 per share for a total fair value of $5.5 million. The Company utilized a Monte Carlo simulation with the following assumptions: a 10-year term to maturity, the Company’s fair value of common stock at September 30, 2024 of $0.35, estimated volatility of 108%, and risk-free rate of 4.2% to discount the ending result to present value. The valuation also includes a derived service period of 2.07 years, which is the median time to vest, as calculated by the model. This derived service period inherently contains some degree of estimation uncertainty. Upon the performance condition being considered probable, which has not been met as of December 31, 2024, the Company will recognize stock compensation expense over the remaining measurement period. The Company did not record any stock-based compensation expenses for SARs for the years ended December 31, 2024 and 2023.

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

Stock-Based Compensation Expense

Stock compensation expense recorded for the years ended December 31, 2024 and 2023, consisted of expense for stock options. No stock compensation expense was recorded for RSUs or SARs for the years ended December 31, 2024 and 2023. The following table is a summary of stock compensation expense by function recognized for the periods indicated (in thousands):

 

     Years Ended
December 31,
 
     2024      2023  

General Administrative

   $ 1,017      $ 850  

Research and development

     705        634  
  

 

 

    

 

 

 

Total stock-based compensation expense

   $ 1,722      $ 1,484  
  

 

 

    

 

 

 

The 2020 Plan provides the holders of certain stock options an election to early exercise prior to vesting. The shares are subject to the Company’s lapsing repurchase right upon termination of employment, with the repurchase price being the lesser of the original exercise price or the then fair value of the Company’s common stock. At December 31, 2024, less than $0.1 million of proceeds from unvested early exercised options were recognized as both other current liability and other non-current liability in the accompanying consolidated balance sheets.

The following table summarizes activity relating to early exercises of stock options for the periods indicated:

 

     Number of shares  

Unvested balance at January 1, 2023

     609,376  

Vested

     (268,125 ) 
  

 

 

 

Unvested balance at December 31, 2023

     341,251  

Vested

     (179,584 ) 
  

 

 

 

Unvested balance at December 31, 2024

     161,667  
  

 

 

 

10. Income Taxes

Loss before provision for income taxes consisted of the following (in thousands):

 

     Years Ended
December 31,
 
     2024     2023  

Domestic

   $ (68,308 )    $ (34,053 ) 

Foreign

     —       —  
  

 

 

   

 

 

 

Loss before provision for income taxes

   $ (68,308 )    $ (34,053 ) 
  

 

 

   

 

 

 

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows:

 

     Years Ended
December 31,
 
     2024     2023  

Income tax benefit at the statutory rate

     21.00 %      21.00 % 

State taxes, net of federal benefit

     3.32       0.78  

Credits

     3.44       4.22  

Other permanent adjustments

     (1.56 )      (1.50 ) 

Valuation allowance

     (26.20 )      (24.50 ) 
  

 

 

   

 

 

 

Total

     — %      — % 
  

 

 

   

 

 

 

The net deferred income tax asset balance related to the following (in thousands):

 

     December 31,  
     2024     2023  

Deferred tax assets

    

Net operating loss carryforwards

   $ 10,814     $ 6,531  

Tax credit

     4,141       1,899  

Intangibles

     5,239       2,400  

Capitalized research and development

     16,832       9,422  

Right of use liabilities

     289       278  

Accrued bonus

     680       424  

Deferred revenue

     630       —  

Other

     477       249  
  

 

 

   

 

 

 

Total deferred tax assets

     39,102       21,203  

Deferred tax liabilities

    

Right of use assets

     (286 )      (272 ) 
  

 

 

   

 

 

 

Total deferred tax assets

     38,816       20,931  

Valuation allowance

     (38,816 )      (20,931 ) 
  

 

 

   

 

 

 

Net deferred tax assets

   $ —     $ —  
  

 

 

   

 

 

 

As of December 31, 2024 and 2023, the Company had federal net operating loss (“NOL”) carryforwards of $38.5 million and $26.6 million, respectively, which can be carried forward indefinitely. As of December 31, 2024, the Company had state NOL carryforwards of $38.8 million. The state NOL carryforwards begin to expire in 2040.

As of December 31, 2024 and 2023, the Company also has federal tax credits of $4.2 million and $1.9 million, respectively, which begin to expire in 2040, and state tax credits of $1.2 million and $0.6 million, respectively, which do not expire.

The Tax Cuts and Jobs Act contained a provision which requires the capitalization of Section 174 costs incurred in years beginning on or after January 1, 2022. Section 174 costs are expenditures which represent research and development costs that are incidental to the development or improvement of a product, process, formula, invention, computer software, or technique. This provision changes the treatment of Section 174 costs

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

such that the expenditures are no longer allowed as an immediate deduction but rather must be capitalized and amortized. The application of this provision resulted in a deferred tax asset of approximately $16.8 million and $9.4 million as of December 31, 2024 and 2023, respectively.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2024 and 2023, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2024 and 2023.

Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company completed a formal Section 382 study that determined a single “ownership change” had occurred in August 2021, which limits the Company’s ability to utilize its then existing tax attributes. The Company expects to be able to utilize all of its pre-change and post-change NOL carryforwards and as such, has not recorded a deferred tax asset reduction. Tax losses generated since the Company’s inception in 2020 may be used to offset only 80% of taxable income and carryforward indefinitely, which may require the Company to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years. Future changes in the Company’s stock ownership, which may be outside of the Company’s control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” If an additional “ownership change” does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to the Company.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which the Company operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when the Company’s judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024 and 2023, the Company has recorded unrecognized tax benefits and if recognized would not impact the effective tax rate and has not recognized any interest or penalties related to unrecognized tax benefits.

The following table summarizes the changes to the Company’s gross unrecognized tax benefits (in thousands):

 

     December 31,  
     2024      2023  

Balance at January 1,

   $ 490      $ —  

Increase related to current year tax positions

     574        490  
  

 

 

    

 

 

 

Balance at December 31,

   $ 1,064      $ 490  
  

 

 

    

 

 

 

 

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EVOMMUNE, INC.

Notes to the Consolidated Financial Statements

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from December 31, 2020, to the present. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements.

11. Subsequent Events

In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential disclosure through May 14, 2025, the date the consolidated financial statements were available to be issued.

 

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EVOMMUNE, INC.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

 

     June 30,
2025
    December 31,
2024
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $
61,837
 
  $ 16,255  

Short-term investments

     24,958       55,785  

Prepaid expenses and other current assets

     8,100       1,948  
  

 

 

   

 

 

 

Total current assets

     94,895       73,988  

Operating lease right-of-use assets

     69       472  

Property and equipment, net

     977       1,326  

Restricted cash

     208       208  

Other non-current assets

     61       61  
  

 

 

   

 

 

 

Total assets

   $ 96,210     $ 76,055  
  

 

 

   

 

 

 
    

Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit

    

Current liabilities:

    

Accounts payable

   $ 3,673     $ 8,264  

Accrued liabilities

     5,916       6,729  

Operating lease liability, current portion

     71       487  

Convertible preferred stock forward

    
—
 
    8,928  

Deferred revenue

     —       3,000  

Other current liabilities

     432       573  
  

 

 

   

 

 

 

Total current liabilities

     10,092       27,981  

Other non-current liabilities

     347       535  
  

 

 

   

 

 

 

Total liabilities

     10,439       28,516  
  

 

 

   

 

 

 

Commitments and contingencies (Note 6)

    

Convertible preferred stock: $0.0001 par value — 157,657,729 shares authorized at June 30, 2025 and December 31, 2024, respectively, 157,657,729 and 116,716,142 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively (Liquidation preference $275,611 and $210,328 at June 30, 2025 and December 31, 2024, respectively)

     257,004       191,776  

Stockholders’ deficit:

    

Common stock, par value $0.0001 — 223,593,879 shares authorized at June 30, 2025 and December 31, 2024, respectively; 13,245,339 and 13,215,131 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

     1       1  

Additional paid-in capital

     9,107       7,981  

Accumulated deficit

     (180,341 )      (152,219 ) 
  

 

 

   

 

 

 

Total stockholders’ equity

     (171,233 )      (144,237 ) 
  

 

 

   

 

 

 

Total liabilities, convertible preferred stock, and stockholders’ deficit

   $ 96,210     $ 76,055  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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EVOMMUNE, INC.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

     Six Months Ended  
     June 30,  
     2025     2024  

Revenues:

    

License revenue

   $ 3,000     $ 7,000  
  

 

 

   

 

 

 

Operating expenses:

    

Research and development

     34,000       33,125  

General and administrative

     7,026       5,918  
  

 

 

   

 

 

 

Total operating expenses

     41,026       39,043  
  

 

 

   

 

 

 

Loss from operations

     (38,026 )      (32,043 ) 
  

 

 

   

 

 

 

Other income, net:

    

Change in fair value of convertible preferred stock forward

     8,928       —  

Interest income

     1,017       1,898  

Other expense, net

     (41 )      (21 ) 
  

 

 

   

 

 

 

Total other income, net

     9,904       1,877  
  

 

 

   

 

 

 

Net loss

     (28,122 )      (30,166 ) 
  

 

 

   

 

 

 

Net loss attributable to common stockholders

     (28,122 )      (30,166 ) 
  

 

 

   

 

 

 

Basic and diluted net loss per share of common stock

   $ (2.15 )    $ (2.37 ) 
  

 

 

   

 

 

 

Weighted average basic and diluted shares of common stock outstanding

     13,099,369       12,708,722  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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EVOMMUNE, INC.

Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share amounts)

 

    For the Six Months Ended June 30, 2025  
    Convertible Preferred
stock
    Common stock     Additional
paid-in

capital
    Accumulated
Deficit
    Total  
    Shares     Amount     Shares     Amount  

Balance, January 1, 2025

    116,716,142     $ 191,776       13,215,131     $ 1     $ 7,981     $ (152,219 )    $ (144,237 ) 

Issuance of common stock on exercise of options

    —       —       30,208       —       6       —       6  

Issuance of Series C convertible preferred stock, net of transaction costs

    40,941,587       65,228       —       —       —       —       —  

Stock-based compensation

    —       —       —       —       1,100       —       1,100  

Vesting of early exercised options

    —       —       —       —       20       —       20  

Net loss

    —       —       —       —       —       (28,122 )      (28,122 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2025

    157,657,729     $ 257,004       13,245,339     $ 1     $ 9,107     $ (180,341 )    $ (171,233 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    For the Six Months Ended June 30, 2024  
    Convertible Preferred
stock
    Common stock     Additional
paid-in

capital
    Accumulated
Deficit
    Total  
    Shares     Amount     Shares     Amount  

Balance, January 1, 2024

    85,222,619     $ 149,374       13,161,608     $ 1     $ 6,196     $ (83,911 )    $ (77,714 ) 

Issuance of common stock on exercise of options

    —       —       5,555       —       2       —       2  

Stock-based compensation

    —       —       —       —       826       —       826  

Vesting of early exercised options

    —       —       —       —       27       —       27  

Net loss

    —       —       —       —       —       (30,166 )      (30,166 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2024

    85,222,619     $ 149,374       13,167,163     $ 1     $ 7,051     $ (114,077 )    $ (107,025 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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EVOMMUNE, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

     Six Months Ended
June 30,
 
     2025     2024  

Cash flows from operating activities:

    

Net loss

   $ (28,122 )    $ (30,166 ) 

Adjustments to reconcile net loss to net cash used in operating activities:

    

Stock-based compensation expense

     1,100       826  

Accretion of discount on short-term investments

     (673 )      (1,049 ) 

Depreciation and amortization

     752       596  

Change in fair value of convertible preferred stock forward

     (8,928 )      —  

Changes in operating assets and liabilities:

    

Prepaid expenses and other assets

     (5,416 )      191  

Accounts payable

     (4,591 )      16,035  

Accrued liabilities

     (813 )      483  

Operating lease liabilities

     (416 )      (372 ) 

Deferred revenue

     (3,000 )      —  
  

 

 

   

 

 

 

Net cash used in operating activities

     (50,107 )      (13,456 ) 
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     —       (28,987 ) 

Maturities of short-term investments

     31,500       48,750  

Purchase of property and equipment

     —       (88 ) 
  

 

 

   

 

 

 

Net cash provided by investing activities

     31,500       19,675  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of convertible preferred stock, net of issuance costs

     65,228       —  

Proceeds from exercise of stock options

     6       2  

Payment of deferred offering costs

     (736 )      —  

Principal payments of finance lease liability

     (192 )      (65 ) 

Principal payments of financing obligation

     (117 )      (105 ) 
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     64,189       (168 ) 
  

 

 

   

 

 

 

Net increase in cash, cash equivalents and restricted cash

     45,582       6,051  

Cash, cash equivalents and restricted cash - beginning of period

     16,463       29,232  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash - end of period

   $ 62,045     $ 35,283  
  

 

 

   

 

 

 

Reconciliation of cash, cash equivalents, and restricted cash to the amounts reports within the balance sheets

    

Cash and cash equivalents

   $ 61,837     $ 35,075  

Restricted cash

     208       208  
  

 

 

   

 

 

 

Total cash, cash equivalents, and restricted cash

   $ 62,045     $ 35,283  
  

 

 

   

 

 

 

Supplemental cash flow disclosures:

    

Cash paid for interest

   $ 7     $ 20  

Deferred offering costs in accrued expenses

     583       —  

Non-cash investing and financing activities:

    

Vesting of early exercised stock options

   $ 20     $ 27  

Assets acquired under finance leases

   $ —     $ 595  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of the Business

Business and Organization

Evommune, Inc. and subsidiaries (“Evommune” or the “Company”) is a Delaware corporation headquartered in Palo Alto, California. Evommune is a clinical stage biotechnology company developing innovative therapies that target key drivers of chronic inflammatory diseases.

Liquidity

The Company has incurred significant operating losses since inception and has relied primarily on equity financing and license revenue to fund its operations. As of June 30, 2025, the Company had an accumulated deficit of $180.3 million. The Company expects to continue to incur substantial losses, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenue to support its cost structure. The Company may never achieve profitability and, unless and until it does, the Company will need to continue to raise additional capital.

As previously disclosed in the Company’s consolidated financial statements for the year ended December 31, 2024, management identified conditions that raised substantial doubt about the Company’s ability to continue as a going concern. During the six months ended June 30, 2025, management implemented plans that alleviated the substantial doubt. The principal factor leading to this conclusion is additional capital raised through the issuance of preferred stock (Note 7). As of June 30, 2025, management expects that exiting cash, cash equivalents and short-term investments will be sufficient to fund the Company’s current operating plan for at least twelve months from the issuance date of these financial statements.

Significant Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s product candidates; development of sales channels; certain strategic relationships; competition from pharmaceutical or other biotechnology companies with greater financial resources or expertise; litigation or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s ability to attract and retain employees necessary to support its growth.

Products candidates being developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) or other international regulatory agencies prior to commercial sales. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a materially adverse impact on the Company.

The Company has expended and expects to continue to expend substantial funds to complete the research, development and preclinical and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of product candidates that may receive regulatory approval. If adequate funds are unavailable from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and results of operations.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

The Company is currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, a recessionary environment and high domestic and global inflation. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy, and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect the Company’s operating results. The Company continues to monitor these events and the potential impact on its business. Although the Company does not believe that inflation has had a material impact on its financial position or operations to date, it may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, and other factors, and such factors may lead to increases in the cost of manufacturing for and initiation of studies in the Company’s product candidates.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company operates in one segment considering the nature of the Company’s products and services, class of customers, methods used to distribute the products and the regulatory environment in which the Company operates. The accompanying unaudited condensed consolidated financial statements, which include the accounts of Evommune, Inc. and its domestic subsidiaries, all of which are wholly owned by Evommune, Inc., have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) and with the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consistent of normal recurring adjustments, considered necessary for a fair statement have been include. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2025 or other interim periods. The Condensed Consolidated Balance Sheet as of December 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s significant accounting policies, other than as described below.

Segments

The Company has a single operating segment. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, manages and allocates resources to the operations of the company on a total company basis by assessing the overall level of resources available and how to best deploy these resources across functions and research and development projects that are in line with its long-term company-wide strategic goals. In making these decisions, the CODM uses consolidated financial information for purposes of evaluating performance and forecasting future period financial results. The CODM performs this assessment based on the Company’s consolidated net loss. Through this analysis, the CODM assesses performance by comparing actual net loss versus the budget, and then decides how to allocate resources to invest in the Company’s research and development programs. The following is a breakdown of net loss by category for the six months ended June 30, 2025 and 2024 as managed by the CODM (in thousands).

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

     Six Months Ended  
     June 30,
2025
    June 30,
2024
 

License revenue

   $ 3,000     $ 7,000  

Operating Expenses:

    

EVO756

     14,859       9,685  

EVO301

     4,402       15,006  

Other research and development

     9,512       3,897  
  

 

 

   

 

 

 

Total external research and development

   $ 28,773     $ 28,588  

Research and development personnel costs

     5,227       4,537  
  

 

 

   

 

 

 

Total research and development operating expenses

   $ 34,000     $ 33,125  

General and administrative operating expenses

     3,660       3,155  

General and administrative personnel costs

     3,366       2,763  
  

 

 

   

 

 

 

Total general and administrative operating expenses

   $ 7,026     $ 5,918  
  

 

 

   

 

 

 

Total operating expenses

   $ 41,026     $ 39,043  

Other income, net

     9,904       1,877  
  

 

 

   

 

 

 

Net Loss

   $ (28,122 )    $ (30,166 ) 
  

 

 

   

 

 

 

Other research and development consists of discovery research, preclinical programs and other early stage development programs. The measure of segment assets, all of which are held in the United States, is reported on the consolidated balance sheets as total assets. Additionally, segment depreciation expense is consistent with amounts reported within the consolidated statement of cash flows.

Revenue Recognition

The Company recognizes revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”), the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current portion. Since inception, the Company’s only revenues have been generated through license agreements.

License Revenue

The terms of the Company’s license agreements typically may include payment to the Company of one or more of the following: nonrefundable, up-front license fees, research, development and commercial milestone

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

payments; royalties and other contingent payments due based on the activities of the counterparty. Each of these types of revenue are recorded as license revenues in the Company’s consolidated statements of operations. See Note 5 for additional details regarding the Company’s license arrangements.

Transaction Price Allocated to Future Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2025. The guidance provides certain practical expedients that limit this requirement. The Company has various contracts that meet the following practical expedients provided by ASC 606:

 

  1.  

The performance obligation is part of a contract that has an original expected duration of one year or less.

 

  2.  

Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer.

 

  3.  

The variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.

As of December 31, 2024, the Company had one performance obligation that had not yet been satisfied related to the Maruho Co., Ltd. License agreement, with $3.0 million of the transaction price allocated to future performance obligations under ASC 606 (Note 5). The Company recorded deferred revenue of $0.0 million, $3.0 million and $0.0 million as of June 30, 2025, December 31, 2024 and December 31, 2023, respectively. The Company completed the associated performance obligation in February 2025 and recognized $3.0 million in license revenue for the six months ended June 30, 2025.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of June 30, 2025 and December 31, 2024, cash and cash equivalents consisted of cash and money market mutual funds. The Company has invested its excess cash in U.S. government securities, and intends and has the ability to hold these investments to maturity. All of the Company’s investments in U.S. government securities are classified as held to maturity and are reported as short-term or long-term based on maturity dates. All of the Company’s short-term investments had original maturity dates of less than 12 months. The following tables summarize the Company’s cash, cash equivalents and short-term investments as of June 30, 2025 and December 31, 2024:

 

     June 30, 2025  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
 

Cash and cash equivalents:

           

Cash and money market funds

   $ 61,837      $ —      $ —      $ 61,837  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     61,837        —        —        61,837  
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments:

           

Held-to-maturity securities

     24,958        —        —        24,958  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

     24,958        —        —        24,958  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and short-term investments

   $ 86,795      $ —      $ —      $ 86,795  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

     December 31, 2024  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
 

Cash and cash equivalents:

           

Cash and money market funds

   $ 16,255      $ —      $ —      $ 16,255  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     16,255        —        —        16,255  
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments:

           

Held-to-maturity securities

     55,785        —        —        55,785  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term investments

     55,785        —        —        55,785  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and investment debt securities

   $ 72,040      $ —      $ —      $ 72,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted Cash

Restricted cash is defined as cash and cash equivalents that cannot be withdrawn or used for general operating activities. As of June 30, 2025 and December 31, 2024, the Company’s restricted cash was $0.2 million and was associated with a letter of credit issued in connection with an office lease.

Convertible Preferred Stock Forward

Certain provisions of the Series C Preferred Stock Purchase Agreement (“Series C SPA”) obligated the Company to sell, and the investors to purchase, additional tranches of the Series C Convertible Preferred Stock (“Series C”) at a future date and specified price (the “tranche closings forward”) if certain clinical performance milestones were met. The tranche closings forward represented freestanding instruments as they are legally detachable and separately exercisable and, therefore, were accounted for separately from Series C as convertible preferred stock forwards (liability or asset). The tranche closings forward were completed in June 2025.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts and respective tax bases of existing assets and liabilities, as well as for net operating loss carryforwards and research and development credits. Valuation allowances are provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of a change in the tax laws is recorded in the period in which the law is enacted.

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the convertible preferred stock, common stock subject to repurchase, stock options, restricted stock units (“RSUs”), and stock appreciation rights (“SARs”) are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss is attributed entirely to common stockholders. Because the Company has reported a net loss for the reporting periods presented, the diluted net loss per common share is the same as basic net loss per common share for those periods.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

 

     Six Months ended
June 30,
 
     2025     2024  

Numerator:

    

Net Loss

   $ (28,122 )    $ (30,166 ) 

Denominator:

    

Weighted-average common shares outstanding

   $ 13,226,468     $ 13,166,156  

Less: weighted-average unvested founder shares

     —       (171,475 ) 

Less: weighted-average unvested early-exercised options

     (127,099 )      (285,959 ) 
  

 

 

   

 

 

 

Weighted-average common shares outstanding used to compute net loss per share, basic and diluted

     13,099,369       12,708,722  
  

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (2.15 )    $ (2.37 ) 
  

 

 

   

 

 

 

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

 

     Six Months Ended June 30,  
     2025      2024  

Convertible preferred stock

     163,099,487        85,222,619  

Stock options outstanding

     31,741,410        22,882,750  

Restricted stock units outstanding

     3,728,809        —  

Stock appreciation rights outstanding

     3,790,449        —  

Common stock subject to repurchase

     103,125        240,001  
  

 

 

    

 

 

 

Total

     202,463,280        108,345,370  
  

 

 

    

 

 

 

The amounts above represent common stock equivalents, where applicable.

Deferred Financing Costs

The Company capitalizes costs that are directly associated with in-process equity and debt financings until such financings are consummated, at which time such costs are recorded against the gross proceeds from the applicable financing. If a financing is abandoned, deferred financing costs are expensed. As of June 30, 2025, the Company has incurred $1.5 million in fees associated with the IPO, which are recognized as a component of prepaid expenses and other current assets on the consolidated balance sheet.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require incremental income tax disclosures on an annual basis for all public entities. The amendments require that public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold. The amendments also require disclosure of income taxes paid to be disaggregated by jurisdiction, and disclosure of income tax expense disaggregated by federal, state and foreign. ASU 2023-09 is effective for annual reporting beginning with the fiscal year ending December 31, 2025. The Company is currently evaluating the incremental disclosures that will be required in its future consolidated financial statements.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” (“ASU 2024-03”), which will require additional expense disclosures for all public entities. The amendments require that at each interim and annual reporting period, an entity will disclose certain disaggregated expenses included in each relevant expense caption, as well as the total amount of selling expenses and, in annual periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning with the fiscal year ending December 31, 2027, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the incremental disclosures that will be required in its future consolidated financial statements.

3. Fair Value Measurements and Fair Value of Financial Instruments

The following table sets forth the Company’s consolidated financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

     Fair Value Measurements at June 30, 2025  
     Total     Level 1      Level 2      Level 3  

Assets:

          

Cash Equivalents

          

Money market funds

   $ 61,618       61,618        —        —  

Short-term investments

          

Held-to-maturity securities

     24,958       —        24,958        —  
  

 

 

   

 

 

    

 

 

    

 

 

 

Total fair value of assets

   $ 86,576       61,618        24,958        —  
  

 

 

   

 

 

    

 

 

    

 

 

 
     Fair Value Measurements at December 31,
2024
 
     Total     Level 1      Level 2      Level 3  

Assets:

          

Cash Equivalents

          

Money market funds

   $ 14,227       14,227        —        —  

Short-term investments

          

Held-to-maturity securities

     55,785       —        55,785        —  
  

 

 

   

 

 

    

 

 

    

 

 

 

Total fair value of assets

   $ 70,012       14,227        55,785        —  
  

 

 

   

 

 

    

 

 

    

 

 

 

Liabilities:

          

Convertible preferred stock forward

     (8,928 )      —        —        (8,928 ) 
  

 

 

   

 

 

    

 

 

    

 

 

 

Total fair value of liabilities

   $ (8,928 )      —        —        (8,928 ) 
  

 

 

   

 

 

    

 

 

    

 

 

 

Items classified as Level 1 within the valuation hierarchy consist of the Company’s cash equivalents held in money market funds. The Company measures these investments at fair value determined based on Level 1 observable quoted price market inputs. The Company’s money market funds are included in cash and cash equivalents in the consolidated balance sheets.

Items classified as Level 2 within the valuation hierarchy consist of the Company’s excess cash invested in U.S. government securities, measured at fair value based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. The Company’s U.S. government securities are included in short-term investments in the consolidated balance sheets.

Items classified as Level 3 within the valuation hierarchy consist of the Company’s convertible preferred stock forward (Note 7). The fair value of the convertible preferred stock forward has been estimated at the date of

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

inception, and re-measured at the end of each reporting period until the forwards expire. The Company used a standard forward pricing valuation model to estimate the fair value of the forward contracts with the following significant assumptions:

 

     June 26, 2025      December 31, 2024  

Fair value per share of Series C Tranche Two

   $ 1.59      $ 0.22  

Strike price

   $ 1.59453      $ 1.59453  

Expected term

     0.003 years        0.58 years  

Discount rate

     4.11%        4.32%  

The following table is a roll-forward of Level 3 assets for the periods indicated (in thousands) (Note 7):

 

     Series C
Tranche
Two
Forward
 

Balance at January 1, 2024

   $ —  

Issuance of convertible preferred stock forward

     (8,928 ) 
  

 

 

 

Balance at December 31, 2024

     (8,928 ) 

Change in fair value of convertible preferred stock forward

     8,928  
  

 

 

 

Balance at June 30, 2025

   $ —  
  

 

 

 

In June 2025, the Company issued 40,941,587 shares of Series C and settled the convertible preferred stock forward.

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

     June 30,
2025
     December 31,
2024
 

Accrued research and development

   $ 3,054      $ 2,828  

Accrued compensation

     1,975        3,634  

Other

     887        267  
  

 

 

    

 

 

 

Total

   $ 5,916      $ 6,729  
  

 

 

    

 

 

 

5. Strategic Collaborations and License Agreements

The Company has entered into several license agreements for products currently under development. The Company’s license agreements are disclosed in “Note 5. Strategic Collaborations and License Agreements” of the Company’s annual audited consolidated financial statements for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s license agreements, other than the following.

Dermira

In December 2020, the Company entered into an exclusive license agreement with Dermira, Inc., a wholly owned subsidiary of Eli Lilly and Company (“Dermira”) to develop and commercialize EVO756 and two other development programs for the treatment of various inflammatory diseases (the “Dermira License Agreement”).

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

The Dermira License Agreement remains in effect on a product-by-product and a country-by-country basis until the expiration of the royalty term for such product in such country. The Dermira License Agreement may be terminated by either party due to the other party’s uncured material breach or bankruptcy.

Milestones and royalties are contingent upon future events and will be recorded when the milestones are achieved and when payments are due. For the six months ended June 30, 2025, the Company has recorded $2.5 million as research and development expense upon achievement of a development milestone under the Dermira License Agreement. No other milestones were achieved under the Dermira License Agreement during the six months ended June 30, 2025 and 2024.

Maruho Co., Ltd.

Maruho Japan Agreement

As of December 31, 2024, the Company has recorded short term deferred revenue of $3.0 million, attributable to the Company’s on-going performance obligations. The Company recognized $3.0 million in license revenue for the six months ended June 30, 2025 upon the satisfaction of the performance obligation. No other milestone or royalty revenues related to this agreement have been earned as of June 30, 2025.

AprilBio

In June 2024, the Company entered into a License, Development and Commercialization Agreement with AprilBio Co., Ltd. (“AprilBio”) upon which AprilBio granted the Company an exclusive worldwide license to develop and commercialize an IL-18BP compound (“EVO301”). The Company is responsible for the payments of development milestones of up to $82.5 million, sales milestones of up to $377.5 million, and tiered royalty payments in the mid-to-high single digit percentage on covered product net worldwide sales. For the six months ended June 30, 2025, the Company has recorded $1.5 million as research and development expense upon achievement of a development milestone under the AprilBio License, Development and Commercialization Agreement. No development milestones were recorded as research and development expenses for the six months ended June 30, 2024. No other development or sales milestones have been achieved as of June 30, 2025.

6. Commitments and Contingencies

Leases

The Company has operating leases for office space and equipment as well as finance leases of certain lab and office equipment. The leases have the original lease terms of three years each. Generally, the Company’s leases are non-cancellable and do not include renewal options. The Company’s leases do not have any residual value guarantees or any restrictions or covenants imposed by leases.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

As of June 30, 2025, future minimum lease payments included in the measurement of lease liabilities and financing obligations were as follows (in thousands):

 

     Operating
lease
     Finance
lease
    Financing
obligation
 

2025

   $ 71      $ 210     $ 42  

2026

     —        400       —  

2027

     —        184       —  

2028 and thereafter

     —        —       —  
  

 

 

    

 

 

   

 

 

 

Total undiscounted lease payments

     71        794       42  

Less: imputed interest

     —        (94 )      (1 ) 
  

 

 

    

 

 

   

 

 

 

Total lease liability

     71        700       41  

Less: current portion

     71        353       41  
  

 

 

    

 

 

   

 

 

 

Operating and finance lease liability, net of current maturities

   $ —      $ 347     $ —  
  

 

 

    

 

 

   

 

 

 

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases and finance leases (in thousands):

 

     Six Months Ending
June 30, 2025
     Six Months Ending
June 30, 2024
 

Operating lease:

     

Short-term lease cost

   $ 533      $ 425  

Variable lease cost

     115        154  

Operating lease cost

     416        372  
  

 

 

    

 

 

 

Total operating lease costs

     1,064        951  
  

 

 

    

 

 

 

Finance lease:

     

Amortization of right-of-use assets

   $ 191      $ 65  

Interest on lease liabilities

     42        20  

Financing obligation:

     

Interest expense

     7        20  
  

 

 

    

 

 

 

Total finance lease and financing obligation cost

     240        105  
  

 

 

    

 

 

 

Total lease cost

   $ 2,368      $ 2,007  
  

 

 

    

 

 

 

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

For the six months ended June 30, 2025, payments were $0.4 million, $0.1 million and $0.2 million for operating leases, financing obligation and finance leases, respectively. For the six months ended June 30, 2024, payments were $0.4 million, $0.1 million and $0.1 million for operating leases, financing obligation and finance leases, respectively. Interest expense is recorded within other expense within the Company’s unaudited condensed consolidated statements of operations. The weighted average discount rate and remaining terms are as follows:

 

     Six Months Ending
June 30, 2025
    Six Months Ending
June 30, 2024
 

Weighted-average remaining lease term (in years)

    

Operating leases

     —       1.00  

Finance leases

     1.98       2.63  

Financing obligation

     0.17       1.17  

Weighted-average discount rate (percent)

    

Operating leases

     8.00 %      8.00 % 

Finance leases

     10.50 %      12.45 % 

Financing obligation

     12.70 %      12.70 % 

Research and Development Agreements

The Company enters into contracts in the normal course of business with clinical research organizations, contract manufacturing organizations and other third-party vendors for clinical trials, manufacturing, testing and other research and development activities. These contracts generally provide for termination on notice, with varying termination fees, typically up to 50%, dependent on timing of notification in advance of planned activity timelines. As of June 30, 2025 and December 31, 2024, there were no amounts accrued related to termination and cancellation charges as these are not probable.

License Agreements

The Company has entered into various license agreements (Note 5), pursuant to which the Company is required to make payments contingent upon the occurrence of specified events. The Company is required to pay development and sales milestones and royalties on sales of products developed under these agreements. Except as disclosed in Note 5, no such milestone events occurred in during the six months ended June 30, 2025 and 2024.

Guarantees and Indemnifications

The Company accrues a liability for any contingent liabilities when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

Legal proceedings

The Company was not subject to any material legal proceedings during the six months ended June 30, 2025 and 2024, and no material legal proceedings are currently pending or threatened.

7. Convertible Preferred Stock

The Company’s convertible preferred stock are disclosed in the financial statements included in “Note 7. Redeemable Convertible Preferred Stock” for the year ended December 31, 2024. Since the date of such consolidated financial statements, there have been no significant changes to the Company’s redeemable convertible preferred stock, other than the following.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

Series C Convertible Preferred Stock Tranche Closings Forward

The Company determined that its obligation to issue and the investors’ obligation to purchase additional shares of Series C in the Series C Tranche Two Closing at a fixed price represent a freestanding instruments and forward contracts that are accounted for at fair value at the issuance date and re-measured at each reporting date until the expiration or the settlement of the obligation (the “Series C Tranche Two Forward”). At issuance and as of December 31, 2024, the Series C Tranche Two Forward liability’s fair value was estimated as $8.9 million.

On May 20, 2025, the Company completed, and the board of directors approved, the achievement of the Series C milestone event and as a result, on June 27, 2025, the Company issued and sold 40,941,587 shares of Series C redeemable convertible preferred stock at the original issuance price of $1.59453 when the total fair value of the Series C Tranche Two Forward was $0.0 million. The Company issued 40,941,587 shares of Series C and settled the related forward contracts in June 2025, and recognized a gain of $8.9 million for the six months ended June 30, 2025. The Company received aggregate gross proceeds of $65.3 million as part of the Series C Tranche Two Closing.

Pursuant to the Series C SPA, the Company issued and sold shares of Series C Preferred Stock at a purchase price of $1.59453 per share, which triggered the anti-dilution protection provision under the Company’s then in effect certificate of incorporation. Due to these provisions, the conversion ratio of the Series A Preferred Stock and Series B Preferred Stock was adjusted from 1.0378 to 1.0707, and from 1.0436 to 1.0820, respectively.

The authorized, issued, and outstanding shares of the Company’s convertible preferred stock and liquidation values as of June 30, 2025 and December 31, 2024 were as follows (in thousands, except for share amounts):

 

     As of June 30, 2025  
     Authorized
Shares
     Outstanding
Shares
     Liquidation
Preference
     Carrying
Value
 

Series Seed

     12,858,517        12,858,517      $ 12,462      $ 14,240  

Series A

     43,614,102        43,614,102        87,640        79,056  

Series B

     28,750,000        28,750,000        60,009        57,578  

Series C

     72,435,110        72,435,110        115,500        106,130  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     157,657,729        157,657,729      $ 275,611      $ 257,004  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2024  
     Authorized
Shares
     Outstanding
Shares
     Liquidation
Preference
     Carrying
Value
 

Series Seed

     12,858,517        12,858,517      $ 12,462      $ 14,240  

Series A

     43,614,102        43,614,102        87,640        79,056  

Series B

     28,750,000        28,750,000        60,009        57,578  

Series C

     72,435,110        31,493,523        50,217        40,902  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     157,657,729        116,716,142      $ 210,328      $ 191,776  
  

 

 

    

 

 

    

 

 

    

 

 

 

The significant rights and obligations of the Company’s Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (collectively “Convertible Preferred Stock”) are disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2024.

8. Common Stock

As of June 30, 2025, the Company is authorized to issue 223,593,879 shares of $0.0001 par value common stock. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

receive dividends whenever funds are legally available and when declared by the board of directors, subject to prior rights of the preferred stockholders.

The Company had reserved common stock for future issuance as follows:

 

     June 30, 2025      December 31, 2024  

Series Seed

     12,858,517        12,858,517  

Series A

     46,696,937        45,261,538  

Series B

     31,108,923        30,004,385  

Series C

     72,435,110        31,493,523  

Outstanding options under 2020 Stock Plan

     31,741,410        31,647,035  

Outstanding restricted stock units under 2020 Stock Plan

     3,728,809        3,728,809  

Options available for grants under the 2020 Stock Plan

     1,131,506        1,256,089  
  

 

 

    

 

 

 

Total

     199,701,212        156,249,896  
  

 

 

    

 

 

 

9. Stock Option Plan

Stock Options

In May 2020, the board of directors adopted the Evommune, Inc. 2020 Stock Plan (the “Plan”) under which officers, employees, outside directors and consultants may be eligible for the grant of equity awards. The Plan provides for the direct award or sale of shares, the grant of Incentive Stock Options (“ISO”) and Nonstatutory Stock Options (“NSO”) options to purchase shares and the grant of RSUs to acquire shares. The board of directors has authorized an aggregate number of 37,987,851 shares of the Company’s common stock to be issued under the Plan. Options under the Plan may be granted for periods of up to 10 years at exercise prices no less than 100% of the fair market value of the Company’s common stock on the date of grant with the exception of ISOs granted to a 10% holder which is no less than 110% of the fair market value of common stock on the date of grant. As of June 30, 2025, the Company had 1,131,506 shares available for issuance under the Plan.

The following table summarizes the Company’s stock option activity from January 1, 2025 to June 30, 2025:

 

     Stock Options     Weighted-Average
Exercise Price
     Weighted-Average
Remaining
Contractual Term
(years)
     Aggregate
Intrinsic
Value
(in thousands)
 

Outstanding at January 1, 2025

     31,647,035     $ 0.36        8.52      $ 585  

Shares authorized

     —          

Options granted

     175,000       0.54        

Options exercised

     (30,208 )      0.20           5  

Options cancelled or forfeited

     (50,417 )      0.24        

Outstanding at June 30, 2025

     31,741,410       0.36        8.03        6,908  
  

 

 

         

Exercisable at June 30, 2025

     14,189,507       0.37        7.29        2,995  
  

 

 

         

Vested and expected to vest at June 30, 2025

     31,844,535     $ 0.36        8.03      $ 6,930  
  

 

 

         

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2025 and 2024 was $0.41 and $0.16 per option, respectively. The aggregate intrinsic value of options exercised for the

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

six months ended June 30, 2025 and 2024 was less than $0.1 million, respectively. Intrinsic values are calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the fair value per share of the common stock, multiplied by the related in the money options that would have been received by the option holders had they exercised their options at the end of the period.

As of June 30, 2025, the total unrecognized stock-based compensation expense for stock options was $4.5 million, which is expected to be recognized over a weighted-average period of 2.6 years. The total fair value of options vested for the six months ended June 30, 2025 and 2024 was $0.9 million and $1.2 million, respectively.

The fair value of the stock options granted was estimated using the following assumptions:

 

     Six Months Ended June 30,
     2025   2024

Expected term

   6.1 years   5.8 - 6.1 years

Expected volatility

   88.51% - 89.11%   99.94% - 101.80%

Risk-free interest rate

   3.94% - 4.07%   4.03% - 4.63%

Fair value of common stock

   $0.27 - $ 0.44   $0.16

Dividend yield

   0%   0%

Restricted Stock Units

In December 2024, certain employees were granted a total of 3,728,809 RSUs. The terms of the RSUs are disclosed in the Company’ consolidated financial statements for the year ended December 31, 2024.

A summary of restricted stock activity during the six months ended June 30, 2025, is as follows:

 

     Number of Units
Outstanding
     Grant Date Fair Value
per Share
 

Unvested balance at January 1, 2025

     3,728,809      $ 0.35  

Granted

     —        —  

Vested

     —        —  
  

 

 

    

 

 

 

Unvested balance at June 30, 2025

     3,728,809      $ 0.35  
  

 

 

    

 

 

 

As of June 30, 2025, the total unrecognized stock-based compensation expense for unvested restricted stock was $1.3 million, which is expected to be recognized over a weighted-average period of 3.4 years. The Company did not record any stock-based compensation expenses for RSUs for the six months ended June 30, 2025 and 2024.

Stock Appreciation Right

In December 2024, an employee was granted 3,790,449 SARs with a base price of $0.35 per unit. The terms of the SAR are disclosed in the Company’ consolidated financial statements for the year ended December 31, 2024.

Upon the performance condition being considered probable, which has not been met as of June 30, 2025, the Company will recognize stock compensation expense over the remaining measurement period. The Company did not record any stock-based compensation expenses for SAR units for the six months ended June 30, 2025 and 2024.

 

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EVOMMUNE, INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

 

Stock-Based Compensation Expense

Stock compensation expense recorded for the six months ended June 30, 2025 and 2024, consisted of expense for stock options. No stock compensation expense was recorded for RSUs or SARs for the six months ended June 30, 2025 and 2024. The following table is a summary of stock compensation expense by function recognized for the periods indicated (in thousands):

 

     Six Months Ended
June 30
 
     2025      2024  

General Administrative

   $ 674      $ 482  

Research and development

     426        344  
  

 

 

    

 

 

 
   $ 1,100      $ 826  
  

 

 

    

 

 

 

10. Income Taxes

The Company’s interim income tax provision consists of U.S. federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary. As of June 30, 2025, and December 31, 2024, the Company was in a pre-tax loss position and is anticipated to remain so throughout the year. For the six months ended June 30, 2025 and 2024, the Company did not record any tax benefit or expense.

In assessing the realizability of deferred tax assets, management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. Management assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Based on these factors, including cumulative losses in recent years, the Company continues to maintain a full valuation allowance against its net deferred tax assets as of June 30, 2025 and December 31, 2024.

11. Subsequent Events

In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential disclosure through August 29, 2025, the date the consolidated financial statements were available to be issued.

On July 16, 2025, the Company received notice from Maruho confirming the achievement of a development milestone under the Maruho Japan Agreement and received a $10.0 million milestone payment in July 2025.

In June 2025, the Company executed a sixty-three month lease agreement to lease office space in Palo Alto, California. The lease is expected to commence in January 2026 and includes annual lease payments during each of the first three years of approximately $1.5 million, with increases of approximately 3% each year thereafter for the remainder of the lease.

In August 2025, we executed a sixty-month lease agreement to lease office space in New York, New York. The lease is expected to commence in October 2025 and includes annual lease payments of approximately $0.4 million.

 

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   Shares

 

 

LOGO

Common Stock

PROSPECTUS

 

MORGAN STANLEY   LEERINK PARTNERS    EVERCORE ISI   CANTOR

Through and including    , 2025 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

     , 2025

 


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with the registration of the common stock hereunder. All amounts are estimates except the Securities and Exchange Commission (“SEC”) registration fee, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filing fee and the NYSE listing fee.

 

     Amount to Be Paid  

SEC registration fee

   $ 15,310  

FINRA filing fee

     15,500  

NYSE listing fee

     *  

Printing and mailing expenses

     *  

Legal fees and expenses

     *  

Accounting fees and expenses

     *  

Transfer agent and registrar fees and expenses

     *  

Miscellaneous expenses

     *  
  

 

 

 

Total

   $   *  
  

 

 

 
 
*

To be completed by amendment.

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law (the “DGCL”) authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings to which they are made or threatened to be made a party by reason of the fact that they have served or are currently serving as a director or officer to a corporation. The indemnity may cover expenses (including attorneys’ fees) judgments, fines and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay expenses (including attorneys’ fees) incurred by directors and officers in advance of the final disposition of such action, suit or proceeding. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability under Section 145.

We have adopted provisions in our amended and restated certificate of incorporation and amended and restated bylaws (our “bylaws”) to be in effect immediately prior to the completion of this offering that limit or eliminate the personal liability of our directors to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to us or our stockholders, any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions or any transaction from which the director derived an improper personal benefit.

These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.

 

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In addition, our bylaws provide that:

 

  •  

we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended; and

 

  •  

we will advance reasonable expenses, including attorneys’ fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings relating to their service for or on behalf of us, subject to limited exceptions.

We have entered into indemnification agreements with each of our directors (and their affiliated funds), executive officers and other officers as determined from time to time by our board of directors or our compensation committee. These agreements provide that we will indemnify each of our directors (and their affiliated funds) and officers with whom we have entered into indemnification agreements to the fullest extent permitted by Delaware law. We will advance expenses, including attorneys’ fees (but excluding judgments, fines and settlement amounts), to each indemnified director (and their affiliated funds) or officer in connection with any proceeding in which indemnification is available and we will indemnify our directors and officers for certain actions or proceedings arising out of that person’s services as a director or officer brought on behalf of us or in furtherance of our rights. Additionally, certain of our directors or officers may have certain rights to indemnification, advancement of expenses or insurance provided by their affiliates or other third parties, which indemnification relates to and might apply to the same proceedings arising out of such director’s or officer’s services as a director referenced herein. Nonetheless, we will agree in the indemnification agreements that our obligations to those same directors or officers are primary and any obligation of such affiliates or other third parties to advance expenses or to provide indemnification for the expenses or liabilities incurred by those directors are secondary.

We will maintain general liability insurance which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).

The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of us and our directors and officers by the underwriters against certain liabilities under the Securities Act and the Securities Exchange Act of 1934.

Item 15. Recent Sales of Unregistered Securities.

In the three years preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities Act. No underwriters were involved in the sales and the certificates representing the securities sold and issued contain legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.

(a) Issuances of Capital Stock

From January 2022 to February 2023, we issued an aggregate of 14,279,809 shares of our Series A Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), to certain accredited investors for gross proceeds of approximately $27.6 million at a purchase price of $1.9363 per share. Of those, 180,756 shares of Series A Preferred Stock were subsequently converted into the shares of our common stock.

From March to June 2023, we issued an aggregate of 28,750,000 shares of our Series B Preferred Stock, par value $0.0001 per share, to certain accredited investors for gross proceeds of approximately $57.5 million at a purchase price of $2.00 per share.

In October 2024 and June 2025, we issued an aggregate of 72,435,110 shares of our Series C Preferred Stock, par value $0.0001 per share, to certain accredited investors for gross proceeds of approximately $115.5 million at a purchase price of $1.59453 per share.

 

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The offers and sales of the securities described above were exempt from registration pursuant to Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, as transactions by an issuer not involving a public offering. All of the purchasers in these transactions represented to us in connection with their purchase that they were acquiring the securities for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an indefinite period of time. Such purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. All recipients had adequate access, through their relationships with us, to information about us. The securities were issued directly by us and did not involve a public offering or general solicitation. All of the foregoing securities are deemed restricted securities for the purposes of the Securities Act.

(b) Grants and Exercises of Stock Options

Since January 1, 2021, we have granted options to purchase an aggregate of 33,652,522 shares of our common stock with a weighted-average exercise price of $0.36 per share, to certain employees, directors and consultants in connection with services provided to us by such persons pursuant to the 2020 Plan. Through the effective date of this registration statement, we have issued an aggregate of 1,136,126 shares of our common stock upon exercise of such stock options for aggregate consideration of $0.3 million.

The issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans. The shares of common stock issued upon the exercise of options are deemed to be restricted securities for purposes of the Securities Act.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

 

Exhibit
Number

 

Description

  1.1*   Form of Underwriting Agreement.
  3.1   Restated Certificate of Incorporation of the Registrant as currently in effect.
  3.2   Form of Amended and Restated Certificate of Incorporation of Registrant, to be in effect prior to the closing of this offering.
  3.3   Bylaws of the Registrant, as currently in effect.
  3.4   Form of Amended and Restated Bylaws of the Registrant, to be in effect prior to the closing of this offering.
  4.1   Form of Common Stock Certificate of the Registrant.
  4.2++   Third Amended and Restated Investors’ Rights Agreement, dated October 30, 2024, by and among the Registrant and the investors party thereto.
  5.1*   Opinion of Cooley LLP.
 10.1#   Form of Indemnification Agreements.
 10.2(a)#   Evommune, Inc. 2020 Stock Plan.
 10.2(b)#   Forms of Stock Option Grant Notice, Option Agreement, Stock Agreement, Notice of Exercise, Restricted Stock Unit Agreement and Restricted Stock Unit Grant Notice under the 2020 Plan.
 10.3(a)#*   Evommune, Inc. 2025 Equity Incentive Plan.

 

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Exhibit
Number

 

Description

 10.3(b)#*   Forms of Stock Option Grant Notice, Option Agreement, Notice of Exercise, Restricted Stock Unit Agreement and Restricted Stock Unit Grant Notice under the 2025 Plan.
 10.4#*   Evommune, Inc. 2025 Employee Stock Purchase Plan.
 10.5#   Employment Agreement, dated November 1, 2024, by and between the Registrant and Luis Peña.
 10.6#   Employment Agreement, dated November 1, 2024, by and between the Registrant and Eugene A. Bauer.
 10.7#   Amendment to Employment Agreement, dated September 22, 2025, by and between the Registrant and Eugene A. Bauer.
 10.8#   Employment Agreement, dated November 1, 2024, by and between the Registrant and Kyle B. Carver.
 10.9#   Employment Agreement, dated November 1, 2024, by and between the Registrant and Janice Drew.
 10.10#   Employment Agreement, dated November 1, 2024, by and between the Registrant and Gregory S. Moss.
 10.11#†   Employment Agreement, dated November 1, 2024, by and between the Registrant and Jeegar P. Patel.
 10.12#   Stock Appreciation Right Agreement, dated January 17, 2025, by and between the Registrant and Luis Peña.
 10.13†   License, Development and Commercialization Agreement, dated December 17, 2020, by and between the Registrant and Dermira, Inc.
 10.14†   Sublicense Agreement, dated September 26, 2023, by and between the Registrant and Maruho Co., Ltd.
 10.15†   Sublicense Agreement, dated March 19, 2024, by and between the Registrant and Maruho Co., Ltd.
 10.16†   License Agreement, dated June 20, 2024, by and between the Registrant and AprilBio Co., Ltd.
 10.17++   Lease Agreement, dated June 29, 2025, by and between the Registrant and Hudson Page Mill Hill, LLC.
 21.1   List of Subsidiaries of the Registrant.
 23.1   Consent of BDO USA, P.C., independent registered public accounting firm.
 23.2*   Consent of Cooley LLP (included in Exhibit 5.1).
 24.1   Power of Attorney (included on signature page to this registration statement).
 99.1   Consent of Arthur Kirsch as director nominee.
 107   Filing Fee Table
 
*

To be filed by amendment.

#

Indicates a management contract or any compensatory plan, contract or arrangement.

†

Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC.

++

Certain schedules and exhibits to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

 

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(b) Financial Statements Schedules

None.

(c) Filing Fee Table

The information required to be furnished by paragraph (c) of this Item is incorporated herein by reference to Exhibit 107.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act 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 Securities and Exchange Commission 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 hereby undertakes that:

 

  (1)  

For purposes of determining any liability under the Securities Act, 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.

 

  (2)  

For the purpose of determining any liability under the Securities Act, 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.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, California, on the 9th day of October, 2025.

 

EVOMMUNE, INC.

By:  

/s/ Luis Peña

 

Luis Peña

Chief Executive Officer and President

 

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POWER OF ATTORNEY

Each person whose individual signature appears below hereby authorizes and appoints Luis Peña and Kyle Carver and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Registration Statement, including any and all post-effective amendments and amendments thereto, and any registration statement relating to the same offering as this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all 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, ratifying and confirming all that said attorneys in fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the 9th day of October, 2025.

 

Signature

  

Title

  

Date

/s/ Luis Peña

Luis Peña

   President, Chief Executive Officer and Director
(Principal Executive Officer)
   October 9, 2025

/s/ Kyle Carver

Kyle Carver, M.B.A., C.P.A.

   Chief Financial Officer (Principal Financial and Accounting Officer)    October 9, 2025

/s/ Benjamin F. McGraw

Benjamin F. McGraw, III, Pharm.D.

   Chairman    October 9, 2025

/s/ Eugene A. Bauer

Eugene A. Bauer, M.D.

   Director    October 9, 2025

/s/ Francois Beaubien

Francois Beaubien, Ph.D., C.F.A.

   Director    October 9, 2025

/s/ David E. Cohen

David E. Cohen, M.D., M.P.H.

   Director    October 9, 2025

/s/ Derek DiRocco

Derek DiRocco, Ph.D.

   Director    October 9, 2025

/s/ Rob Hopfner

Rob Hopfner, R.Ph., Ph.D.

   Director    October 9, 2025

/s/ Felice Verduyn-van Weegen

Felice Verduyn-van Weegen

   Director    October 9, 2025

/s/ Yuexin Yu

Yuexin Yu

   Director    October 9, 2025

 

II-7

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

EVOMMUNE, INC.

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

EVOMMUNE, INC., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

DOES HEREBY CERTIFY:

FIRST: That the name of this corporation is Evommune, Inc. and that this corporation was originally incorporated pursuant to the General Corporation Law on April 9, 2020 under the name Evommune, Inc.

SECOND: That the Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

RESOLVED, that the Restated Certificate of Incorporation of this corporation be amended and restated in its entirety as follows:

ARTICLE I

The name of this corporation is Evommune, Inc.

ARTICLE II

The address of the registered office of this corporation in the State of Delaware is 3500 South DuPont Highway, in the City of Dover, County of Kent 19901. The name of its registered agent at such address is Incorporating Services, Ltd.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

ARTICLE IV

A. Authorization of Stock. This corporation is authorized to issue two classes of stock to be designated, respectively, common stock and preferred stock. The total number of shares that this corporation is authorized to issue is 381,251,608. The total number of shares of common stock authorized to be issued is 223,593,879, par value $0.0001 per share (the “Common Stock”). The total number of shares of preferred stock authorized to be issued is 157,657,729, par value $0.0001 per share (the “Preferred Stock”), of which 12,858,517 shares are designated as “Series Seed Preferred Stock”, 43,614,102 shares are designated as “Series A Preferred Stock”, 28,750,000 shares are designated as “Series B Preferred Stock” and 72,435,110 shares are designated as “Series C Preferred Stock”.

 

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B. Rights, Preferences and Restrictions of Preferred Stock. The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock are as set forth below in this Article IV(B).

1. Dividend Provisions. The holders of shares of Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any other dividend (other than dividends on shares of Common Stock payable in shares of Common Stock), at the applicable Dividend Rate (as defined below), payable when, as and if declared by this corporation’s board of directors (the “Board of Directors”). Such dividends shall not be cumulative. The corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate of Incorporation) the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in addition to the dividends payable pursuant to the first sentence of this Section 1, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided that, if the corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one (1) class or series of capital stock of the corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend. The holders of the outstanding Preferred Stock can waive any dividend preference that such holders shall be entitled to receive under this Section 1 upon the affirmative vote or written consent of (i) the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class and not as separate series, and on an as-converted basis) and (ii) at least one of the Series C Major Investors (as defined in the that certain Third Amended and Restated Investors’ Rights Agreement, dated on or about the Filing Date (as defined below), by and among the Corporation and the investors party thereto) ((i) and (ii) collectively, the “Requisite Holders”). For purposes of this subsection 1(a), “Dividend Rate” shall mean $0.0775 per annum for each share of Series Seed Preferred Stock, $0.1549 per annum for each share of Series A Preferred Stock, $0.1600 per annum for each share of Series B Preferred Stock and $0.1276 per annum for each share of Series C Preferred Stock (each as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like).

2. Liquidation Preference.

(a) In the event of any Liquidation Event (as defined below), the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the proceeds or assets of this corporation available for distribution to its stockholders (the “Proceeds”), before any payment shall be made to the holders of Series B Preferred Stock, Series A Preferred Stock, Series Seed Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the Series C Original Issue Price (as defined below), plus any dividends declared but unpaid thereon (the “Series C Liquidation Preference”). If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series C Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid

 

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preferential amounts, then the entire Proceeds legally available for distribution shall be distributed ratably among the holders of the Series C Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (a). For purposes of this Restated Certificate of Incorporation, “Series C Original Issue Price” shall mean $1.59453 per share for each share of Series C Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Series C Preferred Stock).

(b) In the event of any Liquidation Event, after payment in full of the Series C Liquidation Preference, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the Proceeds, before any payment shall be made to the holders of Series A Preferred Stock, Series Seed Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the Series B Original Issue Price (as defined below), plus any dividends declared but unpaid thereon (the “Series B Liquidation Preference”). If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series B Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire Proceeds legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (b). For purposes of this Restated Certificate of Incorporation, “Series B Original Issue Price” shall mean $2.0000 per share for each share of Series B Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Series B Preferred Stock).

(c) In the event of any Liquidation Event, after payment in full of the Series C Liquidation Preference and Series B Liquidation Preference, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the Proceeds, before any payment shall be made to the holders of Series Seed Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the Series A Original Issue Price (as defined below), plus any dividends declared but unpaid thereon (the “Series A Liquidation Preference”). If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire Proceeds legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (c). For purposes of this Restated Certificate of Incorporation, “Series A Original Issue Price” shall mean $1.9363 per share for each share of Series A Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Series A Preferred Stock).

(d) In the event of any Liquidation Event, after the payment in full of the Series C Liquidation Preference, Series B Liquidation Preference and Series A Liquidation Preference, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the Proceeds, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the Series Seed Original Issue Price (as defined below), plus any dividends declared but unpaid thereon (the “Series Seed Liquidation Preference” and “Liquidation Preference” means the Series C Liquidation Preference, Series B Liquidation Preference, Series A Liquidation Preference or the Series Seed Liquidation Preference, as applicable). If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series Seed Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire Proceeds legally available for distribution to the Series Seed Preferred Stock shall be distributed ratably among the holders of the Series Seed Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (d). For purposes of this Restated Certificate of Incorporation, “Series Seed Original Issue Price” shall mean $0.9692 per share for each share of Series Seed Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to the Series Seed Preferred Stock) and “Original Issue Price” means the Series C Original Issue Price, Series B Original Issue Price, Series A Original Issue Price or the Series Seed Original Issue Price, as applicable.

 

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(e) Upon completion of the distribution required by subsections (a), (b), (c), and (d) of this Section 2, all of the remaining Proceeds available for distribution to stockholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each.

(f) Notwithstanding the above, for purposes of determining the amount each holder of shares of Preferred Stock is entitled to receive with respect to a Liquidation Event, each such holder of shares of a series of Preferred Stock shall be deemed to have converted (regardless of whether such holder actually converted) such holder’s shares of such series into shares of Common Stock immediately prior to the Liquidation Event if, as a result of an actual conversion of all shares of such series into shares of Common Stock, such holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if all shares of such series of Preferred Stock did not convert into shares of Common Stock. If any series of Preferred Stock shall be entitled to receive a greater amount under this paragraph (f) than under paragraph (a), (b), (c) or (d), as applicable, then, for purposes of this Restated Certificate of Incorporation, the applicable “Liquidation Preference” with respect to such series of Preferred Stock shall be deemed to be the amount that each share of such series shall be entitled to receive under this paragraph (f). If any such holder shall be deemed to have converted shares of Preferred Stock into Common Stock pursuant to this paragraph, then such holder shall not be entitled to receive any distribution that would otherwise be made to holders of Preferred Stock that have not converted (or have not been deemed to have converted) into shares of Common Stock.

(g) (i) For purposes of this Restated Certificate of Incorporation, a “Liquidation Event” shall mean (A) the closing of the sale, lease, transfer, exclusive license or other disposition (whether by merger, consolidation, statutory conversion, domestication, continuance or otherwise, and whether in one transaction or a series of related transactions) of all or substantially all of this corporation’s assets or a majority of this corporation’s key research and development programs or assets, (B) the consummation of the merger, consolidation, statutory conversion, transfer, domestication, or continuance of this corporation with or into another entity (except a merger, consolidation, statutory conversion, transfer, domestication, or continuance in which the holders of capital stock of this corporation immediately prior to such merger, consolidation, statutory conversion, transfer, domestication, or continuance continue to hold at least fifty percent (50%) of the voting power of the capital stock of this corporation or the surviving or acquiring entity immediately following such merger, consolidation, statutory conversion, transfer, domestication, or continuance in substantially the same proportions, and with substantially the same terms, as held immediately prior to such merger, consolidation, statutory conversion, transfer, domestication, or continuance), (C) the closing of the transfer (whether by whether by merger, consolidation, statutory conversion, domestication, continuance or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of this corporation’s securities), of this corporation’s securities if, after such closing, such person or group of affiliated persons would hold fifty percent (50%) or more of the then outstanding voting stock of this corporation (or the surviving or acquiring entity), or (D) a liquidation, dissolution or winding up of this corporation, whether voluntary or involuntary; provided, however, that a transaction shall not constitute a Liquidation Event if its sole purpose is to change the state of this corporation’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held this corporation’s securities immediately prior to such transaction. Notwithstanding the prior sentence, the sale by this corporation of shares of Preferred Stock in a bona fide financing transaction primarily for capital raising purposes shall not be deemed a “Liquidation Event.” The treatment of any particular transaction or series of related transactions as a Liquidation Event may be waived by the vote or written consent of the Requisite Holders and the holders of a majority of the outstanding shares of Series C Preferred Stock (voting as a separate series) (the “Requisite Series C Holders”).

 

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(ii) In any Liquidation Event, if Proceeds received by this corporation or its stockholders is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

(A) Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below:

(1) If traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the twenty (20) trading-day period ending three (3) trading days prior to the closing of the Liquidation Event;

(2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the twenty (20) trading-day period ending three (3) trading days prior to the closing of the Liquidation Event; and

(3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Board of Directors and the Requisite Holders; provided that if a holder of Preferred Stock or an affiliate thereof is an acquiring entity in such Liquidation Event, the shares of Preferred Stock held by such holder shall not be included for purposes of such approval calculation.

(B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Board of Directors and the Requisite Holders; provided that if a holder of Preferred Stock or an affiliate thereof is an acquiring entity in such Liquidation Event, the shares of Preferred Stock held by such holder shall not be included for purposes of such approval calculation.

(C) The foregoing methods for valuing non-cash consideration to be distributed in connection with a Liquidation Event shall, with the appropriate approval of the definitive agreements governing such Liquidation Event by the stockholders under the General Corporation Law and Section 6 of this Article IV(B), be superseded by the determination of such value set forth in the definitive agreements governing such Liquidation Event.

(iii) In the event the requirements of this Section 2 are not complied with, this corporation shall forthwith either:

(A) cause the closing of such Liquidation Event to be postponed until such time as the requirements of this Section 2 have been complied with; or

(B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 2(i) hereof.

 

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(h) In the event of a Liquidation Event, if any portion of the consideration payable to the stockholders of this corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement (as defined below) or other transaction documents with respect to such Liquidation Event shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of this corporation in accordance with subsections 2(a)-(e)(e) as if the Initial Consideration were the only consideration payable in connection with such Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with subsections 2(a)-(e) after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this subsection 2(h), consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Liquidation Event shall be deemed to be Additional Consideration.

(i) This corporation shall give each holder of record of Preferred Stock written notice of such impending Liquidation Event not later than twenty (20) days prior to the stockholders’ meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and this corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after this corporation has given the first notice provided for herein or sooner than ten (10) days after this corporation has given notice of any material changes provided for herein; provided, however, that subject to compliance with the General Corporation Law such periods may be shortened or waived upon the written consent of the Requisite Holders.

(j) Effecting Certain Liquidation Events.

(i) This corporation shall not have the power to effect a Liquidation Event referred to in subsection 2(g)(i)(B) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Liquidation Event shall be paid to the holders of capital stock of the corporation in accordance with subsections 2(a)-(f) (unless waived in accordance with the last sentence of Section 2(g)).

(ii) In the event of a Liquidation Event referred to in subsection 2(g)(i)(A) or (C), if the corporation does not effect a dissolution of the corporation under the General Corporation Law within ninety (90) days after such Liquidation Event, then (i) the corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after such Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Preferred Stock, and (ii) if the Requisite Holders (or solely with respect to the Series C Preferred Stock, the Requisite Series C Holders) so request in a written instrument delivered to the corporation not later than one hundred twenty (120) days after such Liquidation Event, the corporation shall use the consideration received by the corporation for such Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors, including a majority of the Preferred Directors (as defined below)), together with any other assets of the corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Liquidation Event, to redeem all outstanding shares of each applicable series of Preferred Stock at a price per share equal to the Liquidation Preference for such applicable series of Preferred Stock. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all

 

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outstanding shares of Preferred Stock, the corporation shall ratably redeem the maximum number of shares that it may lawfully redeem under Delaware law governing distributions to stockholder, and shall redeem the remaining shares as soon as it may lawfully do so, in the following priority: (w) first, the corporation shall ratably redeem the Series C Preferred Stock, based on the respective amounts which would otherwise be payable in respect of the shares of Series C Preferred Stock to be redeemed if there were sufficient funds to redeem all such shares, and shall redeem the remaining shares of Series C Preferred Stock as soon as practicable after the corporation has funds legally available therefor; (x) second, if, after the redemption in full of the Series C Preferred Stock, there are any remaining Available Proceeds, the corporation shall ratably redeem the Series B Preferred Stock, based on the respective amounts which would otherwise be payable in respect of the shares of Series B Preferred Stock to be redeemed if there were sufficient funds to redeem all such shares, and shall redeem the remaining shares of Series B Preferred Stock as soon as practicable after the corporation has funds legally available therefor, (y) third, if, after the redemption in full of the Series C Preferred Stock and Series B Preferred Stock, there are any remaining Available Proceeds, the corporation shall ratably redeem the Series A Preferred Stock, based on the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock to be redeemed if there were sufficient funds to redeem all such shares, and shall redeem the remaining shares of Series A Preferred Stock as soon as practicable after the corporation has funds legally available therefor, and (z) fourth, if, after the redemption in full of the Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock, there are any remaining Available Proceeds, the corporation shall ratably redeem the Series Seed Preferred Stock, based on the respective amounts which would otherwise be payable in respect of the shares of Series Seed Preferred Stock to be redeemed if there were sufficient funds to redeem all such shares, and shall redeem the remaining shares of Series Seed Preferred Stock as soon as practicable after the corporation has funds legally available therefor. The corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of Preferred Stock not less than forty (40) days prior to the date of any such redemption (the “Redemption Date”). The Redemption Notice shall state: (1) the number of shares of each series of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice; (2) the Redemption Date and the applicable aggregate Liquidation Preference of each series of Preferred Stock; (3) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 4); and (4) for holders of shares in certificated form, that the holder is to surrender to the corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed. On or before the Redemption Date, each holder of shares of Preferred Stock to be redeemed on the Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the corporation to indemnify the corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the applicable Liquidation Preference for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder. If the Redemption Notice shall have been duly given, and if on the Redemption Date the applicable Liquidation Preference payable upon redemption of the Preferred Stock to be redeemed on the Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, all rights with respect to such shares of Preferred Stock shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the applicable Liquidation Preference without interest upon surrender of any such certificate or certificates therefor. Prior to the distribution or redemption provided for in this subsection 2(j)(ii), the corporation shall not expend or dissipate the consideration received for such Liquidation Event, except to discharge expenses incurred in connection with such Liquidation Event or in the ordinary course of business.

 

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3. Redemption. The Preferred Stock is not redeemable at the option of the holder thereof except in accordance with subsection 2(j)(ii).

4. Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

(a) Right to Convert. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, and without the payment of additional consideration by the holder thereof, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the applicable Original Issue Price for such series by the applicable Conversion Price (as defined below) for such series (the conversion rate for a series of Preferred Stock into Common Stock is referred to herein as the “Conversion Rate” for such series), determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. “Conversion Price” means, in the case of the Series Seed Preferred Stock, a per share amount equal to $0.9692; in the case of the Series A Preferred Stock, a per share amount equal to $1.865822; in the case of the Series B Preferred Stock, a per share amount equal to $1.916386; and in the case of the Series C Preferred Stock, a per share amount equal to $1.59453; provided, however, that the Conversion Price for the Preferred Stock shall be subject to adjustment as set forth in subsection 4(d). Notwithstanding the foregoing, unless such holder of Series C Preferred Stock purchases its Second Tranche Shares (as defined in the Purchase Agreement (as defined below)) prior to the Outside Date (as defined in the Purchase Agreement), a holder of Series C Preferred Stock shall not be entitled pursuant to this Section 4(a) to elect to convert shares of Preferred Stock into shares of Common Stock during the period commencing on the date and time of the first issuance of the Series C Preferred Stock and ending on the earlier of (i) the Second Tranche Closing (as defined in the Purchase Agreement) and any Special Mandatory Conversion (as defined below) effected in connection with such Second Tranche Closing and (ii) the termination of such holder’s obligations to purchase Second Tranche Shares pursuant to the Purchase Agreement (as applicable, the “Expiration Date”).

(b) Automatic Conversion. Each share of Preferred Stock shall automatically be converted into shares of Common Stock at the Conversion Rate at the time in effect for such series of Preferred Stock immediately upon the earlier of (i) the closing of this corporation’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, the public offering price of which is at least 1.20 times the Original Issue Price per share of Series C Preferred Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like) and that results in greater than $80,000,000 of proceeds, net of the underwriting discount and commissions, to this corporation and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market’s National Market, the New York Stock Exchange or another exchange or marketplace approved the Board of Directors, including the approval of a majority of the Preferred Directors (a “Qualified Public Offering”) or (ii) the date, or the occurrence of an event, specified by vote or written consent or agreement of the Requisite Holders; provided, however, that such conversion pursuant to this clause (ii) shall not be effective with respect to the conversion of the Series C Preferred Stock without the approval of the Requisite Series C Holders if such conversion is approved in connection (or as a part of a series of related transactions) with a Liquidation Event.

 

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(c) Mechanics of Conversion. Before any holder of Preferred Stock shall be entitled to voluntarily convert the same into shares of Common Stock, if such holder’s shares are certificated, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock, or to the nominee or nominees of such holder, a certificate, certificates or a notice of issuance of uncertificated shares for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date set forth for conversion in the written notice of the election to convert irrespective of the surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the persons entitled to receive the Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities. If the conversion is in connection with Automatic Conversion provisions of subsection 4(b)(ii) above, such conversion shall be deemed to have been made on the conversion date described in the stockholder consent approving such conversion, and the persons entitled to receive shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holders of such shares of Common Stock as of such date.

(d) Conversion Price Adjustments of Preferred Stock for Certain Dilutive Issuances, Certain Other Issuances, Splits and Combinations. The Conversion Price of the Preferred Stock shall be subject to adjustment from time to time as follows:

(i) (A) If this corporation shall, at any time on or after the date upon which this Restated Certificate of Incorporation is accepted for filing by the Secretary of State of the State of Delaware (the “Filing Date”), issue any Additional Stock (as defined below) without consideration or for a consideration per share that is less than the Conversion Price applicable to a series of Preferred Stock in effect immediately prior to the issuance of such Additional Stock, the Conversion Price for such series in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price (calculated to the nearest one-thousandth of a cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock Outstanding (as defined below) immediately prior to such issuance plus the number of shares of Common Stock that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of such Additional Stock. For purposes of this Section 4(d)(i)(A), the term “Common Stock Outstanding” shall mean and include the following: (1) outstanding Common Stock, (2) Common Stock issuable upon conversion of outstanding Preferred Stock, (3) Common Stock issuable upon exercise of outstanding stock options and (4) Common Stock issuable upon conversion, exchange or exercise of any evidence of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock. Shares described in (1) through (4) above shall be included whether vested or unvested, whether contingent or non-contingent and whether exercisable or not yet exercisable.

(B) No adjustment of the Conversion Price for the Preferred Stock shall be made in an amount less than one-tenth (1/10th) of one cent per share ($0.001). Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment.

 

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(C) In the case of the issuance of Additional Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof.

(D) In the case of the issuance of the Additional Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the Board of Directors, including a majority of the Preferred Directors, irrespective of any accounting treatment.

(E) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for purposes of determining the number of shares of Additional Stock issued and the consideration paid therefor:

(1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the issuance of such options or rights plus the minimum exercise price provided for in such options or rights (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.

(2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of time, but without taking into account potential antidilution adjustments) for, any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by this corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by this corporation (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).

(3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, the Conversion Price of the Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities.

 

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(4) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.

(5) The number of shares of Additional Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).

(ii) ”Additional Stock” shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 4(d) (i)(E)) by this corporation on or after the Filing Date other than:

(A) Common Stock issued pursuant to subsection 4(d)(iii) hereof;

(B) Common Stock issued to employees, directors, consultants and other service providers for the primary purpose of soliciting or retaining their services pursuant to plans or agreements approved by the Board of Directors, including a majority of the Preferred Directors (if approved after the Filing Date);

(C) Common Stock issued pursuant to a Qualified Public Offering;

(D) Common Stock issued pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the Filing Date;

(E) Common Stock issued in connection with a bona fide business acquisition by this corporation, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise; provided that such issuances are approved by the Board of Directors, including a majority of the Preferred Directors;

(F) Common Stock issued or deemed issued pursuant to subsection 4(d)(i)(E) as a result of a decrease in the Conversion Price of any series of Preferred Stock resulting from the operation of Section 4(d);

(G) Common Stock issued upon conversion of the Preferred Stock outstanding as of the Filing Date or thereafter issued pursuant to that certain Series C Preferred Stock Purchase Agreement, dated on or about the Filing Date, by and among the Corporation and the investors party thereto (the “Purchase Agreement”);

(H) Common Stock issued pursuant to any equipment leasing arrangement or debt financing arrangement, which arrangement is approved by the Board of Directors, including a majority of the Preferred Directors, and is primarily for non-equity financing purposes; or

(I) Common Stock issued to persons or entities with which this corporation has business relationships, provided such issuances are approved by the Board of Directors, including a majority of the Preferred Directors, and are primarily for non-equity financing purposes.

 

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(iii) In the event this corporation should at any time or from time to time after the Filing Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of the Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents.

(iv) If the number of shares of Common Stock outstanding at any time after the Filing Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares.

(e) Other Distributions. In the event this corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection 4(d)(iii), then, in each such case for the purpose of this subsection 4(e), the holders of the Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of this corporation into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of this corporation entitled to receive such distribution.

(f) Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 4 or in Section 2) provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive, upon conversion of the Preferred Stock, the number of shares of stock or other securities or property of this corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Preferred Stock) shall be applicable after that event as nearly equivalently as may be practicable.

(g) No Fractional Shares and Certificate as to Adjustments.

(i) No fractional shares shall be issued upon the conversion of any share or shares of the Preferred Stock and the aggregate number of shares of Common Stock to be issued to particular stockholders, shall be rounded down to the nearest whole share and this corporation shall pay in cash the fair market value of any fractional shares as of the time when entitlement to receive such fractional shares is determined. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such conversion.

 

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(ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Preferred Stock pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price for such series of Preferred Stock at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Preferred Stock.

(h) Notices of Record Date. In the event of any taking by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, this corporation shall mail to each holder of Preferred Stock, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution, and the amount and character of such dividend or distribution; provided, however, that subject to compliance with the General Corporation Law such notice period may be shortened or waived upon the written consent of the Requisite Holders.

(i) Reservation of Stock Issuable Upon Conversion. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, in addition to such other remedies as shall be available to the holder of such Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate of Incorporation.

(j) Waiver of Adjustment to Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of any series of Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of at least fifty-five percent (55%) of then-outstanding shares of such series of Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis); provided, however, that any downward adjustment of the Conversion Price of the Series C Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, only with the approval of the Requisite Series C Holders; provided further, however, that any downward adjustment of the Conversion Price of the Series B Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, only in accordance with Section 6(c)(i). Any such waiver shall bind all future holders of shares of such series of Preferred Stock.

(k) Special Mandatory Conversion. In the event that any holder of shares of Series C Preferred Stock is a Defaulting Investor (as defined in the Purchase Agreement), then each share of Preferred Stock held by such holder and its Affiliates shall automatically, and without any further action on the part of such holder or its Affiliates, be converted into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the applicable Original Issue Price of such Preferred Stock by a price equal to five times (5X) the applicable Conversion Price of such Preferred Stock in effect at the time of conversion, effective upon, subject to, and concurrently with, the consummation of the Second Tranche Closing. Such conversion is referred to as a “Special Mandatory Conversion.”

 

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(i) Special Mandatory Conversion Procedural Requirements. Upon a Special Mandatory Conversion, each holder of shares of Preferred Stock converted pursuant to Section 4(k) shall be sent written notice of such Special Mandatory Conversion and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Section 4(k). Upon receipt of such notice, each holder of such shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to this corporation to indemnify this corporation against any claim that may be made against this corporation on account of the alleged loss, theft or destruction of such certificate) to this corporation at the place designated in such notice. If so required by this corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to this corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 4(k), including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the time of the Special Mandatory Conversion (notwithstanding the failure of the holder or holders thereof to surrender any certificates for such shares at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders therefor (or lost certificate affidavit and agreement), to receive the items provided for in the next sentence of this Section 4(k)(i). As soon as practicable after the Special Mandatory Conversion and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock so converted, this corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Section 4(g)(i) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and series thereof) accordingly.

(ii) Definitions. For purposes of Section 4(k), the following definitions shall apply:

(A) “Affiliate” shall mean, with respect to any holder of shares of Preferred Stock, any person, entity or firm which, directly or indirectly, controls, is controlled by or is under common control with such holder, including, without limitation, any entity of which the holder is a partner or member, any partner, officer, director, member or employee of such holder and any venture capital fund, registered investment company or other investment funds now or hereafter existing of which the holder is a partner or member which is controlled by or under common control with one or more general partners, managing members or investment advisers of such holder or shares the same management company or investment adviser with such holder.

(l) Taxes. This corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. This corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the corporation the amount of any such tax or has established, to the satisfaction of the corporation, that such tax has been paid.

 

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5. Voting Rights.

(a) General Voting Rights. The holder of each share of Preferred Stock shall have the right to one vote for each share of Common Stock into which such Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of this corporation, and except as provided by law or in subsection 5(b) below with respect to the election of directors by the separate class vote of the holders of Common Stock, shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half (1/2) being rounded upward).

(b) Voting for the Election of Directors. As long as a majority of the shares of Series A Preferred Stock originally issued remain outstanding, the holders of such shares of Series A Preferred Stock shall be entitled to elect two (2) directors of this corporation at any election of directors (the “Series A Directors”). As long as at least 24% of the shares of Series B Preferred Stock originally issued remain outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), the holders of such shares of Series B Preferred Stock shall be entitled to elect one (1) director of this corporation at any election of directors (the “Series B Director”). As long as a majority of the shares of Series C Preferred Stock originally issued remain outstanding, the holders of such shares of Series C Preferred Stock shall be entitled to elect two (2) directors of this corporation at any election of directors (the “Series C Directors,” and together with the Series A Directors and Series B Director, the “Preferred Directors”); provided, however, that for administrative convenience, the initial Series C Directors may also be appointed by the Board of Directors in connection with the approval of the initial issuance of Series C Preferred Stock without a separate action by the holders of the Series C Preferred Stock. The holders of outstanding Common Stock shall be entitled to elect two (2) directors of this corporation at any election of directors (the “Common Directors”). The holders of Preferred Stock and Common Stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect any remaining directors of this corporation.

Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the General Corporation Law, any vacancy, including newly created directorships resulting from any increase in the authorized number of directors or amendment of this Restated Certificate of Incorporation, and vacancies created by removal or resignation of a director, may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that where such vacancy occurs among the directors elected by the holders of a class or series of stock, the holders of shares of such class or series may override the Board of Directors’ action to fill such vacancy by (A) voting for their own designee to fill such vacancy at a meeting of the Corporation’s stockholders or (B) written consent, if the consenting stockholders hold a sufficient number of shares to elect their designee at a meeting of the applicable class or series of stockholders. Any director may be removed during his or her term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled only by the holders of that class or series of stock represented at the meeting or pursuant to written consent.

 

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6. Protective Provisions.

(a) Preferred Stock Protective Provisions. So long as at least 40% of the Preferred Stock originally issued remains outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (either directly, or indirectly by amendment, merger, consolidation, conversion or otherwise) do any of the following without (in addition to any other vote required by law or this Restated Certificate of Incorporation) first obtaining the approval by vote or written consent of the Requisite Holders, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

(i) consummate a Liquidation Event, effect any other merger or consolidation or consent to any of the foregoing;

(ii) amend, alter or repeal any provision of this corporation’s Restated Certificate of Incorporation or Bylaws;

(iii) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Common Stock or Preferred Stock or designated shares of any series of Preferred Stock;

(iv) authorize, create or issue, or obligate itself to issue, any equity security (including, without limitation, (i) any other security convertible into or exercisable for any such equity security or (ii) any unit of debt and equity securities) having a preference over, or being on a parity with, any series of Preferred Stock with respect to dividends, distribution of assets upon liquidation or redemption, other than the issuance of any authorized but unissued shares of Series C Preferred Stock pursuant to the Purchase Agreement (including, without limitation, any security convertible into or exercisable for such shares of Preferred Stock);

(v) (i) reclassify, alter or amend any existing security of this corporation that is pari passu with the Series A Preferred Stock and/or the Series B Preferred Stock and/or the Series C Preferred Stock with respect to dividends, distribution of assets upon liquidation or redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock and/or the Series B Preferred Stock and/or the Series C Preferred Stock in respect of any such right, preference or privilege or (ii) reclassify, alter or amend any existing security of this corporation that is junior to the Series A Preferred Stock and/or the Series B Preferred Stock and/or the Series C Preferred Stock with respect to dividends, distribution of assets upon liquidation or redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock and/or the Series B Preferred Stock and/or the Series C Preferred Stock in respect of any such right, preference or privilege;

(vi) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements approved by the Board of Directors under which this corporation has the option to repurchase such shares at the lower of the original per share purchase price (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like) or then fair market value thereof upon the occurrence of certain events, such as the termination of employment or service;

 

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(vii) change the authorized number of, or method of electing the, directors of this corporation, change the number of votes entitled to be cast by any director or directors on any matter, or adopt any provision inconsistent with Article VI;

(viii) sell, assign, license, pledge, transfer, encumber or spin-out any of the material technology or intellectual property rights owned or licensed by this corporation to any or all of Luis Pena, Eugene Bauer or Hans Hofland (together, the “Founders”), or any of their respective or collective Affiliates (as defined below), or enter into or grant any royalty streams related thereto, other than licenses granted in the ordinary course of business; or

(ix) authorize, create or issue any debt security, or permit any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of this corporation and its subsidiaries for borrowed money following such action would exceed $1,000,000 unless such debt security has been approved by the Board of Directors, including a majority of the Preferred Directors.

(b) Series C Preferred Stock Protective Provisions. So long as at least 25% of the Series C Preferred Stock originally issued remains outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (either directly, or indirectly by amendment, merger, consolidation, conversion or otherwise) without (in addition to any other vote required by law or this Restated Certificate of Incorporation) first obtaining the approval by vote or written consent, as provided by law, of the Requisite Series C Holders and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

(i) amend, waive, alter or repeal any provision of this Restated Certificate of Incorporation or the Bylaws of this corporation in a manner that adversely affects the powers, preferences, or other rights of the Series C Preferred Stock; provided, that, for the avoidance of doubt, the creation, authorization and/or issuance of any new class or series of securities which are senior to or pari passu with the Series C Preferred Stock in connection with a bona fide financing transaction primarily for capital raising purposes shall not in, and of itself, be deemed to adversely affect such powers, preferences or rights of the Series C Preferred Stock for purposes of this subsection 6(b)(i); or

(ii) or increase or decrease the authorized number of shares of Series C Preferred Stock.

(c) Series B Preferred Stock Protective Provisions. So long as at least 25% of the Series B Preferred Stock originally issued remains outstanding (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like), this corporation shall not (either directly, or indirectly by amendment, merger, consolidation, conversion or otherwise) without (in addition to any other vote required by law or this Restated Certificate of Incorporation) first obtaining the approval by vote or written consent, as provided by law, of the holders of a majority of the shares of Series B Preferred Stock then outstanding (voting as a separate series), which majority must include at least one of the Series B New Investors (as defined in that certain Third Amended and Restated Investors’ Rights Agreement by and among this corporation and certain of its investors, dated on or about the Filing Date, as amended and/or restated from time to time (the “IRA”)) and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

 

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(i) amend, waive, alter or repeal any provision of this Restated Certificate of Incorporation or the Bylaws of this corporation in a manner that adversely affects the powers, preferences, or other rights of the Series B Preferred Stock; provided, that, for the avoidance of doubt, the creation, authorization and/or issuance of any new class or series of securities which are senior to or pari passu with the Series B Preferred Stock in connection with a bona fide financing transaction primarily for capital raising purposes shall not in, and of itself, be deemed to adversely affect such powers, preferences or rights of the Series B Preferred Stock for purposes of this subsection 6(c)(i); or

(ii) or increase or decrease the authorized number of shares of Series B Preferred Stock.

For the purpose of Section 6(a)(viii) of Article IV(B) hereof, “Affiliate” means, with respect to an individual, a member of such individual’s immediate or extended family (each, a “Family Member”), or a trust or trusts for the benefit of such individual or a Family Member of such individual, or any corporation, partnership or other entity in which such individual or a Family Member of such individual is an officer, director, member or partner, or in which such individual, such individual’s Family Member, one or more of the Founders or one or more of the Founders’ Family Members has significant ownership interest or otherwise controls (in each case, individually or collectively as a group), or has an agreement (whether written or oral) to become an officer, director, member or partner and/or to obtain significant ownership interest or otherwise control such corporation, partnership or other entity.

7. Status of Converted Stock. In the event any shares of Preferred Stock shall be redeemed, converted or otherwise acquired pursuant to Section 4 hereof, the shares so redeemed converted or otherwise acquired shall be cancelled and shall not be issuable by this corporation. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption, conversion or acquisition. The Restated Certificate of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in this corporation’s authorized capital stock.

8. Notices. Any notice required by the provisions of this Article IV(B) to be given to the holders of shares of Preferred Stock shall be deemed given (a) ten (10) days following its deposit in the United States mail, postage prepaid, and addressed to each holder of record at his, her or its address appearing on the books of this corporation, (b) upon such notice being provided by electronic transmission in a manner permitted by the General Corporation Law or (c) ten (10) days following such notice being provided in another manner then permitted by the General Corporation Law.

C. Common Stock. The rights, preferences, privileges and restrictions granted to and imposed on the Common Stock are as set forth below in this Article IV(C).

1. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of any assets of this corporation legally available therefor, any dividends as may be declared from time to time by the Board of Directors.

2. Liquidation Rights. Upon the liquidation, dissolution or winding up of this corporation, the assets of this corporation shall be distributed as provided in Section 2 of Article IV(B) hereof.

3. Redemption. The Common Stock is not redeemable at the option of the holder.

4. Voting Rights. The holder of each share of Common Stock shall have the right to one vote for each such share, and shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law; provided, however, that, except as otherwise required by law, holders of Common

 

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Stock, as such, shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate of Incorporation or pursuant to the General Corporation Law. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of this corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

ARTICLE V

Except as otherwise provided in this Restated Certificate of Incorporation, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of this corporation.

ARTICLE VI

Subject to the requirements of Section 6 of Article IV(B) hereof, the number of directors of this corporation shall be determined in the manner set forth in the Bylaws of this corporation. Unless otherwise provided herein, each director shall be entitled to one vote on each matter presented to the Board of Directors; provided that to the extent the approval of any particular director or directors is required by any agreement for specified actions, receipt of such approval shall be necessary for the board to authorize such actions; provided further that, so long as the holders of Preferred Stock are entitled to elect a Preferred Director, the affirmative vote of a majority of the Preferred Directors shall be required for the authorization by the Board of Directors of any of the matters set forth in Section 3.14 of the IRA.

ARTICLE VII

Elections of directors need not be by written ballot unless the Bylaws of this corporation shall so provide.

ARTICLE VIII

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of this corporation may provide. The books of this corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of this corporation.

ARTICLE IX

To the fullest extent permitted by law, a director of this corporation shall not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law is amended after approval by the stockholders of this Article IX to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

Any amendment, repeal or modification of the foregoing provisions of this Article IX by the stockholders of this corporation shall not adversely affect any right or protection of a director of this corporation existing at the time of, or increase the liability of any director of this corporation with respect to any acts or omissions of such director occurring prior to, such amendment, repeal or modification.

 

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ARTICLE X

This corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and, subject to the requirements of Section 6 of Article IV(B) hereof, all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE XI

To the fullest extent permitted by applicable law, this corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents of this corporation (and any other persons to which General Corporation Law permits this corporation to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

Any amendment, repeal or modification of the foregoing provisions of this Article XI shall not adversely affect any right or protection of a director, officer, employee, agent or other person existing at the time of, or increase the liability of any such person with respect to any acts or omissions of such person occurring prior to, such amendment, repeal or modification.

ARTICLE XII

This corporation renounces any interest or expectancy of this corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of this corporation who is not an employee of this corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of this corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of this corporation. Notwithstanding anything to the contrary contained elsewhere in this Restated Certificate of Incorporation, the affirmative vote of the Requisite Holders will be required to amend or repeal, or to adopt any provisions inconsistent with this Article XII.

ARTICLE XIII

In connection with repurchases by this corporation of its Common Stock (i) from employees, officers, directors, advisors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment, (ii) issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right or (iii) which are approved the Requisite Holders, Section 500 of the California Corporations Code shall not apply in all or in part with respect to such repurchases. In the case of any such repurchases, distributions by the corporation may be made without regard to the “preferential dividends arrears amount” or any “preferential rights amount,” as such terms are defined in Section 500(b) of the California Corporations Code.

 

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ARTICLE XIV

A. Forum Selection. Unless this corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of this corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of this corporation to this corporation or this corporation’s stockholders, (iii) any action arising pursuant to any provision of the General Corporation Law or this Restated Certificate of Incorporation or the Bylaws (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of this corporation shall be deemed to have notice of and consented to the provisions of this Article XIV.

B. Personal Jurisdiction. If any action the subject matter of which is within the scope of Article XIV(A) is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Article XIV(A) (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

C. Savings. If any provision or provisions of this Article XIV shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XIV (including, without limitation, each portion of any sentence of this Article XIV containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

*  *  *

THIRD: The foregoing amendment and restatement was approved by the holders of the requisite number of shares of said corporation in accordance with Section 228 of the General Corporation Law.

FOURTH: That said Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Restated Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

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IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 29th day of October, 2024.

 

/s/ Luis Pena
Luis Peña
Chief Executive Officer

 

 

SIGNATURE PAGE TO SERIES C RESTATED CERTIFICATE OF

INCORPORATION FOR EVOMMUNE, INC.

Exhibit 3.2

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

EVOMMUNE, INC.

 

 

Evommune, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:

ONE: The name of this corporation is Evommune, Inc. The date of filing of the original certificate of incorporation of this corporation with the Secretary of State of the State of Delaware was April 9, 2020.

TWO: This certificate of incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL, and has been duly approved by the written consent of the stockholders of this corporation in accordance with Section 228 of the DGCL.

THREE: Pursuant to Sections 242 and 245 of the DGCL, the certificate of incorporation of this corporation, as heretofore amended, is hereby amended, integrated and restated to read in its entirety as follows:

SECTION 1.

The name of this corporation is Evommune, Inc. (the “Corporation”).

SECTION 2.

The address of the registered office of the Corporation in the State of Delaware is 3500 South DuPont Highway, City of Dover, County of Kent, Zip Code 19901, and the name of the registered agent of the Corporation in the State of Delaware at such address is Incorporating Services, Ltd.

SECTION 3.

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

SECTION 4.

Section 4.1 The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares that the Corporation is authorized to issue is 510,000,000 shares, consisting of 500,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of Preferred Stock, par value $0.0001 per share.

Section 4.2 The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board”) is hereby expressly authorized to provide for the issue of all or

 

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any of the unissued and undesignated shares of the Preferred Stock, in one or more series, and to fix the number of shares of such series and to determine for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be set forth in a certificate of designation adopted by the Board and filed in accordance with the DGCL.

Section 4.3 Irrespective of the provisions of Section 242(b)(2) of the DGCL, but subject to the terms of any certificate of designation filed with respect to any series of Preferred Stock, the holders of Preferred Stock and Common Stock shall vote together, and not as separate classes, on any amendment to this Certificate of Incorporation to increase or decrease the number of authorized shares of Preferred Stock or Common Stock.

Section 4.4 Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by applicable law, holders of Common Stock shall not be entitled to vote on any amendment to this certificate of incorporation (as amended from time to time, the “Certificate of Incorporation”) (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together as a class with the holders of one or more other affected series of Preferred Stock, to vote thereon pursuant to applicable law or the Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

SECTION 5.

For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and stockholders, or any class thereof, as the case may be, it is further provided that:

Section 5.1 MANAGEMENT OF THE BUSINESS.

Except as otherwise provided by the DGCL or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. Subject to any rights of the holders of shares of any one or more series of Preferred Stock then outstanding to elect additional directors under specified circumstances, the number of directors that shall constitute the Board shall be fixed exclusively by the Board.

Section 5.2 BOARD OF DIRECTORS

Subject to the rights of the holders of any one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. The Board is authorized to assign members of the Board already in office to such classes at the time the classification becomes effective (the “Filing Date”). At the first annual meeting of stockholders following the Filing Date, the initial term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Filing Date, the initial term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Filing Date, the initial term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

 

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Notwithstanding the foregoing provisions of this section, each director shall serve until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board shall remove or shorten the term of any incumbent director.

Section 5.3 REMOVAL OF DIRECTORS

Subject to the rights of the holders of any one or more series of Preferred Stock to remove directors elected by such series of Preferred Stock, any individual director or the entire Board may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of the capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class.

Section 5.4 VACANCIES.

Subject to any limitations imposed by applicable law and subject to the rights of the holders of any one or more series of Preferred Stock to elect additional directors or fill vacancies in respect of such directors, any vacancies on the Board resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board, or by a sole remaining director, and not by the stockholders. Any director elected to fill a newly created directorship or vacancy in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders held to elect the class of directors to which such director is elected and until such director’s successor shall have been elected and qualified or such director’s earlier death, resignation or removal.

Section 5.5 PREFERRED STOCKHOLDERS ELECTION RIGHTS.

Whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a series or separately as a class with one or more such other series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal and other features of such directorships shall be governed by the terms of the Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) applicable thereto. The number of directors that may be elected by the holders of any such series of Preferred Stock shall be in addition to the number fixed pursuant to Section 5.1 hereof, and the total number of directors constituting the whole Board shall be automatically adjusted accordingly. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.

Section 5.6 BYLAW AMENDMENTS.

The Board is expressly authorized and empowered to adopt, amend or repeal any provisions of the bylaws of the Corporation (as amended from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or the Certificate of Incorporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation

 

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required by applicable law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class.

Section 5.7 STOCKHOLDER ACTIONS.

a. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

b.  Subject to any rights of the holders of shares of any one or more series of Preferred Stock then outstanding, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders and may not be effected by consent in lieu of a meeting, unless taking such action by consent in lieu of a meeting is approved by all directors of the Corporation then in office.

c. Subject to any rights of the holders of shares of any series of Preferred Stock then outstanding, special meetings of stockholders of the Corporation may be called only by the Board and shall be called by the Secretary of the corporation upon the request of a majority of the directors then in office, but a special meeting may not be called by any other person or persons and any power of stockholders to call a special meeting of stockholders is specifically denied. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.

SECTION 6.

No director or officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL, as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director or officer of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. Solely for purposes of this Section 6, “officer” shall have the meaning provided in Section 102(b)(7) of the DGCL.

SECTION 7.

Section 7.1 Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware and any appellate court therefrom shall be the sole and exclusive forum for: (A) any derivative claim or cause of action brought on behalf of the Corporation; (B) any claim or cause of action that is based upon a violation of a duty owed by any current or former director, officer, other employee or stockholder of the Corporation, to the Corporation or the Corporation’s stockholders; (C) any claim or cause of action against the Corporation or any current or former director, officer or other employee of the Corporation, arising out of or pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws; (D) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (including any right, obligation, or remedy thereunder); (E) any claim or cause of action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and (F) any claim or cause of action against the Corporation or any current or former director, officer or other employee of the Corporation, governed by the internal-affairs doctrine or otherwise related to the Corporation’s internal affairs, in all cases to the fullest extent permitted by applicable law; provided, however, that if such court does not have, or declines to accept, jurisdiction over such a claim or cause of action, then the United States District Court for the District of Delaware shall be the sole and exclusive forum for such claim or cause of action.

 

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Section 7.2 Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, 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 of 1933, as amended, including all causes of action asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by the Corporation, its officers and directors, the underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.

SECTION 8.

Section 8.1 Any person or entity holding, owning, or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of the Certificate of Incorporation.

Section 8.2 The Corporation reserves the right to amend, alter, change or repeal, at any time and from time to time, any provision contained in the Certificate of Incorporation and all rights, preferences and privileges of whatsoever nature conferred upon the stockholders, directors or any other persons whomsoever by and pursuant to the Certificate of Incorporation are granted subject to this reservation. For the avoidance of doubt, but subject to the rights of the holders of any outstanding series of Preferred Stock, Section 242(d) of the DGCL shall apply to amendments to the Certificate of Incorporation.

Section 8.3 Notwithstanding any other provisions of the Certificate of Incorporation or any provision of applicable law that might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of capital stock of the Corporation required by applicable law or by the Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to alter, amend or repeal (whether by merger, consolidation, conversion or otherwise), or adopt any provision inconsistent with, Sections 5, 6, 7 and this Section 8.

SECTION 9. 

Section 9.1 If any provision or provisions of the Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of the Certificate of Incorporation (including, without limitation, each portion of any paragraph of the Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby.

The Corporation has caused this certificate of incorporation to be signed by a duly authorized officer of the Corporation on [MONTH][DAY], 20 .

 

Evommune, Inc.
By:  

 

  Luis Peña
  President and Chief Executive Officer

 

5

Exhibit 3.3

BYLAWS OF

EVOMMUNE, INC.

(A DELAWARE CORPORATION)


TABLE OF CONTENTS

 

 

          Page  
ARTICLE I   

OFFICES

     1  
1.1    Registered Office      1  
1.2    Offices      1  
ARTICLE II   

MEETINGS OF STOCKHOLDERS

     1  
2.1    Location      1  
2.2    Timing      1  
2.3    Notice of Meeting      1  
2.4    Stockholders’ Records      1  
2.5    Special Meetings      2  
2.6    Notice of Meeting      2  
2.7    Business Transacted at Special Meeting      2  
2.8    Quorum; Meeting Adjournment; Presence by Remote Means      2  
2.9    Voting Thresholds      3  
2.10    Number of Votes Per Share      3  
2.11    Action by Written Consent of Stockholders; Electronic Consent; Notice of Action      3  
ARTICLE III   

DIRECTORS

     4  
3.1    Authorized Directors      4  
3.2    Vacancies      4  
3.3    Board Authority      5  
3.4    Location of Meetings      5  
3.5    First Meeting      5  
3.6    Regular Meetings      5  
3.7    Special Meetings      5  
3.8    Quorum      6  
3.9    Action Without a Meeting      6  
3.10    Telephonic Meetings      6  
3.11    Committees      6  
3.12    Minutes of Meetings      6  
3.13    Compensation of Directors      7  
3.14    Removal of Directors      7  
ARTICLE IV   

NOTICES

     7  
4.1    Notice      7  
4.2    Waiver of Notice      7  
4.3    Electronic Notice      7  
ARTICLE V   

OFFICERS

     8  
5.1    Required and Permitted Officers      8  
5.2    Appointment of Required Officers      8  
5.3    Appointment of Permitted Officers      8  

 

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TABLE OF CONTENTS

(continued)

 

 

          Page  
5.4    Officer Compensation      8  
5.5    Term of Office; Vacancies      8  
5.6    Chairman Presides      8  
5.7    Absence of Chairman      9  
5.8    Powers of Chief Executive Officer      9  
5.9    Chief Executive Officer’s Signature Authority      9  
5.10    Absence of Chief Executive Officer      9  
5.11    Powers of President      9  
5.12    Absence of President      9  
5.13    Duties of Secretary      9  
5.14    Duties of Assistant Secretary      10  
5.15    Duties of Treasurer      10  
5.16    Disbursements and Financial Reports      10  
5.17    Treasurer’s Bond      10  
5.18    Duties of Assistant Treasurer      10  
ARTICLE VI   

CERTIFICATE OF STOCK

     11  
6.1    Stock Certificates      11  
6.2    Facsimile Signatures      11  
6.3    Lost Certificates      11  
6.4    Transfer of Stock      11  
6.5    Fixing a Record Date      12  
6.6    Registered Stockholders      12  
ARTICLE VII   

GENERAL PROVISIONS

     12  
7.1    Dividends      12  
7.2    Reserve for Dividends      12  
7.3    Checks      12  
7.4    Fiscal Year      12  
7.5    Corporate Seal      12  
7.6    Indemnification      13  
7.7    Conflicts with Certificate of Incorporation      14  
ARTICLE VIII   

AMENDMENTS

     14  
ARTICLE IX   

LOANS TO OFFICERS

     14  
ARTICLE X   

RECORDS AND REPORTS

     14  

 

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BYLAWS

OF

EVOMMUNE, INC.

ARTICLE I

OFFICES

1.1 Registered Office. The registered office shall be in the City of Dover, County of Kent, State of Delaware.

1.2 Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 Location. All meetings of the stockholders for the election of directors shall be held in Los Altos, CA, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting; provided, however, that the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the Delaware General Corporations Law (“DGCL”). Meetings of stockholders for any other purpose may be held at such time and place, if any, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof, or a waiver by electronic transmission by the person entitled to notice.

2.2 Timing. Annual meetings of stockholders, commencing with the year 2021, shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.

2.3 Notice of Meeting. Written notice of any stockholder meeting stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting.

2.4 Stockholders’ Records. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address (but not the electronic address or other electronic contact information) of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network,

 

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provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

2.5 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Chief Executive Officer and shall be called by the Chief Executive Officer or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning at least fifty percent (50%) in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

2.6 Notice of Meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. The means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting shall also be provided in the notice.

2.7 Business Transacted at Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

2.8 Quorum; Meeting Adjournment; Presence by Remote Means.

(a) Quorum; Meeting Adjournment. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

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(b) Presence by Remote Means. If authorized by the Board of Director in its sole discretion, and subject to such guidelines and procedures as the Board of Director may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication:

(i) participate in a meeting of stockholders; and

(ii) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measure to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

2.9 Voting Thresholds. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express pr vision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.

2.10 Number of Votes Per Share. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote by such stockholder or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

2.11 Action by Written Consent of Stockholders; Electronic Consent; Notice of Action.

(a) Action by Written Consent of Stockholders. Unless otherwise provided by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, is signed in a manner permitted by law by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the corporation as provided in subsection (b) below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the corporation in the manner provided above.

 

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(b) Electronic Consent. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors of the corporation.

(c) Notice of Action. Prompt notice of any action taken pursuant to this Section 2.11 shall be provided to the stockholders in accordance with Section 228(e) of the DGCL.

ARTICLE III

DIRECTORS

3.1 Authorized Directors. The number of directors that shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting of the stockholders, except as provided in Section 3.2 of this Article, and each director elected shall hold office until his or her successor is elected and qualified. Directors need not be stockholders.

3.2 Vacancies. Unless otherwise provided in the corporation’s certificate of incorporation, as it may be amended, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

 

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3.3 Board Authority. The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

3.4 Location of Meetings. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

3.5 First Meeting. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order to legally constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

3.6 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

3.7 Special Meetings. Special meetings of the Board of Directors may be called by the Chief Executive Officer upon notice to each director; special meetings shall be called by the Chief Executive Officer or secretary in like manner and on like notice on the written request of two (2) directors unless the Board of Directors consists of only one director, in which case special meetings shall be called by the Chief Executive Officer or secretary in like manner and on like notice on the written request of the sole director. Notice of any special meeting shall be given to each director at his or her business or residence in writing, or by telegram, facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed). If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company at least twenty-four (24) hours before such meeting. If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting. If by telephone, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in writing, either before or after such meeting.

 

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3.8 Quorum. At all meetings of the Board of Directors, the greater of (a) a majority of the directors at any time in office, and (b) one-third of the number of directors fixed by the Board of Directors or by the stockholders pursuant to Section 3.1 of Article III hereof shall constitute a quorum for the transaction of business and any act of a majority of the directors present at any meeting at which there is a quorum shall be an act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

3.9 Action Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing, writings, electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.

3.10 Telephonic Meetings. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or any committee, by means of conference telephone or other means of communication by which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting.

3.11 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it, but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any provision of these bylaws.

3.12 Minutes of Meetings. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

 

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3.13 Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

3.14 Removal of Directors. Unless otherwise provided by the certificate of incorporation or these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

ARTICLE IV

NOTICES

4.1 Notice. Unless otherwise provided in these bylaws, whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his or her address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.

4.2 Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

4.3 Electronic Notice.

(a) Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders and directors, any notice to stockholders or directors given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder or director to whom the notice is given. Any such consent shall be revocable by the stockholder or director by written notice to the corporation. Any such consent shall be deemed revoked if (1) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

(b) Effective Date of Notice. Notice given pursuant to subsection (a) of this section shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the stockholder or director has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder or director has consented

 

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to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder or director of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder or director. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) Form of Electronic Transmission. For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE V

OFFICERS

5.1 Required and Permitted Officers. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer and/or a president, a treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice-Chairman of the Board. The Board of Directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.

5.2 Appointment of Required Officers. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chief Executive Officer and/or a president, a treasurer, and a secretary and may choose vice-presidents.

5.3 Appointment of Permitted Officers. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

5.4 Officer Compensation. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.

5.5 Term of Office; Vacancies. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

THE CHAIRMAN OF THE BOARD

5.6 Chairman Presides. Unless the Board of Directors appoints a Chairman of the Board, the Chief Executive Officer shall be the Chairman of the Board, so long as the Chief Executive Officer is a director of the corporation. The Chairman of the Board shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board of Directors and as may be provided by law.

 

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5.7 Absence of Chairman. In the absence of the Chairman of the Board, the Vice-Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board of Directors and as may be provided by law.

THE CHIEF EXECUTIVE OFFICER

5.8 Powers of Chief Executive Officer. The Chief Executive Officer shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

5.9 Chief Executive Officer’s Signature Authority. The Chief Executive Officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Executive Officer may sign certificates for shares of stock of the corporation.

5.10 Absence of Chief Executive Officer. In the absence of the Chief Executive Officer or in the event of his or her inability or refusal to act, the president shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.

THE PRESIDENT AND VICE-PRESIDENTS

5.11 Powers of President. Unless the Board of Directors appoints a president of the corporation, the Chief Executive Officer shall be the president of the corporation. The president of the corporation shall have such powers as required by law and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

5.12 Absence of President. In the absence of the president or in the event of his or her inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARY

5.13 Duties of Secretary. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given,

 

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notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he or she shall be. He or she shall have custody of the corporate seal of the corporation and he or she, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature.

5.14 Duties of Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS

5.15 Duties of Treasurer. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.

5.16 Disbursements and Financial Reports. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings or when the Board of Directors so requires, an account of all his or her transactions as treasurer and of the financial condition of the corporation.

5.17 Treasurer’s Bond. If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the corporation.

5.18 Duties of Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the treasurer’s inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

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ARTICLE VI

CERTIFICATE OF STOCK

6.1 Stock Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of the corporation by any two authorized officers of the corporation, certifying the number of shares owned by him or her in the corporation.

Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

6.2 Facsimile Signatures. Any or all of the signatures on the certificate may be facsimile. In the event that any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the corporation with the same effect as if such officer, transfer agent or registrar were still acting as such at the date of issue.

6.3 Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

6.4 Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

 

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6.5 Fixing a Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

6.6 Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

GENERAL PROVISIONS

7.1 Dividends. Dividends upon the capital stock of the corporation, if any, subject to the provisions of the certificate of incorporation, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

7.2 Reserve for Dividends. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their sole discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors think conducive to the interests of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

7.3 Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

7.4 Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

7.5 Corporate Seal. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

 

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7.6 Indemnification. The corporation shall, to the fullest extent authorized under the laws of the State of Delaware, as those laws may be amended and supplemented from time to time, indemnify any director made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of being a director of the corporation or a predecessor corporation or a director or officer of another corporation, if such person served in such position at the request of the corporation; provided, however, that the corporation shall indemnify any such director or officer in connection with a proceeding initiated by such director or officer only if such proceeding was authorized by the Board of Directors of the corporation. The indemnification provided for in this Section 7.6 shall: (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under these bylaws, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director, and (iii) inure to the benefit of the heirs, executors and administrators of a person who has ceased to be a director. The corporation’s obligation to provide indemnification under this Section 7.6 shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person.

Expenses incurred by a director of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he or she is or was a director of the corporation (or was serving at the corporation’s request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized by relevant sections of the DGCL. Notwithstanding the foregoing, the corporation shall not be required to advance such expenses to an agent who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors of the corporation that alleges willful misappropriation of corporate assets by such agent, disclosure of confidential information in violation of such agent’s fiduciary or contractual obligations to the corporation or any other willful and deliberate breach in bad faith of such agent’s duty to the corporation or its stockholders.

The foregoing provisions of this Section 7.6 shall be deemed to be a contract between the corporation and each director who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

The Board of Directors in its sole discretion shall have power on behalf of the corporation to indemnify any person, other than a director, made a party to any action, suit or proceeding by reason of the fact that he or she, his or her testator or intestate, is or was an officer or employee of the corporation.

 

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To assure indemnification under this Section 7.6 of all directors, officers and employees who are determined by the corporation or otherwise to be or to have been “fiduciaries” of any employee benefit plan of the corporation that may exist from time to time, Section 145 of the DGCL shall, for the purposes of this Section 7.6, be interpreted as follows: an “other enterprise” shall be deemed to include such an employee benefit plan, including without limitation, any plan of the corporation that is governed by the Act of Congress entitled “Employee Retirement Income Security Act of 1974,” as amended from time to time; the corporation shall be deemed to have requested a person to serve the corporation for purposes of Section 145 of the DGCL, as administrator of an employee benefit plan where the performance by such person of his or her duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed “fines.”

7.7 Conflicts with Certificate of Incorporation. In the event of any conflict between the provisions of the corporation’s certificate of incorporation and these bylaws, the provisions of the certificate of incorporation shall govern.

ARTICLE VIII

AMENDMENTS

8.1 These bylaws may be altered, amended or repealed, or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

ARTICLE IX

LOANS TO OFFICERS

9.1 The corporation may lend money to, or guarantee any obligation of or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

ARTICLE X

RECORDS AND REPORTS

10.1 The application and requirements of Section 1501 of the California General Corporation Law are hereby expressly waived to the fullest extent permitted thereunder.

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CERTIFICATE OF SECRETARY OF

EVOMMUNE, INC.

The undersigned, Eugene Bauer, hereby certifies that he or she is the duly elected and acting Secretary of EVOMMUNE, INC., a Delaware corporation (the “Corporation”), and that the Bylaws attached hereto constitute the Bylaws of said Corporation as duly adopted by Action by Written Consent in Lieu of Organizational Meeting by the Directors on May 6, 2020.

IN WITNESS WHEREOF, the undersigned has hereunto subscribed his or her name this 6th day of May, 2020.

 

/s/ Eugene Bauer
Eugene Bauer, Secretary

Exhibit 3.4

AMENDED AND RESTATED BYLAWS

OF

EVOMMUNE, INC.

 

 

(A DELAWARE CORPORATION)

SECTION 1.

OFFICES

Section 1.1 Registered Office. The registered office of Evommune, Inc. (the “Corporation”) in the State of Delaware and the name of the Corporation’s registered agent at such address shall be as set forth in the certificate of incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”).

Section 1.2 Other Offices. The Corporation may at any time establish other offices both within and without the State of Delaware.

SECTION 2.

CORPORATE SEAL

Section 2.1 Corporate Seal. The Board of Directors of the Corporation (the “Board”) may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 3.

STOCKHOLDERS’ MEETINGS

Section 3.1 Place of Meetings. Meetings of the stockholders of the Corporation may be held at such place, if any, either within or without the State of Delaware, as may be determined from time to time by the Board (or its designee). The Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the General Corporation Law of the State of Delaware (“DGCL”) and Section 3.9 below.

Section 3.2 Annual Meetings.

(a) The annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may properly come before it, shall be held on such date and time as may be determined from time to time by the Board (or its designee). Any annual meeting of stockholders may be postponed, rescheduled or cancelled by the Board, or any director or officer of the Corporation to whom the Board delegates such authority, at any time before or after notice of such meeting has been given to stockholders. Nominations of persons for election to the Board and proposals of other business to be considered by the stockholders may be made at an annual meeting of stockholders:

(i) pursuant to the Corporation’s notice of meeting of stockholders (or any supplement thereto);


(ii) by or at the direction of the Board (or a duly authorized committee thereof); or

(iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in Section 3.2(b) of these bylaws (as may be amended and/or restated from time to time, the “Bylaws”) and who is a stockholder of record at the time of the annual meeting of stockholders, who is entitled to vote at the meeting and who complied with the procedures and requirements set forth in this Section 3.2.

For the avoidance of doubt, clause (iii) above shall be the exclusive means for a stockholder to make nominations and submit other business before an annual meeting of stockholders.

(b) At an annual meeting of the stockholders, only such business shall be conducted as is a proper matter for stockholder action under the DGCL, the Certificate of Incorporation and the Bylaws, and only such nominations shall be made and such other business shall be conducted as shall have been properly brought before the meeting in accordance with the procedures below.

 

  (1)

For nominations for the election to the Board to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 3.2(a), the stockholder must deliver written notice to the Secretary at the principal executive offices of the Corporation on a timely basis as set forth in Section 3.2(b)(3) and must update and supplement the information contained in such written notice on a timely basis as set forth in Section 3.2(c). In addition to all of the information required by Section 3.2(b)(4), such stockholder’s notice shall include as to each nominee such stockholder proposes to nominate at the meeting:

(A) the name, age, business address and residence address of such nominee,

(B) the principal occupation or employment of such nominee,

(C) the class or series and number of shares of each class or series of capital stock of the Corporation that are owned of record and beneficially by such nominee and list of any pledge of or encumbrances on such shares,

(D) the date or dates on which such shares were acquired and the investment intent of such acquisition,

(E) the questionnaire, representation and agreement required by Section 3.2(e), completed and signed by such nominee, and

(F) all other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved and whether or not proxies are being or will be solicited), or that is otherwise required to be disclosed or provided to the Corporation pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (including such person’s written consent to being named in a proxy statement, associated proxy card and other filings as a nominee and to serving as a director if elected).

 

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The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or to serve on any committee or sub-committee of the Board, in either case under any applicable stock exchange listing requirements, applicable law or the Policies (as defined below). The number of nominees a stockholder may nominate for election at an annual meeting on its own behalf (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at an annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such annual meeting. A stockholder may not designate any substitute or alternate nominees unless the stockholder provides timely notice of such substitute or alternate nominee(s) in accordance with this Section 3.2, in the case of an annual meeting, or Section 3.3, in the case of a special meeting (and such notice contains all of the information, representations, questionnaires and certifications with respect to such substitute or alternate nominee(s) that are required by the Bylaws with respect to nominees for director).

 

  (2)

For business other than nominations for the election to the Board to be properly brought before an annual meeting by a stockholder pursuant to clause (ii) of Section 3.2(a), the stockholder must deliver written notice to the Secretary at the principal executive offices of the Corporation on a timely basis as set forth in Section 3.2(b)(3), and must update and supplement the information contained in such written notice on a timely basis as set forth in Section 3.2(c). In addition to all of the information required by Section 3.2(b)(4), such stockholder’s notice shall include as to each matter such stockholder proposes to bring before the meeting:

(A) a brief description of the business desired to be brought before the meeting,

(B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the language of the proposed amendment),

(C) the reasons for conducting such business at the meeting, and

(D) any material interest (including any anticipated benefit of such business to any Proponent (as defined below) other than solely as a result of its ownership of the Corporation’s capital stock, that is material to any Proponent individually, or to the Proponents in the aggregate) in such business of any Proponent.

 

  (3)

To be timely, the written notice required by Section 3.2(b)(1) or 3.2(b)(2) must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day, nor earlier than the 120th day, prior to the first anniversary of the immediately preceding year’s annual meeting (for purposes of notice required for action to be taken at the Corporation’s first annual meeting of stockholders after its initial public offering of common stock, the date of the immediately preceding year’s annual meeting shall be deemed to have occurred on June 1st in such immediately preceding calendar year); provided, however, that, subject to the last sentence of this Section 3.2(b)(3), in the event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 70 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held (or deemed to have been held), notice by the stockholder to be timely must be so received not earlier than the 120th day prior to such annual meeting and not later than the later of the close of business on (i) the 90th day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation.

 

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In no event shall an adjournment or postponement (or the public announcement thereof) of an annual meeting for which notice has been given, or for which a public announcement of the date of the meeting has been made by the Corporation, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

  (4)

The written notice required by Sections 3.2(b)(1) or 3.2(b)(2) shall also include, as of the date of the notice and as to the stockholder giving the notice, the beneficial owner, if any, on whose behalf the nomination or proposal is made and any affiliate who controls (as such term is defined in Rule 405 under the Securities Act of 1933, as amended (the “1933 Act”) either of the foregoing stockholder or beneficial owner, directly or indirectly (each, a “Proponent” and collectively, the “Proponents”):

(A) the name and address of each Proponent, including, if applicable, such name and address as they appear on the Corporation’s books and records;

(B) the class, series and number of shares of each class or series of the capital stock of the Corporation that are, directly or indirectly, owned of record or beneficially (within the meaning of Rule 13d-3 under the 1934 Act) by each Proponent (provided, that for purposes of this Section 3.2(b)(4), such Proponent shall in all events be deemed to beneficially own all shares of any class or series of capital stock of the Corporation as to which such Proponent or any of its affiliates or associates has a right to acquire beneficial ownership whether immediately or at any time in the future);

(C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal (and/or the voting of shares of any class or series of capital stock of the Corporation, other than a revocable proxy given in response to a proxy solicitation made to 10 or more persons) between or among any Proponent and any of its affiliates or associates, and/or any other persons (including their names) including without limitation, any agreements, arrangements or understandings required to be disclosed pursuant to Item 5 or Item 6 of 1934 Act Schedule 13D, regardless of whether the requirement to file a Schedule 13D is applicable;

(D) a representation that the stockholder is a holder of record of shares of the Corporation at the time of giving notice, will be entitled to vote at the meeting, and that such stockholder (or a qualified representative thereof) intends to appear at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 3.2(b)(1)) or to propose the business that is specified in the notice (with respect to a notice under Section 3.2(b)(2));

(E) a representation whether any Proponent or any other participant (as defined in Item 4 of Schedule 14A under the 1934 Act) will engage in a solicitation with respect to such nomination or proposal and, if so, the name of each participant in such solicitation and the amount of the cost of solicitation that has been and will be borne, directly or indirectly, by each participant in such solicitation, and a representation as to whether the Proponents intend or are part of a group which intends to:

(x) deliver, or make available, a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s voting shares required to approve or adopt the proposal or elect the nominee,

(y) otherwise solicit proxies or votes from stockholders in support of such proposal or nomination and/or

 

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(z) solicit proxies in support of any proposed nominee in accordance with Rule 14a-19 promulgated under the 1934 Act;

(F) a description of all Derivative Transactions (as defined below) by each Proponent during the previous 12-month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic or voting terms of, such Derivative Transactions;

(G) a certification regarding whether each Proponent has complied with all applicable federal, state and other legal requirements in connection with such Proponent’s acquisition of shares of capital stock or other securities of the Corporation and/or such Proponent’s acts or omissions as a stockholder or beneficial owner of the Corporation; and

(H) any other information relating to each Proponent required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14 of the 1934 Act and the rules and regulations promulgated thereunder.

(c) A stockholder providing the written notice required by Section 3.2(b)(1) or (2) shall update and supplement such notice in writing, if necessary, so that the information (other than the representations required by Section 3.2(b)(4)(E)) provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for the determination of stockholders entitled to notice of the meeting and (ii) the date that is five Business Days (as defined below) prior to the meeting and, in the event of any adjournment or postponement thereof, five Business Days prior to such adjourned or postponed meeting; provided, that no such update or supplement shall cure or affect the accuracy (or inaccuracy) of any representations made by any Proponent, any of its affiliates or associates, or a nominee or the validity (or invalidity) of any nomination or proposal that failed to comply with this Section 3.2 or is rendered invalid as a result of any inaccuracy therein.

In the case of an update and supplement pursuant to clause (i) of this Section 3.2(c), such update and supplement must be received by the Secretary at the principal executive offices of the Corporation not later than five Business Days after the later of the record date for the determination of stockholders entitled to notice of the meeting or the public announcement of such record date. In the case of an update and supplement pursuant to clause (ii) of this Section 3.2(c), such update and supplement shall be received by the Secretary at the principal executive offices of the Corporation not later than two Business Days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, two Business Days prior to such adjourned or postponed meeting (or if there are fewer than two Business Days between the date for the meeting, or the date of the immediately preceding adjournment or postponement thereof, and the date for the adjourned or postponed meeting, not later than the day prior to such adjourned or postponed meeting).

(d) Notwithstanding anything in Section 3.2(b)(3) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with Section 3.2(b)(3), a stockholder’s notice required by this Section 3.2 and that complies with the requirements in Section 3.2(b)(1), other than the timing requirements in Section 3.2(b)(3), shall also be considered timely, but only with respect to nominees for the new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

 

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(e) To be eligible to be a nominee for election or re-election as a director of the Corporation pursuant to a nomination under clause (iii) of Section 3.2(a) or clause (ii) of Section 3.3(c), each Proponent must deliver (in accordance with the time periods prescribed for delivery of notice under Sections 3.2(b)(3), 3.2(d) or 3.3(c), as applicable) to the Secretary at the principal executive offices of the Corporation a completed written questionnaire with respect to the background, qualifications, stock ownership and independence of such proposed nominee (in the form provided by the Secretary within 10 days following a written request therefor by a stockholder of record) and a written representation and agreement (in the form provided by the Secretary within 10 days following written request therefor by a stockholder of record) that such person:

(i) is not and will not become a party to any agreement, arrangement or understanding (whether oral or in writing) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question that (x) has not been disclosed in the questionnaire or (y) could limit or interfere with such person’s ability to comply with such person’s fiduciary duties under applicable law;

(ii) is not and will not become a party to any agreement, arrangement or understanding (whether oral or in writing) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation or a nominee that has not been disclosed in such questionnaire;

(iii) would be in compliance, if elected as a director of the Corporation (and a statement as to whether such person, if elected, intends to comply with), all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation that are publicly disclosed or which were provided by the Secretary with the written representation and agreement required by this Section 3.2(e) (together, the “Policies”); and

(iv) if elected as a director of the Corporation, intends to serve the entire term until the next meeting at which such candidate would face re-election.

(f) Notwithstanding anything to the contrary in the Bylaws, unless otherwise required by applicable law, in the event that any Proponent (i) provides notice pursuant to Rule 14a-19(b) promulgated under the 1934 Act with respect to one or more proposed nominees and (ii) subsequently fails to

(x) comply with the requirements of Rule 14a-19 promulgated under the 1934 Act (or fails to timely provide reasonable evidence sufficient to satisfy the Corporation that such Proponent has met the requirements of Rule 14a-19(a)(3) promulgated under the 1934 Act in accordance with the next sentence) or

(y) inform the Corporation that they no longer plan to solicit proxies in accordance with the requirements of Rule 14a-19 under the 1934 Act by delivering a written notice to the Secretary at the principal executive offices of the Corporation within two (2) Business Days after the occurrence of such change,

then the nomination of each such proposed nominee shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that the nominee is included (as applicable) as a nominee in the Corporation’s proxy statement, notice of meeting or other proxy materials for any stockholder meeting (or any supplement thereto) and notwithstanding that proxies or votes in respect of the election of such proposed nominees may have been received by the Corporation (which proxies and votes shall be disregarded).

 

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If any Proponent provides notice pursuant to Rule 14a-19(b) promulgated under the 1934 Act, such Proponent shall deliver to the Corporation, no later than five (5) Business Days prior to the applicable meeting, reasonable evidence sufficient to demonstrate that it has met the requirements of Rule 14a-19(a)(3) promulgated under the 1934 Act.

Notwithstanding anything to the contrary set forth herein, and for the avoidance of doubt, the nomination of any person whose name is included (as applicable) as a nominee in the Corporation’s proxy statement, notice of meeting or other proxy materials for any stockholder meeting (or any supplement thereto) as a result of any notice provided by any Proponent pursuant to Rule 14a-19(b) promulgated under the 1934 Act with respect to such proposed nominee and whose nomination is not made by or at the direction of the Board or any authorized committee thereof shall not be deemed (for purposes of clause (i) of Section 3.2(a) or otherwise) to have been made pursuant to the Corporation’s notice of meeting (or any supplement thereto) and any such nominee may only be nominated by a Proponent pursuant to clause (iii) of Section 3.2(a) and, in the case of a special meeting of stockholders, pursuant to and to the extent permitted under Section 3.3(c).

A person shall not be eligible for election or re-election as a director at an annual meeting unless the person is nominated in accordance with clause (ii) or (iii) of Section 3.2(a) and in accordance with the procedures and requirements set forth in Section 3.2(b), Section 3.2(c), Section 3.2(d), Section 3.2(e) and Section 3.2(f), as applicable, . Only such business shall be conducted at any annual meeting of the stockholders of the Corporation as shall have been brought before the meeting in accordance with Section 3.2(a) and in accordance with the procedures and requirements set forth in Section 3.2(b), Section 3.2(c) and Section 3.2(f), as applicable. Except as otherwise required by applicable law, and subject to the supervision, direction and control of the Board of Directors, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures and requirements set forth in the Bylaws (including, without limitation, compliance with Rule 14a-19 promulgated under the 1934 Act) and, if any proposed nomination or business is not in compliance with the Bylaws, or the Proponent does not act in accordance with the representations required in this Section 3.2, to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded (and such nominee disqualified from standing for election or re-election), or that such business shall not be transacted, notwithstanding that such proposal or nomination is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination or such business may have been solicited or received.

Notwithstanding the foregoing provisions of this Section 3.2, unless otherwise required by applicable law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded (and such nominee disqualified from standing for election or re-election) and such proposed business shall not be transacted, notwithstanding that such nomination or proposed business is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such vote may have been solicited or received by the Corporation.

(g) For purposes of Sections 3.2 and 3.3,

 

  (1)

“affiliates” and “associates” shall have the meanings set forth in Rule 405 under the 1933 Act;

 

  (2)

“Business Day” means any day other than Saturday, Sunday or a day on which banks are closed in New York City, New York;

 

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  (3)

“close of business” means 6:00 p.m. local time at the principal executive offices of the Corporation on any calendar day, whether or not the day is a Business Day;

 

  (4)

“Derivative Transaction” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proponent or any of its affiliates or associates, whether record or beneficial:

(A) the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the Corporation;

(B) that otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the Corporation;

(C) the effect or intent of which is to mitigate loss, manage risk or benefit from changes in value or price with respect to any securities of the Corporation; or

(D) that provides the right to vote (other than a revocable proxy given in response to a proxy solicitation made to 10 or more persons) or increase or decrease the voting power of, such Proponent, or any of its affiliates or associates, directly or indirectly, with respect to any securities of the Corporation,

which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation or similar right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proponent in the securities of the Corporation held by any general or limited partnership, or any limited liability company, of which such Proponent is, directly or indirectly, a general partner or managing member; and

 

  (5)

“public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, GlobeNewswire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act or by such other means reasonably designed to inform the public or security holders in general of such information, including, without limitation, posting on the Corporation’s investor relations website

 

  (6)

a “qualified representative” of a stockholder shall mean (A) a duly authorized officer, manager, trustee or partner of such stockholder or (B) a person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, shall be provided to the Secretary of the Corporation at least five Business Days prior to the meeting of stockholders.

Section 3.3 Special Meetings.

(a) Special meetings of the stockholders of the Corporation may only be called in the manner provided in the Certificate of Incorporation. Any special meeting of stockholders previously scheduled by the Board may be postponed, rescheduled or cancelled by the Board, or any director or officer to whom the Board has delegated such authority, at any time before or after notice of such meeting has been given to stockholders.

 

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(b) The Board (or its designee) shall determine the date and time of such special meeting. Upon determination of the date, time and place, if any, of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 3.4.

(c) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected

(i) by or at the direction of the Board or a duly authorized committee thereof or

(ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving notice provided for in this paragraph and who is a stockholder of record at the time of the special meeting, who is entitled to vote at the meeting and who complies with Sections 3.2(b)(1), 3.2(b)(4), 3.2(c), 3.2(e) and 3.2(f).

The number of nominees a stockholder may nominate for election at a special meeting on its own behalf (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at a special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of submitting a proposal to stockholders for the election of one or more directors, any such stockholder of record entitled to vote in such election of directors may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if written notice setting forth the information required by Sections 3.2(b)(1) and 3.2(b)(4) shall be received by the Secretary at the principal executive offices of the Corporation not earlier than the close of business on 120th day prior to such special meeting and not later than the close of business on the later of (i) the 90th day prior to such meeting or (ii) the tenth day following the day on which the Corporation first makes a public announcement of the date of the special meeting at which directors are to be elected. The stockholder shall also update and supplement such information as required under Section 3.2(c).

In no event shall an adjournment or a postponement (or the public announcement thereof) of a special meeting for which notice has been given, or for which a public announcement of the date of the meeting has been made by the Corporation, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(d) A person shall not be eligible for election or re-election as a director at the special meeting unless the person is nominated either in accordance with clause (i) or clause (ii) of Section 3.3(c). Except as otherwise required by applicable law, and subject to the supervision, direction and control of the Board of Directors, the chairperson of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures and requirements set forth in the Bylaws and, if any proposed nomination is not in compliance with the Bylaws (including, without limitation, compliance with Rule 14a-19 under the 1934 Act), or if the Proponent does not act in accordance with the representations required in Section 3.2, to declare that such nomination shall not be presented for stockholder action at the meeting and shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that such nomination is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination may have been solicited or received.

Notwithstanding the foregoing provisions of this Section 3.3, unless otherwise required by applicable law, if the stockholder (or a qualified representative of the stockholder) does not appear at the special meeting of stockholders of the Corporation to present a nomination, such nomination shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that the nomination is set forth (as applicable) in the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination may have been solicited or received by the Corporation.

 

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(e) Notwithstanding the foregoing provisions of Sections 3.2 and 3.3, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations promulgated thereunder with respect to the matters set forth in Sections 3.2 and 3.3, and any failure to comply with such requirements shall be deemed a failure to comply with Sections 3.2 or 3.3, as applicable; provided, however, that, to the fullest extent not prohibited by applicable law, any references in the Bylaws to the 1934 Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to proposals and/or nominations to be considered pursuant to Sections 3.2(a)(iii) and 3.3(c). Nothing in the Bylaws shall be deemed to affect any rights of holders of any class or series of preferred stock to nominate and elect directors pursuant to and to the extent provided in any applicable provision of the Certificate of Incorporation.

Section 3.4 Notice of Meetings. Except as otherwise provided by applicable law, the Certificate of Incorporation or the Bylaws, notice of each meeting of stockholders shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of such meeting. Such notice shall specify the date, time and place, if any, of the meeting, the record date for determining stockholders entitled to vote at the meeting, if such record date is different from the record date for determining stockholders entitled to notice of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting, and, in the case of special meetings, the purpose or purposes of the meeting. Notice shall be deemed given as provided in Section 232 of the DGCL.

Section 3.5 Quorum and Vote Required. At all meetings of stockholders, except where otherwise required by law or by the Certificate of Incorporation, or by the Bylaws, the presence, in person, by remote communication, if applicable, or by proxy, of the holders of a majority of the voting power of the outstanding shares of stock entitled to vote at the meeting shall constitute a quorum for the transaction of business. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Unless a different or minimum vote is provided by law or by applicable stock exchange rules, or by the Certificate of Incorporation or the Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, in all matters other than the election of directors, the affirmative vote of a majority of the votes cast on such matter, voting affirmatively or negatively (excluding abstentions and broker non-votes) shall be the act of the stockholders. Except as otherwise required by law, the Certificate of Incorporation or the Bylaws, 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 the meeting and entitled to vote in the election of directors. Where a separate vote by a class or classes or series is required, except as required by law or by the Certificate of Incorporation or the Bylaws, the holders of a majority of the voting power of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

Unless a different or minimum vote is provided by law or by the Certificate of Incorporation or the Bylaws or any applicable stock exchange rules, in which case such different or minimum vote shall be the applicable vote on the matter, the affirmative vote of the holders of a majority (or plurality, in the case of the election of directors) of the votes cast on such matter, voting affirmatively or negatively (excluding abstentions and broker non-votes) shall be the act of such class or classes or series.

 

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Section 3.6 Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairperson of the meeting or by the stockholders by the affirmative vote of a majority of the votes cast, voting affirmatively or negatively (excluding abstentions and broker non-votes). When a meeting is adjourned to another time or place, if any, (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication) notice need not be given of the adjourned meeting if the time and place, if any, thereof and the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and may vote at such meeting are announced at the meeting at which the adjournment is taken or are

(i) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication or

(ii) set forth in the notice of meeting given in accordance with Section 3.4.

At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.

Section 3.7 Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders or adjournment thereof, except as otherwise provided by applicable law, only persons in whose names shares stand on the stock records of the Corporation on the record date shall be entitled to vote at any meeting of stockholders. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. No proxy shall be voted after three years from its date of creation unless the proxy provides for a longer period. Voting at meetings of stockholders need not be by written ballot. Any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board.

Section 3.8 List of Stockholders. The corporation shall prepare, no later than the tenth day before each meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder; provided, however, if the record date for determining the stockholders entitled to vote is less than ten days before the meeting date, the list shall reflect all of the stockholders entitled to vote as of the tenth day before the meeting date. Nothing in this Section 3.8 shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of ten days ending on the day before the meeting date:

(a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or

 

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(b) during ordinary business hours, at the principal place of business of the Corporation.

In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation.

Section 3.9 Remote Communication; Delivery to the Corporation.

(a) If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a stockholder meeting may, by means of remote communication:

 

  (1)

participate in a meeting of stockholders; and

 

  (2)

be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

(b) Whenever Section 3.2 or 3.3 requires one or more persons (including a record or beneficial owner of capital stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered.

Section 3.10 Organization.

(a) At every meeting of stockholders, a person designated by the Board shall act as chairperson of the meeting of stockholders. If no chairperson of the meeting of stockholders is so designated, then the Chairperson of the Board, or if no Chairperson has been appointed, is absent or refuses to act, the Chief Executive Officer, or if no Chief Executive Officer is then serving or the Chief Executive Officer is absent or refuses to act, the President, or, if the President is absent or refuses to act, a chairperson of the meeting chosen by the stockholders by the affirmative vote of a majority of the votes cast, voting affirmatively or negatively (excluding abstentions and broker non-votes), shall act as chairperson of the meeting of stockholders. A person designated by the Board shall act as secretary of the meeting. If no secretary of the meeting is designated, then the Secretary, or, in the Secretary’s absence, an Assistant Secretary or other officer or other person directed to do so by the chairperson of the meeting, shall act as secretary of the meeting.

(b) The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairperson of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures

 

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and to do all such acts as, in the judgment of such chairperson, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chairperson shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters that are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

(c) The Corporation may and shall, if required by applicable law, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairperson of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspectors shall:

(1) ascertain the number of shares outstanding and the voting power of each;

(2) determine the shares represented at a meeting and the validity of proxies and ballots;

(3) count all votes and ballots;

(4) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and

(5) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.

The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Sections 211(e) or 212(c)(2) of the DGCL, or any information provided pursuant to Sections 211(a)(2)b.(i) or (iii) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to Section 231(b)(5) of the DGCL shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

 

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SECTION 4.

DIRECTORS

Section 4.1 Number. The authorized number of directors of the Corporation shall be fixed in accordance with the Certificate of Incorporation.

Section 4.2 Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as may be otherwise provided by the Certificate of Incorporation or the DGCL.

Section 4.3 Terms. The terms of directors shall be as set forth in the Certificate of Incorporation.

Section 4.4 Vacancies; Newly Created Directorships. Vacancies and newly created directorships on the Board shall be filled as set forth in the Certificate of Incorporation, except as otherwise required by applicable law.

Section 4.5 Resignation. Any director may resign at any time by delivering such director’s notice in writing or by electronic transmission to the Board or the Secretary. Such resignation shall take effect at the time of delivery of the notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal.

Section 4.6 Removal. Directors shall be removed as set forth in the Certificate of Incorporation.

Section 4.7 Meetings.

(a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board may be held at any time or date and at any place, if any, within or outside of the State of Delaware that has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board.

(b) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board may be held at any time and place, if any, within or without the State of Delaware as designated and called by the Chairperson of the Board, the Chief Executive Officer or by a majority of the directors then in office.

(c) Meetings by Electronic Communications Equipment. Any member of the Board, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(d) Notice of Special Meetings. Notice of the time and place, if any, of all special meetings of the Board shall be given orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, or by electronic mail or other means of electronic transmission at least 24 hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, postage prepaid, at least three days before the date of the meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board need be specified in any such notice.

 

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Section 4.8 Quorum and Voting.

(a) Except as otherwise required by the DGCL, the Certificate of Incorporation or the Bylaws, a quorum of the Board shall consist of a majority of the authorized number of directors fixed from time to time by the Board in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn the meeting to another time, without notice other than by announcement at the meeting.

(b) At each meeting of the Board at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by applicable law, the Certificate of Incorporation or the Bylaws.

Section 4.9 Action without Meeting. Unless otherwise restricted by the Certificate of Incorporation or the Bylaws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, such consent or consents shall be filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 4.10 Fees and Compensation. Unless otherwise restricted by the Certificate of Incorporation or the Bylaws, the Board, or any duly authorized committee thereof, shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

Section 4.11 Committees.

(a) Committees. The Board may, from time to time, appoint such committees as may be permitted by applicable law. Such committees appointed by the Board shall consist of one or more members of the Board and to the extent permitted by applicable law and provided in the resolution of the Board shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the Corporation.

(b) Term. The Board, subject to any requirements of any outstanding series of preferred stock and the provisions of subsection (a) of this Section 4.11, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of such committee member’s death, such person’s resignation from the committee or on such date that the committee member, for any reason, is no longer a member of the Board. The Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

 

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(c) Meetings. Unless the Board shall otherwise provide, regular meetings of any committee appointed pursuant to this Section 4.11 shall be held at such times and places, if any, as are determined by the Board, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at such place, if any, that has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place, if any, of such special meeting given in the manner provided for the giving of notice to members of the Board of the time and place, if any, of special meetings of the Board. Unless otherwise provided by the Board in the resolutions authorizing the creation of the committee, the presence of at least a majority of the members of the committee then serving shall be necessary to constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by the affirmative vote of a majority of the members present at a meeting of the committee at which a quorum is present.

Section 4.12 Duties of Chairperson of the Board. The Board shall elect from its ranks a Chairperson of the Board. The Chairperson of the Board shall perform such other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time. The Chairperson of the Board, when present, shall preside at all meetings of the Board in accordance with Section 4.13 of the Bylaws.

Section 4.13 Organization. At every meeting of the directors, the Chairperson of the Board shall act as chairperson of the meeting. If a Chairperson has not been appointed or is absent, the Chief Executive Officer (if a director), or, if no Chief Executive Officer is then serving or the Chief Executive Officer is absent, the President (if a director), or, in the absence of any such person, a chairperson of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in the Secretary’s absence, any Assistant Secretary or other officer, director or other person directed to do so by the person presiding over the meeting, shall act as secretary of the meeting.

SECTION 5.

OFFICERS

Section 5.1 Officers Designated. The officers of the Corporation shall include, if and when designated by the Board, the Chief Executive Officer, the President, the Secretary and the Treasurer. The Board may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem appropriate or necessary. The Board may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by applicable law, the Certificate of Incorporation or the Bylaws.

Section 5.2 Tenure and Duties of Officers.

(a) General. All officers shall hold office at the pleasure of the Board and until their successors shall have been duly elected and qualified, subject to such officer’s earlier death, resignation or removal. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board or by a committee thereof to which the Board has delegated such responsibility.

 

16


(b) Duties of Chief Executive Officer. The Chief Executive Officer shall preside, if a director, at all meetings of the Board, unless a Chairperson of the Board has been appointed and is present thereat. The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the Board, shall have the general powers and duties of supervision, direction, management and control of the business and officers of the Corporation as are customarily associated with the position of Chief Executive Officer. To the extent that a Chief Executive Officer has been appointed and no President has been appointed, all references in the Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time.

(c) Duties of President. The President shall preside, if a director, at all meetings of the Board, unless a Chairperson of the Board or Chief Executive Officer has been appointed and is present and willing to act. Unless another officer has been appointed Chief Executive Officer of the Corporation, the President shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the Board, shall have the general powers and duties of supervision, direction, management and control of the business and officers of the Corporation as are customarily associated with the position of chief executive officer. The President shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board (or the Chief Executive Officer, if the Chief Executive Officer and President are not the same person and the Board has delegated the designation of the President’s duties to the Chief Executive Officer) shall designate from time to time.

(d) Duties of Secretary and Assistant Secretary. The Secretary shall attend all meetings of the stockholders and of the Board and shall record, or cause to be recorded, all acts, votes and proceedings thereof in the minute books of the Corporation. The Secretary shall give, or cause to be given, notice in conformity with the Bylaws of all meetings of the stockholders and of all meetings of the Board and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in the Bylaws and other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

(e) Duties of Treasurer and Assistant Treasurer. The Treasurer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board, the Chief Executive Officer or the President. The Treasurer, subject to the order of the Board, shall have the custody of all funds and securities of the Corporation. The Treasurer shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct any Assistant Treasurer or other officer to assume and perform the duties of the Treasurer in the absence or disability of the Treasurer, and each Assistant Treasurer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

Section 5.3 Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

17


Section 5.4 Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board, the Chairperson of the Board, the Chief Executive Officer, the President or the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.

Section 5.5 Contracts and Other Documents. The Chief Executive Officer, or such other officer or officers as may from time to time be authorized by the Board or any other committee given specific authority in the premises by the Board of Directors during the intervals between the meetings of the Board, shall have power to sign and execute on behalf of the Corporation deeds, conveyances and contracts, and any and all other documents requiring execution by the Corporation.

Section 5.6 Removal. Any officer may be removed from office at any time, either with or without cause, by the Board, or by any duly authorized committee thereof or any officer upon whom such power of removal may have been conferred by the Board.

SECTION 6.

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

Section 6.1 Execution of Corporate Instruments. The Board may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute, sign or endorse on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by applicable law or the Bylaws, and such execution or signature shall be binding upon the Corporation.

(a) All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board shall from time to time authorize so to do.

(b) Unless otherwise specifically determined by the Board or otherwise required by applicable law, the execution, signing or endorsement of any corporate instrument or document by or on behalf of the Corporation may be effected manually, by facsimile or (to the extent not prohibited by applicable law and subject to such policies and procedures as the Corporation may have in effect from time to time) by electronic signature.

(c) Unless authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

Section 6.2 Voting of Securities Owned by the Corporation. All stock and other securities of or interests in other corporations or entities owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies and consents with respect thereto shall be executed, by the person authorized so to do by resolution of the Board, or, in the absence of such authorization, by the Chairperson of the Board, the Chief Executive Officer, or the President.

 

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SECTION 7.

SHARES OF STOCK

Section 7.1 Form and Execution of Certificates. The shares of the Corporation shall be represented by certificates, or shall be uncertificated if so provided by resolution or resolutions of the Board. Certificates for the shares of stock of the Corporation, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by any two authorized officers of the Corporation (including, without limitation, the Chairperson of the Board, the Chief Executive Officer, the President, the Treasurer, any Assistant Treasurer, the Secretary and any Assistant Secretary), certifying the number, and the class or series, of shares owned by such holder in the Corporation in certificated form. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

Section 7.2 Lost Certificates. The Corporation may issue a new certificate or certificates or uncertificated shares in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The Corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to give the Corporation a bond (or other adequate security) sufficient to indemnify the Corporation against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate(s) or uncertificated shares.

Section 7.3 Transfers.

(a) Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

(b) The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes or series owned by such stockholders in any manner not prohibited by the DGCL.

Section 7.4 Fixing Record Dates.

(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, subject to applicable law, not be more than 60 nor less than ten days before the date of such meeting. If the Board so fixes a record date for determining the stockholders entitled to notice of any meeting of stockholders, such date shall also be the record date for determining the stockholders entitled to vote at such meeting, unless the Board determines, at the time it fixes the record date for determining the stockholders entitled to notice of such meeting, that a later date on or before the date of the meeting shall be the record date for determining the stockholders entitled to vote at such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting

 

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of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determining the stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determining the stockholders entitled to vote in accordance with the provisions of this Section 7.4(a).

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating to such action.

Section 7.5 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

Section 7.6 Additional Powers of the Board. In addition to, and without limiting, the powers set forth in the Bylaws, the Board shall have power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation, including the use of uncertificated shares of stock, subject to the provisions of the DGCL, other applicable law, the Certificate of Incorporation and the Bylaws. The Board may appoint and remove transfer agents and registrars of transfers, and may require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers.

SECTION 8.

OTHER SECURITIES OF THE CORPORATION

Section 8.1 Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates (covered in Section 7.1), may be signed by the Chairperson of the Board, the Chief Executive Officer, or the President, or such other person as may be authorized by the Board; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or such other person as may be authorized by the Board, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation.

 

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SECTION 9.

DIVIDENDS

Section 9.1 Declaration of Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board. Dividends may be paid in cash, in property, or in shares of capital stock or other securities of the Corporation, subject to the provisions of the Certificate of Incorporation and applicable law.

Section 9.2 Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board from time to time, in its absolute discretion, determines proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose or purposes as the Board shall determine to be conducive to the interests of the Corporation, and the Board may modify or abolish any such reserve in the manner in which it was created.

SECTION 10.

FISCAL YEAR

Section 10.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

SECTION 11.

INDEMNIFICATION

Section 11.1 Indemnification of Directors, Officers, Employees and Other Agents.

(a) Directors and Officers. The Corporation shall indemnify to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), any person who was or is made or is threatened to be made a party or is otherwise involved in a Proceeding, by reason of the fact that such person is or was a director or officer of the Corporation, or while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether the basis of such Proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the Corporation will not be required to indemnify or advance expenses to any director or officer in connection with any Proceeding (or part thereof) initiated by such person unless (i) the Proceeding (or part thereof) was authorized by the Board or (ii) the Proceeding (or part thereof) is initiated to enforce rights to indemnification or advancement of expenses as provided under subsection (d) of this Section 11.1 or is a compulsory counterclaim brought by such person.

 

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Any reference to an officer of the Corporation in this Section 11.1 shall be deemed to refer exclusively to the Chief Executive Officer, President, Secretary, Treasurer and any other officer of the Corporation appointed by the Board pursuant to Section 5 of these Bylaws, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors or equivalent governing body of such other entity pursuant to the certificate of incorporation and bylaws or equivalent organizational documents of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, but not an officer thereof as described in the preceding sentence, has been given or has used the title of “Vice President” or any other title that could be construed to suggest or imply that such person is or may be such an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, such an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Section 11.1.

(b) Employees and Other Agents. The Corporation shall have power to indemnify and advance expenses to its employees and other agents to the fullest extent permitted by the DGCL.

(c) Expenses. The Corporation shall advance to any current or former director or officer of the Corporation, or to any person, who while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, prior to the final disposition of the Proceeding, promptly following request therefor, all expenses incurred by such person in defending (or participating as a witness in) any Proceeding referred to in Section 11.1(a), or in connection with a Proceeding (or part thereof) brought to establish or enforce a right to indemnification or advancement of expenses under subsection (d) of this Section 11.1, provided, however, that any advancement of expenses incurred by a current or former director or officer will be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it is ultimately determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified or entitled to advancement for such expenses under this Section 11.1 or otherwise.

(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to current and former directors and officers under this Section 11.1 will be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the Corporation and such director or officer. Any right to indemnification or advancement of expenses granted by this Section 11.1 to a current or former director or officer will be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if

(i) the claim for indemnification or advancement of expenses is denied, in whole or in part,

(ii) no disposition of a claim for indemnification is made within 60 days of request therefor, or

(iii) no disposition of a claim for an advance is made within 30 days of request therefor.

The indemnitee in such enforcement action, if successful in whole or in part, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, will be entitled to be paid also the expense of prosecuting or defending the claim to the fullest extent permitted by the DGCL.

 

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In (i) any suit brought to enforce a right to indemnification hereunder (but not in a suit brought to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the DGCL.

Neither the failure of the Corporation (including its Board, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the indemnitee is proper in the circumstances because such person has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that the indemnitee has not met the applicable standard of conduct. In any suit brought by a current or former director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Section 11.1 or otherwise is on the Corporation.

(e) Non-Exclusivity of Rights. The rights conferred on any person by this Section 11.1 are not exclusive of any other right that such person may have or hereafter acquire under any applicable law, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL.

(f) Survival of Rights. The rights conferred on any person by this Section 11.1 will continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors and administrators of such a person.

(g) Insurance. To the fullest extent permitted by the DGCL, the Corporation may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 11.1.

(h) Amendments. Any repeal or modification of this Section 11.1 is only prospective and does not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any Proceeding against any current or former director or officer of the Corporation.

(i) Saving Clause. If this Section 11 or any portion hereof is invalidated on any ground by any court of competent jurisdiction, then the Corporation will nevertheless indemnify and advance expenses to each director and officer to the full extent not prohibited by any applicable portion of this Section 11 that has not been invalidated, or by any. If this Section 11 is invalid due to the application of the indemnification and advancement provisions of another jurisdiction, then the Corporation will indemnify and advance expenses to each director and officer to the full extent under applicable law.

(j) Certain Definitions. For the purposes of this Section 11, the following definitions apply:

 

  (1)

The term “Proceeding” is to be broadly construed and includes, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

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  (2)

The term “expenses” is to be broadly construed and includes, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

  (3)

The term the “Corporation” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, stands in the same position under the provisions of this Section 11 with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

 

  (4)

References to “fines” include any excise taxes assessed on a person with respect to an employee benefit plan.

SECTION 12.

NOTICES

Section 12.1 Notices.

(a) Notice to Stockholders. Notice to stockholders of stockholder meetings shall be given as provided in Section 3.4. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by applicable law, notice to stockholders for purposes other than stockholder meetings may be sent by U.S. mail or courier service, facsimile or by electronic mail or other means of electronic transmission in accordance with Section 232 of the DGCL.

(b) Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a) or as otherwise provided in the Bylaws, with notice other than one that is delivered personally to be sent to such address or electronic mail address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known address or electronic mail address of such director.

(c) Affidavit of Mailing. An affidavit of notice, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

(d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

(e) Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under applicable law or any provision of the Certificate of Incorporation or Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such

 

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notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

(f) Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, any notice given under the provisions of the DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the Corporation within 60 days of having been given notice by the Corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the Corporation.

(g) Waiver. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or the Bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or the Bylaws.

SECTION 13.

AMENDMENTS

Section 13.1 Amendments. Subject to the limitations set forth in Section 11.1(h) or the Certificate of Incorporation, the Board is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by the Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock (as defined in the Certificate of Incorporation)), such action by stockholders shall require the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class.

 

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Exhibit 4.1

 

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ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# COMMON STOCK PAR VALUE $0.0001 COMMON STOCK Certificate Number ZQ00000000 Evommune, Inc. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE THIS CERTIFIES THAT ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample *000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000**Shares****000000 **Shares ****000000**Shares ****000000** Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000** Shares**** 000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000** Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares****000000 **Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares****0000 00**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares****00 0000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** 000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares ****000000**Shares**** ***ZERO HUNDRED THOUSAND ZERO HUNDRED AND ZERO*** MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP Shares is the owner of THIS CERTIFICATE IS TRANSFERABLE IN CITIES DESIGNATED BY THE TRANSFER AGENT, AVAILABLE ONLINE AT www.computershare.com FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Evommune, Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Incorporation, as amended, and the By-Laws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. FACSIMILE SIGNATURE TO COME President FACSIMILE SIGNATURE TO COME Secretary DATED MM-DDD-YYYY COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR, By AUTHORIZED SIGNATURE PO Box 43004, Providence RI 02940-3004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 CUSIP/IDENTIFIER XXXXXX XX X Holder ID XXXXXXXXXX Insurance Value 1,000,000.00 Number of Shares 123456 DTC 12345678 123456789012345 Certificate Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Total Transaction Num/No. 123456 Denom. 123456 Total 1234567


LOGO

EVOMMUNE, INC. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. For US purposes the following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - (Cust) Custodian (Minor) under Uniform Gifts to Minors Act (State) UNIF TRF MIN ACT - (Cust) Custodian (until age) (Minor) under Uniform Transfers to Minors Act (State) Additional abbreviations may also be used though not in the above list. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE For value received, hereby sell, assign and transfer unto (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within-named Company with full power of substitution in the premises. Dated: 20 Signature: Signature: Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. SECURITY INSTRUCTIONS THIS IS WATERMARKED PAPER, DO NOT ACCEPT WITHOUT NOTING WATERMARK. HOLD TO LIGHT TO VERIFY WATERMARK. The IRS requires that the named transfer agent (“we”) report the cost basis of certain shares or units acquired after January 1, 2011. If your shares or units are covered by the legislation, and you requested to sell or transfer the shares or units using a specific cost basis calculation method, then we have processed as you requested. If you did not specify a cost basis calculation method, then we have defaulted to the first in, first out (FIFO) method. Please consult your tax advisor if you need additional information about cost basis. If you do not keep in contact with the issuer or do not have any activity in your account for the time period specified by state law, your property may become subject to state unclaimed property laws and transferred to the appropriate state. 1234567

Exhibit 4.2

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

THIS THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (the “Agreement”) is made and entered into as of October 30, 2024, by and among EVOMMUNE, INC., a Delaware corporation (the “Company”), and the investors listed on Schedule A hereto, each of which is herein referred to as an “Investor” and collectively as the “Investors”.

RECITALS

WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of the Company’s Series Seed Preferred Stock, par value $0.0001 per share (the “Series Seed Preferred Stock”), the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) the Company’s Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) and/or shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), and possess registration rights, information rights, rights of first offer and other rights pursuant to that certain Second Amended and Restated Investors’ Rights Agreement dated as of March 28, 2023 by and among the Company and such Existing Investors (the “Prior Agreement”);

WHEREAS, the Prior Agreement may be amended, and any provision therein waived, with the consent of the Company, and the Investors (as such term is defined in the Prior Agreement) holding at least 60% of the outstanding Registrable Securities (as such term is defined in the Prior Agreement);

WHEREAS, the Existing Investors as holders of at least 60% of the outstanding Registrable Securities (as such term is defined in the Prior Agreement) of the Company desire to amend and restate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement; and

WHEREAS, certain Investors are parties to that certain Series C Preferred Stock Purchase Agreement of even date herewith by and among the Company and certain of the Investors (the “Series C Agreement”), which provides that as a condition to the closing of the sale of the Series C Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and collectively with the Series Seed Preferred Stock, Series A Preferred Stock and Series B Preferred Stock, the “Preferred Stock”), this Agreement must be executed and delivered by such Investors, Existing Investors holding at least 60% of the outstanding Registrable Securities (as such term is defined in the Prior Agreement) of the Company and the Company.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Company and the Existing Investors hereby agree that the Prior Agreement shall be amended and replaced in its entirety by this Agreement, and the parties hereto further agree as follows:

1. DEFINITIONS. For purposes of this Agreement:

(a) The term “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(b) The term “Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(c) The term “Affiliate” means, with respect to any Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any general partner, officer, director or manager of such Person and any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or is under common investment management with, such Person.

 

1


(d) The term “Andera” means BioDiscovery 6 FPCI, a French fonds professionnel de capital investissement.

(e) The term “Board” means the Company’s Board of Directors, as constituted from time to time.

(f) The term “Defaulting Investor” has the meaning set forth in the Series C Agreement.

(g) The term “Excluded Registration” means (i) a registration relating solely to the sale of securities of participants in a Company stock plan, (ii) a registration relating to a corporate reorganization or transaction under Rule 145 of the Act, (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

(h) The term “Expiration Date” has the meaning set forth in the Restated Certificate.

(i) The term “Family Member” means a spouse, child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

(j) The term “Form S-3” means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

(k) The term “Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405.

(l) The term “Holder” means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 2.10 of this Agreement.

(m) The term “Initial Offering” means the Company’s first Offering.

(n) The term “LSP” means LSP 7 Coöperatief UA.

(o) The term “Offering” means the Company’s firm commitment underwritten public offering of its Common Stock or other equity securities to the public under the Act.

(p) The term “Person” shall mean any individual, corporation, partnership, trust, limited liability company, association or other entity.

(q) The term “Preferred Directors” shall mean the Preferred Directors, as such term is defined in the Restated Certificate.

(r) The term “RA Capital” means RA Capital Healthcare Fund, L.P. and RA Capital Nexus Fund III, L.P.

 

2


(s) The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

(t) The term “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock (excluding any Common Stock issued upon conversion of the Preferred Stock pursuant to the Special Mandatory Conversion (as defined in the Restated Certificate)) and (ii) any Common Stock issued as (or issuable upon the conversion and/or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which his rights under Section 2 of this Agreement are not assigned. In addition, the number of shares of Registrable Securities outstanding shall equal the aggregate of the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.

(u) The term “Requisite Holders” has the meaning set forth in the Restated Certificate.

(v) The term “Restated Certificate” shall mean the Company’s Restated Certificate of Incorporation, as amended and/or restated from time to time.

(w) The term “Restricted Securities” shall mean the securities of the Company required to be notated with the legend set forth in Subsection 2.13(b) hereof.

(x) The term “RTW” shall mean RTW Biotech Opportunities Operating LTD.

(y) The term “Rule 144” shall mean Rule 144 under the Act.

(z) The term “Rule 144(b)(1)(i)” shall mean subsection (b)(1)(i) of Rule 144 under the Act as it applies to Persons who have held shares for more than one (1) year.

(aa) The term “Rule 405” shall mean Rule 405 under the Act.

(bb) The term “SEC” shall mean the Securities and Exchange Commission.

(cc) The term “Second Tranche Closing” has the meaning set forth in the Series C Agreement.

(dd) The term “Second Tranche Shares” has the meaning set forth in the Series C Agreement.

(ee) The term “Sectoral” means New Emerging Medical Opportunities Fund V SCSP.

(ff) The term “Series B New Investors” means RTW and any institutional and/or venture capital investor who (i) purchased shares of Series B Preferred Stock pursuant to Section 1.3 of the Series B Preferred Stock Purchase Agreement, dated March 28, 2023, by and among the Company and the other parties thereto (as amended) and (ii) did not own shares of Preferred Stock prior to such purchase, as determined by the Board.

 

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(gg) The term “Series C Major Investors” means RA Capital, Sectoral, and other institutional and/or venture capital investor who, together with its Affiliates, holds at least 5,017,152 shares of Series C Preferred Stock (other than Existing Investors holding shares of Series Seed Preferred Stock, Series A Preferred Stock, and/or Series B Preferred Stock as of the date of this Agreement). The number of Second Tranche Shares an Investor is committed to purchase pursuant to the Series C Agreement shall be deemed “held” by such Investor for purposes of determining whether such Investor qualifies as a Series C Major Investor if such Investor is not a Defaulting Investor.

(hh) The term “Specified Holders” means Andera and LSP and “Specified Holder” means any of them.

2. REGISTRATION RIGHTS. The Company covenants and agrees as follows:

2.1 Request for Registration.

(a) Subject to the conditions of this Section 2.1, if the Company shall receive at any time after the earlier of (i) three (3) years after the date of this Agreement or (ii) six (6) months after the effective date of the Initial Offering, a written request from the Holders of a majority of the Registrable Securities then outstanding (for purposes of this Section 2.1, the “Initiating Holders”) that the Company file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price of at least $15,000,000, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.1, use its commercially reasonable efforts to effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty (20) days of the mailing of the Company’s notice pursuant to this Section 2.1(a).

(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.1, and the Company shall include such information in the written notice referred to in Section 2.1(a). In such event the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (which underwriter or underwriters shall be reasonably acceptable to those Initiating Holders holding a majority of the Registrable Securities then held by all Initiating Holders). Notwithstanding any other provision of this Section 2.1, if the underwriter advises the Company that marketing factors require a limitation on the number of securities underwritten (including Registrable Securities), then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities pro rata based on the number of Registrable Securities held by all such Holders (including the Initiating Holders). In no event shall any Registrable Securities be excluded from such underwriting unless all other securities are first excluded. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

 

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(c) Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 2.1:

(i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Act; or

(ii) after the Company has effected two (2) registrations pursuant to this Section 2.1, and such registrations have been declared or ordered effective; or

(iii) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of and ending on a date one hundred eighty (180) days following the effective date of a Company-initiated registration subject to Section 2.2 below, provided that the Company is actively employing in good faith its commercially reasonable efforts to cause such registration statement to become effective; or

(iv) if the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to Section 2.3 hereof; or

(v) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.1 a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board of Directors stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected or remain effective at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders; provided that such right shall be exercised by the Company not more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for the account of itself or any other stockholder during such one hundred twenty (120) day period (other than an Excluded Registration).

(d) For purposes of Subsection 2.1(c)(ii), a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.1(b), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

2.2 Company Registration.

(a) If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than (i) a registration relating to a demand pursuant to Section 2.1 of this Agreement or (ii) an Excluded Registration), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 4.5 of this Agreement, the Company shall, subject to the provisions of Section 2.2(c) of this Agreement, use its commercially reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder requests to be registered.

 

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(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.6 hereof.

(c) Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section 2.2 to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company (or by other Persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with such underwriters, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering. In the event that the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be apportioned pro rata among the selling Holders based on the number of Registrable Securities held by all selling Holders or in such other proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the foregoing, in no event shall (i) any Registrable Securities be excluded from such offering unless all other stockholders’ securities have been first excluded from the offering and (ii) the amount of securities of the selling Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, unless such offering is the Initial Offering, in which case the selling Holders may be excluded if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the preceding sentence concerning apportionment, for any selling stockholder that is a Holder of Registrable Securities and that is a venture capital fund, partnership or corporation, the affiliated venture capital funds, partners, members, retired partners and stockholders of such Holder, or the estates and Family Members of any such partners, members and retired partners and any trusts for the benefit of any of the foregoing Persons shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate amount of Registrable Securities owned by all such related entities and individuals. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

2.3 Form S-3 Registration. In case the Company shall receive from the Holders of at least twenty percent (20%) of the Registrable Securities (for purposes of this Section 2.3, the “S-3 Initiating Holders”) a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company shall:

(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

(b) use its commercially reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 2.3:

(i) if Form S-3 is not available for such offering by the Holders;

 

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(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $5,000,000;

(iii) if the Company shall furnish to all Holders requesting a registration statement pursuant to this Section 2.3 a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board of Directors stating that in the good faith judgment of the Board, including a majority of the Preferred Directors, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the S-3 Initiating Holders; provided that such right shall be exercised by the Company not more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for the account of itself or any other stockholder during such ninety (90) day period (other than an Excluded Registration);

(iv) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 pursuant to this Section 2.3;

(v) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance; or

(vi) if the Company, within thirty (30) days of receipt of the request of such S-3 Initiating Holders, gives notice of its bona fide intention to effect the filing of a registration statement with the SEC within one hundred twenty (120) days of receipt of such request (other than an Excluded Registration), (other than a registration specified in clause (iii) of the definition of Excluded Registration), provided that the Company is actively employing in good faith its commercially reasonable efforts to cause such registration statement to become effective; or

(vii) during the period starting with the date thirty (30) days prior to the Company’s good faith estimate of the date of the filing of and ending on a date ninety (90) days following the effective date of a Company-initiated registration subject to Section 2.2 of this Agreement, provided that the Company is actively employing in good faith its commercially reasonable efforts to cause such registration statement to become effective.

(c) If the S-3 Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.3 and the Company shall include such information in the written notice referred to in Section 2.3(a). The provisions of Section 2.1(b) of this Agreement shall be applicable to such request (with the substitution of Section 2.3 for references to Section 2.1).

(d) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the S-3 Initiating Holders. Registrations effected pursuant to this Section 2.3 shall not be counted as requests for registration effected pursuant to Section 2.1 of this Agreement.

 

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2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 120-day period shall be extended for up to an additional 90 days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

(b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement;

(c) furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus and any Free Writing Prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;

(f) notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus or Free Writing Prospectus (to the extent prepared by or on behalf of the Company) relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, at the request of any such Holder, the Company will, as soon as reasonably practicable, file and furnish to all such Holders a supplement or amendment to such prospectus or Free Writing Prospectus (to the extent prepared by or on behalf of the Company) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in light of the circumstances under which they were made;

(g) cause all such Registrable Securities registered pursuant to this Section 2 to be listed on a national exchange or trading system and on each securities exchange and trading system on which similar securities issued by the Company are then listed;

 

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(h) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(i) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(j) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(k) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the 1934 Act.

Notwithstanding the provisions of this Section 2, the Company shall be entitled to postpone or suspend, for a reasonable period of time, the filing, effectiveness or use of, or trading under, any registration statement if the Company shall determine that any such filing or the sale of any securities pursuant to such registration statement would in the good faith judgment of the Board, including a majority of the Preferred Directors:

(l) materially impede, delay or interfere with any material pending or proposed financing, acquisition, corporate reorganization or other similar transaction involving the Company for which the Board has authorized negotiations;

(i) materially and adversely impair the consummation of any pending or proposed material offering or sale of any class of securities by the Company; or

(ii) require disclosure of material nonpublic information that, if disclosed at such time, would be materially harmful to the interests of the Company and its stockholders; provided, however, that during any such period all executive officers and directors of the Company are also prohibited from selling securities of the Company (or any security of any of the Company’s subsidiaries or affiliates).

In the event of the suspension of effectiveness of any registration statement pursuant to this Section 2.4, the applicable time period during which such registration statement is to remain effective shall be extended by that number of days equal to the number of days the effectiveness of such registration statement was suspended.

 

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2.5 Information from Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of such Holder’s Registrable Securities.

2.6 Expenses of Registration. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Sections 2.1, 2.2 and 2.3 of this Agreement, including, without limitation, all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders (not to exceed $100,000 per registration) shall be borne by the Company. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 or Section 2.3 of this Agreement if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration) unless, in the case of a registration requested under Section 2.1 of this Agreement, the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 2.1 of this Agreement and; provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Sections 2.1 and 2.3 of this Agreement.

2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 2:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each Person, if any, who controls such Holder or underwriter or such financial advisor within the meaning of the Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages, or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (i) any untrue or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus, final prospectus contained therein, or any Free Writing Prospectus, any amendments or supplements thereto, any issuer information (as defined in Rule 433 of the Act) filed or required to be filed pursuant to Rule 433(d) under the Act or any other document incident to such registration prepared by or on behalf of the Company or used or referred to by the Company, (ii) the omission or alleged omission of a material fact required to be stated in such registration statement, or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws, and the Company will reimburse each such Holder, underwriter, financial advisor, controlling Person or other aforementioned Person for any legal or other

 

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expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, action or proceeding to the extent that it arises out of or is based upon a Violation that occurs in reliance upon, and in conformity with, written information furnished expressly for use in connection with such registration by any such Holder, underwriter, financial advisor, controlling Person or other aforementioned Person.

(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Act, legal counsel and accountants for the Company, any underwriter, financial advisor, any other Holder selling securities in such registration statement and any controlling Person of any such underwriter, financial advisor or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing Persons may become subject, under the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any Person intended to be indemnified pursuant to this Section 2.8(b) for any legal or other expenses reasonably incurred by such Person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld), and provided that in no event shall any indemnity under this Section 2.8(b) exceed the net proceeds from the offering received by such Holder, except in the case of fraud or willful misconduct by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) for which a party may be entitled to indemnification, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one (1) separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action or proceeding, if prejudicial to its ability to defend such action or proceeding, shall relieve such indemnifying party of liability to the indemnified party under this Section 2.8 to the extent of such prejudice, but the omission to so deliver written notice to the indemnifying party will not relieve such indemnifying party of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

 

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(d) If the indemnification provided for in this Section 2.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided, however, that (i) no contribution by any Holder, when combined with any amounts paid by such Holder pursuant to Section 2.8(b), shall exceed the net proceeds from the offering received by such Holder and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the net proceeds from the offering received by such Holder (net of any expenses paid by such Holder). The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) The obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2 and otherwise.

2.9 Reports Under the 1934 Act. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the effective date of the first registration statement filed by the Company under the Act;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and

(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company under the Act), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to avail any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

 

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2.10 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (a) is an Affiliate, subsidiary, parent, partner, limited partner, retired partner, member or stockholder of a Holder, (b) is a Holder’s Family Member or trust for the benefit of an individual Holder or any of such Holder’s Family Members, or (c) after such assignment or transfer, holds at least 500,000 shares of Registrable Securities (appropriately adjusted for any stock split, dividend, combination or other recapitalization), provided: (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including, without limitation, the provisions of Section 2.12 of this Agreement; and (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act.

2.11 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Requisite Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include any of such securities in any registration filed under Section 2.1, Section 2.2 or Section 2.3 of this Agreement, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included or (b) to demand registration of their securities; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Subsection 4.10.

2.12 “Market Stand-Off” Agreement.

(a) Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter of the Initial Offering, during the period commencing on the date of the final prospectus relating to the Initial Offering (the “Stand-Off Effective Date”) and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days) (i) lend, 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, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock held immediately prior to the Stand-Off Effective Date, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 2.12 (i) shall apply only to the Initial Offering, (ii) shall not apply to (A) the sale of any shares (x) to an underwriter pursuant to an underwriting agreement or (y) that are acquired by an Investor in the Initial Offering or following the Initial Offering or (B) the transfer of any shares to any trust for the direct or indirect benefit of a Holder or any Family Member of such Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided, further, that any such transfer shall not involve a disposition for value, and (iii) shall only be applicable to the Holders only if all officers and directors of the Company are subject to similar restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than 1% of the Company’s outstanding Common Stock (after giving effect to the conversion into Common Stock of all outstanding Preferred Stock). Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Company stockholders that are subject to such agreements, based on the number of shares subject to such agreements, except that, notwithstanding the foregoing, the Company and the underwriters may, in their sole discretion, waive or terminate these restrictions with respect to up to 2,129,465 shares of the Common Stock.

 

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(b) The underwriters in connection with the Initial Offering are intended third-party beneficiaries of this Section 2.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in the Initial Offering that are consistent with this Section 2.12 or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other Person subject to the foregoing restriction) until the end of such period.

2.13 Restrictions on Transfer.

(a) The Preferred Stock and the Registrable Securities shall not be sold, pledged or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge or transfer, except pursuant to the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Act. A transferring Holder will cause any proposed purchaser, pledgee or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions, and upon the conditions specified in, this Agreement. Notwithstanding the foregoing, the Company shall not require any transferee of shares pursuant to an effective registration statement or, following the Initial Offering, SEC Rule 144, in each case, to be bound by the terms of this Agreement.

(b) Each certificate, instrument or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii) upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.13(c)) be notated with legends substantially in the following form:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

“THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN INVESTORS’ RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”

(c) The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2.13. Before any proposed sale, pledge or transfer of any Restricted Securities, unless there is in effect a registration statement under the Act covering the proposed transaction or following the Initial Offering, the transfer is made pursuant to SEC Rule 144, the Holder thereof shall give notice to the Company of such Holder’s intention to effect

 

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such sale, pledge or transfer, provided that no such notice shall be required in connection if the intended sale, pledge or transfer complies with SEC Rule 144. Each such notice shall describe the manner and circumstances of the proposed sale, pledge or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge or transfer of the Restricted Securities may be effected without registration under the Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a notice, legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that with respect to transfers under the foregoing clause (y), each transferee agrees in writing to be subject to the terms of this Section 2.13. Each certificate, instrument or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.13(b), except that such certificate, instrument or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Act.

(d) If (A) the Registrable Securities may be sold by the Holder without restriction under SEC Rule 144(b)(1) (as evidenced by customary non-affiliate certifications), including without limitation, any volume and manner of sale restrictions, and without any requirement that “current public information” (within the meaning of SEC Rule 144 under the Act) be available at the time of sale of such securities, including as a result of SEC Rule 144(i) under the Act, (B) the Holder has sold or transferred Registrable Securities in compliance with SEC Rule 144 (in which case the Holder shall submit a letter agreement reasonably satisfactory to the Company and its transfer agent with respect to ongoing compliance with SEC Rule 144 under the Act) or (C) the Registrable Securities are registered for resale under the Act pursuant to an effective registration statement and the Holder has sold or transferred such Registrable Securities pursuant to such then-effective registration statement (in which case the Holder shall submit a letter agreement reasonably satisfactory to the Company and its transfer agent with respect to such sale pursuant to such then-effective registration statement), then the Company shall, if requested by the Holder, use its commercially reasonable efforts to (i) cause the removal of any restrictive legend related to compliance with the federal securities laws set forth on such Registrable Securities (including by using commercially reasonable efforts to cause its legal counsel to deliver an opinion, if necessary, to the Company’s transfer agent in connection with the removal of such legends, if required by such transfer agent), and (ii) reasonably promptly after such request issue such Registrable Securities without any such legend in certificated or book-entry form or by electronic delivery (if then eligible for such delivery through the facilities of The Depository Trust Company).

2.14 Termination of Registration Rights. No Holder shall be entitled to exercise any right provided for in this Section 2: (a) after five (5) years following the consummation of the Initial Offering, (b) as to any Holder, such earlier time after the Initial Offering (whichever occurs first) at which such Holder (i) can sell all shares held by it in compliance with Rule 144(b)(1)(i) or (ii) holds one percent (1%) or less of the Company’s outstanding Common Stock and all Registrable Securities held by such Holder (together with any Affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in any three (3) month period without registration in compliance with Rule 144 or (c) after the consummation of a Liquidation Event, as that term is defined in the Restated Certificate.

 

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3. COVENANTS OF THE COMPANY.

3.1 Delivery of Financial Statements.

(a) The Company shall deliver to each Investor (or transferee of an Investor) that, together with its Affiliates, holds at least 3,000,000 shares of Registrable Securities ((x) as appropriately adjusted for any stock split, dividend, combination or other recapitalization and (y) inclusive of any Second Tranche Shares such Investor is committed to purchase pursuant to the Series C Agreement provided that such Investor is not a Defaulting Investor) (a “Major Investor”), provided that the Board has not reasonably determined that such Major Investor is a competitor of the Company (provided that none of RA Capital, Sectoral, RTW, Pivotal bioVenture Partners Fund I, L.P. (“Pivotal”), SymBiosis II, LLC (“SymBiosis”), Longwood Special Situations Fund, L.P. (“Longwood”) or any Specified Holder and their respective Affiliates shall be considered a competitor of the Company):

(i) as soon as practicable, but in any event within one hundred fifty (150) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholders’ equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles (“GAAP”), provided, however, that all such financial statements shall be audited and certified by independent public accountants of regionally recognized standing selected by the Company;

(ii) as soon as practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal year of the Company, an unaudited income statement and statement of cash flows for such fiscal quarter and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (A) be subject to normal year-end audit adjustments and (B) not contain all notes thereto that may be required in accordance with GAAP);

(iii) as soon as practicable following the request of a Major Investor, but no more than four (4) times per year, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company;

(iv) as soon as practicable, but in any event within thirty (30) days following the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board of Directors (including a majority of the of the Preferred Directors) and, promptly after prepared, any other budgets or revised budgets prepared by the Company;

(v) as soon as practicable, but in any event within forty-five (45) days following the end of each fiscal quarter, an update on the Company’s business development activity;

(vi) as soon as practicable, but in any event within forty-five (45) days following the end of each fiscal quarter, a scientific progress report discussing the significant results and development status of each project to which the Company is directing material research; and

 

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(vii) such other information relating to the financial condition, business or corporate affairs of the Company as the Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this subsection (vii) or any other subsection of Section 3.1 to provide information that (A) it deems in good faith to be a trade secret or similar confidential information or (B) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel; and

(b) If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

(c) Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

(d) Notwithstanding anything to the contrary in this Agreement or any other agreement to which the Company is a party, the Company acknowledges and agrees that:

(i) any and all information or documentation that the Specified Investors will receive in connection with their ownership of equity in the Company may at any time, and without any need for prior approval or to inform or otherwise notify the Company, be disclosed or provided in whole or in part to:

A. the Specified Holders’ investors, shareholders and limited partners (each, a “Specified Holder Investor”) and each of their Affiliates;

B. any prospective acquirer of any Specified Holder or any Specified Holder Investor’s interest in a Specified Holder;

C. any investment advisor or depositary of any Specified Holder or Specified Holder Investor;

D. any governmental or other institution or authority to which any Specified Holder or Specified Holder Investor is required to disclose confidential information for audit, monitoring, reporting, tax, legal, regulatory, supervisory or other purposes;

E. the professional advisors of the parties mentioned under (A), (B), (D) and (D) above;

provided that in all such cases other than (D) above, such parties and persons shall have agreed to keep such information confidential before such disclosure is made to them; it being further specified that no later than March 15 of each year, the Company will provide the Specified Holders with the following information regarding the Company, which information may be shared with the Specified Holder Investors: (i) turnover, (ii) EBIT and (iii) number of employees.

All financial statements and other information to be delivered to the Major Investors pursuant to this Section 3.1 shall be furnished in a manner reasonably acceptable to such Major Investor (including to any particular email address or site specified by a Major Investor).

 

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3.2 Inspection Rights. The Company shall permit each Major Investor, provided that the Board has not reasonably determined that such Major Investor is a competitor of the Company (provided that none of RA Capital, Sectoral, RTW, Pivotal, SymBiosis, Longwood or the Specified Holders and any of their Affiliates shall be considered a competitor of the Company), at such Major Investor’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that (a) it deems in good faith to be a trade secret or similar confidential information or (b) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel. Notwithstanding the foregoing or anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Relevant Parties (as defined below) and other entities listed below (together the “Auditing Parties”) shall be allowed, during normal business hours and subject to a reasonable notice period, to: (i) visit the sites, facilities, installations and works comprising the Company; (ii) interview representatives of the Company; (iii) monitor the structure of the investment within and the management of the Company; (iv) conduct such on-the-spot audits and checks as they may wish and review the Company’s books and records in relation to the execution of any Specified Holder’s investment within the Company, it being specified that such entities shall be authorized to take copies of related documents to the extent permitted by the law. Upon the occurrence of a visit as referred to in the preceding sentence, the Company will provide the concerned Relevant Party with such documents that it may reasonably require and that are in the Company’s possession that fall within the aforementioned scope. If such documents are not in the Company’s possession, the Company will make reasonable efforts to obtain them provided that it does not incur any costs in relation therewith. The Company further acknowledges that the EIF and the EIB may be obligated to communicate information relating to a Specified Holder’s investment within the Company, and generally to the Company, to any Relevant Party in accordance with the relevant mandatory provisions of the laws of the European Union. For the purposes of this Section 3.2, “Relevant Parties” shall mean the European Court of Auditors, the European Commission, the European Anti-Fraud Office and any other competent EU institution or body, as well as any persons designated by any of the foregoing; and “Auditing Parties” shall mean the EIF, the German Ministry for Economic Affairs and Energy, the ERP Special Fund (ERP-Sondervermögen) and KFW Capital (each either in person or by way of a duly authorized third party), the German Federal Court of Auditors, the EIB and, when so required by the relevant mandatory provisions of EU law, the Relevant Parties.

3.3 Termination of Information and Inspection Covenants. The covenants set forth in Sections 3.1 and 3.2 shall terminate and be of no further force or effect upon the earlier to occur of (a) the consummation of the sale of securities pursuant to a registration statement under the Act in connection with the firm commitment underwritten offering of its securities to the general public, (b) when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act and (c) the consummation of a Liquidation Event, whichever event shall first occur.

3.4 Right of First Offer. Subject to the terms and conditions specified in this Section 3.4 and applicable securities laws, the Company hereby grants to each Major Investor a right of first offer with respect to future offering, issuances or sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 3.4, the term “Major Investor” includes any Affiliates of a Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and Affiliates in such proportions as it deems appropriate; provided that each such party and Affiliate (x) is not a competitor, unless such person’s purchase of Shares is otherwise consented to by the Board (including a majority of the Preferred Directors), and (y) agrees to enter into this Agreement and each of the Voting Agreement and Right of First Refusal and Co-Sale Agreement (as such terms are defined in the Series C Agreement), as an investor under each such agreement (provided that any competitor shall not be entitled to any rights as a Major Investor under Subsections 3.1, 3.2 and 4.1 hereof) (provided that none of RA Capital, Sectoral, RTW, Pivotal, SymBiosis, or any Specified Holder and their respective Affiliates shall be considered a competitor of the Company).

 

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Each time the Company proposes to offer, issue or sell any shares of, or securities convertible into or exchangeable or exercisable for any shares of, its capital stock (excluding any such shares or securities for which the rights under this Section 3.4 have previously been waived) (“Shares”), the Company shall first make an offering of such Shares to each Major Investor in accordance with the following provisions:

(a) The Company shall deliver a notice in accordance with Section 4.5 (“Notice”) to the Major Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered and (iii) the price and terms upon which it proposes to offer such Shares.

(b) By written notification received by the Company within twenty (20) calendar days after the giving of Notice, each Major Investor may elect to purchase, at the price and on the terms specified in the Notice, up to that portion of such Shares that equals the proportion that the number of shares of Registrable Securities issued and held by such Major Investor (assuming full conversion, exercise and/or exchange of all convertible, exercisable and/or exchangeable securities then outstanding) bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion, exercise and/or exchange of all convertible, exercisable and/or exchangeable securities then outstanding). At the expiration of such twenty (20) calendar day period, the Company shall promptly, in writing, notify each Major Investor that elects to purchase all the shares available to it (a “Fully-Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) calendar day period commencing after the Company has given such notice to the Fully-Exercising Investors, each Fully-Exercising Investor may elect to purchase that portion of the Shares for which Major Investors were entitled to subscribe, but which were not subscribed for by the Major Investors, that is equal to the proportion that the number of shares of Registrable Securities issued and held by such Fully-Exercising Investor bears to the total number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock then held, by all Fully-Exercising Investors who wish to purchase some of the unsubscribed shares.

(c) If all Shares that Major Investors are entitled to obtain pursuant to Section 3.4(b) of this Agreement are not elected to be obtained as provided in Section 3.4(b) of this Agreement, the Company may, during the ninety (90) day period following the expiration of the period provided in Section 3.4(b) of this Agreement, offer the remaining unsubscribed portion of such Shares to any Person or Persons at a price not less than that, and upon terms no more favorable to the offeree than those, specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within ninety (90) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the Major Investors in accordance herewith.

(d) The right of first offer in this Section 3.4 shall not be applicable to (i) offers of securities exempted from the definition of “Additional Stock” pursuant to subsection 4(d)(ii) of Article IV.B of the Restated Certificate (including any securities from which such exemptions from Additional Stock were derived) or (ii) the issuance of shares of Series C Preferred Stock at any Closing (as defined in the Series C Agreement) pursuant to the Series C Agreement. In addition to the foregoing, the right of first offer in this Section 3.4 shall not be applicable with respect to any Major Investor in any subsequent offering of Shares if (A) at the time of such offering, the Major Investor is not an “accredited investor,” as that term is then defined in Rule 501(a) of the Act and (B) such offering of Shares is otherwise being offered only to accredited investors.

 

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(e) The rights provided in this Section 3.4 may not be assigned or transferred by any Major Investor; provided, however, that a Major Investor may assign or transfer such rights to its Affiliates.

(f) The covenants set forth in this Section 3.4 shall terminate and be of no further force or effect upon the consummation of (i) the Qualified Public Offering (as defined in the Restated Certificate or (ii) a Liquidation Event.

3.5 Directors’ and Officers’ Insurance. The Company has as of the date hereof or shall within ninety (90) days of the date hereof obtain from financially sound and reputable insurers, directors and officers liability insurance in an amount and on terms and conditions satisfactory to the Board (including a majority of the Preferred Directors), and will use its commercially reasonable efforts to cause such insurance policy to be maintained until such time as the Board (including a majority of the Preferred Directors) determines that such insurance should be discontinued.

3.6 Proprietary Information and Inventions Agreements. The Company shall require all employees and consultants with access to confidential information to execute and deliver a Proprietary Information and Inventions Agreement in substantially the form approved by the Board or a consulting agreement containing substantially similar proprietary rights assignment and confidentiality provisions.

3.7 Employee Agreements. Unless approved by the Board, all future employees of the Company who shall purchase, or receive options to purchase, shares of Common Stock following the date hereof shall be required to execute stock purchase or option agreements providing for (a) vesting of shares over a four (4) year period with the first twenty five percent (25%) of such shares vesting following twelve (12) months of continued employment or services, and the remaining shares vesting in equal monthly installments over the following thirty six (36) months thereafter and (b) a one hundred and eighty (180)-day lockup period in connection with the Initial Offering, plus an additional period as specified in Section 2.12. The Company shall retain a right of first refusal on transfers until the Initial Offering and the right to repurchase unvested shares at cost.

3.8 Indemnification Matters. The Company hereby acknowledges that one (1) or more of the directors nominated to serve on the Board by the Investors (each a “Fund Director”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Fund Director are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Fund Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Fund Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Fund Director to the extent legally permitted and as required by the Restated Certificate or Bylaws of the Company (or any agreement between the Company and such Fund Director), without regard to any rights such Fund Director may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Fund Director with respect to any claim for which such Fund Director has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Fund Director against the Company.

 

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3.9 Confidentiality. Each Investor agrees, severally and not jointly, that such Investor (a) will keep confidential, (b) will not disclose, divulge or use for any purpose (other than to monitor its investment in the Company) and (c) will protect to the same degree as it protects its own confidential information any confidential information obtained from the Company pursuant to the terms of this Agreement (including, without limitation, notice of the Company’s intention to file a registration statement), unless such confidential information (i) is known or becomes known to the public in general (other than as a result of a breach of this Subsection 3.9 by such Investor), (ii) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (iii) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (A) to its attorneys, accountants, consultants and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, provided that such Persons are under a contractual or legal obligation to preserve the confidentiality of such information; (B) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.9; (C) to any Affiliate, partner, member, stockholder or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (D) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure (each Person contemplated by clause (A), (B) and (C), a “Permitted Disclosee”). Investor shall be fully responsible for any use or disclosure of the confidential information by its Permitted Disclosees as if such Permitted Disclosees were Investor. Notwithstanding the foregoing or anything to the contrary contained in this Agreement, the Company acknowledges that the investments completed by one or both of the Specified Holders in the Company derive partly from the European Investment Fund (“EIF”) through the European Recovery Program (“ERP”) – EIF Facility, the European Investment Bank (“EIB”) Risk Capital Resources mandate – EIF Facility and from KFW through the ERP Venture Capital Fondsfinanzierung Facility, and that part of the funds invested by LSP originate from the EIF through (i) the Pan-European Guarantee Fund (“EGF”) implemented by the EIF with the financial support of the participating Member States (as published on the EIF website), (ii) Risk Capital Resources (“RCR”), (iii) the ERP—EIF Facility, (iv) the LfA—EIF Facility, (v) INVEST-NL Capital N.V. (“INL” or “NPI”), and (vi) the GFF - EIF Facility consisting of moneys committed by the German Future Fund, represented by the German Federal Ministry for Economic Affairs and Energy and the German Federal Ministry of Finance, the ERP Special Fund (“ERP-Sondervermogen”) represented by the German Federal Ministry for Economic Affairs and Energy and other resources of the EIF. The Company further acknowledges and agrees that (i) the EIF and EIB may publish on their website or produce press releases containing information related to the financing provided pursuant to each of the Specified Holders’ investments in the Company, including the name and address of the EIF, the EIB, each Specified Holder and the Company, the purpose of the financing and the type and amount of financing received from each Specified Holder, and (ii) the Specified Holders may publish a press release in connection with their respective investment in the Company, which will include an appropriate acknowledgement of the financial support provided by the EIF and the EIB with the backing of the European Union.

3.10 Real Property Holding Covenant. The Company shall provide prompt notice to Pivotal or any Specified Holder (the “RPH Investor”) following any “determination date” (as defined in Treasury Regulation Section 1.897-2(c)(1)) on which the Company becomes a United States real property holding corporation. In addition, upon a written request by the RPH Investor, the Company shall provide the RPH Investor with a written statement informing the RPH Investor whether the RPH Investor’s interest in the Company constitutes a United States real property interest. The Company’s determination shall comply with the requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company shall provide timely notice to the Internal Revenue Service, in accordance with and to

 

21


the extent required by Treasury Regulation Section 1.897-2(h)(2) or any successor regulation, that such statement has been made. The Company’s written statement to the RPH Investor shall be delivered to the RPH Investor within ten (10) days of the RPH Investor’s written request therefor. The Company’s obligation to furnish such written statement shall continue notwithstanding the fact that a class of the Company’s stock may be regularly traded on an established securities market or the fact that there is no Preferred Stock then outstanding.

3.11 Qualified Small Business Stock. Within twenty (20) business days after any Investor’s written request therefor (but no more frequently than once per year), the Company shall, at its option, deliver to such Investor either (i) a written statement indicating whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code or (ii) such factual information in the Company’s possession as is reasonably necessary to enable such Investor to determine whether (and what portion of) such Investor’s interest in the Company constitutes “qualified small business stock” as defined in Section 1202(c) of the Code.

3.12 Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Restated Certificate, or elsewhere, as the case may be.

3.13 Board Matters. Unless otherwise determined by the vote of a majority of the directors then in office, including a majority of the Preferred Directors, the Board shall meet at least quarterly in accordance with an agreed-upon schedule. In addition to the regularly scheduled quarterly meetings described in the foregoing sentence, the Board shall at any reasonable time or date as is jointly requested by at least two members of the Board. The Company shall reimburse the non-employee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors. Each non-employee director shall be entitled in such person’s discretion to be a member of any committee of the Board of Directors.

3.14 Matters Requiring Preferred Director Approval. During such time or times as the holders of Preferred Stock are entitled to elect one or more Preferred Director and such seat is filled, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board of Directors, which approval must include the approval of a majority of the Preferred Directors (the “Required Directors”):

(a) make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

(b) make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors, including the Required Directors (if approved after the date of this Agreement);

(c) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

 

22


(d) make any investment inconsistent with any investment policy approved by the Board of Directors, including the Required Directors;

(e) incur any aggregate indebtedness that is not already included in the Budget (as defined in Section 3.1(a)(iv)), other than equipment leases, trade credit or other trade payables incurred in the ordinary course of business;

(f) hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers, unless unanimously approved by the Compensation Committee of the Board of Directors; provided at least one Preferred Director is then serving as a member of the Compensation Committee;

(g) change the principal business of the Company, enter new lines of business, or exit the current line of business;

(h) sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

(i) enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $1,000,000.

3.15 Right to Conduct Activities. The Company hereby agrees and acknowledges that each of RA Capital, Sectoral, RTW, Pivotal, SymBiosis, Longwood, MW XO Health Innovations Fund II, LP (“MW”), NEXTBio Master Fund LP (“NextBio”), BEIERSDORF AG (“Beiersdorf”) and the Specified Holders (together with each of their affiliates) is a professional investment fund, and as such invests in numerous portfolio companies, some of which may be deemed competitive with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, RA Capital, Sectoral, RTW, Pivotal, SymBiosis, Longwood, MW, NextBio, Beiersdorf and the Specified Holders shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by RTW, Pivotal, SymBiosis, Longwood, MW, NextBio, Beiersdorf or any Specified Holder in any entity competitive with the Company, or (ii) actions taken by any partner, officer or other representative of RA Capital, Sectoral, RTW, Pivotal, SymBiosis, Longwood, MW, NextBio, Beiersdorf and the Specified Holders to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

3.16 Anti-Corruption.

(a) The Company shall take all necessary steps to ensure that the Company and its Subsidiaries comply with their social obligations and the following obligations: (i) Not to pay, promise to pay or accept bribes or kickbacks, nor to authorize any person to do so on behalf of the Company or its subsidiaries; (ii) promptly report to the appropriate body any evidence that the Company or any of its subsidiaries or any person acting on their behalf has paid, promised to pay or accepted bribes or kickbacks or otherwise violated applicable anti-bribery laws (and ensure that such incidents are fully investigated to the satisfaction of the Board of Directors).

 

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(b) In case of applicability of the provisions of Article 17 of the French Law no. 2016-1691 on transparency, the fight against corruption and the modernization of economic life (known as the “Sapin II Law”), the Company declares that it is in compliance with its obligations, or undertakes to promptly bring the Company into compliance with, in particular, but not exclusively, the pillars set out in the Sapin II Law. In furtherance of the foregoing, the Company shall promptly:

(i) Carry out a risk mapping to ensure that the corruption risks to which the Company or the Group is exposed are regularly assessed and evaluated by a competent body;

(ii) Formalize a code of conduct that includes the measures, principles and preventive procedures to be implemented in the area of anti-corruption;

(iii) Set up a whistleblowing system;

(iv) Carry out due diligence on its service providers, intermediaries and suppliers in the fight against corruption;

(v) Provide for a disciplinary system for any non-compliant behavior;

(vi) Maintain operational accounting control procedures;

(vii) Maintain an internal audit system; and

(viii) Provide regular training on anti-corruption.

3.17 Anti-Money Laundering Compliance. The Company shall make available to the Specified Holders any information that may be legally required in the future in the context of the fight against money laundering pursuant to applicable Law affecting the Company or the Specified Holders. The Company hereby acknowledges and agrees that the Specified Holders are in particular required to report to the competent authorities transactions involving sums which the Specified Holders know, suspect or have good reason to suspect are the proceeds of an offence punishable by a prison sentence of more than one year or are involved in the financing of terrorism, as well as any transaction for which the identity of the originator or the beneficial owner or any other instrument for the management of an earmarked asset remains doubtful despite the diligence they are required to carry out, and must also refrain from carrying out, under the conditions provided for by law, any operation which they suspect is related to money laundering or terrorism financing. The Company further acknowledges and agrees that the Specified Holders, as well as their management company and/or their management delegates, are subject to the obligations of the laws of France and the Netherlands (as applicable) relating to the fight against money laundering and terrorism financing (“AML Laws”). Consequently, the Company acknowledges and agrees that, provided that they act in good faith, the Specified Holders, their management company and/or their management delegates shall have the right, if required by applicable AML Laws, to refuse to perform any of their obligations under this Agreement, to the extent that it is not possible for them to do otherwise in order to comply with mandatory laws.

3.18 Cash Management and Banking Policy. The Company shall maintain and implement a cash management and banking policy, which such policy shall be subject to the approval of the Board of Directors, including a majority of the Preferred Directors.

3.19 Side Letters. The Company will make available to Investors all side letters or similar agreements entered in with any purchasers or holders of Registrable Securities.

 

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3.20 Equity Incentive Plan. As the Company and the Investors intend that the Second Tranche Reserve (as defined below) be used at least in part to incentivize retention of key employees following the Second Tranche Closing, until the earlier of the Second Tranche Closing or the Expiration Date, the Company shall not issue equity awards pursuant to the Company’s Equity Incentive Plan (the “Plan”) that would result in the vesting of any shares subject to the Second Tranche Reserve in excess of the number of shares that is equal to (a) the Second Tranche Reserve multiplied by (b) the dividend of (x) the number of Second Tranche Shares issued as of such vesting date, and (y) the aggregate number of Second Tranche Shares authorized for issuance pursuant to the Series C Agreement. For purposes of this Section 3.20, “Second Tranche Reserve” means 3,022,780 shares of Common Stock that are available for issuance pursuant to the Plan (appropriately adjusted for any stock split, dividend, combination or other recapitalization).

3.21 Termination of Certain Covenants. The covenants set forth in Sections 3.5, 3.6, 3.7, 3.11, 3.13, 3.14, 3.16, and 3.17 shall terminate and be of no further force or effect upon the consummation of (a) the Qualified Public Offering (as defined in the Restated Certificate) or (b) a Liquidation Event.

4. MISCELLANEOUS.

4.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including, without limitation, permitted transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

4.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware.

4.3 Counterparts. This Agreement may be executed by electronic signature and in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument. Counterparts may be delivered by facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

4.4 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

4.5 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices and other communications shall be sent to the parties at the addresses set forth on their signature pages hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 4.5).

4.6 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

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4.7 Entire Agreement; Amendments. This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. The Prior Agreement is hereby amended and restated in its entirety and shall be of no further force or effect. Any term of this Agreement (other than Section 3.1, Section 3.2, Section 3.3 and Section 3.4) may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and (i) prior to the conversion of all outstanding shares of Preferred Stock into Common Stock, the Requisite Holders or (ii) following the conversion of all outstanding shares of Preferred Stock into Common Stock, the holders of a majority of the Registrable Securities then outstanding. The provisions of Section 3.1, Section 3.2, Section 3.3 and Section 3.4 may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Major Investors holding a majority of the Registrable Securities then held by all of the Major Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities, each future holder of all such Registrable Securities and the Company. Notwithstanding the foregoing, this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, if such amendment, modification, termination or waiver would adversely affect the rights of such Investor in a manner disproportionate to any adverse effect such amendment, modification, termination or waiver would have on the rights of the other Investors under this Agreement (it being agreed that a waiver of the provisions of Section 3.4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction).

4.8 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

4.9 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities (including, without limitation, affiliated venture capital funds or venture capital funds under common investment management) or Persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

4.10 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Preferred Stock after the date hereof, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

4.11 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the foregoing courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

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4.12 Waiver of Jury Trial: TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

COMPANY:
EVOMMUME, INC.
By:   /s/ Luis Peña
  Luis Peña, Chief Executive Officer

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
RA CAPITAL HEALTHCARE FUND, L.P.

By: 

  RA Capital Healthcare Fund GP, LLC
  its General Partner
By:   /s/ Rajeev Shah
Printed Name: Rajeev Shah
Title:   Manager

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
RA CAPITAL NEXUS FUND III, L.P.
By:   RA Capital Nexus Fund III GP, LLC its
  General Partner
By:   /s/ Rajeev Shah
Printed Name: Rajeev Shah
Title:   Manager

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
NEW EMERGING MEDICAL OPPORTUNITIES FUND V SCSP
By:   Sectoral Asset Management Inc., its
  Investment Manager
By:   /s/ Michael Sjöström
  Michael Sjöström, Co-Founder &
  Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
AMPLITUDE VENTURES FUND II L.P., REPRESENTED BY ITS GENERAL PARTNER
By:   Amplitude Venture GP II Inc., its
By:   /s/ Dion Madsen
  Dion Madsen, Partner
By:   /s/ Matthew Rosenberger
  Matthew Rosenberger, Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
NFLS Delta III Limited
By:   /s/ Xintong Sun
  Xintong Sun, Director

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.

 

33


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
/s/ Luis Peña
Luis Peña

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
BIODISCOVERY 6 FPCI
By:   /s/ Sofia Ioannidou
  Sofia Ioannidou, Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
PIVOTAL BIOVENTURE PARTNERS FUND II, L.P.
By:   Pivotal bioVenture Partners Fund II
  G.P., Ltd., its General Partner
By:   /s/ Robert Hopfner
  Robert Hopfner, RPh, PhD, MBA,
  Managing Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
/s/ Eugene Bauer
Eugene Bauer, M.D.

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
RTW BIOTECH OPPORTUNITIES OPERATING LTD.
By:   RTW Investments, LP, its Investment Manager
By:   /s/ Roderick Wong
  Roderick Wong, Managing Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
PIVOTAL BIOVENTURE PARTNERS FUND I, L.P.
By:   Pivotal bioVenture Partners Fund I G.P., Ltd., its General Partner
By:   Pivotal bioVenture Partners Fund I
  U.G.P. Ltd., its General Partner
By:   /s/ Robert Hopfner
  Robert Hopfner, RPh, PhD, MBA,
  Managing Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
SYMBIOSIS II, LLC
By:   /s/ Chidozie Ugwumba
  Chidozie Ugwumba, Managing Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
VERITION MULTI STRATEGY MASTER FUND LTD.
By:   /s/ William Anderson
Printed Name: William Anderson
Title:   Authorized Signatory

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
LSP 7 COÖPERATIEF UA
By:   LSP 7 Management BV, its Managing Director
By:   /s/ Martijn Kleijwegt
  Martijn Kleijwegt, Director
By:   /s/ René Kuijten
  René Kuijten, Director

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.

 

42


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
B Capital Global Growth III, L.P.
By:   /s/ Robert Mittendorff
  Robert Mittendorff, General Partner & Head of Healthcare
By:   /s/ Raj Ganguly
  Raj Ganguly, Co-Founder & Co-CEO

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
B Capital Healthcare I, L.P.
By:   /s/ Robert Mittendorff
  Robert Mittendorff, General Partner & Head of Healthcare
By:   /s/ Raj Ganguly
  Raj Ganguly, Co-Founder & Co-CEO

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:

ADAR1 Partners, LP

By:   /s/ Daniel Schneeberger
  Daniel Schneeberger, Manager of General Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
NEXTBio Master Fund LP
By:   /s/ Hongbo Lu
  Hongbo Lu, Managing Member of the GP

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
Spearhead Insurance Solutions IDF, LLC - Series ADAR1
By:   /s/ Ken Foley
  Ken Foley, Managing Member

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
FemHealth Ventures Fund I LP
By:   FemHealth Ventures GP I LLC, its
  General Partner
By:   /s/ Maneesha Ghiya
  Maneesha Ghiya, Managing Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
MW XO HEALTH INNOVATIONS FUND II, LP
By:   Marshall Wace North America, LP,. its Investment Manager

By:

  Marshall Wace LLC, its General Partner of the Investment Manager
By:   /s/ Courtney Lewis
Printed Name: Courtney Lewis
Title:   Authorized Signatory
By:   /s/ Todd Builione
Printed Name: Todd Builione
Title:   Authorized Signatory

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.

 


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
LONGWOOD SPECIAL SITUATIONS FUND, L.P.
By:   Longwood Special Situations Fund GP, LLC, its General Partner
By:   /s/ Rob Hadfield
  Rob Hadfield, General Counsel

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.

 

50


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
Avego Bioscience Capital, L.P.
By:   Avego Bioscience Capital GP, LLC, its General Partner
By:   /s/ Vishal Kapoor
  Vishal Kapoor, Partner

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
RTW MASTER FUND, LTD.
By:   /s/ Darshan Patel
  Darshan Patel, Director

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
RTW INNOVATION MASTER FUND, LTD.
By:   /s/ Darshan Patel
  Darshan Patel, Director

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
Allostery Master Fund LP
By:   /s/ Christopher Staral
Printed Name: Christopher Staral
Title:   Founder and Portfolio Manager

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

INVESTOR:
BEIERSDORF AKTIENGESELLSCHAFT
By:   /s/ Christopher Sheldon
  Christopher Sheldon, Head of M&A,
  Venture Cap. & Investor Relations
By:   /s/ Melanie Schrewe
  Melanie Schrewe, Corporate Law
  EB/SB-Affairs

SIGNATURE PAGE TO THE THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT FOR EVOMMUNE, INC.


Schedule A

Schedule of Investors

[***]

Exhibit 10.1

INDEMNIFICATION

AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the “Agreement”) is made and entered into as of [•], 2024 between Evommune, Inc., a Delaware corporation (the “Company”), and [•] (“Indemnitee”).

WITNESSETH THAT:

WHEREAS, highly competent persons have become more reluctant to serve corporations as directors and/or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Certificate of Incorporation of the Company authorizes indemnification of the officers and directors of the Company, and the Bylaws of the Company require indemnification of the executive officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“DGCL”). The Bylaws, Certificate of Incorporation and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the Board, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;


WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws and Certificate of Incorporation of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Company’s Bylaws and Certificate of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified.

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as an officer and/or director from and after the date hereof, the parties hereto agree as follows:

1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof.

(a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of Indemnitee’s Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee, or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of Indemnitee’s Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.


(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(d) Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

2. Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

3. Contribution.

(a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not, without the prior written consent of the Indemnitee, enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.


(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c) The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors, or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

4. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

5. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. This Section 5 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.


6. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company. The Company will be entitled to participate in the Proceeding at its own Expense.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board (1) by a majority vote of the disinterested directors, even though less than a quorum, (2) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum, (3) if there are no disinterested directors or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (4) if so directed by the Board, by the stockholders of the Company. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee.

(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by the Board. Indemnitee may, within ten (10) days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as


Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incurred by the Company and the Indemnitee incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 6(e) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.


(f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such sixty (60) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

(g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h) In the event that any action, suit or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, suit or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(i) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.


7. Remedies of Indemnitee.

(a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within ninety (90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 1(c), 1(d), 4 or the last sentence of Section 6(g) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made pursuant to Sections 1(a), 1(b) and 2 of this Agreement within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).

(c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee’s rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on Indemnitee’s behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by Indemnitee in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery.


(e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, if, in the case of indemnification, Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

8. Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders, a resolution of directors of the Company, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.


(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

9. Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing shall not affect the rights of Indemnitee; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or


(c) except as provided in Section 7(e) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) such payment arises in connection with any mandatory counterclaim or cross claim brought or raised by Indemnitee in any Proceeding (or any part of any Proceeding) or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

10. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue for six years and ninety days following the date that Indemnitee ceases to be an officer or director of the Company (or, if appliable, ceases to serve at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise), and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of Indemnitee’s Corporate Status, whether or not Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. If the Company or any of its successors or assignees consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company under this Agreement.

11. Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

12. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.


(c) The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of Expenses under this Agreement.

13. Definitions. For purposes of this Agreement:

(a) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(b) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(c) “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including, without limitation, the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent (ii) Expenses incurred in connection with recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement or Expenses or insurance recovery, as the case may be, and (iii) for purposes of Section 7(e) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, the Certificate of Incorporation, the Bylaws or under any directors’ and officers’ liability insurance policies maintained by the Company, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.


(f) “Proceeding” includes any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, alternate dispute resolution mechanism (including, without limitation, mediation), investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of Indemnitee’s Corporate Status, by reason of any action taken by Indemnitee or of any inaction on Indemnitee’s part while acting in Indemnitee’s Corporate Status; in each case whether or not Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of Expenses can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce Indemnitee’s rights under this Agreement.

14. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent:

 

  (a)

To Indemnitee at the address set forth below Indemnitee signature hereto.


  (b)

To the Company at:

 

                

 

                

 

                

Attention:

 

                

 

                

 

                

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20. Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.


SIGNATURE PAGE TO

FOLLOW


IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement on and as of the day and year first above written.

 

COMPANY:
Evommune, Inc.
By:  

 

  Name:  
  Title:  
Email:  

 

Address:  

 

 

 

 

 

INDEMNITEE:
[__________]
 
 

(Signature)

Address:  

 

 

 

 

 

Email:  

 

SIGNATURE PAGE TO EVOMMUNE, INC. INDEMNIFICATION AGREEMENT

Exhibit 10.2(a)

EVOMMUNE, INC.

2020 STOCK PLAN

ADOPTED ON MAY 6, 2020


TABLE OF CONTENTS

 

         Page  

SECTION 1.

  ESTABLISHMENT AND PURPOSE      1  

SECTION 2.

  ADMINISTRATION      1  

(a)

  Committees of the Board of Directors      1  

(b)

  Authority of the Board of Directors      1  

SECTION 3.

  ELIGIBILITY      1  

(a)

  General Rule      1  

(b)

  Ten-Percent Stockholders      1  

SECTION 4.

  STOCK SUBJECT TO PLAN      2  

(a)

  Basic Limitation      2  

(b)

  Additional Shares      2  

SECTION 5.

  TERMS AND CONDITIONS OF AWARDS OR SALES      2  

(a)

  Stock Grant or Purchase Agreement      2  

(b)

  Duration of Offers and Nontransferability of Rights      2  

(c)

  Purchase Price      2  

SECTION 6.

  TERMS AND CONDITIONS OF OPTIONS      3  

(a)

  Stock Option Agreement      3  

(b)

  Number of Shares      3  

(c)

  Exercise Price      3  

(d)

  Vesting and Exercisability      3  

(e)

  Basic Term      4  

(f)

  Termination of Service (Except by Death)      4  

(g)

  Leaves of Absence      4  

(h)

  Death of Optionee      4  

(i)

  Restrictions on Transfer of Options      5  

(j)

  No Rights as a Stockholder      5  

(k)

  Modification, Extension and Assumption of Options      5  

(l)

  Company’s Right to Cancel Certain Options      5  

SECTION 7.

  TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS      6  

(a)

  Restricted Stock Unit Agreement      6  

(b)

  Payment for Restricted Stock Units      6  

(c)

  Vesting Conditions      6  

(d)

  Forfeiture      6  

(e)

  Voting and Dividend Rights      6  

(f)

  Form and Time of Settlement of Restricted Stock Units      6  

(g)

  Death of Recipient      6  

(h)

  Creditors’ Rights      7  

(i)

  Modification, Extension and Assumption of Restricted Stock Units      7  

(j)

  Restrictions on Transfer of Restricted Stock Units      7  


SECTION 8.

  PAYMENT FOR SHARES      7  

(a)

  General Rule      7  

(b)

  Services Rendered      7  

(c)

  Promissory Note      7  

(d)

  Surrender of Stock      7  

(e)

  Cashless Exercise      7  

(f)

  Net Exercise      8  

(g)

  Other Forms of Payment      8  

SECTION 9.

  ADJUSTMENT OF SHARES      8  

(a)

  General      8  

(b)

  Corporate Transactions      8  

(c)

  Dissolution or Liquidation      10  

(d)

  Reservation of Rights      10  

SECTION 10.

  MISCELLANEOUS PROVISIONS      10  

(a)

  Securities Law Requirements      10  

(b)

  No Retention Rights      10  

(c)

  Treatment as Compensation      10  

(d)

  Governing Law      10  

(e)

  Conditions and Restrictions on Shares      11  

(f)

  Tax Matters      11  

SECTION 11.

  DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL      12  

(a)

  Term of the Plan      12  

(b)

  Right to Amend or Terminate the Plan      12  

(c)

  Effect of Amendment or Termination      12  

(d)

  Stockholder Approval      12  

SECTION 12.

  DEFINITIONS      12  


EVOMMUNE, INC. 2020 STOCK PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE.

The purpose of this Plan is to attract, incentivize and retain Employees, Outside Directors and Consultants through the grant of Awards. The Plan provides for the direct award or sale of Shares, the grant of Options to purchase Shares and the grant of Restricted Stock Units to acquire Shares. Options granted under the Plan may be ISOs intended to qualify under Code Section 422 or NSOs which are not intended to so qualify.

Capitalized terms are defined in Section 12.

SECTION 2. ADMINISTRATION.

(a) Committees of the Board of Directors. The Plan may be administered by one or more Committees. Each Committee shall consist, as required by applicable law, of one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan or an Award Agreement shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function.

(b) Authority of the Board of Directors. Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Notwithstanding anything to the contrary in the Plan, with respect to the terms and conditions of awards granted to Participants outside the United States, the Board of Directors may vary from the provisions of the Plan to the extent it determines it necessary and appropriate to do so; provided that it may not vary from those Plan terms requiring stockholder approval pursuant to Section 11(d) below. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Participants and all persons deriving their rights from a Participant.

SECTION 3. ELIGIBILITY.

(a) General Rule. Employees, Outside Directors and Consultants shall be eligible for the grant of Awards under the Plan.1 However, only Employees shall be eligible for the grant of ISOs.

(b) Ten-Percent Stockholders. A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for the grant of an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the Date of Grant and (ii) such ISO by its terms is not exercisable after the expiration of five years from the Date of Grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

 
1 

Note that special considerations apply if the Company proposes to grant awards to an Employee or Consultant of a Parent company.

 

1


SECTION 4. STOCK SUBJECT TO PLAN.

(a) Basic Limitation. Not more than 1,111,111 Shares may be issued under the Plan, subject to Subsection (b) below and Section 9(a).2 All of these Shares may be issued upon the exercise of ISOs. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.

(b) Additional Shares. In the event that Shares previously issued under the Plan are forfeited to or repurchased by the Company due to failure to vest, such Shares shall be added to the number of Shares then available for issuance under the Plan. In the event that Shares that otherwise would have been issuable under the Plan are withheld by the Company in payment of the Purchase Price, Exercise Price or withholding taxes, such Shares shall remain available for issuance under the Plan. In the event that an outstanding Option, Restricted Stock Unit or other right for any reason expires or is canceled, the Shares allocable to the unexercised or unsettled portion of such Option, Restricted Stock Unit or other right shall remain available for issuance under the Plan. To the extent an Award is settled in cash, the cash settlement shall not reduce the number of Shares remaining available for issuance under the Plan. Notwithstanding the foregoing, in the case of ISOs, this Subsection (b) shall be subject to any limitations imposed under Section 422 of the Code and the treasury regulations thereunder.

SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.

(a) Stock Grant or Purchase Agreement. Each award of Shares under the Plan shall be evidenced by a Stock Grant Agreement between the Grantee and the Company. Each sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Grant Agreement or Stock Purchase Agreement. The provisions of the various Stock Grant Agreements and Stock Purchase Agreements entered into under the Plan need not be identical.

(b) Duration of Offers and Nontransferability of Rights. Any right to purchase Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days (or such other period as may be specified in the Award Agreement) after the grant of such right was communicated to the Purchaser by the Company. Such right is not transferable and may be exercised only by the Purchaser to whom such right was granted.

 

(c) Purchase Price. The Board of Directors shall determine the Purchase Price of Shares to be offered under the Plan at its sole discretion. The Purchase Price shall be payable in a form described in Section 8.

 
2 

Please refer to Exhibit A for a schedule of the initial share reserve and any subsequent increases in the reserve.

 

2


SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

(a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

(b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 9. The Stock Option Agreement shall also specify whether the Option is an ISO or an NSO.

(c) Exercise Price.

(i) General. Each Stock Option Agreement shall specify the Exercise Price, which shall be payable in a form described in Section 8. Subject to the remaining provisions of this Subsection (c), the Exercise Price shall be determined by the Board of Directors in its sole discretion.

(ii) ISOs. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant, and a higher percentage may be required by Section 3(b). This Subsection (c)(ii) shall not apply to an ISO granted pursuant to an assumption of, or substitution for, another incentive stock option in a manner that complies with Code Section 424(a).

(iii) NSOs. Except as specifically set forth in this Subsection (c)(iii), the Exercise Price of an NSO shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant. This Subsection (c)(iii) shall not apply to an NSO granted to a person who is not a U.S. taxpayer on the Date of Grant or to an NSO that is intended either to be exempt from Code Section 409A as a “short-term deferral” or to comply with the requirements of Code Section 409A. In addition, this Subsection (c)(iii) shall not apply to an NSO granted pursuant to an assumption of, or substitution for, another stock option in a manner that complies with Code Section 409A.

(d) Vesting and Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become vested and exercisable. No Option shall be exercisable unless the Optionee (i) has delivered an executed copy of the Stock Option Agreement to the Company or (ii) otherwise agrees to be bound by the terms of the Stock Option Agreement. The Board of Directors shall determine the vesting and exercisability provisions of the Stock Option Agreement at its sole discretion.

 

3


(e) Basic Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed 10 years from the Date of Grant, and in the case of an ISO, a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire.

(f) Termination of Service (Except by Death). If an Optionee’s Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following dates:

(i) The expiration date determined pursuant to Subsection (e) above;

(ii) The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such earlier or later date as the Board of Directors may determine (but in no event earlier than 30 days after the termination of the Optionee’s Service); or

(iii) The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board of Directors may determine.

The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). In no event will an Option, or the Shares underlying an Option, become vested and/or exercisable after termination of the Optionee’s Service unless the Board of Directors takes affirmative action or unless expressly provided in a written agreement between the Company and the Optionee.

(g) Leaves of Absence. For purposes of Subsection (f) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence approved by the Company in writing.

(h) Death of Optionee. If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:

(i) The expiration date determined pursuant to Subsection (e) above; or

(ii) The date 12 months after the Optionee’s death, or such earlier or later date as the Board of Directors may determine (but in no event earlier than six months after the Optionee’s death).

 

4


All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death). In no event will an Option, or the Shares underlying an Option, become vested and/or exercisable after the Optionee’s death unless the Board of Directors takes affirmative action or unless expressly provided in a written agreement between the Company and the Optionee.

(i) Restrictions on Transfer of Options. An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. If the Board of Directors so provides, in a Stock Option Agreement or otherwise, an NSO may be transferable to the extent permitted by Rule 701 under the Securities Act. An ISO may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.

(j) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person submits a notice of exercise, pays the Exercise Price and satisfies all applicable withholding taxes pursuant to the terms of such Option.

(k) Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board of Directors may modify, reprice, extend or assume outstanding Options or may accept the cancellation of outstanding options (whether granted by the Company or another issuer) in return for the grant of new Options or a different type of award for the same or a different number of Shares and at the same or a different Exercise Price (if applicable). The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option; provided, however, that a modification of an Option that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise the Option after termination of employment or providing for additional forms of payment) but causes the Option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee.

(l) Company’s Right to Cancel Certain Options. Any other provision of the Plan or a Stock Option Agreement notwithstanding, the Company shall have the right at any time to cancel an Option that was not granted in compliance with Rule 701 under the Securities Act. Prior to canceling such Option, the Company shall give the Optionee not less than 30 days’ notice in writing. If the Company elects to cancel such Option, it shall deliver to the Optionee consideration with an aggregate value equal to the excess of (i) the Fair Market Value of the Shares subject to such Option as of the time of the cancellation over (ii) the Exercise Price of such Option. The consideration may be delivered in the form of cash or cash equivalents, in the form of Shares, or a combination of both. If the consideration would be a negative amount, such Option may be cancelled without the delivery of any consideration.

 

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SECTION 7. TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

(a) Restricted Stock Unit Agreement. Each grant of Restricted Stock Units under the Plan shall be evidenced by a Restricted Stock Unit Agreement between the recipient and the Company. Such Restricted Stock Units shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Restricted Stock Unit Agreement. The provisions of the various Restricted Stock Unit Agreements entered into under the Plan need not be identical.

(b) Payment for Restricted Stock Units. No cash consideration shall be required of the recipient in connection with the grant of Restricted Stock Units.

(c) Vesting Conditions. Each Restricted Stock Unit Agreement shall specify the vesting requirements applicable to the Restricted Stock Units subject thereto, which the Board of Directors shall determine in its sole discretion.

(d) Forfeiture. Unless a Restricted Stock Unit Agreement provides otherwise, upon termination of the recipient’s Service and upon such other times specified in the Restricted Stock Unit Agreement, any unvested Restricted Stock Units shall be forfeited to the Company.

(e) Voting and Dividend Rights. The holders of Restricted Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Restricted Stock Unit granted under the Plan may, at the discretion of the Board of Directors, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Restricted Stock Unit is outstanding. Dividend equivalents may be converted into additional Restricted Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Restricted Stock Units to which they attach.

(f) Form and Time of Settlement of Restricted Stock Units. Settlement of vested Restricted Stock Units may be made in the form of (i) cash, (ii) Shares or (iii) any combination of both, as determined by the Board of Directors. The actual number of Restricted Stock Units eligible for settlement may be larger or smaller than the number included in the original award, based on predetermined performance factors. Vested Restricted Stock Units shall be settled in such manner and at such time(s) as specified in the Restricted Stock Unit Agreement. Until Restricted Stock Units are settled, the number of Shares represented by such Restricted Stock Units shall be subject to adjustment pursuant to Section 9.

(g) Death of Recipient. Any Restricted Stock Units that become distributable after the Participant’s death shall be distributed to the Participant’s estate or to any person who has acquired such Restricted Stock Units directly from the recipient by beneficiary designation, bequest or inheritance.

 

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(h) Creditors’ Rights. A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Restricted Stock Unit Agreement.

(i) Modification, Extension and Assumption of Restricted Stock Units. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding restricted stock units (whether granted by the Company or a different issuer). The foregoing notwithstanding, no modification of a Restricted Stock Unit shall, without the consent of the Participant, impair the Participant’s rights or increase the Participant’s obligations under such Restricted Stock Unit.

(j) Restrictions on Transfer of Restricted Stock Units. A Restricted Stock Unit shall be transferable by the Participant only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. In addition, if the Board of Directors so provides, in a Restricted Stock Unit Agreement or otherwise, a Restricted Stock Unit shall also be transferable to the extent permitted by Rule 701 under the Securities Act.

SECTION 8. PAYMENT FOR SHARES.

(a) General Rule. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 8. In addition, the Board of Directors in its sole discretion may also permit payment through any of the methods described in (b) through (g) below.

(b) Services Rendered. Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award.

(c) Promissory Note. All or a portion of the Purchase Price or Exercise Price (as the case may be) of Shares issued under the Plan may be paid with a promissory note. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors in its sole discretion shall specify the term, interest rate, recourse, amortization requirements (if any) and other provisions of such note.

(d) Surrender of Stock. All or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when the Option is exercised.

(e) Cashless Exercise. All or part of the Exercise Price and any withholding taxes may be paid pursuant to a cashless exercise arrangement (whether through a securities broker or otherwise) established by the Company whereby Shares subject to an Option are sold and all or part of the sale proceeds are delivered to the Company.

 

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(f) Net Exercise. An Option may permit exercise through a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair Market Value (determined by the Board of Directors as of the exercise date) that does not exceed the aggregate Exercise Price or the sum of the aggregate Exercise Price and any withholding taxes (with the Company accepting from the Optionee payment of cash or cash equivalents to satisfy any remaining balance of the aggregate Exercise Price and, if applicable, any additional withholding taxes not satisfied through such reduction in Shares); provided that to the extent Shares subject to an Option are withheld in this manner, the number of Shares subject to the Option following the net exercise will be reduced by the sum of the number of Shares withheld and the number of Shares delivered to the Optionee as a result of the exercise.

(g) Other Forms of Payment. To the extent that an Award Agreement so provides, the Purchase Price or Exercise Price of Shares issued under the Plan may be paid in any other form permitted by the Delaware General Corporation Law, as amended.

SECTION 9. ADJUSTMENT OF SHARES.

(a) General. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a reclassification, or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company, proportionate adjustments shall automatically be made, as applicable, in each of (i) the number and kind of Shares available under Section 4, (ii) the number and kind of Shares covered by each outstanding Option, Award of Restricted Stock Units and any outstanding and unexercised right to purchase Shares that has not yet expired pursuant to Section 5(b), (iii) the Exercise Price under each outstanding Option and the Purchase Price applicable to any unexercised stock purchase right described in clause (ii) above, and (iv) any repurchase price that applies to Shares granted under the Plan pursuant to the terms of a Company repurchase right under the applicable Award Agreement. In the event of a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a recapitalization, a spin-off, or a similar occurrence, the Board of Directors at its sole discretion may make appropriate adjustments in one or more of the items listed in clauses (i) through (iv) above; provided, however, that the Board of Directors shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code to the extent the Company is relying on the exemption afforded thereunder with respect to an Award. No fractional Shares shall be issued under the Plan as a result of an adjustment under this Section 9(a), although the Board of Directors in its sole discretion may make a cash payment in lieu of fractional Shares.

(b) Corporate Transactions. In the event that the Company is a party to a merger or consolidation, or in the event of a sale of all or substantially all of the Company’s stock or assets, all Shares acquired under the Plan and all Awards outstanding on the effective date of the transaction shall be treated in the manner described in the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which the Company is party, in the manner determined by the Board of Directors in its capacity as administrator of the Plan, with such determination having final and binding effect on all parties), which agreement or determination need not treat all Awards (or all portions of an Award) in an identical manner. The treatment specified in the transaction agreement or as determined by the Board of Directors may include (without limitation) one or more of the following with respect to each outstanding Award:

 

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(i) The Company, the surviving corporation or a parent thereof may continue or assume the Award or substitute a comparable award for the Award (including, but not limited to, an award to acquire the same consideration paid to the holders of Shares in the transaction). For avoidance of doubt, a comparable award need not be the same type of award as the Award for which it is substituted, and, in the case of an Option, need not have the same tax-status (e.g., an NSO may be substituted for an ISO).

(ii) The cancellation of the Award and a payment to the Participant with respect to each Share subject to the portion of the Award that is vested as of the transaction date equal to the excess of (A) the value, as determined by the Board of Directors in its absolute discretion, of the property (including cash) received by the holder of a share of Stock as a result of the transaction, over (if applicable) (B) the per-Share Exercise Price of the Award (such excess, the “Spread”). Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent having a value equal to the Spread. In addition, any escrow, indemnification, holdback, earn-out or similar provisions in the transaction agreement may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of Stock. Receipt of the payment described in this Subsection (b)(ii) may be conditioned upon the Participant acknowledging such escrow, indemnification, holdback, earn-out or other provisions on a form prescribed by the Company. If the Spread applicable to an Award is zero or a negative number, then the Award may be cancelled without making a payment to the Participant.

(iii) Even if the Spread applicable to an Option is a positive number, the Option may be cancelled without the payment of any consideration; provided that the Optionee shall be notified of such treatment and given an opportunity to exercise the Option (to the extent the Option is vested or becomes vested as of the effective date of the transaction) during a period of not less than five (5) business days preceding the effective date of the transaction, unless (A) a shorter period is required to permit a timely closing of the transaction and (B) such shorter period still offers the Optionee a reasonable opportunity to exercise the Option.

(iv) In the case of an Option: (A) suspension of the Optionee’s right to exercise the Option during a limited period of time preceding the closing of the transaction if such suspension is administratively necessary to facilitate the closing of the transaction and/or (B) termination of any right the Optionee has to exercise the Option prior to vesting in the Shares subject to the Option (i.e., “early exercise”), such that following the closing of the transaction the Option may only be exercised to the extent it is vested.

 

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For the avoidance of doubt, the Board of Directors has discretion to accelerate, in whole or part, the vesting and exercisability of an Award in connection with a corporate transaction covered by this Section 9(b).

(c) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, Restricted Stock Units and other rights to purchase Shares shall terminate immediately prior to the liquidation or dissolution of the Company.

(d) Reservation of Rights. Except as provided in Section 7(e) or this Section 9, a Participant shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 10. MISCELLANEOUS PROVISIONS.

(a) Securities Law Requirements. Shares shall not be issued under the Plan unless, in the opinion of counsel acceptable to the Board of Directors, the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be liable for a failure to issue Shares as a result of such requirements. Without limiting the foregoing, the Company may suspend the exercise of some or all outstanding Options for a period of up to 60 days in order to facilitate compliance with Securities Act Rule 701(e).

(b) No Retention Rights. Nothing in the Plan or in any right or Award granted under the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

(c) Treatment as Compensation. Any compensation that an individual earns or is deemed to earn under this Plan shall not be considered a part of his or her compensation for purposes of calculating contributions, accruals or benefits under any other plan or program that is maintained or funded by the Company, a Parent or a Subsidiary.

(d) Governing Law. The Plan and all awards, sales and grants under the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions), as such laws are applied to contracts entered into and performed in such State.

 

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(e) Conditions and Restrictions on Shares. Shares issued under the Plan shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal, other transfer restrictions and such other terms and conditions as the Board of Directors may determine. Such conditions and restrictions shall be set forth in the applicable Award Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In addition, Shares issued under the Plan shall be subject to conditions and restrictions imposed either by applicable law or by Company policy, as adopted from time to time, designed to ensure compliance with applicable law or laws with which the Company determines in its sole discretion to comply including in order to maintain any statutory, regulatory or tax advantage, which (for avoidance of doubt) need not be set forth in the applicable Award Agreement.

(f) Tax Matters.

(i) As a condition to the award, grant, issuance, vesting, purchase, exercise, settlement or transfer of any Award, or Shares issued pursuant to any Award, granted under this Plan, the Participant shall make such arrangements as the Board of Directors may require or permit for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such event.

(ii) Unless otherwise expressly set forth in an Award Agreement, it is intended that Awards shall be exempt from Code Section 409A, and any ambiguity in the terms of an Award Agreement and the Plan shall be interpreted consistently with this intent. To the extent an Award is not exempt from Code Section 409A (any such award, a “409A Award”), any ambiguity in the terms of such Award and the Plan shall be interpreted in a manner that to the maximum extent permissible supports the Award’s compliance with the requirements of that statute. Notwithstanding anything to the contrary permitted under the Plan, in no event shall a modification of an Award not already subject to Code Section 409A, or any subsequent action taken with respect to such Award, be given effect if such modification or action would cause the Award to become subject to Code Section 409A unless the parties explicitly acknowledge and consent to the modification or action as one having that effect. A 409A Award shall be subject to such additional rules and requirements as specified by the Board of Directors from time to time in order for it to comply with the requirements of Code Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” to an individual who is considered a “specified employee” (as each term is defined under Code Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s separation from service or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to Section 409A(a)(1). In addition, if a transaction subject to Section 9(b) constitutes a payment event with respect to any 409A Award, then the transaction with respect to such award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A.

(iii) Neither the Company nor any member of the Board of Directors shall have any liability to a Participant in the event an Award held by the Participant fails to achieve its intended characterization under applicable tax law.

 

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SECTION 11. DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL.

(a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to approval of the Company’s stockholders under Subsection (d) below. The Plan shall terminate automatically 10 years after the later of (i) the date when the Board of Directors adopted the Plan or (ii) the date when the Board of Directors approved the most recent increase in the number of Shares reserved under Section 4 that was also approved by the Company’s stockholders. The Plan may be terminated on any earlier date pursuant to Subsection (b) below.

(b) Right to Amend or Terminate the Plan. Subject to Subsection (d) below, the Board of Directors may amend, suspend or terminate the Plan at any time and for any reason.

(c) Effect of Amendment or Termination. No Shares shall be issued or sold and no Award granted under the Plan after the termination thereof, except upon exercise or settlement of an Award granted under the Plan prior to such termination. Except as expressly provided in Section 6(k) above, the termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Award previously granted under the Plan.

(d) Stockholder Approval. To the extent required by applicable law, the Plan will be subject to approval of the Company’s stockholders within 12 months of its adoption date. An amendment of the Plan will be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.

SECTION 12. DEFINITIONS.

(a) “Award” means any award granted under the Plan, including as an Option, an award of Restricted Stock Units or the grant or sale of Shares pursuant to Section 5 of the Plan.

(b) “Award Agreement” means a Restricted Stock Unit Agreement, Stock Grant Agreement, Stock Option Agreement or Stock Purchase Agreement or such other agreement evidencing an Award under the Plan.

(c) “Board of Directors” means the Board of Directors of the Company, as constituted from time to time.

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e) “Committee” means a committee of the Board of Directors, as described in Section 2(a).

(f) “Company” means Evommune, Inc., a Delaware corporation.

 

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(g) “Consultant” means a person, excluding Employees and Outside Directors, who performs bona fide services for the Company, a Parent3 or a Subsidiary as a consultant or advisor and who qualifies as a consultant or advisor under Rule 701(c)(1) of the Securities Act or under Instruction A.1.(a)(1) of Form S-8 under the Securities Act.

(h) “Date of Grant” means the date of grant specified in the Award Agreement, which date shall be the later of (i) the date on which the Board of Directors resolved to grant the Award or (ii) the first day of the Participant’s Service.

(i) “Disability” means that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

(j) “Employee” means any individual who is a common-law employee of the Company, a Parent4 or a Subsidiary.

(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(l) “Exercise Price” means the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.

(m) “Fair Market Value” means the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.

(n) “Grantee” means a person to whom the Board of Directors has awarded Shares under the Plan.

(o) “ISO” means an Option that qualifies as an incentive stock option as described in Code Section 422(b). Notwithstanding its designation as an ISO, an Option that does not qualify as an ISO under applicable law shall be treated for all purposes as an NSO.

(p) “NSO” means an Option that does not qualify as an incentive stock option as described in Code Section 422(b) or 423(b).

(q) “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Shares.

(r) “Optionee” means a person who holds an Option.

(s) “Outside Director” means a member of the Board of Directors who is not an Employee.

 
3 

Note that special considerations apply if the Company proposes to grant awards to consultant or advisor of a Parent company.

4 

Note that special considerations apply if the Company proposes to grant awards to an Employee of a Parent company.

 

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(t) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

(u) “Participant” means the holder of an outstanding Award.

(v) “Plan” means this Evommune, Inc. 2020 Stock Plan.

(w) “Purchase Price” means the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors.

(x) “Purchaser” means a person to whom the Board of Directors has offered the right to purchase Shares under the Plan (other than upon exercise of an Option).

(y) “Restricted Stock Unit” means a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan.

(z) “Restricted Stock Unit Agreement” means the agreement between the Company and the recipient of a Restricted Stock Unit that contains the terms, conditions and restrictions pertaining to such Restricted Stock Unit.

(aa) “Securities Act” means the Securities Act of 1933, as amended.

(bb) “Service” means service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

(cc) “Share” means one share of Stock, as adjusted in accordance with Section 9 (if applicable).

(dd) “Stock” means the Common Stock of the Company.

(ee) “Stock Grant Agreement” means the agreement between the Company and a Grantee who is awarded Shares under the Plan that contains the terms, conditions and restrictions pertaining to the award of such Shares.

(ff) “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option.

(gg) “Stock Purchase Agreement” means the agreement between the Company and a Purchaser who purchases Shares under the Plan that contains the terms, conditions and restrictions pertaining to the purchase of such Shares.

 

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(hh) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

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EXHIBIT A

SCHEDULE OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN

 

Date of Board

Approval

  

Date of Stockholder
Approval

   Number of
Shares Added
     Cumulative Number
of Shares
 

May 6, 2020

   May 6, 2020      Not Applicable        1,111,111  

June 22, 2020

   June 22, 2020      238,889        1,350,000  

August 25, 2021

   August 26, 2021      5,785,658        7,135,658  

May 11, 2022

   May 17, 2022      9,472,709        16,608,367  

March 28, 2023

   March 28, 2023      7,140,951        23,749,318  

April 19, 2023

   April 19, 2023      405,406        24,154,724  

June 16, 2023

   June 16, 2023      304,054        24,458,778  

October 29, 2024

   October 29, 2024      13,529,073        37,987,851  

SUMMARY OF MODIFICATIONS AND AMENDMENTS TO THE PLAN

The following is a summary of material modifications made to the Plan (including any material deviations from the Gunderson Dettmer precedent form used to create the Plan):

 

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Exhibit 10.2(b)

EVOMMUNE, INC. 2020 STOCK PLAN

NOTICE OF STOCK OPTION GRANT (INSTALLMENT EXERCISE)

The Optionee has been granted the following option to purchase shares of the Common Stock of Evommune, Inc. (the “Company”):

 

     Name of Optionee:    «Name»
  Total Number of Shares:    «TotalShares»
  Type of Option:    «ISO» Incentive Stock Option (ISO)
     «NSO» Nonstatutory Stock Option (NSO)
  Exercise Price per Share:    $«PricePerShare»
  Date of Grant:    «DateGrant»
  Vesting Schedule/Date Exercisable:    This option shall vest and become exercisable with respect to the first «Percent»% of the Shares subject to this option when the Optionee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth below. This option shall vest and become exercisable with respect to an additional «Fraction»% of the Shares subject to this option when the Optionee completes each month of continuous Service thereafter.
  Vesting Commencement Date:    «VestComDate»
  Expiration Date:    «ExpDate». This option expires earlier if the Optionee’s Service terminates earlier, as provided in Section 6 of the Stock Option Agreement, or if the Company engages in certain corporate transactions, as provided in Section 9 of the Plan.

By signing below or otherwise accepting this option in a manner acceptable to the Company, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, this Notice of Stock Option Grant, the 2020 Stock Plan and the Stock Option Agreement. Both of the latter documents are attached to, and made a part of, this Notice of Stock Option Grant. Capitalized terms not otherwise defined herein or in the Stock Option Agreement shall have the meanings set forth in the Plan. Section 14 of the Stock Option Agreement includes important acknowledgements of the Optionee.


OPTIONEE:     EVOMMUNE, INC.  
   

By:

   
    Title:    


THE OPTION GRANTED PURSUANT TO THE NOTICE OF STOCK OPTION GRANT AND THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

EVOMMUNE, INC. 2020 STOCK PLAN:

STOCK OPTION AGREEMENT (INSTALLMENT EXERCISE)

SECTION 1. GRANT OF OPTION.

(a) Option. On the terms and conditions set forth in the Notice of Stock Option Grant, this Agreement and the Plan, the Company has granted to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies). This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

(b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

(c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 15 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

SECTION 2. RIGHT TO EXERCISE.

(a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant.

(b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.


SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

Except as otherwise provided in or pursuant to this Agreement or the Plan, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

SECTION 4. EXERCISE PROCEDURES.

(a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option by: (i) signing and delivering written notice (on a form prescribed by the Company) to the Company pursuant to Section 13(c) specifying the election to exercise this option, the number of Shares for which it is being exercised and the form of payment, (ii) if requested by the Company, executing and delivering such stockholders agreements as apply to the holders of the Company’s preferred stock (including, without limitation, any right of first refusal and co-sale agreement and/or voting agreement of the Company) and (iii) delivering payment, in a form permissible under Section 5, for the full amount of the Purchase Price (together with any applicable withholding taxes under Subsection (b)). In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option.

(b) Withholding Taxes. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Optionee’s participation in the Plan and legally applicable to the Optionee (the “Tax-Related Items”)) as a result of the grant, vesting or exercise of this option, or as a result of the transfer of shares acquired upon exercise of this option, the Optionee, as a condition of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Optionee acknowledges that the responsibility for all Tax-Related Items is the Optionee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

(c) Issuance of Shares. After satisfying all requirements for exercise of this option, the Company shall cause to be issued one or more certificates evidencing, or electronic notation representing, the Shares for which this option has been exercised. Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and his or her spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust. Until the issuance of the Shares has been entered into the books and records of the Company or a duly authorized transfer agent of the Company, no right to vote, receive dividends or any other right as a stockholder will exist with respect to such Shares. The Company shall cause any certificates evidencing such Shares to be delivered to or upon the order of the person exercising this option.

 

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SECTION 5. PAYMENT FOR STOCK.

(a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents or pursuant to a form of electronic funds transfer acceptable to the Company.

(b) Surrender of Stock. At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

(c) Cashless Exercise. All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company. However, payment pursuant to the preceding sentence shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law. At the discretion of the Board of Directors, all or part of the Purchase Price and any withholding taxes may be paid pursuant to another cashless exercise arrangement established by the Company.

SECTION 6. TERM AND EXPIRATION.

(a) Basic Term. This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

(b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any reason other than death, then this option shall expire on the earliest of the following occasions:

(i) The expiration date determined pursuant to Subsection (a) above;

(ii) The date three months after the termination of the Optionee’s Service for any reason other than Disability; or

(iii) The date six months after the termination of the Optionee’s Service by reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option had become vested and exercisable before the Optionee’s Service terminated or becomes vested and exercisable as a result of such termination. In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested and exercisable before the Optionee’s Service terminated or becomes vested and exercisable as a result of such termination. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

 

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(c) Death of the Optionee. If the Optionee dies while in Service, then this option shall expire on the earlier of the following dates:

(i) The expiration date determined pursuant to Subsection (a) above; or

(ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested and exercisable before the Optionee’s death or becomes vested and exercisable as a result of the Optionee’s death. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

(d) Additional Vesting After Termination of Service. The period of time beginning on the date that the Optionee’s Service terminates or the date that the Optionee dies while in Service and ending on the earliest of the occasions determined pursuant to Subsections (b) or (c) above, as applicable, is referred to as the “post-termination exercise period”. To the extent this option is not fully vested and exercisable on the date the Optionee’s Service terminates or the date that the Optionee dies while in Service, the Board of Directors may, during the post-termination exercise period, take action to cause this option to become vested and exercisable (in whole or in part). In no event will this option become vested or exercisable after termination of the Optionee’s Service or death unless the Board of Directors takes affirmative action pursuant to the preceding sentence or unless expressly provided in a written agreement between the Company and the Optionee. In this regard, any provision of this Agreement or another agreement that provides for vesting upon an event (including, without limitation, a change in control) will be deemed to require Service through the occurrence of such event unless the agreement clearly provides otherwise.

(e) Extension of Post-Termination Exercise Periods. Following the date on which the Company’s Stock is first listed for trading on an established securities market, if during any part of the exercise period described in Subsections (b)(ii) or (iii) or Subsection (c)(ii) above the exercise of this option would be prohibited solely because the issuance of Shares upon such exercise would violate the registration requirements under the Securities Act or a similar provision of other applicable law, then instead of terminating at the end of such prescribed period, the then-vested portion of this option will instead remain outstanding and not expire until the earlier of (i) the expiration date determined pursuant to Section 6(a) above or (ii) the date on which the then-vested portion of this option has been exercisable without violation of applicable law for the aggregate period (which need not be consecutive) after termination of the Optionee’s Service specified in the applicable Subsection above.

 

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(f) Part-Time Employment and Leaves of Absence. If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant. If the Optionee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Notice of Stock Option Grant. Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work when such leave ends.

(g) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

(i) More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

(ii) More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

(iii) More than three months after the date when the Optionee has been on a leave of absence for three months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF FIRST REFUSAL.

(a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

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(b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Optionee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

(c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 7 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 7.

(d) Termination of Right of First Refusal. Any other provision of this Section 7 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

(e) Permitted Transfers. This Section 7 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

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(f) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 7, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

(g) Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 7.

SECTION 8. LEGALITY OF INITIAL ISSUANCE.

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

(a) It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

(b) Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

(c) Any other applicable provision of federal, State or foreign law has been satisfied.

SECTION 9. NO REGISTRATION RIGHTS.

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

SECTION 10. RESTRICTIONS ON TRANSFER OF SHARES.

(a) General Restrictions. Unless the Stock is readily tradeable on an established securities market, the transfer of any of the Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.

 

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(b) Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

(c) Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act.

(d) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.

 

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(e) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel, including (if applicable because the Company is relying on Regulation S under the Securities Act) that as of the date of exercise the Optionee is (i) not a U.S. Person; (ii) not acquiring the Shares on behalf, or for the account or benefit, of a U.S. Person; and (iii) is not exercising the option in the United States.

(f) Legends. Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement shall bear the following legend:

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK OPTION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK OPTION AGREEMENT. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK OPTION AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”

 

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(g) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

(h) Administration. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 10 shall be conclusive and binding on the Optionee and all other persons.

SECTION 11. DRAG ALONG RIGHT.

(a) Required Actions. If the Requisite Parties approve a Sale of the Company, then Optionee hereby agrees with respect to all Shares which the Optionee own(s) or over which the Optionee otherwise exercises voting or dispositive authority:

(i) if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Stockholder shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

(ii) if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Optionee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

(iii) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

(iv) if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;

(v) if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Stockholder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the Stockholders;

 

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(vi) to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Optionee than to other holders of Common Stock of the Company; and

(vii) to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

(b) Exceptions. Notwithstanding the foregoing, an Optionee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Optionee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Optionee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Optionee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Optionee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Optionee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

SECTION 12. ADJUSTMENT OF SHARES.

In the event of any transaction described in Section 9(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 9(a) of the Plan. In the event that the Company is a party to a merger or consolidation or in the event of a sale of all or substantially all of the Company’s stock or assets, this option shall be subject to the treatment provided by the Board of Directors in its sole discretion, as provided in Section 9(b) of the Plan.

 

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SECTION 13. MISCELLANEOUS PROVISIONS.

(a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

(b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

(c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

(d) Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee); provided, however, that a modification that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise this option after termination of employment or providing for additional forms of payment) but causes this option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(e) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

(f) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

 

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(g) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(h) Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Optionee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the restrictions on transfer in Section 10 and the drag along right in Section 11. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (h).

SECTION 14. ACKNOWLEDGEMENTS OF THE OPTIONEE.

In addition to the other terms, conditions and restrictions imposed on this option and the Shares issuable under this option pursuant to this Agreement and the Plan, the Optionee expressly acknowledges being subject to Sections 7 (Right of First Refusal), 8 (Legality of Initial Issuance), 10 (Restrictions on Transfer of Shares, including without limitation the Market Stand-Off) and 11 (Drag Along Right), as well as the following provisions:

(a) Tax Consequences. The Optionee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Optionee’s tax liabilities. The Optionee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this option or the Optionee’s other compensation. In particular, any Optionee subject to U.S. taxation acknowledges that this option is exempt from Section 409A of the Code only if the Exercise Price is at least equal to the Fair Market Value per Share on the Date of Grant. Since Shares are not traded on an established securities market, the determination of their Fair Market Value is made by the Board of Directors or by an independent valuation firm retained by the Company. The Optionee acknowledges that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and the Optionee shall not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low. In addition, if this option is designated as an ISO, the Optionee acknowledges that there is no guarantee that the option in fact qualifies for incentive stock option treatment or that it will continue to qualify for incentive stock option treatment at the time of exercise. In this regard, the Optionee acknowledges that the Company may take actions that will cause the option to cease to be eligible for incentive stock option treatment and that such actions do not require the Optionee’s consent.

 

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(b) Electronic Delivery of Documents. The Optionee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this option and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Optionee acknowledges that he or she may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with his or her ability to access the documents.

(c) No Notice of Expiration Date. The Optionee agrees that the Company and its officers, employees, attorneys and agents do not have any obligation to notify him or her prior to the expiration of this option pursuant to Section 6, regardless of whether this option will expire at the end of its full term or on an earlier date related to the termination of the Optionee’s Service. The Optionee further agrees that he or she has the sole responsibility for monitoring the expiration of this option and for exercising this option, if at all, before it expires. This Subsection (c) shall supersede any contrary representation that may have been made, orally or in writing, by the Company or by an officer, employee, attorney or agent of the Company.

(d) Waiver of Statutory Information Rights. The Optionee acknowledges and agrees that, upon exercise of this option and until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, he or she shall waive, and shall be deemed to have waived, any rights the Optionee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”). The Optionee acknowledges and understands that, but for the waiver made herein, the Optionee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Optionee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Optionee hereunder without the benefit of such waiver from the Optionee. This waiver applies only in the Optionee’s capacity as a stockholder and does not affect any other inspection rights the Optionee may have pursuant to any written agreement with the Company.

(e) Plan Discretionary. The Optionee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Optionee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

 

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(f) Termination of Service. The Optionee understands and acknowledges that participation in the Plan ceases upon termination of his or her Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

(g) Extraordinary Compensation. The value of this option shall be an extraordinary item of compensation outside the scope of the Optionee’s employment contract, if any, and shall not be considered a part of his or her normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

(h) Authorization to Disclose. The Optionee hereby authorizes and directs the Optionee’s employer to disclose to the Company or any Subsidiary any information regarding the Optionee’s employment, the nature and amount of the Optionee’s compensation and the fact and conditions of the Optionee’s participation in the Plan, as the Optionee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

(i) Personal Data Authorization. The Optionee consents to the collection, use and transfer of personal data as described in this Subsection (i). The Optionee understands and acknowledges that the Company, the Optionee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Optionee for the purpose of managing and administering the Plan, including (without limitation) the Optionee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Optionee’s favor (the “Data”). The Optionee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Optionee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Optionee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Optionee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Optionee’s participation in the Plan, including a transfer to any broker or other third party with whom the Optionee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Optionee’s behalf. The Optionee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (i) by contacting the Company in writing.

SECTION 15. DEFINITIONS.

(a) “Agreement” shall mean this Stock Option Agreement.

(b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

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(c) “Certificate” shall mean the Company’s amended and restated certificate of incorporation as in effect from time to time.

(d) “Company” shall mean Evommune, Inc., a Delaware corporation.

(e) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

(f) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

(g) “Plan” shall mean the Evommune, Inc. 2020 Stock Plan, as in effect on the Date of Grant.

(h) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

(i) “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

(j) “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 7.

(k) “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.

(l) “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

(m) “Service” shall mean service as an Employee, Outside Director or Consultant.

(n) “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

(o) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 7.

(p) “U.S. Person” shall mean a person described in Rule 902(k) of Regulation S of the Securities Act (or any successor rule or provision), which generally defines a U.S. person as any natural person resident in the United States, any estate of which any executor or administrator is a U.S. Person, or any trust of which of any trustee is a U.S. Person.

 

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EVOMMUNE, INC. 2020 STOCK PLAN

NOTICE OF STOCK OPTION GRANT (EARLY EXERCISE)

The Optionee has been granted the following option to purchase shares of the Common Stock of Evommune, Inc. (the “Company”):

 

     Name of Optionee:    «Name»
  Total Number of Shares:    «TotalShares»
  Type of Option:    «ISO» Incentive Stock Option (ISO)
     «NSO» Nonstatutory Stock Option (NSO)
  Exercise Price per Share:    $«PricePerShare»
  Date of Grant:    «DateGrant»
  Date Exercisable:    This option may be exercised at any time after the Date of Grant for all or any part of the Shares subject to this option.
  Vesting Commencement Date:    «VestComDate»
  Vesting Schedule:    This option shall vest, and the Right of Repurchase shall lapse, with respect to the first «Percent»% of the Shares subject to this option when the Optionee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth above. This option shall vest, and the Right of Repurchase shall lapse, with respect to an additional «Fraction»% of the Shares subject to this option when the Optionee completes each month of continuous Service thereafter.
  Expiration Date:    «ExpDate». This option expires earlier if the Optionee’s Service terminates earlier, as provided in Section 6 of the Stock Option Agreement, or if the Company engages in certain corporate transactions, as provided in Section 9 of the Plan.

By signing below or otherwise accepting this option in a manner acceptable to the Company, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, this Notice of Stock Option Grant, the 2020 Stock Plan and the Stock Option Agreement. Both of the latter documents are attached to, and made a part of, this Notice of Stock Option Grant. Capitalized terms not otherwise defined herein or in the Stock Option Agreement shall have the meanings set forth in the Plan. Section 15 of the Stock Option Agreement includes important acknowledgements of the Optionee.


OPTIONEE:        EVOMMUNE, INC.
       By:   
       Title:   

THE OPTION GRANTED PURSUANT TO THE NOTICE OF STOCK OPTION GRANT AND THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

EVOMMUNE, INC. 2020 STOCK PLAN:

STOCK OPTION AGREEMENT (EARLY EXERCISE)

SECTION 1. GRANT OF OPTION.

(a) Option. On the terms and conditions set forth in the Notice of Stock Option Grant, this Agreement and the Plan, the Company has granted to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies). This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

(b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

(c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 16 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

SECTION 2. RIGHT TO EXERCISE.

(a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option may be subject to the Right of Repurchase under Section 7.


(b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

Except as otherwise provided in or pursuant to this Agreement or the Plan, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

SECTION 4. EXERCISE PROCEDURES.

(a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option by: (i) signing and delivering written notice (on a form prescribed by the Company) to the Company pursuant to Section 14(c) specifying the election to exercise this option, the number of Shares for which it is being exercised and the form of payment, (ii) if requested by the Company, executing and delivering such stockholders agreements as apply to the holders of the Company’s preferred stock (including, without limitation, any right of first refusal and co-sale agreement and/or voting agreement of the Company) and (iii) delivering payment, in a form permissible under Section 5, for the full amount of the Purchase Price (together with any applicable withholding taxes under Subsection (b)). In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option. In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in the order in which they vest in accordance with the Notice of Stock Option Grant.

(b) Withholding Taxes. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Optionee’s participation in the Plan and legally applicable to the Optionee (the “Tax-Related Items”)) as a result of the grant, vesting or exercise of this option, or as a result of the vesting or transfer of shares acquired upon exercise of this option, the Optionee, as a condition of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Optionee acknowledges that the responsibility for all Tax-Related Items is the Optionee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

(c) Issuance of Shares. After satisfying all requirements for exercise of this option, the Company shall cause to be issued one or more certificates evidencing, or electronic notation representing, the Shares for which this option has been exercised. Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and his or her spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust. Until the issuance of the Shares has been entered into the books and records of the Company or a duly authorized transfer agent of the Company, no right to vote, receive dividends or any other right as a stockholder will exist with respect to such Shares. In the case of Restricted Shares, the Company shall cause any certificates evidencing such Shares to be deposited in escrow under Section 7(c). In the case of other Shares, the Company shall cause any certificates evidencing such Shares to be delivered to or upon the order of the person exercising this option.


SECTION 5. PAYMENT FOR STOCK.

(a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents or pursuant to a form of electronic funds transfer acceptable to the Company.

(b) Surrender of Stock. At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

(c) Cashless Exercise. All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company. However, payment pursuant to the preceding sentence shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law. At the discretion of the Board of Directors, all or part of the Purchase Price and any withholding taxes may be paid pursuant to another cashless exercise arrangement established by the Company.

SECTION 6. TERM AND EXPIRATION.

(a) Basic Term. This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

(b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any reason other than death, then this option shall expire on the earliest of the following occasions:

(i) The expiration date determined pursuant to Subsection (a) above;

(ii) The date three months after the termination of the Optionee’s Service for any reason other than Disability; or


(iii) The date six months after the termination of the Optionee’s Service by reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option had become vested before the Optionee’s Service terminated or becomes vested as a result of such termination. In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested before the Optionee’s Service terminated or becomes vested as a result of such termination. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

(c) Death of the Optionee. If the Optionee dies while in Service, then this option shall expire on the earlier of the following dates:

(i) The expiration date determined pursuant to Subsection (a) above; or

(ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested before the Optionee’s death or becomes vested as a result of the Optionee’s death. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

(d) Additional Vesting After Termination of Service. The period of time beginning on the date that the Optionee’s Service terminates or the date that the Optionee dies while in Service and ending on the earliest of the occasions determined pursuant to Subsections (b) or (c) above, as applicable, is referred to as the “post-termination exercise period”. To the extent this option is not fully vested on the date the Optionee’s Service terminates or the date that the Optionee dies while in Service, the Board of Directors may, during the post-termination exercise period, take action to cause this option to become vested (in whole or in part). In no event will this option become vested after termination of the Optionee’s Service or death unless the Board of Directors takes affirmative action pursuant to the preceding sentence or unless expressly provided in a written agreement between the Company and the Optionee. In this regard, any provision of this Agreement or another agreement that provides for vesting upon an event (including, without limitation, a change in control) will be deemed to require Service through the occurrence of such event unless the agreement clearly provides otherwise.


(e) Extension of Post-Termination Exercise Periods. Following the date on which the Company’s Stock is first listed for trading on an established securities market, if during any part of the exercise period described in Subsections (b)(ii) or (iii) or Subsection (c)(ii) above the exercise of this option would be prohibited solely because the issuance of Shares upon such exercise would violate the registration requirements under the Securities Act or a similar provision of other applicable law, then instead of terminating at the end of such prescribed period, the then-vested portion of this option will instead remain outstanding and not expire until the earlier of (i) the expiration date determined pursuant to Section 6(a) above or (ii) the date on which the then-vested portion of this option has been exercisable without violation of applicable law for the aggregate period (which need not be consecutive) after termination of the Optionee’s Service specified in the applicable Subsection above.

(f) Part-Time Employment and Leaves of Absence. If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant. If the Optionee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Notice of Stock Option Grant. Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work when such leave ends.

(g) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

(i) More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

(ii) More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

(iii) More than three months after the date when the Optionee has been on a leave of absence for three months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

(a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the Repurchase Period following the termination of the Optionee’s Service, but the Right of Repurchase may be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised, the Company shall pay the Optionee an amount equal to the lower of (i) the Exercise Price of each Restricted Share being repurchased or (ii) the Fair Market Value of such Restricted Share at the time the Right of Repurchase is exercised.


(b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option Grant.

(c) Escrow. Upon issuance, any certificate(s) for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any additional or exchanged securities or other property described in Subsection (f) below shall immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the Right of Repurchase or the Right of First Refusal or (ii) if held in escrow, released to the Optionee upon his or her request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently than once every six months). In any event, all Shares that have ceased to be Restricted Shares, together with any other vested assets held in escrow under this Agreement, shall be released within 90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the Right of First Refusal.

(d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period, unless the Company during the Repurchase Period notifies the holder of the Restricted Shares pursuant to Section 14(c) that it will not exercise its Right of Repurchase for some or all of the Restricted Shares. The Company shall pay to the holder of the Restricted Shares the purchase price determined under Subsection (a) above for the Restricted Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. If the Restricted Shares being repurchased are represented by certificate(s), any such certificate(s) shall be delivered to the Company. If the Restricted Shares being repurchased are not represented by certificate, the repurchase shall be effected by an appropriate book entry on the stock ledger for the Shares.

(e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in accordance with this Section 7 and the Company makes available the consideration for the Restricted Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no longer have any rights as a holder of the Restricted Shares (other than the right to receive payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased pursuant to this Section 7, whether or not any certificate(s) for such Restricted Shares have been delivered to the Company or the consideration for such Restricted Shares has been accepted.


(f) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same. In the event of any transaction described in Section 9(b) of the Plan or any other corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.

(g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. The Optionee may transfer Restricted Shares to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

(h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of Repurchase from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

(a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.


(b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Optionee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

(c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 8.

(d) Termination of Right of First Refusal. Any other provision of this Section 8 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

(e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.


(f) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 8, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

(g) Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 8.

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

(a) It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

(b) Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

(c) Any other applicable provision of federal, State or foreign law has been satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

SECTION 11. RESTRICTIONS ON TRANSFER OF SHARES.

(a) General Restrictions. Unless the Stock is readily tradeable on an established securities market, the transfer of any of the Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.


(b) Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

(c) Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act.

(d) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.


(e) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel, including (if applicable because the Company is relying on Regulation S under the Securities Act) that as of the date of exercise the Optionee is (i) not a U.S. Person; (ii) not acquiring the Shares on behalf, or for the account or benefit, of a U.S. Person; and (iii) is not exercising the option in the United States.

(f) Legends. Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement shall bear the following legend:

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK OPTION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK OPTION AGREEMENT. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK OPTION AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”


(g) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

(h) Administration. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all other persons.

SECTION 12. DRAG ALONG RIGHT.

(a) Required Actions. If the Requisite Parties approve a Sale of the Company, then Optionee hereby agrees with respect to all Shares which the Optionee own(s) or over which the Optionee otherwise exercises voting or dispositive authority:

(i) if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Stockholder shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

(ii) if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Optionee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

(iii) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

(iv) if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;


(v) if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Stockholder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the Stockholders;

(vi) to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Optionee than to other holders of Common Stock of the Company; and

(vii) to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

(b) Exceptions. Notwithstanding the foregoing, an Optionee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Optionee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Optionee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Optionee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Optionee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Optionee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

SECTION 13. ADJUSTMENT OF SHARES.

In the event of any transaction described in Section 9(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 9(a) of the Plan. In the event that the Company is a party to a merger or consolidation or in the event of a sale of all or substantially all of the Company’s stock or assets, this option shall be subject to the treatment provided by the Board of Directors in its sole discretion, as provided in Section 9(b) of the Plan.


SECTION 14. MISCELLANEOUS PROVISIONS.

(a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

(b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

(c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

(d) Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee); provided, however, that a modification that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise this option after termination of employment or providing for additional forms of payment) but causes this option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(e) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.


(f) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

(g) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(h) Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Optionee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the restrictions on transfer in Section 11 and the drag along right in Section 12. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (h).

SECTION 15. ACKNOWLEDGEMENTS OF THE OPTIONEE.

In addition to the other terms, conditions and restrictions imposed on this option and the Shares issuable under this option pursuant to this Agreement and the Plan, the Optionee expressly acknowledges being subject to Sections 7 (Right of Repurchase), 8 (Right of First Refusal), 9 (Legality of Initial Issuance), 11 (Restrictions on Transfer of Shares, including without limitation the Market Stand-Off) and 12 (Drag Along Right), as well as the following provisions:

(a) Tax Consequences. The Optionee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Optionee’s tax liabilities. The Optionee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this option or the Optionee’s other compensation. In particular, any Optionee subject to U.S. taxation acknowledges that this option is exempt from Section 409A of the Code only if the Exercise Price is at least equal to the Fair Market Value per Share on the Date of Grant. Since Shares are not traded on an established securities market, the determination of their Fair Market Value is made by the Board of Directors or by an independent valuation firm retained by the Company. The Optionee acknowledges that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and the Optionee shall not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low. In addition, if this option is designated as an ISO, the Optionee acknowledges that there is no guarantee that the option in fact qualifies for incentive stock option treatment or that it will continue to qualify for incentive stock option treatment at the time of exercise. In this regard, the Optionee acknowledges that the Company may take actions that will cause the option to cease to be eligible for incentive stock option treatment and that such actions do not require the Optionee’s consent.


(b) Electronic Delivery of Documents. The Optionee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this option and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Optionee acknowledges that he or she may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with his or her ability to access the documents.

(c) No Notice of Expiration Date. The Optionee agrees that the Company and its officers, employees, attorneys and agents do not have any obligation to notify him or her prior to the expiration of this option pursuant to Section 6, regardless of whether this option will expire at the end of its full term or on an earlier date related to the termination of the Optionee’s Service. The Optionee further agrees that he or she has the sole responsibility for monitoring the expiration of this option and for exercising this option, if at all, before it expires. This Subsection (c) shall supersede any contrary representation that may have been made, orally or in writing, by the Company or by an officer, employee, attorney or agent of the Company.

(d) Waiver of Statutory Information Rights. The Optionee acknowledges and agrees that, upon exercise of this option and until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, he or she shall waive, and shall be deemed to have waived, any rights the Optionee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”). The Optionee acknowledges and understands that, but for the waiver made herein, the Optionee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Optionee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Optionee hereunder without the benefit of such waiver from the Optionee. This waiver applies only in the Optionee’s capacity as a stockholder and does not affect any other inspection rights the Optionee may have pursuant to any written agreement with the Company.

(e) Plan Discretionary. The Optionee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Optionee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.


(f) Termination of Service. The Optionee understands and acknowledges that participation in the Plan ceases upon termination of his or her Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

(g) Extraordinary Compensation. The value of this option shall be an extraordinary item of compensation outside the scope of the Optionee’s employment contract, if any, and shall not be considered a part of his or her normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

(h) Authorization to Disclose. The Optionee hereby authorizes and directs the Optionee’s employer to disclose to the Company or any Subsidiary any information regarding the Optionee’s employment, the nature and amount of the Optionee’s compensation and the fact and conditions of the Optionee’s participation in the Plan, as the Optionee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

(i) Personal Data Authorization. The Optionee consents to the collection, use and transfer of personal data as described in this Subsection (i). The Optionee understands and acknowledges that the Company, the Optionee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Optionee for the purpose of managing and administering the Plan, including (without limitation) the Optionee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Optionee’s favor (the “Data”). The Optionee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Optionee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Optionee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Optionee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Optionee’s participation in the Plan, including a transfer to any broker or other third party with whom the Optionee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Optionee’s behalf. The Optionee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (i) by contacting the Company in writing.


SECTION 16. DEFINITIONS.

(a) “Agreement” shall mean this Stock Option Agreement.

(b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

(c) “Certificate” shall mean the Company’s amended and restated certificate of incorporation as in effect from time to time.

(d) “Company” shall mean Evommune, Inc., a Delaware corporation.

(e) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

(f) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

(g) “Plan” shall mean the Evommune, Inc. 2020 Stock Plan, as in effect on the Date of Grant.

(h) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

(i) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when the Optionee’s Service terminates for any reason, including (without limitation) death or disability.

(j) “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

(k) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

(l) “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 8.

(m) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

(n) “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.


(o) “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

(p) “Service” shall mean service as an Employee, Outside Director or Consultant.

(q) “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

(r) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 8.

(s) “U.S. Person” shall mean a person described in Rule 902(k) of Regulation S of the Securities Act (or any successor rule or provision), which generally defines a U.S. person as any natural person resident in the United States, any estate of which any executor or administrator is a U.S. Person, or any trust of which of any trustee is a U.S. Person.


EVOMMUNE, INC. 2020 STOCK PLAN

NOTICE OF STOCK OPTION EXERCISE (INSTALLMENT EXERCISE)

You must sign this Notice on Page 4 before submitting it to the Company.

OPTIONEE INFORMATION: 

 

Name:

  

Social Security Number:

Address:

  

Employee Number:

  

Email Address:             

OPTION INFORMATION:

 

Date of Grant:          , 20     Type of Stock Option:
Exercise Price per Share: $       ☐ Nonstatutory (NSO)
Total number of shares of Common Stock of Evommune, Inc.    ☐ Incentive (ISO)
(the “Company”) covered by the option:             

EXERCISE INFORMATION:

Number of shares of Common Stock of the Company for which the option is being exercised now:

      . (These shares are referred to below as the “Purchased Shares.”) Total Exercise Price for the Purchased Shares: $    

Form of payment enclosed [check all that apply]:

 

☐

Check for $    , payable to “Evommune, Inc.”

 

☐

Certificate(s)       for shares of Common Stock of the Company. These shares will be valued as of the date this notice is received by the Company. [Requires Company consent.]

 

☐

Attestation Form covering       shares of Common Stock of the Company. These shares will be valued as of the date this notice is received by the Company. [Requires Company consent.]

Name(s) in which the Purchased Shares should be registered [please review the attached explanation of the available forms of ownership, and then check one box]*:

 

☐  

In my name only

  
☐  

In the names of my spouse and myself as

  
 

community property

  

My spouse’s name (if applicable):


☐  

In the names of my spouse and myself as

  

 

 

community property with the right of survivorship

  
☐   In the names of my spouse and myself as joint tenants with the right of survivorship   
☐  

In the name of an eligible revocable trust

  

Full legal name of revocable trust:

 

[requires Stock Transfer Agreement]

  

 

    

 

    

 

 

*

While the Company will register the Purchased Shares in accordance with your instruction, this document does not control or change the nature of the Purchased Shares as community property or separate property. You are advised to consult your own advisor to determine if additional steps or documentation are required in this regard.

REPRESENTATIONS AND ACKNOWLEDGEMENTS OF THE OPTIONEE:

 

1.

I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares for investment for my account only, and not with a view to, or for resale in connection with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

2.

I understand that my purchase of the Purchased Shares has not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or I obtain an opinion of counsel (in form and substance satisfactory to the Company and its counsel) that registration is not required.

 

3.

I acknowledge that the Company is under no obligation to register the Purchased Shares or any sale or transfer thereof.

 

4.

I am aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction” and that the amount of securities being sold during any three-month period not exceed specified limitations. I understand that the conditions for resale set forth in Rule 144 have not been satisfied as of the date set forth below, and that the Company is not required to take action to satisfy any conditions applicable to it.

 

5.

I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act.

 

6.

I acknowledge that I have received and had access to such information as I consider necessary or appropriate for deciding whether to invest in the Purchased Shares and that I had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.

 

2


7.

I am aware that my investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. I am able, without impairing my financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of my investment in the Purchased Shares.

 

8.

I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal, the drag-along right and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement. I acknowledge that any transfer of the Purchased Shares may be subject to a transfer fee and must be effected on the Company’s form of stock transfer agreement, as further described in the Stock Option Agreement.

 

9.

I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the Notice of Stock Option Grant and Stock Option Agreement.

 

10.

I acknowledge that I have received a copy of the Company’s explanation of the forms of ownership available for my Purchased Shares. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me. In the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement on a form prescribed by the Company. In the event that I choose to transfer my Purchased Shares to a trust that does not satisfy the requirements described in the attached explanation (i.e., a trust that is not an eligible revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes. As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

 

11.

I acknowledge that I have received a copy of the Company’s explanation of the federal income tax consequences of an option exercise. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Purchased Shares at this time.

 

12.

I agree that the Company does not have a duty to design or administer the 2020 Stock Plan or its other compensation programs in a manner that minimizes my tax liabilities. I will not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from my options or my other compensation. In particular, I acknowledge that my options are exempt from section 409A of the Internal Revenue Code only if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Company’s Board of Directors. Since shares of the Company’s Common Stock are not traded on an established securities market, the determination of their fair market value was made by the Company’s Board of Directors or by an independent valuation firm retained by the Company. I acknowledge that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and I will not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

13.

I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

3


14.

I consent, with respect to all shares of capital stock of the Company held by me, to receive any notice given by the Company under its certificate of incorporation or bylaws, as the same may be amended and/or restated from time to time, the General Corporation Law of the State of Delaware (the “General Corporation Law”) or otherwise, by electronic transmission pursuant to Section 232 of the General Corporation Law at the email address set forth above. I further acknowledge and agree that the Company may rely upon any expressions of my consent to proposed corporate actions received from the email address provided above. I hereby agree to notify the Company of any change to my email address set forth above, and further agree that the provision of such notice shall constitute my consent to receive notice and to provide my expression of consent as provided herein at such address. In the event that the Company is unable to deliver notice to me at the e-mail address set forth above, I shall, within five (5) days after a request by the Company, provide the Company with a valid e-mail address to which I consent to receive notice and to provide expressions of consent as provided herein.

 

SIGNATURE:      DATE:   

 

        

 

  

 

4


EXPLANATION OF FORMS OF STOCK OWNERSHIP

PURPOSE OF THIS EXPLANATION

The purpose of this explanation is to provide you with a brief summary of the forms of legal ownership available for the shares that you are purchasing (the “Purchased Shares”). For a number of reasons, this explanation is no substitute for personal legal advice:

 

  •  

To make the explanation short and readable, only the highlights are covered. Some legal rules are not addressed, even though they may be important in particular cases.

 

  •  

While the summary attempts to deal with the most common situations, your own situation may well be different from the norm.

 

  •  

The law may change, and the Company is not responsible for updating this summary.

 

  •  

The form in which you own your shares may have a substantial impact on the estate tax treatment that applies to those shares when you die or the income tax treatment that applies when your survivors sell the shares after your death.

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN ADVISER BEFORE EXERCISING YOUR OPTION AND BEFORE MAKING A DECISION ABOUT THE FORM OF OWNERSHIP FOR YOUR SHARES.

OVERVIEW

The Notice of Stock Option Exercise offers five forms of taking title to the Purchased Shares:

 

  •  

In your name only,

 

  •  

In your name and the name of your spouse as community property,

 

  •  

In your name and the name of your spouse as community property with the right of survivorship,

 

  •  

In your name and the name of your spouse as joint tenants with the right of survivorship, or

 

  •  

In the name of an eligible revocable trust.

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws of your state of residence and (c) any agreement with your spouse altering the existing marital property laws of your state of residence. If you are not married, you generally will take title in your name alone. If you are married, title depends upon the marital property laws of your state of residence. In general, states are classified either as “community property” states or as “common-law property” states. (But individual state law may vary within these classifications.)

 

5


COMMUNITY PROPERTY AND JOINT TENANCY

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico, Idaho, Louisiana and Wisconsin. In a community property state, property acquired during marriage by either spouse is presumed to be one-half owned by each spouse. All other property is classified as the separate property of the spouse who acquires the property. While either spouse has equal management and control over the community property and may sell, spend or encumber all community property, neither spouse may gift community property or partition his/her one-half interest without the consent of the other spouse. Upon divorce, all community property is divided equally among the spouses and each spouse is entitled to retain all of his/her separate property. Upon the death of a spouse, one-half of the community property (and all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs. The other one-half of the community property remains the property of the surviving spouse.

Other states are common-law property states. In a common-law property state, each spouse is generally deemed to own whatever he/she earns or acquires.

A married couple may elect to alter the marital property rules by mutually agreeing to take title to property in other forms. For example, a couple residing in a community property state may generally enter into an agreement and transform what otherwise would be community property into the separate property of the spouse who earns or acquires the property.

In addition, many community property and common-law property states allow married couples to take joint title in property acquired during marriage. For example, California allows a married couple to take title in a joint tenancy with the right of survivorship. In a joint tenancy, each spouse owns a one-half interest in the property as separate property. This means that each spouse may transfer or sell his/her one-half interest in the property while he/she is alive. However, unlike traditional separate property, a spouse cannot transfer his/her one-half interest to heirs at death. Instead, the surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the property. (This is called the “right of survivorship.”) Both spouses must consent to taking property in a joint tenancy in lieu of having the community property laws apply.

California also allows a married couple to take title in the shares as community property with the right of survivorship. This means that the shares are treated like community property while both spouses are alive. However, if one spouse dies, then the other spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the shares. In other words, the decedent spouse’s will or trust does not control the disposition of the shares.

If you have the Purchased Shares issued in a form other than those described above, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

6


TRUSTS

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares for tax purposes if the trust satisfies each of the following conditions:

 

  •  

You are the sole grantor of the trust,

 

  •  

You are the sole trustee, or you and your spouse are the sole co-trustees,

 

  •  

The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your spouse while you are alive, and

 

  •  

The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the consent of any other person (including your spouse).

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer Agreement in your capacity as trustee. Under the Stock Transfer Agreement, the Purchased Shares remain subject to the Company’s right of first refusal in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

THE COMPANY WILL NOT CHECK TO DETERMINE WHETHER THE FORM OF OWNERSHIP THAT YOU ELECT IN YOUR NOTICE OF STOCK OPTION EXERCISE IS APPROPRIATE. YOU SHOULD CONSULT YOUR OWN ADVISERS ON THIS SUBJECT. IF AN INAPPROPRIATE ELECTION IS MADE, THE FORM OF OWNERSHIP MAY NOT WITHSTAND LEGAL SCRUTINY OR MAY HAVE ADVERSE TAX CONSEQUENCES.

 

7


EXPLANATION OF U.S. FEDERAL INCOME TAX CONSEQUENCES

(Current as of January 2020)

PURPOSE OF THIS EXPLANATION

The purpose of this explanation is to provide you with a brief summary of the tax consequences of exercising your option. For a number of reasons, this explanation is no substitute for personal tax advice:

 

  •  

To make the explanation short and readable, only the highlights are covered. Some tax rules are not addressed, even though they may be important in particular cases.

 

  •  

While the summary attempts to deal with the most common situations, your own tax situation may well be different from the norm.

 

  •  

State and foreign income taxes are not addressed at all, even though they could have a significant impact on your tax planning. Likewise, federal gift and estate taxes and state inheritance taxes are not discussed.

 

  •  

Tax planning involving incentive stock options is exceedingly complex, in part because of the possible application of the alternative minimum tax.

 

  •  

This explanation assumes that your option is not subject to section 409A of the Internal Revenue Code. However, the Company cannot be certain that section 409A is inapplicable to your option. (Please refer to the last segment of this summary for more information about section 409A.)

 

  •  

The tax rules change often, and the Company is not responsible for updating this summary. (Please refer to the date at the top of this page.)

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN TAX ADVISER BEFORE EXERCISING YOUR OPTION.

EXERCISE OF NSO

If you are exercising an NSO, you generally will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on the exercise date.

 

8


DISPOSITION OF NSO SHARES

When you dispose of the Purchased Shares, you will recognize a capital gain equal to the excess of (a) the sale proceeds over (b) your tax basis in the Purchased Shares. If the sale proceeds are less than your tax basis, you will recognize a capital loss. The capital gain or loss will be long-term if you held the Purchased Shares for more than 12 months. The holding period starts when you exercise your NSO. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

Depending on the level of your adjusted gross income, the additional Medicare contribution tax may be imposed on any short-term and long-term capital gain income and can increase your marginal tax rate.

LIMIT ON ISO TREATMENT

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO) or an incentive stock option (ISO). The favorable tax treatment for ISOs is limited, regardless of what the Notice of Stock Option Grant indicates. Of the options that become exercisable in any calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment. The excess over $100,000 automatically receives NSO treatment. For this purpose, stock is valued at the time of grant. This means that the value is generally equal to the exercise price.

For example, assume that you hold an option to buy 60,000 shares for $8 per share. Assume further that the entire option becomes exercisable in four equal annual installments. Only the first 50,000 shares qualify for ISO treatment. (12,500 times $8 equals $100,000.) The remaining 10,000 shares will be treated as if they had been acquired by exercising an NSO. This is true regardless of when the option is actually exercised; what matters is when it first could have been exercised.

 

9


EXERCISE OF ISO AND ISO HOLDING PERIODS

If you are exercising an ISO, you will not be taxed under the regular tax rules until you dispose of the Purchased Shares.1 (The alternative minimum tax rules are described below.) The tax treatment at the time of disposition depends on how long you hold the shares. You will satisfy the ISO holding periods if you hold the Purchased Shares until the later of the following dates:

 

  •  

More than two years after the ISO was granted, and

 

  •  

More than one year after the ISO is exercised.

DISPOSITION OF ISO SHARES

If you dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you will recognize only a long-term capital gain at the time of disposition. The amount of the capital gain is equal to the excess of (a) the sale proceeds over (b) the exercise price. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met, then you will recognize ordinary income at the time of disposition. The amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes.

Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of exercise.

SUMMARY OF ALTERNATIVE MINIMUM TAX

The alternative minimum tax (AMT) must be paid to the extent that it exceeds your regular federal income tax for the year. For 2020, the first $197,900 ($98,950 for a married taxpayer filing a separate return) of your alternative minimum taxable income for the year over the allowable exemption amount (see below) is subject to alternative minimum taxation at the rate of 26%. The balance of your alternative minimum taxable income is subject to alternative minimum taxation at the rate of 28%. The dollar thresholds dividing the 26% and 28% rates are indexed for inflation in future years. Your alternative minimum tax base is equal to your alternative minimum taxable income (AMTI) minus your exemption amount.

 
1 

Generally, a “disposition” of shares purchased under an ISO encompasses any transfer of legal title, such as a transfer by sale, exchange or gift. It generally does not include a transfer to your spouse, a transfer into joint ownership with right of survivorship (if you remain one of the joint owners), a pledge, a transfer by bequest or inheritance, or certain tax-free exchanges permitted under the Internal Revenue Code. A transfer to a trust is a “disposition” unless the trust is an eligible revocable trust, as described in the attached explanation.

 

10


  •  

Alternative Minimum Taxable Income. Your AMTI is equal to your regular taxable income, subject to certain adjustments and increased by items of tax preference. Among the many adjustments made in computing AMTI are the following:

 

  •  

State and local income and property taxes are not allowed as a deduction.

 

  •  

Certain interest and other deductions are not allowed.

 

  •  

When an ISO is exercised, the spread is added to income for AMT purposes. (See discussion below.)

 

  •  

Exemption Amount. Before AMT is calculated, AMTI is reduced by the exemption amount. Under current law, the exemption amount is as follows:

 

Year:

   Joint Returns:      Single Returns:      Separate Returns:  

20202

   $ 113,400      $ 72,900      $ 56,700  

The allowable exemption amount is reduced by $0.25 for each $1.00 by which alternative minimum taxable income for the year exceeds the following amounts:

 

Year:

   Joint Returns:      Single Returns:      Separate Returns:  

20203

   $ 1,036,800      $ 518,400      $ 518,400  

This means, for example, in 2020, the $113,400 exemption amount is phased out completely for married individuals filing joint returns when their alternative minimum taxable income reaches $1,490,400 [($113,400 ÷ $0.25) + $1,036,800].

APPLICATION OF AMT WHEN ISO IS EXERCISED

As noted above, when an ISO is exercised, the spread is included in AMTI at the time of exercise.

A special rule applies if you dispose of the Purchased Shares in the same year in which you exercised the ISO. If the amount you realize on the sale is less than the value of the stock at the time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to the gain realized on the sale.4

 
2 

Amounts are indexed for inflation in future years.

3 

Amounts are indexed for inflation in future years.

4 

This is similar to the rule that applies under the regular tax system in the event of a disqualifying disposition of ISO stock. The amount of ordinary income that must be recognized in that case generally does not exceed the amount of the gain realized in the disposition.

 

11


To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other items), you may be able to apply the AMT that you paid as a credit against your income tax liability in future years. But the rules on calculating the available tax credits were amended frequently in recent years and have become extraordinarily complex. On this issue in particular, you must consult your own tax adviser.

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under the AMT system is increased by the option spread that exists at the time of exercise. Again, an ISO is treated under the AMT system much like an NSO is treated under the regular tax system. But your basis in the ISO shares for purposes of computing gain or loss under the regular tax system does not reflect any AMT that you pay on the spread at exercise. Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that you can use the AMT credit described above).

SECTION 409A OF THE INTERNAL REVENUE CODE

The preceding summary assumes that section 409A of the Internal Revenue Code does not apply to your option. In general, your option is exempt from section 409A if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Board of Directors. Since shares of Common Stock are not traded on an established securities market, the determination of their fair market value generally is made by the Board of Directors or by an independent appraisal firm retained by the Company. In either case, there is no guarantee that the Internal Revenue Service will agree with the valuation.

If your option were found to be subject to section 409A, then you would be required to recognize ordinary income as early as the year in which the option (or portion thereof) vests. This amount would also be subject to a 20% federal tax in addition to the federal income tax at your usual marginal rate for ordinary income. Additional state income taxes may apply in some states.

DISCLAIMER UNDER IRS CIRCULAR 230

To ensure compliance with requirements imposed by U.S. tax authorities, we inform you that any U.S. tax advice contained in the foregoing summary is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding United States federal, state or local tax penalties, or (ii) promoting, marketing or recommending to another party any matters addressed herein (including any attachments).

 

12


EVOMMUNE, INC. 2020 STOCK PLAN

NOTICE OF STOCK OPTION EXERCISE (EARLY EXERCISE)

You must sign this Notice on Page 4 before submitting it to the Company.

OPTIONEE INFORMATION:

 

Name:    Social Security Number:
Address:    Employee Number:
   Email Address:              

OPTION INFORMATION:

 

Date of Grant:          , 20     Type of Stock Option:
Exercise Price per Share: $          ☐ Nonstatutory (NSO)
Total number of shares of Common Stock of Evommune, Inc. (the “Company”) covered by the option:           ☐ Incentive (ISO)

EXERCISE INFORMATION:

Number of shares of Common Stock of the Company for which the option is being exercised now:

    . (These shares are referred to below as the “Purchased Shares.”)

Total Exercise Price for the Purchased Shares: $    

Form of payment enclosed [check all that apply]:

 

☐

Check for $    , payable to “Evommune, Inc.”

 

☐

Certificate(s) for       shares of Common Stock of the Company. These shares will be valued as of the date this notice is received by the Company. [Requires Company consent.]

 

☐

Attestation Form covering         shares of Common Stock of the Company. These shares will be valued as of the date this notice is received by the Company. [Requires Company consent.]

Name(s) in which the Purchased Shares should be registered [please review the attached explanation of the available forms of ownership, and then check one box]*:

 

☐  

In my name only

  
☐  

In the names of my spouse and myself as

  
 

community property

  

My spouse’s name (if applicable):


☐   In the names of my spouse and myself as community property with the right of survivorship   

 

☐   In the names of my spouse and myself as joint tenants with the right of survivorship   
☐   In the name of an eligible revocable trust    Full legal name of revocable trust:
  [requires Stock Transfer Agreement]   

 

    

 

    

 

 

*

While the Company will register the Purchased Shares in accordance with your instruction, this document does not control or change the nature of the Purchased Shares as community property or separate property. You are advised to consult your own advisor to determine if additional steps or documentation are required in this regard.

REPRESENTATIONS AND ACKNOWLEDGEMENTS OF THE OPTIONEE:

 

1.

I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares for investment for my account only, and not with a view to, or for resale in connection with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

2.

I understand that my purchase of the Purchased Shares has not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or I obtain an opinion of counsel (in form and substance satisfactory to the Company and its counsel) that registration is not required.

 

3.

I acknowledge that the Company is under no obligation to register the Purchased Shares or any sale or transfer thereof.

 

4.

I am aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction” and that the amount of securities being sold during any three-month period not exceed specified limitations. I understand that the conditions for resale set forth in Rule 144 have not been satisfied as of the date set forth below and that the Company is not required to take action to satisfy any conditions applicable to it.

 

5.

I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act.

 

6.

I acknowledge that I have received and had access to such information as I consider necessary or appropriate for deciding whether to invest in the Purchased Shares and that I had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.

 

2


7.

I am aware that my investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. I am able, without impairing my financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of my investment in the Purchased Shares.

 

8.

I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal, the drag-along right and the market stand-off (sometimes referred to as the “lock-up”) and may remain subject to the Company’s right of repurchase, all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement. I acknowledge that any transfer of the Purchased Shares may be subject to a transfer fee and must be effected on the Company’s form of stock transfer agreement, as further described in the Stock Option Agreement.

 

9.

I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the Notice of Stock Option Grant and Stock Option Agreement.

 

10.

I acknowledge that I have received a copy of the Company’s explanation of the forms of ownership available for my Purchased Shares. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me. In the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement on a form prescribed by the Company. In the event that I choose to transfer my Purchased Shares to a trust that does not satisfy the requirements described in the attached explanation (i.e., a trust that is not an eligible revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes. As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

 

11.

I acknowledge that I have received a copy of the Company’s explanation of the federal income tax consequences of an option exercise and the tax election under section 83(b) of the Internal Revenue Code. In the event that I choose to make a section 83(b) election, I acknowledge that it is my responsibility—and not the Company’s responsibility—to file the election in a timely manner, even if I ask the Company or its agents to make the filing on my behalf. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Purchased Shares at this time.

 

12.

I agree that the Company does not have a duty to design or administer the 2020 Stock Plan or its other compensation programs in a manner that minimizes my tax liabilities. I will not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from my options or my other compensation. In particular, I acknowledge that my options are exempt from section 409A of the Internal Revenue Code only if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Company’s Board of Directors. Since shares of the Company’s Common Stock are not traded on an established securities market, the determination of their fair market value was made by the Company’s Board of Directors or by an independent valuation firm retained by the Company. I acknowledge that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and I will not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

3


13.

I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

14.

I consent, with respect to all shares of capital stock of the Company held by me, to receive any notice given by the Company under its certificate of incorporation or bylaws, as the same may be amended and/or restated from time to time, the General Corporation Law of the State of Delaware (the “General Corporation Law”) or otherwise, by electronic transmission pursuant to Section 232 of the General Corporation Law at the email address set forth above. I further acknowledge and agree that the Company may rely upon any expressions of my consent to proposed corporate actions received from the email address provided above. I hereby agree to notify the Company of any change to my email address set forth above, and further agree that the provision of such notice shall constitute my consent to receive notice and to provide my expression of consent as provided herein at such address. In the event that the Company is unable to deliver notice to me at the e-mail address set forth above, I shall, within five (5) days after a request by the Company, provide the Company with a valid e-mail address to which I consent to receive notice and to provide expressions of consent as provided herein.

 

SIGNATURE:      DATE:   

 

        

 

  

 

4


EXPLANATION OF FORMS OF STOCK OWNERSHIP

PURPOSE OF THIS EXPLANATION

The purpose of this explanation is to provide you with a brief summary of the forms of legal ownership available for the shares that you are purchasing (the “Purchased Shares”). For a number of reasons, this explanation is no substitute for personal legal advice:

 

  •  

To make the explanation short and readable, only the highlights are covered. Some legal rules are not addressed, even though they may be important in particular cases.

 

  •  

While the summary attempts to deal with the most common situations, your own situation may well be different from the norm.

 

  •  

The law may change, and the Company is not responsible for updating this summary.

 

  •  

The form in which you own your shares may have a substantial impact on the estate tax treatment that applies to those shares when you die or the income tax treatment that applies when your survivors sell the shares after your death.

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN ADVISER BEFORE EXERCISING YOUR OPTION AND BEFORE MAKING A DECISION ABOUT THE FORM OF OWNERSHIP FOR YOUR SHARES.

OVERVIEW

The Notice of Stock Option Exercise offers five forms of taking title to the Purchased Shares:

 

  •  

In your name only,

 

  •  

In your name and the name of your spouse as community property,

 

  •  

In your name and the name of your spouse as community property with the right of survivorship,

 

  •  

In your name and the name of your spouse as joint tenants with the right of survivorship, or

 

  •  

In the name of an eligible revocable trust.

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws of your state of residence and (c) any agreement with your spouse altering the existing marital property laws of your state of residence. If you are not married, you generally will take title in your name alone. If you are married, title depends upon the marital property laws of your state of residence. In general, states are classified either as “community property” states or as “common-law property” states. (But individual state law may vary within these classifications.)

 

5


COMMUNITY PROPERTY AND JOINT TENANCY

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico, Idaho, Louisiana and Wisconsin. In a community property state, property acquired during marriage by either spouse is presumed to be one-half owned by each spouse. All other property is classified as the separate property of the spouse who acquires the property. While either spouse has equal management and control over the community property and may sell, spend or encumber all community property, neither spouse may gift community property or partition his/her one-half interest without the consent of the other spouse. Upon divorce, all community property is divided equally among the spouses and each spouse is entitled to retain all of his/her separate property. Upon the death of a spouse, one-half of the community property (and all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs. The other one-half of the community property remains the property of the surviving spouse.

Other states are common-law property states. In a common-law property state, each spouse is generally deemed to own whatever he/she earns or acquires.

A married couple may elect to alter the marital property rules by mutually agreeing to take title to property in other forms. For example, a couple residing in a community property state may generally enter into an agreement and transform what otherwise would be community property into the separate property of the spouse who earns or acquires the property.

In addition, many community property and common-law property states allow married couples to take joint title in property acquired during marriage. For example, California allows a married couple to take title in a joint tenancy with the right of survivorship. In a joint tenancy, each spouse owns a one-half interest in the property as separate property. This means that each spouse may transfer or sell his/her one-half interest in the property while he/she is alive. However, unlike traditional separate property, a spouse cannot transfer his/her one-half interest to heirs at death. Instead, the surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the property. (This is called the “right of survivorship.”) Both spouses must consent to taking property in a joint tenancy in lieu of having the community property laws apply.

California also allows a married couple to take title in the shares as community property with the right of survivorship. This means that the shares are treated like community property while both spouses are alive. However, if one spouse dies, then the other spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the shares. In other words, the decedent spouse’s will or trust does not control the disposition of the shares.

If you have the Purchased Shares issued in a form other than those described above, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

6


TRUSTS

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares for tax purposes if the trust satisfies each of the following conditions:

 

  •  

You are the sole grantor of the trust,

 

  •  

You are the sole trustee, or you and your spouse are the sole co-trustees,

 

  •  

The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your spouse while you are alive, and

 

  •  

The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the consent of any other person (including your spouse).

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer Agreement in your capacity as trustee. Under the Stock Transfer Agreement, the Purchased Shares remain subject to the Company’s right of first refusal and may remain subject to the Company’s right of repurchase, all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

THE COMPANY WILL NOT CHECK TO DETERMINE WHETHER THE FORM OF OWNERSHIP THAT YOU ELECT IN YOUR NOTICE OF STOCK OPTION EXERCISE IS APPROPRIATE. YOU SHOULD CONSULT YOUR OWN ADVISERS ON THIS SUBJECT. IF AN INAPPROPRIATE ELECTION IS MADE, THE FORM OF OWNERSHIP MAY NOT WITHSTAND LEGAL SCRUTINY OR MAY HAVE ADVERSE TAX CONSEQUENCES.

 

7


EXPLANATION OF FEDERAL INCOME TAX CONSEQUENCES

AND SECTION 83(b) ELECTION

(Current as of January 2020)

PURPOSE OF THIS EXPLANATION

The purpose of this explanation is to provide you with a brief summary of the tax consequences of exercising your option. For a number of reasons, this explanation is no substitute for personal tax advice:

 

  •  

To make the explanation short and readable, only the highlights are covered. Some tax rules are not addressed, even though they may be important in particular cases.

 

  •  

While the summary attempts to deal with the most common situations, your own tax situation may well be different from the norm.

 

  •  

State and foreign income taxes are not addressed at all, even though they could have a significant impact on your tax planning. Likewise, federal gift and estate taxes and state inheritance taxes are not discussed.

 

  •  

Tax planning involving incentive stock options is exceedingly complex, in part because of the possible application of the alternative minimum tax.

 

  •  

The explanation assumes that you are paying the exercise price of your option in cash (or in the form of a full-recourse promissory note with an interest rate that meets IRS requirements). If you are paying the exercise price in the form of stock, you become subject to special rules that are not addressed here.

 

  •  

This explanation assumes that your option is not subject to section 409A of the Internal Revenue Code. However, the Company cannot be certain that section 409A is inapplicable to your option. (Please refer to the last segment of this summary for more information about section 409A.)

 

  •  

The tax rules change often, and the Company is not responsible for updating this summary. (Please refer to the date at the top of this page.)

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN TAX ADVISER BEFORE EXERCISING YOUR OPTION AND BEFORE MAKING A DECISION ABOUT FILING OR NOT FILING A SECTION 83(b) ELECTION.

EXERCISE OF NSO TO PURCHASE VESTED SHARES

The Notice of Stock Option Grant indicates whether your Purchased Shares are already vested. Vested shares are no longer subject to the Company’s right to repurchase them, although they are still subject to the Company’s right of first refusal. If you know that your Purchased Shares are already vested, there is no need to file a section 83(b) election.

 

8


If you are exercising an NSO to purchase vested shares, you generally will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on the exercise date.

EXERCISE OF NSO TO PURCHASE NON-VESTED SHARES

If you are exercising an NSO to purchase non-vested shares, and if you do not file a timely election under section 83(b) of the Internal Revenue Code, then you will not be taxed at the time of exercise. Instead, you will be taxed whenever an increment of Purchased Shares vests—in other words, when the Company no longer has the right to repurchase those shares. The Notice of Stock Option Grant indicates when this occurs, generally over a period of several years. Whenever an increment of Purchased Shares vests, you will recognize ordinary income in an amount equal to the excess of (a) the fair market value of those Purchased Shares on the date of vesting over (b) the exercise price you are paying for those Purchased Shares. If you are an employee or former employee of the Company, this amount will be subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on each vesting date.

If you are exercising an NSO to purchase non-vested shares, and if you file a timely election under section 83(b) of the Internal Revenue Code, then you will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income as a result of filing the section 83(b) election. Even if the fair market value of the Purchased Shares on the date of exercise equals the exercise price (and thus no tax is payable), the section 83(b) election must be made in order to avoid having any subsequent appreciation taxed as ordinary income at the time of vesting.

YOU MUST FILE A SECTION 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS AFTER THE NOTICE OF STOCK OPTION EXERCISE IS SIGNED. The 30-day filing period cannot be extended. If you miss the deadline, you will be taxed as the Purchased Shares vest, based on the value of the shares at that time. (See above.) The form for making the 83(b) election is attached. Additional copies of the form must be filed with the Company.

 

9


DISPOSITION OF NSO SHARES

When you dispose of the Purchased Shares, you will recognize a capital gain equal to the excess of (a) the sale proceeds over (b) your tax basis in the Purchased Shares. If the sale proceeds are less than your tax basis, you will recognize a capital loss. The capital gain or loss will be long-term if you held the Purchased Shares for more than 12 months. The holding period normally starts when you exercise your NSO. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

Depending on the level of your adjusted gross income, the additional Medicare contribution tax may be imposed on any short-term and long-term capital gain income and can increase your marginal tax rate.

LIMIT ON ISO TREATMENT

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO) or an incentive stock option (ISO). The favorable tax treatment for ISOs is limited, regardless of what the Notice of Stock Option Grant indicates. Of the options that become exercisable in any calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment. The excess over $100,000 automatically receives NSO treatment. For this purpose, stock is valued at the time of grant. This means that the value is generally equal to the exercise price.

For example, assume that you hold an option to buy 50,000 shares for $4 per share. Assume further that the entire option is exercisable immediately after the date of grant. (It is irrelevant when the underlying stock vests.) Only the first 25,000 shares qualify for ISO treatment. (25,000 times $4 equals $100,000.) The remaining 25,000 shares will be treated as if they had been acquired by exercising an NSO. This is true regardless of when the option is actually exercised; what matters is when it first could have been exercised.

 

10


EXERCISE OF ISO AND ISO HOLDING PERIODS

If you are exercising an ISO, you will not be taxed under the regular tax rules until you dispose of the Purchased Shares.1 (The alternative minimum tax rules are described below.) The tax treatment at the time of disposition depends on how long you hold the shares. You will satisfy the ISO holding periods if you hold the Purchased Shares until the later of the following dates:

 

  •  

More than two years after the ISO was granted, and

 

  •  

More than one year after the ISO is exercised.

DISPOSITION OF ISO SHARES

If you dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you will recognize only a long-term capital gain at the time of disposition. The amount of the capital gain is equal to the excess of (a) the sale proceeds over (b) the exercise price. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met, then you will recognize ordinary income at the time of disposition. The calculation of the ordinary income amount depends on whether the shares are vested at the time of exercise.

 

  •  

Shares Vested. If the shares are vested at the time of exercise, the amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes. Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of exercise.

 

  •  

Shares Not Vested. If the Purchased Shares are not vested at the time of exercise, then the amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of vesting over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes. Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any

 
1 

Generally, a “disposition” of shares purchased under an ISO encompasses any transfer of legal title, such as a transfer by sale, exchange or gift. It generally does not include a transfer to your spouse, a transfer into joint ownership with right of survivorship (if you remain one of the joint owners), a pledge, a transfer by bequest or inheritance, or certain tax-free exchanges permitted under the Internal Revenue Code. A transfer to a trust is a “disposition” unless the trust is an eligible revocable trust, as described in the attached explanation.

 

11


 

additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of vesting. Please note that it makes no difference under the regular tax rules whether or not you filed a section 83(b) election at the time you exercised your ISO. In either case, your regular taxable income is measured as of the time of vesting rather than the time of exercise.

SUMMARY OF ALTERNATIVE MINIMUM TAX

The alternative minimum tax (AMT) must be paid to the extent that it exceeds your regular federal income tax for the year. For 2020, the first $197,900 ($98,950 for a married taxpayer filing a separate return) of your alternative minimum taxable income for the year over the allowable exemption amount (see below) is subject to alternative minimum taxation at the rate of 26%. The balance of your alternative minimum taxable income is subject to alternative minimum taxation at the rate of 28%. The dollar thresholds dividing the 26% and 28% rates are indexed for inflation in future years. Your alternative minimum tax base is equal to your alternative minimum taxable income (AMTI) minus your exemption amount.

 

  •  

Alternative Minimum Taxable Income. Your AMTI is equal to your regular taxable income, subject to certain adjustments and increased by items of tax preference. Among the many adjustments made in computing AMTI are the following:

 

  •  

State and local income and property taxes are not allowed as a deduction.

 

  •  

Certain interest and other deductions are not allowed.

 

  •  

When an ISO is exercised, the spread is added to income for AMT purposes. (See discussion below.)

 

  •  

Exemption Amount. Before AMT is calculated, AMTI is reduced by the exemption amount. Under current law, the exemption amount is as follows:

 

Year:

   Joint Returns:      Single Returns:      Separate Returns:  

20202

   $ 113,400      $ 72,900      $ 56,700  

The allowable exemption amount is reduced by $0.25 for each $1.00 by which alternative minimum taxable income for the year exceeds the following amounts:

 

Year:

   Joint Returns:      Single Returns:      Separate Returns:  

20203

   $ 1,036,800      $ 518,400      $ 518,400  
 
2 

Amounts are indexed for inflation in future years.

3 

Amounts are indexed for inflation in future years.

 

12


This means, for example, in 2020, the $113,400 exemption amount is phased out completely for married individuals filing joint returns when their alternative minimum taxable income reaches $1,490,400 [($113,400 ÷ $0.25) + $1,036,800].

APPLICATION OF AMT WHEN ISO IS EXERCISED

As noted above, when an ISO is exercised, the spread is included in AMTI at the time of exercise, unless the Purchased Shares are not yet vested at the time of exercise. If the Purchased Shares are not yet vested, the value of the shares minus the exercise price is included in AMTI when the shares vest. However, if you make an election under section 83(b) within 30 days after exercise, then the spread is included in AMTI at the time of exercise. YOU MUST FILE AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS AFTER THE NOTICEOF STOCK OPTION EXERCISE IS SIGNED. The 30-day filing period cannot be extended.

A special rule applies if you dispose of the Purchased Shares in the same year in which you exercised the ISO. If the amount you realize on the sale is less than the value of the stock at the time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to the gain realized on the sale.4

To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other items), you may be able to apply the AMT that you paid as a credit against your income tax liability in future years. But the rules on calculating the available tax credits were amended frequently in recent years and have become extraordinarily complex. On this issue in particular, you must consult your own tax adviser.

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under the AMT system is increased by the option spread that exists at the time of exercise. Again, an ISO is treated under the AMT system much like an NSO is treated under the regular tax system. But your basis in the ISO shares for purposes of computing gain or loss under the regular tax system does not reflect any AMT that you pay on the spread at exercise. Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that you can use the AMT credit described above).

SECTION 409A OF THE INTERNAL REVENUE CODE

The preceding summary assumes that section 409A of the Internal Revenue Code does not apply to your option. In general, your option is exempt from section 409A if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Board of Directors. Since shares of Common Stock are not traded on an established securities market, the determination of their fair market value generally is made by the Board of Directors or by an independent appraisal firm retained by the Company.

 

 
4 

This is similar to the rule that applies under the regular tax system in the event of a disqualifying disposition of ISO stock. The amount of ordinary income that must be recognized in that case generally does not exceed the amount of the gain realized in the disposition.

 

13


In either case, there is no guarantee that the Internal Revenue Service will agree with the valuation.

If your option were found to be subject to section 409A, then you would be required to recognize ordinary income as early as the year in which the option (or portion thereof) vests. This amount would also be subject to a 20% federal tax in addition to the federal income tax at your usual marginal rate for ordinary income. Additional state income taxes may apply in some states.

DISCLAIMER UNDER IRS CIRCULAR 230

To ensure compliance with requirements imposed by U.S. tax authorities, we inform you that any U.S. tax advice contained in the foregoing summary is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding United States federal, state or local tax penalties, or (ii) promoting, marketing or recommending to another party any matters addressed herein (including any attachments).

 

14


SECTION 83(b) ELECTION

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, and pursuant to Treasury Regulations Section 1.83-2, to include in gross income as compensation for services the excess (if any) of the fair market value of the shares described below over an amount paid for those shares.

 

  A.

The taxpayer who performed the services is:

Name:

Address:

Social Security No.:

 

  B.

The property with respect to which the election is made is      shares of the common stock of Evommune, Inc.

 

  C.

The property was transferred to the taxpayer on        ,    .

 

  D.

The taxable year for which the election is made is the calendar year    .

 

  E.

The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property if for any reason taxpayer’s service with the issuer terminates. The issuer’s repurchase right lapses in a series of installments over a      -year period ending on       ,    .

 

  F.

The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction that by its terms will never lapse) is $  per share x    shares = $  .

 

  G.

For the property transferred, the taxpayer paid $    per share ×     shares = $   .

 

  H.

The amount to include in gross income is $    . [The amount in Item F less the amount in Item G]

 

  I.

This statement is executed on     ,    .

 

Signature of Spouse (if any)

   Signature of Taxpayer   

Within 30 days after the date of transfer of the property, this election must be filed with the Internal Revenue Service office where the taxpayer files his or her annual federal income tax return. The filing should be made by registered or certified mail, return receipt requested. The taxpayer must deliver a copy of the completed form to the Company.


EVOMMUNE, INC. 2020 STOCK PLAN:

SUMMARY OF STOCK GRANT (FOR SERVICES)

The Transferee is acquiring shares of the Common Stock of Evommune, Inc. (the “Company”) on the following terms:

 

Name of Transferee:

   «Name»

Total Number of Transferred Shares:

   «TotalShares»

Date of Transfer:

   «DateTransfer»

Vesting Commencement Date:

   «VestComDate»

Vesting Schedule:

   «Percent»% of the Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to such shares, when the Transferee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth above. An additional «Fraction»% of the Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to such shares, when the Transferee completes each month of continuous Service thereafter.

By signing below or otherwise accepting this award in a manner acceptable to the Company, the Transferee and the Company agree that the acquisition of the Transferred Shares is governed by the terms and conditions of this Summary of Stock Grant, the 2020 Stock Plan and the Stock Grant Agreement. Both of these latter documents are attached to, and made a part of, this Summary of Stock Grant. Capitalized terms not otherwise defined herein or in the Stock Grant Agreement shall have the meanings set forth in the Plan.

By signing below, the Transferee consents, with respect to all shares of capital stock of the Company held by the Transferee, to receive any notice given by the Company under its certificate of incorporation or bylaws, as the same may be amended and/or restated from time to time, the General Corporation Law of the State of Delaware (the “General Corporation Law”) or otherwise, by electronic transmission pursuant to Section 232 of the General Corporation Law at the email address set forth below. The Transferee further acknowledges and agrees that the Company may rely upon any expressions of the Transferee’s consent to proposed corporate actions received from the email address provided below. The Transferee hereby agrees to notify the Company of any change to his or her email address set forth below, and further agrees that the provision of such notice shall constitute the Transferee’s consent to receive notice and to provide the Transferee’s expression of consent as provided herein at such address. In the event that the Company is unable to deliver notice to the Transferee at the e-mail address set forth below, the Transferee shall, within five (5) days after a request by the Company, provide the Company with a valid e-mail address to which the Transferee consents to receive notice and to provide expressions of consent as provided herein.

 

TRANSFEREE:     EVOMMUNE, INC.
      By:  
  Email Address:     Title:
  Mailing Address:    


EVOMMUNE, INC. 2020 STOCK PLAN:

STOCK GRANT AGREEMENT (FOR SERVICES)

 

SECTION

1. ACQUISITION OF SHARES.

(a) Transfer. On the terms and conditions set forth in the Summary of Stock Grant, this Agreement and the Plan, the Company agrees to transfer to the Transferee the number of Shares set forth in the Summary of Stock Grant. The transfer shall occur at the offices of the Company on the date of transfer set forth in the Summary of Stock Grant or at such other place and time as the parties may agree.

(b) Consideration. The Transferee and the Company agree that the Transferred Shares are being issued to the Transferee as consideration for a portion of the services performed by the Transferee for the Company. The value of such portion is agreed to be not less than 100% of the Fair Market Value of the Transferred Shares.

(c) Stock Plan and Defined Terms. The transfer of the Transferred Shares is subject to the Plan, a copy of which the Transferee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 12 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

SECTION 2. FORFEITURE CONDITION.

(a) Scope of Forfeiture Condition. Until they vest in accordance with Subsection (b) below, the Transferred Shares shall be subject to forfeiture to the Company and shall be referred to as “Restricted Shares.” The Transferee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. The Transferee may transfer Restricted Shares to one or more members of the Transferee’s Immediate Family or to a trust or other entity established by the Transferee solely for the benefit of the Transferee and/or one or more members of the Transferee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Transferee transfers any Restricted Shares, then this Agreement shall apply to the Subsequent Transferee to the same extent as to the Transferee.

(b) Vesting. The Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to the Transferred Shares, in accordance with the vesting schedule set forth in the Summary of Stock Grant.

(c) Execution of Forfeiture. The Forfeiture Condition shall be applicable only if the Transferee’s Service terminates for any reason, with or without cause, including (without limitation) death or disability, before all Transferred Shares have become vested. In the event that the Transferee’s Service terminates for any reason, any certificate(s) representing any remaining Restricted Shares shall be delivered to the Company. If the Restricted Shares are not represented by certificate, the forfeiture shall be effected by an appropriate book entry on the stock ledger for the Shares. The Company shall make no payment for Transferred Shares that are forfeited.


(d) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares or into which such Restricted Shares thereby become convertible shall immediately be subject to the Forfeiture Condition. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares.

(e) Termination of Rights as Stockholder. If Transferred Shares are forfeited in accordance with this Section 2, then the person who is to forfeit such Transferred Shares shall no longer have any rights as a holder of such Transferred Shares. Such Transferred Shares shall be deemed to have been forfeited in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

(f) Escrow. Upon issuance, any certificates for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any new, substituted or additional securities or other property described in Subsection (d) above shall immediately be delivered to the Company to be held in escrow, but only to the extent the Transferred Shares are at the time Restricted Shares. All regular cash dividends on Restricted Shares (or other securities at the time held in escrow) shall be paid directly to the Transferee and shall not be held in escrow. Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be (i) surrendered to the Company for forfeiture and cancellation in the event that the Forfeiture Condition or Right of First Refusal applies or (ii) released to the Transferee upon the Transferee’s request to the extent the Transferred Shares are no longer Restricted Shares (but not more frequently than once every six months). In any event, all Transferred Shares that have vested (and any other vested assets and securities attributable thereto) shall be released within 60 days after the earlier of (i) the termination of the Transferee’s Service or (ii) the lapse of the Right of First Refusal.

(g) Part-Time Employment and Leaves of Absence. If the Transferee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Summary of Stock Grant. If the Transferee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Summary of Stock Grant. Except as provided in the preceding sentence, Service shall be deemed to continue while the Transferee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Transferee immediately returns to active work when such leave ends.

 

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SECTION

3. RIGHT OF FIRST REFUSAL.

(a) Right of First Refusal. In the event that the Transferee proposes to sell, pledge or otherwise transfer to a third party any Transferred Shares, or any interest in Transferred Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Transferred Shares. If the Transferee desires to transfer Transferred Shares, the Transferee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Transferred Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Subsequent Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Transferee and by the proposed Subsequent Transferee and must constitute a binding commitment of both parties to the transfer of the Transferred Shares. The Company shall have the right to purchase all, and not less than all, of the Transferred Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

(b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after receiving the Transfer Notice, the Transferee may, not later than 90 days after the Company received the Transfer Notice, conclude a transfer of the Transferred Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Transferee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Transferee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Transferee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Transferred Shares on the terms set forth in the Transfer Notice within 60 days after the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Transferred Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Transferred Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

(c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash

 

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equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Transferred Shares subject to this Section 3 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Transferred Shares subject to this Section 3.

(d) Termination of Right of First Refusal. Any other provision of this Section 3 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Transferee desires to transfer Transferred Shares, the Company shall have no Right of First Refusal, and the Transferee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

(e) Permitted Transfers. This Section 3 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Transferee’s Immediate Family or to a trust or other entity established by the Transferee solely for the benefit of the Transferee and/or one or more members of the Transferee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Transferee transfers any Transferred Shares, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Subsequent Transferee to the same extent as to the Transferee.

(f) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 3, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

(g) Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 3.

SECTION 4. OTHER RESTRICTIONS ON TRANSFER.

(a) Transferee Representations. In connection with the issuance and acquisition of Shares under this Agreement, the Transferee hereby represents and warrants to the Company as follows:

(i) The Transferee is acquiring and will hold the Transferred Shares for investment for his or her account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.

 

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(ii) The Transferee understands that the Transferred Shares have not been registered under the Securities Act by reason of a specific exemption therefrom and that the Transferred Shares must be held indefinitely, unless their sale or other transfer is subsequently registered under the Securities Act or the Transferee obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required. The Transferee further acknowledges and understands that the Company is under no obligation to register the Transferred Shares.

(iii) The Transferee is aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction,” and that the amount of securities being sold during any three-month period not exceed specified limitations. The Transferee acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied as of the Date of Transfer and that the Company is not required to take action to satisfy any such conditions.

(iv) The Transferee will not sell, transfer or otherwise dispose of the Transferred Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act. The Transferee agrees that he or she will not dispose of the Transferred Shares unless and until he or she has complied with all requirements of this Agreement applicable to the disposition of Transferred Shares and he or she has provided the Company with written assurances, in substance and form satisfactory to the Company, that (A) the proposed disposition does not require registration of the Transferred Shares under the Securities Act or all appropriate action necessary for compliance with the registration requirements of the Securities Act or with any exemption from registration available under the Securities Act (including Rule 144) has been taken and (B) the proposed disposition will not result in the contravention of any transfer restrictions applicable to the Transferred Shares under applicable state law.

(v) The Transferee has received and has had access to such information as he or she considers necessary or appropriate for deciding whether to invest in the Transferred Shares, and the Transferee has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Transferred Shares.

 

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(vi) The Transferee is aware that his or her investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. The Transferee is able, without impairing his or her financial condition, to hold the Transferred Shares for an indefinite period and to suffer a complete loss of his or her investment in the Transferred Shares.

(b) General Restrictions. Unless the Stock is readily tradeable on an established securities market, the transfer of any Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.

(c) Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of the Transferred Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

(d) Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Transferee or a Subsequent Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Transferred Shares without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Transferred Shares until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (d). This Subsection (d) shall not apply to Shares registered in the public offering under the Securities Act.

 

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(e) Rights of the Company. The Company shall not be required to (i) transfer on its books any Transferred Shares that have been sold or transferred in contravention of this Agreement or (ii) treat as the owner of Transferred Shares, or otherwise to accord voting, dividend or liquidation rights to, any Subsequent Transferee to whom Transferred Shares have been transferred in contravention of this Agreement.

SECTION 5. SUCCESSORS AND ASSIGNS.

Except as otherwise expressly provided to the contrary, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and be binding upon the Transferee and the Transferee’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person has become a party to this Agreement or has agreed in writing to join herein and to be bound by the terms, conditions and restrictions hereof.

SECTION 6. NO RETENTION RIGHTS.

Nothing in this Agreement or in the Plan shall confer upon the Transferee any right to continue providing services to the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Transferee) or of the Transferee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

SECTION 7. TAX ELECTION.

The acquisition of the Transferred Shares may result in adverse tax consequences that may be avoided or mitigated by filing an election under Code Section 83(b). Such election may be filed only within 30 days after the date of transfer set forth in the Summary of Stock Grant. The form for making the Code Section 83(b) election is attached to this Agreement as an Exhibit. The Transferee should consult with his or her tax advisor to determine the tax consequences of acquiring the Transferred Shares and the advantages and disadvantages of filing the Code Section 83(b) election. The Transferee acknowledges that it is his or her sole responsibility, and not the Company’s, to file a timely election under Code Section 83(b), even if the Transferee requests the Company or its representatives to make this filing on his or her behalf.

 

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SECTION 8. LEGENDS.

Any certificates (or electronic equivalent) evidencing Transferred Shares shall bear the following legends:

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK GRANT AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND IMPOSES CERTAIN FORFEITURE CONDITIONS UPON TERMINATION OF SERVICE WITH THE COMPANY. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK GRANT AGREEMENT. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK GRANT AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

Any certificates (or electronic equivalent) evidencing the Transferred Shares acquired under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”

If required by the authorities of any State in connection with the issuance of the Transferred Shares, the legend or legends required by such State authorities shall also be endorsed on all such certificates.

 

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SECTION 9. DRAG ALONG RIGHT.

(a) Required Actions. If the Requisite Parties approve a Sale of the Company, then Transferee hereby agrees with respect to all Shares which the Transferee own(s) or over which the Transferee otherwise exercises voting or dispositive authority:

(i) if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Stockholder shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

(ii) if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Transferee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

(iii) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

(iv) if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;

(v) if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Stockholder’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the Stockholders;

 

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(vi) to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Transferee than to other holders of Common Stock of the Company; and

(vii) to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

(b) Exceptions. Notwithstanding the foregoing, a Transferee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Transferee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Transferee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Transferee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Transferee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Transferee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

SECTION 10. MISCELLANEOUS PROVISIONS.

(a) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions), as such laws are applied to contracts entered into and performed in such State.

(b) Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Transferee at the address that he or she most recently provided to the Company in accordance with this Subsection (b). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

 

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(c) Entire Agreement. The Summary of Stock Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

(d) Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Transferee and an authorized officer of the Company (other than the Transferee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision of or of the same condition or provision at another time.

(e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

(f) Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Transferee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the forfeiture condition in Section 2, the right of first refusal in Section 3, the restrictions on transfer in Section 4 and the drag along right in Section 9. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (f).

SECTION 11. ACKNOWLEDGEMENTS OF THE TRANSFEREE.

In addition to the other terms, conditions and restrictions imposed on the Shares acquired pursuant to this Agreement, the Transferee expressly acknowledges being subject to Sections 2 (Forfeiture Condition), 3 (Right of First Refusal), 4 (Other Restrictions on Transfer, including without limitation the Market Stand-Off) and 9 (Drag Along Right), as well as the following provisions:

(a) Electronic Delivery of Documents. The Transferee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this award and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Transferee acknowledges that he or she may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with his or her ability to access the documents.

 

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(b) Tax Consequences and Withholding. The Transferee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Transferee’s tax liabilities. The Transferee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this award or the Transferee’s other compensation. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Transferee’s participation in the Plan and legally applicable to the Transferee (the “Tax-Related Items”)) as a result of the grant or vesting of the Transferred Shares, the Transferee, as a condition of this award, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Transferee acknowledges that the responsibility for all Tax-Related Items is the Transferee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

(c) Waiver of Statutory Information Rights. The Transferee acknowledges and agrees that, until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, he or she shall waive, and shall be deemed to have waived, any rights the Transferee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”). The Transferee acknowledges and understands that, but for the waiver made herein, the Transferee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Transferee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Transferee hereunder without the benefit of such waiver from the Transferee. This waiver applies only in the Transferee’s capacity as a stockholder and does not affect any other inspection rights the Transferee may have pursuant to any written agreement with the Company.

(d) Plan Discretionary. The Transferee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Transferee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the transfer of the Transferred Shares does not in any way create any contractual or other right to receive additional awards under the Plan at any time or in any amount and (iv) all determinations with respect to any additional awards, including (without limitation) the times when awards will be granted, the number of Shares offered and the vesting schedule, will be at the sole discretion of the Company.

(e) Termination of Service. The Transferee understands and acknowledges that participation in the Plan ceases upon termination of his or her Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

(f) Extraordinary Compensation. The value of the Transferred Shares shall be an extraordinary item of compensation outside the scope of the Transferee’s employment contract, if any, and shall not be considered a part of his or her normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

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(g) Authorization to Disclose. The Transferee hereby authorizes and directs the Transferee’s employer to disclose to the Company or any Subsidiary any information regarding the Transferee’s employment, the nature and amount of the Transferee’s compensation and the fact and conditions of the Transferee’s participation in the Plan, as the Transferee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

(h) Personal Data Authorization. The Transferee consents to the collection, use and transfer of personal data as described in this Subsection (h). The Transferee understands and acknowledges that the Company, the Transferee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Transferee for the purpose of managing and administering the Plan, including (without limitation) the Transferee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Transferee’s favor (the “Data”). The Transferee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Transferee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Transferee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Transferee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Transferee’s participation in the Plan, including a transfer to any broker or other third party with whom the Transferee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Transferee’s behalf. The Transferee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (h) by contacting the Company in writing.

SECTION 12. DEFINITIONS.

(a) “Agreement” shall mean this Stock Grant Agreement.

(b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

(c) “Certificate” shall mean the Company’s amended and restated certificate of incorporation, as in effect from time to time.

(d) “Company” shall mean Evommune, Inc., a Delaware corporation.

(e) “Forfeiture Condition” shall mean the forfeiture condition described in Section 2.

 

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(f) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

(g) “Plan” shall mean the Evommune, Inc. 2020 Stock Plan, as amended.

(h) “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

(i) “Restricted Share” shall mean a Transferred Share that is subject to the Forfeiture Condition.

(j) “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 3.

(k) “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.

(l) “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

(m) “Service” shall mean service as an Employee, Outside Director or Consultant.

(n) “Subsequent Transferee” shall mean any person to whom the Transferee has directly or indirectly transferred any Transferred Shares.

(o) “Transferee” shall mean the individual named in the Summary of Stock Grant.

(p) “Transfer Notice” shall mean the notice of a proposed transfer of Transferred Shares described in Section 3.

(q) “Transferred Shares” shall mean the Shares acquired by the Transferee pursuant to this Agreement.

 

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EXHIBIT I

SECTION 83(b) ELECTION

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, and pursuant to Treasury Regulations Section 1.83-2, to include in gross income as compensation for services the fair market value of the shares described below.

 

  (1)

The taxpayer who performed the services is:

Name:

Address:

Social Security No.:

 

  (2)

The property with respect to which the election is made is     shares of the common stock of Evommune, Inc.

 

  (3)

The property was transferred to the taxpayer on       ,   .

 

  (4)

The taxable year for which the election is made is the calendar year   .

 

  (5)

The property is subject to forfeiture if for any reason taxpayer’s service with the issuer terminates. The forfeiture condition lapses in a series of installments over a  -year period ending on       ,   .

 

  (6)

The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction that by its terms will never lapse) is $      per share x      shares = $     .

 

  (7)

No amount was paid for such property.

 

  (8)

The amount to include in gross income is $   . [The amount in Line 6.]

 

  (9)

A copy of this statement was furnished to Evommune, Inc., for whom taxpayer rendered the services underlying the transfer of such property.

 

  (10)

This statement is executed on        ,    .

 

Spouse (if any)    Taxpayer   

Within 30 days after the date of transfer of the property, this election must be filed with the Internal Revenue Service office where the taxpayer files his or her annual federal income tax return. The filing should be made by registered or certified mail, return receipt requested. The taxpayer must deliver a copy of the completed form to the Company.


EVOMMUNE, INC.

RESTRICTED STOCK UNIT GRANT NOTICE

(2020 STOCK PLAN)

Evommune, Inc. (the “Company”), pursuant to its 2020 Stock Plan (the “Plan”), has granted to Participant (as of the date indicated below) a Restricted Stock Unit Award for the number of shares of the Company’s Stock (“RSUs”) set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth in this Restricted Stock Unit Grant Notice (the “Grant Notice”) and in the Plan and the Restricted Stock Unit Agreement, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein will have the meanings set forth in the Plan or the Restricted Stock Unit Agreement. In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan will control.

 

Participant:

  

«Name»

Date of Grant:

  

«DateGrant»

Vesting Commencement Date:

  

«VestComDate»1

Liquidity Event Deadline:

  

10-year anniversary of the Date of Grant

Number of RSUs:

  

«TotalShares»

 

Expiration Date:    The “Expiration Date” for an RSU is the earlier of: (a) the Liquidity Event Deadline or (b) the date of termination of Participant’s Service (with the exception of any termination of Service, whether alone or in connection with any other event, that results in acceleration of vesting of the RSUs).
Vesting    Participant will become eligible to receive shares of Stock with respect to an RSU only if it vests in full. Except as explicitly set forth below, three vesting requirements must be satisfied on or before the Expiration Date (as defined below) in order for an RSU to vest — a time and service-based requirement (the “Service-Based Requirement”), an issue of shares of Series C Preferred Stock requirement (the “Series C Preferred Stock Requirement”), and (iii) and the “Liquidity Event Requirement” (each described below). An RSU will vest (and therefore become a “Vested RSU”) on the first date upon which each of the Service-Based Requirement, the Series C Preferred Stock Requirement, and the Liquidity Event Requirement are all satisfied with respect to that particular RSU (the “Vesting Date”). All RSUs that do not become Vested RSUs on or before the Expiration Date will be immediately forfeited to the Company upon expiration at no cost to the Company.
Service- Based Requirement:    The Service-Based Requirement will be satisfied as to 1/4th of the RSUs on each anniversary of the Vesting Commencement Date, subject to Participant’s continued Service from the Date of Grant through each such date. For the avoidance of doubt, upon termination of Participant’s Service, any unvested RSUs, including unvested RSUs that have met the Service-Based Requirement, will be forfeited at no cost to the Company and Participant will have no further right, title or interest in or to such RSUs or the shares of Stock underlying them.
 

1 NTD: VCD to be December 9, 2024.


   “Change in Control” means (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.
Liquidity Event Requirement:    The Liquidity Event Requirement will be satisfied as to any then-outstanding RSUs on the first to occur of: (a) immediately prior to the consummation of a Change in Control (b) the effective date of a registration statement of the Company filed under the Securities Act of 1933 for the sale of the Company’s Stock (“IPO”), or (c) the settlement of the initial trade of shares of Stock on a nationally recognized exchange, subject in each case to Participant remaining in continued Service from the Date of Grant through the earliest to occur of (a), (b), or (c).

Series C

Preferred

Stock

Requirement:

   The Series C Preferred Stock Requirement will be satisfied as to 0.09107631807238 of one share of Stock subject to the RSU for each share of Series C Preferred Stock issued in accordance with the Preferred Stock Purchase Agreement subsequent to October 30, 2024, subject to Participant’s continued Service from the Date of Grant through the applicable date of issuance. For purposes of this Grant Notice, Series C Preferred Stock shall mean a share of Series C Preferred Stock of the Company as set forth in that certain Preferred Stock Purchase Agreements dated October 30, 2024 (the “Preferred Stock Purchase Agreement”).
Settlement:    If an RSU vests as provided for above, the Company will issue one share of Stock for each Vested RSU. The shares will be issued in accordance with the issuance schedule set forth in Section 5 of the Restricted Stock Unit Agreement.

Additional Terms/Acknowledgements: By Participant’s signature below or by electronic acceptance or authentication in a form authorized by the Company, Participant understands and agrees that the Award is governed by this Grant Notice, and the provisions of the Plan and the Restricted Stock Unit Agreement (collectively, the “Grant Documents”), all of which are made a part of this document.

 

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By accepting this Award, Participant consents to receive the Grant Documents, and any other Plan-related documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. Participant represents that he or she has read and is familiar with the provisions of the Plan and the Restricted Stock Unit Agreement. Participant acknowledges and agrees that this Grant Notice and the Restricted Stock Unit Agreement may not be modified, amended or revised except in writing signed by Participant and a duly authorized officer of the Company.

Participant further acknowledges that in the event of any conflict between the provisions in this Grant Notice, the Restricted Stock Unit Agreement, and the terms of the Plan, the terms of the Plan shall control. Participant further acknowledges that the Restricted Stock Unit Agreement sets forth the entire understanding between Participant and the Company regarding the acquisition of shares of Stock and supersedes all prior oral and written agreements, promises and/or representations on that subject with the exception of other equity awards previously granted to Participant and any written employment agreement, offer letter, severance agreement, written severance plan or policy, or other written agreement between the Company and Participant in each case that specifies the terms that should govern this Award.

Participant further acknowledges that this Grant Notice has been prepared on behalf of the Company by Cooley LLP, counsel to the Company, and that Cooley LLP does not represent, and is not acting on behalf of, Participant in any capacity. Participant has been provided with an opportunity to consult with Participant’s own counsel with respect to this Grant Notice.

This Grant Notice may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.

Notwithstanding the above, if Participant has not actively accepted the Award within 90 days of the Date of Grant set forth in this Grant Notice, Participant is deemed to have accepted the Award, subject to all of the terms and conditions of the Grant Documents.

 

Evommune, Inc.       «Participant»
By:               
        Signature
Date:       Date:     

ATTACHMENTS:

 

  •  

Attachment I: Restricted Stock Unit Agreement

 

  •  

Attachment II: 2020 Stock Plan


ATTACHMENT I

EVOMMUNE, INC.

RESTRICTED STOCK UNIT AGREEMENT

(2020 STOCK PLAN)

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Agreement (the “Agreement”), Evommune, Inc. (the “Company”) has granted to you a Restricted Stock Unit Award for the number of shares of Stock (“RSUs”) indicated in the Grant Notice (the “Award”) under its 2020 Stock Plan (the “Plan”). The Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award. Capitalized terms not explicitly defined in this Agreement will have the same meanings given to them in the Plan and Grant Notice. The terms and conditions of the Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.

1. Nature of the Award. The Award represents the right to be issued on a future date the number of shares of Stock as indicated in the Grant Notice upon the satisfaction of the terms set forth in this Agreement. Except as otherwise provided herein, you will not be required to make any payment to the Company with respect to your receipt of the Award, the vesting of the RSUs or the issuance of the underlying shares of Stock.

2. Vesting. Subject to the limitations contained herein, the Award will vest in accordance with the vesting schedule provided in the Grant Notice. Upon termination of your Service, any unvested RSUs, including RSUs that have met the Service-Based Requirement, will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such RSUs or the shares of Stock covered thereby.

3. Number of Shares.

(a) The number of RSUs subject to the Award may be adjusted from time to time for capitalization adjustments, as provided at Section 9 of the Plan.

(b) Any additional RSUs, shares, cash or other property that become subject to the Award pursuant to this Section 3 if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of issuance as applicable to the other shares of Stock covered by the Award.

(c) Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Stock will be created pursuant to this Section 3. The Board will, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the adjustments referred to in this Section 3.

4. Securities Law and Other Compliance. In no event may you be issued any shares under the Award unless either (a) the shares are registered under the Securities Act; or (b) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. The Award also must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations. If the Company determines in its sole discretion that the Award does not comply with applicable laws and regulations, the Company may cancel the Award (or otherwise cause the Award to be forfeited) and no claim or entitlement to compensation or damages shall arise from such cancellation or forfeiture.

 

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5. Date of Issuance.

(a) Subject to the satisfaction of the Tax-Related Items set forth in Section 11 of this Agreement, in the event one or more RSUs vest, except as otherwise set forth in Section 5(b), within thirty (30) days of the Vesting Date, the Company will issue to you one (1) share of Stock for each RSU that vests on the applicable Vesting Date (subject to any adjustment under Section 3 above) (such date, the “Original Issuance Date”).

(b) To the extent applicable at a Vesting Date when the Stock is registered under the Securities Act, if:

(i) the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Arrangement”)), and

(ii) either (1) no Tax-Related Items apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Tax-Related Items by withholding shares of Stock from the shares of Stock otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 11 of this Agreement (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit you to pay the Tax-Related Items in cash,

then the shares of Stock that would otherwise be issued to you on the Original Issuance Date will not be issued on such Original Issuance Date and will instead be issued on the first business day when you are not prohibited from selling shares of Stock in the open public market, but in no event later than (a) December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or (b) if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the year immediately following the year in which the shares of Stock covered by this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).

(c) The form of such issuance (e.g., a stock certificate or electronic entry evidencing such shares of Stock) will be determined by the Company. In all cases, the issuance of shares under this Award is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner.

6. Dividends. You will receive no benefit or adjustment to your RSUs with respect to any cash dividend, stock dividend or other distribution except as provided in the Plan with respect to a capitalization adjustment and only then subject to the terms of Section 25 herein.

7. Lock-Up Period. By acquiring shares of Stock under the Award, you agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Stock or other securities of the Company held by you, for a period of 180 days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period as the underwriters or the Company request or as necessary to facilitate compliance with FINRA Rule 2241 and similar or successor regulatory rules and regulations (the “Lock-Up Period”); provided, however, that nothing contained in this

 

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Section 7 will prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock- Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. You also agree that any transferee of any shares of Stock (or other securities of the Company held by you) will be bound by this Section 7. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Stock until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 7 and will have the right, power and authority to enforce the provisions of this Section 7 as though they were a party to this Agreement. You further agree that the obligations contained in this Section 7 shall also, if so determined by the Board, apply in the Company’s initial listing of its Stock on a national securities exchange by means of a registration statement on Form S-1 under the Securities Act (or any successor registration form under the Securities Act subsequently adopted by the Securities and Exchange Commission) filed by the Company with the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale (a “Direct Listing”), provided that all holders of at least 5% of the Company’s outstanding Stock (after giving effect to the conversion into Stock of any outstanding Preferred Stock of the Company) are subject to substantially similar obligations with respect to such Direct Listing.

8. Transfer Restrictions. Shares of Stock that you acquire upon vesting and settlement of the Award are subject to any restrictions on transfer and/or right of first refusal that may be described in the Company’s bylaws in effect at such time the Company elects to exercise its right. In addition to any other limitation on transfer created by applicable securities laws, you will not sell, assign, hypothecate, donate, encumber or otherwise dispose of all or any part of the shares subject to the Award or any interest in such shares, whether voluntarily or by operation of law, by gift, by entering into a contract that requires shares to be issued at a future date, or otherwise, except in compliance with this Agreement, the Company’s bylaws and applicable securities law.

9. Restrictive Legends. The shares of Stock issued in respect of the Award will be endorsed with reasonable and customary legends, as determined by the Company.

10. Award not an Employment or Service Contract. By accepting the Award, you acknowledge, understand and agree that:

(a) subject to applicable law, your employment or other service with the Company or any affiliate is not for any specified term and may be terminated by you or by the Company or an affiliate at any time, for any reason, with or without cause and with or without notice. Nothing in this Agreement (including, but not limited to, the vesting of the Award pursuant to Section 2 or the issuance of the shares subject to the Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan will: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an affiliate; (ii) constitute any promise or commitment by the Company or an affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company or an affiliate of the right to terminate your employment or engagement at will (subject to applicable law) and without regard to any future vesting opportunity that you may have;

(b) by accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to Section 2 and the schedule set forth in the Grant Notice is earned only by continuing as an employee, director or consultant at the will of the Company or an affiliate (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such reorganization could result in the termination of your Service, or the termination of affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award;

 

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(c) the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted under the Plan;

(d) the grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of equity awards (whether on the same or different terms), or benefits in lieu of equity awards, even if equity awards have been granted in thepast;

(e) the Award and any shares of Stock acquired under the Plan on vesting and settlement of the Award, and the income and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar payments;

(f) the future value of the shares of Stock underlying the Award is unknown, indeterminable, and cannot be predicted with certainty;

(g) neither the Company nor any affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Award or of any amounts due to you pursuant to the vesting and settlement of the Award or the subsequent sale of any shares of Stock received;

(h) for the purposes of the Award, your Service will be considered terminated as of the date you are no longer actively providing services to the Company or one of its affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by the Company, your right to vest in the Award under the Plan, if any, will terminate as of such date and will not be extended by any notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any, and the Board shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of the Award (including whether you may still be considered to be providing services while on a leave of absence); and

(i) no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any), and in consideration of the grant of the Award to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company or any affiliate, waive your ability, if any, to bring any such claim, and release the Company and any affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim.

 

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11. Responsibility for Taxes.

(a) You acknowledge that, regardless of any action taken by the Company, the ultimate liability for all income tax (including U.S. federal, state, and local taxes and/or non-U.S. taxes), social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you or deemed by the Company in its discretion to be an appropriate charge to you even if legally applicable to the Company (“Tax-Related Items”) is and remains your responsibility and may exceed the amount actually withheld by the Company.

(b) Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company and/or your employer (if not the Company) to satisfy all Tax-Related Items. In this regard, you authorize the Company or its agent to satisfy their withholding obligations with regard to all Tax-Related Items, if any, by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company or your employer; (ii) causing you to tender a cash payment; (iii) entering on your behalf (pursuant to this authorization without further consent) into a “same day sale” commitment with a broker dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of the shares to be issued under the Award to satisfy the Tax-Related Items and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax-Related Items directly to the Company and/or its affiliates; (iv) withholding shares of Stock from the shares of Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Stock are issued to you or, if and as determined by the Company, the date on which the Tax-Related Items are required to be calculated) equal to the amount of such Tax-Related Items; or (v) any other method of withholding determined by the Company and permitted by applicable law. The Company will use commercially reasonable efforts (as determined by the Company) to facilitate the satisfaction of Tax-Related Items by you using one of the methods described in clauses (iii) and (iv) of the preceding sentence or by permitting you to sell shares of Stock in any initial public offering by the Company. However, the Company does not guarantee that you will be able to satisfy any Tax-Related Items through any of the methods described in the preceding sentence and in all circumstances you remain responsible for timely and fully satisfying the Tax-Related Items. Depending on the withholding method employed, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in your jurisdiction to the extent permitted under the Plan, in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in shares of Stock. In the event any under-withholding results from the application of minimum statutory or other withholding rates, you may be required to pay additional amounts to the tax authorities. If the obligation for Tax-Related Items is satisfied by withholding in shares of Stock, for tax purposes, you are deemed to have been issued the full number of shares of Stock subject to the vested portion of the Award, notwithstanding that a number of the shares of Stock are held back solely for the purpose of paying the Tax-Related Items.

(c) Finally, you agree to pay to the Company or your employer any amount of Tax- Related Items that the Company or your employer may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by any of the means previously described. Notwithstanding any contrary provision of the Plan, the Grant Notice or of this Agreement, if you fail to make satisfactory arrangements for the payment of any Tax-Related Items when due, you permanently will forfeit the RSUs on which the Tax-Related Items were not satisfied and will also permanently forfeit any right to receive shares of Stock thereunder. In that case, the RSUs will be returned to the Company at no actual cost to the Company.

 

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12. Investment Representations. In connection with your acquisition of the Award and the Stock under the Award, you represent to the Company the following:

(a) You are aware of the Company’s business affairs and financial condition and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Stock. You are acquiring the Stock for investment for your own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.

(b) You understand that the Stock has not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of your investment intent as expressed in this Agreement.

(c) You further acknowledge and understand that the Stock must be held indefinitely unless the Stock is subsequently registered under the Securities Act or an exemption from such registration is available. You further acknowledge and understand that the Company is under no obligation to register the Stock. You understand that the certificate evidencing the Stock will be imprinted with a legend that prohibits the transfer of the Stock unless the Stock is registered or such registration is not required in the opinion of counsel for the Company.

(d) You are familiar with the provisions of Rules 144 and 701 under the Securities Act, as in effect from time to time, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the securities, such issuance will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the securities exempt under Rule 701 may be sold by you 90 days thereafter, subject to the satisfaction of certain of the conditions specified by Rule 144 and the Lock-Up Period agreement described in Section 7.

(e) In the event that the sale of the Stock does not qualify under Rule 701 at the time of issuance, then the Stock may be resold by you in certain limited circumstances subject to the provisions of Rule 144, which requires, among other things: (i) the availability of certain public information about the Company; and (ii) the resale occurring following the required holding period under Rule 144 after you have purchased, and made full payment of (within the meaning of Rule 144), the securities to be sold.

(f) You further understand that at the time you wish to sell the Stock there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144 or 701, and that, in such event, you would be precluded from selling the Stock under Rule 144 or 701 even if the minimum holding period requirement had been satisfied.

13. No Obligation to Minimize Taxes. You acknowledge that the Company is not making representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or settlement of the Award, the subsequent sale of shares of Stock acquired pursuant to such settlement and the receipt of any dividends and/or any dividend equivalent payments. Further, you acknowledge that the Company does not have any duty or obligation to minimize your liability for Tax-Related Items arising from the Award or to achieve any particular tax result and will not be liable to you for any Tax-Related Items arising in connection with the Award. If you become subject to taxation in more than one jurisdiction, the Company and/or your employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

6


14. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Stock. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the Tax-Related Items arising in connection with the Award and by accepting the Award, you have agreed that you have done so or knowingly and voluntarily declined to do so.

15. Unsecured Obligation. The Award is unfunded, and as a holder of a vested Award, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 5 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

16. Data Privacy. You explicitly and unambiguously acknowledge and consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, your employer, the Company and its affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan. You understand that the Company, its affiliates and your employer hold certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social security number (or other identification number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all equity awards or any other entitlement to shares of Stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, managing and administering the Plan (“Data”). You understand that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, in particular in the US, and that the recipient country may have different data privacy laws providing less protections of your personal data than your country. You may request a list with the names and addresses of any potential recipients of the Data by contacting the stock plan administrator at the Company (the “Stock Plan Administrator”). You acknowledge that the recipients may receive, possess, process, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data, as may be required, to a broker or other third party with whom you may elect to deposit any shares of Stock acquired upon the vesting and settlement of the Award. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Stock Plan Administrator in writing.

17. Language. You acknowledge that you are sufficiently proficient in the English language, or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the terms and conditions of this Agreement. If you have received this Agreement, or any other document related to the Award and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

 

7


18. Foreign Asset/Account, Exchange Control and Tax Reporting. You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of shares of Stock or cash (including dividends and the proceeds arising from the sale of shares of Stock) derived from your participation in the Plan in, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws in your country may require that you report such accounts, assets and balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You may also be required to repatriate sale proceeds or other funds received as a result of your participation in the Plan to your country through a designated bank or broker within a certain time after receipt. You acknowledge that it is your responsibility to be compliant with such regulations and you are encouraged to consult with your personal legal advisor for any details.

19. Notices. Any notices provided for in the Grant Notice, this Agreement or the Plan will be given in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Award, you consent to receive such documents by electronic delivery and to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the Company.

20. Miscellaneous.

(a) As a condition to the grant of the Award or to the Company’s issuance of any shares of Stock under this Agreement, the Company may require you to execute certain customary agreements entered into with the holders of capital stock of the Company, including without limitation, a voting agreement, right of first refusal and co-sale agreement.

(b) The rights and obligations of the Company under the Award will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns. Your rights and obligations under the Award may only be assigned with the prior written consent of the Company.

(c) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of the Award.

(d) You acknowledge and agree that you have reviewed the documents provided to you in relation to the Award in their entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understand all provisions of such documents.

(e) This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(f) All obligations of the Company under the Plan and this Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

(g) The Company reserves the right to impose other requirements on your participation in this Agreement, on the RSUs and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

8


(h) To the extent Participant is terminated by the Company for Cause, or following the individual’s separation from service pursuant to Section 409A of the Code, it is determined that grounds for “Cause” existed, any cash or shares of Common Stock that are issuable or were issued pursuant to this Award shall be forfeited or subject to recoupment by the Company.

21. Governing Plan Document. The Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of the Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. Except as expressly provided herein, if there is any conflict between the provisions of the Award and those of the Plan, the provisions of the Plan will control.

22. Severability. If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

23. Governing Law. The interpretation, performance and enforcement of this Agreement will be governed by the law of the state of Delaware without regard to such state’s conflict of laws rules.

24. Amendment. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.

25. Compliance with Section 409A of the Code. This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulations Section 1.409A-1(b)(4). Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule, then this Award shall be construed and administered so that such Award complies with Section 409A of the Code (including if any amendments are required for such compliance, as determined solely by the Company) and the related Treasury regulations promulgated thereunder. To the extent this Award is determined to constitute non-qualified deferred compensation subject to Section 409A of the Code, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulations Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code. Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2). Notwithstanding any contrary provision of the Plan, the Grant Notice, or of this Agreement, under no circumstances will the Company reimburse you for any taxes or other costs under Section 409A or any other tax law or rule. All such taxes and costs are solely your responsibility.

*   *   *

This Agreement will be deemed to be accepted by you upon the signing (which may be electronic) by you of the Restricted Stock Unit Grant Notice to which it is attached or by the deemed acceptance of this Agreement, as described in the Restricted Stock Unit Grant Notice.

 

9

Exhibit 10.5

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Luis Peña, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated May 20, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as President and Chief Executive Officer, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at-will status of Employee’s employment.

 

1


  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $546,500, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 50% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

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  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self-employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to two (2) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is

 

7


  required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of California without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non-compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Benjamin McGraw

  Benjamin McGraw
  Chair of the Board
Date:   10/28/2024

 

/s/ Luis Peña

Luis Peña
Date: 10/25/2024

 

11


Exhibit A

EVOMMUNE, INC.

EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT

The following agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (the “Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the

Company (whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest. I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions”) to the Company. However, the foregoing does not purport to assign to the Company (and Assigned Inventions shall not include) any Invention that: (1) by law (including, without limitation, the applicable statutory provision for my state of employment set forth in Appendix A, if any) I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

 


e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

  (1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

  (2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard-copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates”) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competitive Activities” means any direct or indirect non-Company activity (i) that is the same or substantially similar to Employee’s responsibilities for the Company that relates to, is substantially similar to, or competes with the Company (or its demonstrably planned interests) at the time of Employee’s termination from the Company; or (ii) involving the use or disclosure, or the likelihood of the use or disclosure, of Proprietary Information. Competitive Activities do not include being a holder of less than one percent (1%) of the outstanding equity of a public company. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so (provided that if I am a resident of California, “Cause” means to recruit, or otherwise solicit, induce or influence, or to attempt to do so). “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

 


b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and (C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than terminating subordinate employees in the course of my duties for the Company); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following my termination of employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; or (ii) unless I am a resident of California (A) Solicit any Business Partner or (B) engage in any Competitive Activities (I) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (II) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (III) anywhere within a fifty (50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival. I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement. I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the

 


Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder, also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware (provided that if I am a resident of California, any disputes shall be resolved in accordance with the laws of the State of California), without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over San Francisco

County, California, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

— Signature Page Follows —


I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.        EMPLOYEE
By:  

/s/ Luis Peña

    By:  

/s/ Luis Peña

Name:   LUIS PEÑA     Name:   LUIS PEÑA
Title:   PRESIDENT     Address:   1452 AURA WAY
        LOS ALTOS, CA, 94024
Dated:   5/6/2020     Dated:   5/6/2020

SIGNATURE PAGE TO EVOMMUNE, INC. EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT


Appendix A

If I am employed by the Company in the State of California, the following provision applies:

CALIFORNIA LABOR CODE § 2870

Inventions Made by an Employee

 

(a)

Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1)

Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

 

(2)

Result from any work performed by the employee for his employer.

 

(b)

To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

If I am employed by the Company in the State of Delaware, the following provision applies:

DELAWARE CODE, TITLE 19 § 805

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of the employee’s rights in an invention to the employee’s employer shall not apply to an invention that the employee developed entirely on the employee’s own time without using the employer’s equipment, supplies, facility or trade secret information, except for those inventions that: (1) relate to the employer’s business or actual or demonstrably anticipated research or development, or (2) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and is unenforceable. An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment.

If I am employed by the Company in the State of Illinois, the following provision applies:

ILLINOIS COMPILED STATUTES 765 § 1060/2

Employee rights to inventions - conditions.

 

(1)

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this State and is to that extent void and unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this subsection.

 

(2)

An employer shall not require a provision made void and unenforceable by subsection (1) of this Section as a condition of employment or continuing employment. This Act shall not preempt existing common law applicable to any shop rights of employers with respect to employees who have not signed an employment agreement.

 

(3)

If an employment agreement entered into after January 1, 1984, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

If I am employed by the Company in the State of Kansas, the following provision applies:

KANSAS CODE § 44-130

Employment agreements assigning employee rights in inventions to employer; restrictions; certain provisions void; notice and disclosure.

 

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(a)

Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

(1)

The invention relates to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(b)

Any provision in an employment agreement which purports to apply to an invention which it is prohibited from applying to under subsection (a), is to that extent against the public policy of this state and is to that extent void and unenforceable. No employer shall require a provision made void and unenforceable by this section as a condition of employment or continuing employment.

 

(c)

If an employment agreement contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer shall provide, at the time the agreement is made, a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

(1)

The invention relates directly to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(d)

Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.

If I am employed by the Company in the State of Minnesota, the following provision applies:

MINNESOTA STATUTES § 181.78

Agreements; Terms Relating to Inventions.

Subdivision 1. Inventions not related to employment. — Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

Subdivision 2. Effect of subdivision 1. — No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment.

Subdivision 3. Notice to employee. — If an employment agreement entered into after August 1, 1977 contains a provision requiring the employee to assign or offer to assign any of the employee’s rights in any invention to an employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer.

If I am employed by the Company in the State of New Jersey, the following provision applies:

NEW JERSEY STATUTES § 34:1B-265

Employee rights to certain inventions.

Any provision in an employment contract between an employee and employer, which provides that the employee shall assign or offer to assign any of the employee’s rights to an invention to that employer, shall not apply to an invention that the employee develops entirely on the employee’s own time, and without using the employer’s equipment, supplies, facilities or information, including any trade secret information, except for those inventions that: (a) relate to the employer’s business or actual or demonstrably anticipated research or development; or (b) result from any work performed by the employee on behalf of the employer.

 

 

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If I am employed by the Company in the State of North Carolina, the following provision applies:

NORTH CAROLINA GENERAL STATUTES § 66-57.1

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employees shall assign or offer to assign any of his rights in an invention to his employer shall not apply to an invention that the employee developed entirely on his own time without using the employer’s equipment, supplies, facility or trade secret information except for those inventions that (i) relate to the employer’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and in unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this section.

If I am employed by the Company in the State of Utah, the following provisions apply:

UTAH CODE, §§ 34-39-2, 34-39-3

34-39-2.

Definitions.

As used in this chapter:

 

(1)

“Employment invention” means any invention or part thereof conceived, developed, reduced to practice, or created by an employee which is:

 

(a)

conceived, developed, reduced to practice, or created by the employee:

 

(i)

within the scope of his employment;

 

(ii)

on his employer’s time; or

 

(iii)

with the aid, assistance, or use of any of his employer’s property, equipment, facilities, supplies, resources, or intellectual property;

 

(b)

the result of any work, services, or duties performed by an employee for his employer;

 

(c)

related to the industry or trade of the employer; or

 

(d)

related to the current or demonstrably anticipated business, research, or development of the employer.

 

(2)

“Intellectual property” means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them.

34-39-3.

Scope of act — When agreements between an employee and employer are enforceable or unenforceable with respect to employment inventions — Exceptions.

 

(1)

An employment agreement between an employee and his employer is not enforceable against the employee to the extent that the agreement requires the employee to assign or license, or to offer to assign or license, to the employer any right or intellectual property in or to an invention that is:

 

(a)

created by the employee entirely on his own time; and

 

(b)

not an employment invention.

 

(2)

An agreement between an employee and his employer may require the employee to assign or license, or to offer to assign or license, to his employer any or all of his rights and intellectual property in or to an employment invention.

 

(3)

Subsection (1) does not apply to:

 

(a)

any right, intellectual property or invention that is required by law or by contract between the employer and the United States government or a state or local government to be assigned or licensed to the United States; or

 

(b)

an agreement between an employee and his employer which is not an employment agreement.

 

(4)

Notwithstanding Subsection (1), an agreement is enforceable under Subsection (1) if the employee’s employment or continuation of employment is not conditioned on the employee’s acceptance of such agreement and the employee receives a consideration under such agreement which is not compensation for employment.

 

(5)

Employment of the employee or the continuation of his employment is sufficient consideration to support the enforceability of an agreement under Subsection (2) whether or not the agreement recites such consideration.

 

(6)

An employer may require his employees to agree to an agreement within the scope of Subsection (2) as a condition of employment or the continuation of employment.

 

(7)

An employer may not require his employees to agree to anything unenforceable under Subsection (1) as a condition of employment or the continuation of employment.

 

(8)

Nothing in this chapter invalidates or renders unenforceable any employment agreement or provisions of an employment agreement unrelated to employment inventions.

If I am employed by the Company in the State of Washington, the following provision applies:

REVISED CODE OF WASHINGTON § 49.44.140

Requiring Assignment of Employees’ Rights to Inventions – Conditions.

 

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(1)

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

 

(2)

An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.

 

(3)

If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

 

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Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

(for California employees)

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the California Fair Employment and Housing Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (including, but not limited to, harassment and/or discrimination claims to the extent excluded by applicable law) (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

Except to the extent that representative claims under California’s Private Attorneys General Act (“PAGA”) are excluded from this Agreement, Employee agrees that all Claims (including individual claims under PAGA) must be brought in Employee’s individual capacity, and not as a plaintiff or participating class member in any purported class, collective, or consolidated proceeding, and Employee expressly waives any right Employee had or may have had to have any dispute brought, heard, or arbitrated as a class action and/or as a collective action. The arbitrator has no authority to adjudicate class, collective, or consolidated proceedings, other than to enforce this provision. Also except for Excluded Claims and as provided otherwise by law and herein, Employee further understands and agrees that Employee may not bring any Claims as a plaintiff or participating class member in any purported representative action or proceeding, and Employee expressly waives any right Employee had or may have had to have any dispute brought, heard, or arbitrated as a representative action. The arbitrator has no authority to adjudicate representative proceedings, other than to enforce this provision. This class action waiver shall be interpreted consistent with applicable federal law and state law to the extent it is not preempted by federal law.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a

 

1


reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in the State of California, within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of California. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer or other authorized representative.

THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

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Employee:
Signature:  

/s/ Luis Pena

Print Name:   Luis Pena
Date:   10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Benjamin McGraw

Print Name:   Benjamin McGraw
Print Title:   Chair of the Board
Date:   10/28/2024

Exhibit 10.6

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Eugene A. Bauer, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated May 20, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as Chief Medical Officer, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Chief Executive Officer (the “CEO”) and/or the Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the CEO and the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at-will status of Employee’s employment.

 

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  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $470,000, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 40% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the CEO or the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the CEO or the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the CEO or the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

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  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self-employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to one and a half (1.5) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is

 

7


  required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of Missouri without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non-compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Luis Peña

  Luis Peña
  Chief Executive Officer
Date:   10/25/2024

 

/s/ Eugene A. Bauer

Eugene A. Bauer
Date: 10/25/2024

 

11


Exhibit A

EVOMMUNE, INC.

EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT

The following agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (the “Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the

Company (whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest. I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions”) to the Company. However, the foregoing does not purport to assign to the Company (and Assigned Inventions shall not include) any Invention that: (1) by law (including, without limitation, the applicable statutory provision for my state of employment set forth in Appendix A, if any) I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

 


e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

  (1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

  (2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard-copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates”) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competitive Activities” means any direct or indirect non-Company activity (i) that is the same or substantially similar to Employee’s responsibilities for the Company that relates to, is substantially similar to, or competes with the Company (or its demonstrably planned interests) at the time of Employee’s termination from the Company; or (ii) involving the use or disclosure, or the likelihood of the use or disclosure, of Proprietary Information. Competitive Activities do not include being a holder of less than one percent (1%) of the outstanding equity of a public company. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so (provided that if I am a resident of California, “Cause” means to recruit, or otherwise solicit, induce or influence, or to attempt to do so). “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

 


b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and (C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than terminating subordinate employees in the course of my duties for the Company); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following my termination of employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; or (ii) unless I am a resident of California (A) Solicit any Business Partner or (B) engage in any Competitive Activities (I) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (II) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (III) anywhere within a fifty (50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival. I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement. I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the

 


Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder, also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware (provided that if I am a resident of California, any disputes shall be resolved in accordance with the laws of the State of California), without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over San Francisco

County, California, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

— Signature Page Follows —


I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.     EMPLOYEE
By:  

Luis Peña

    By:  

Eugene Bauer

Name:   LUIS PEÑA     Name:   EUGENE BAUER
Title:   PRESIDENT     Address:   248 RIVIERA DRIVE
        SAN RAFAEL, CA 94901
Dated:   5/6/2020     Dated:   5/6/2020

SIGNATURE PAGE TO EVOMMUNE, INC. EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT


Appendix A

If I am employed by the Company in the State of California, the following provision applies:

CALIFORNIA LABOR CODE § 2870

Inventions Made by an Employee

 

(a)

Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1)

Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

 

(2)

Result from any work performed by the employee for his employer.

 

(b)

To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

If I am employed by the Company in the State of Delaware, the following provision applies:

DELAWARE CODE, TITLE 19 § 805

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of the employee’s rights in an invention to the employee’s employer shall not apply to an invention that the employee developed entirely on the employee’s own time without using the employer’s equipment, supplies, facility or trade secret information, except for those inventions that: (1) relate to the employer’s business or actual or demonstrably anticipated research or development, or (2) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and is unenforceable. An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment.

If I am employed by the Company in the State of Illinois, the following provision applies:

ILLINOIS COMPILED STATUTES 765 § 1060/2

Employee rights to inventions - conditions.

 

(1)

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this State and is to that extent void and unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this subsection.

 

(2)

An employer shall not require a provision made void and unenforceable by subsection (1) of this Section as a condition of employment or continuing employment. This Act shall not preempt existing common law applicable to any shop rights of employers with respect to employees who have not signed an employment agreement.

 

(3)

If an employment agreement entered into after January 1, 1984, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

 

A-1


If I am employed by the Company in the State of Kansas, the following provision applies:

KANSAS CODE § 44-130

Employment agreements assigning employee rights in inventions to employer; restrictions; certain provisions void; notice and disclosure.

 

(a)

Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

(1)

The invention relates to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(b)

Any provision in an employment agreement which purports to apply to an invention which it is prohibited from applying to under subsection (a), is to that extent against the public policy of this state and is to that extent void and unenforceable. No employer shall require a provision made void and unenforceable by this section as a condition of employment or continuing employment.

 

(c)

If an employment agreement contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer shall provide, at the time the agreement is made, a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

(1)

The invention relates directly to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(d)

Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.

If I am employed by the Company in the State of Minnesota, the following provision applies:

MINNESOTA STATUTES § 181.78

Agreements; Terms Relating to Inventions.

Subdivision 1. Inventions not related to employment. — Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

Subdivision 2. Effect of subdivision 1. — No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment.

Subdivision 3. Notice to employee. — If an employment agreement entered into after August 1, 1977 contains a provision requiring the employee to assign or offer to assign any of the employee’s rights in any invention to an employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer.

If I am employed by the Company in the State of New Jersey, the following provision applies:

NEW JERSEY STATUTES § 34:1B-265

Employee rights to certain inventions.

Any provision in an employment contract between an employee and employer, which provides that the employee shall assign or offer to assign any of the employee’s rights to an invention to that employer, shall not apply to an invention that the employee develops entirely on the employee’s own time, and without using the employer’s equipment, supplies, facilities or information, including any trade secret information, except for those inventions that: (a) relate to the employer’s business or actual or demonstrably anticipated research or development; or (b) result from any work performed by the employee on behalf of the employer.

 

 

A-2


If I am employed by the Company in the State of North Carolina, the following provision applies:

NORTH CAROLINA GENERAL STATUTES § 66-57.1

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employees shall assign or offer to assign any of his rights in an invention to his employer shall not apply to an invention that the employee developed entirely on his own time without using the employer’s equipment, supplies, facility or trade secret information except for those inventions that (i) relate to the employer’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and in unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this section.

If I am employed by the Company in the State of Utah, the following provisions apply:

UTAH CODE, §§ 34-39-2, 34-39-3

34-39-2.

Definitions.

As used in this chapter:

 

(1)

“Employment invention” means any invention or part thereof conceived, developed, reduced to practice, or created by an employee which is:

 

(a)

conceived, developed, reduced to practice, or created by the employee:

 

(i)

within the scope of his employment;

 

(ii)

on his employer’s time; or

 

(iii)

with the aid, assistance, or use of any of his employer’s property, equipment, facilities, supplies, resources, or intellectual property;

 

(b)

the result of any work, services, or duties performed by an employee for his employer;

 

(c)

related to the industry or trade of the employer; or

 

(d)

related to the current or demonstrably anticipated business, research, or development of the employer.

 

(2)

“Intellectual property” means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them.

34-39-3.

Scope of act — When agreements between an employee and employer are enforceable or unenforceable with respect to employment inventions — Exceptions.

 

(1)

An employment agreement between an employee and his employer is not enforceable against the employee to the extent that the agreement requires the employee to assign or license, or to offer to assign or license, to the employer any right or intellectual property in or to an invention that is:

 

(a)

created by the employee entirely on his own time; and

 

(b)

not an employment invention.

 

(2)

An agreement between an employee and his employer may require the employee to assign or license, or to offer to assign or license, to his employer any or all of his rights and intellectual property in or to an employment invention.

 

(3)

Subsection (1) does not apply to:

 

(a)

any right, intellectual property or invention that is required by law or by contract between the employer and the United States government or a state or local government to be assigned or licensed to the United States; or

 

(b)

an agreement between an employee and his employer which is not an employment agreement.

 

(4)

Notwithstanding Subsection (1), an agreement is enforceable under Subsection (1) if the employee’s employment or continuation of employment is not conditioned on the employee’s acceptance of such agreement and the employee receives a consideration under such agreement which is not compensation for employment.

 

(5)

Employment of the employee or the continuation of his employment is sufficient consideration to support the enforceability of an agreement under Subsection (2) whether or not the agreement recites such consideration.

 

(6)

An employer may require his employees to agree to an agreement within the scope of Subsection (2) as a condition of employment or the continuation of employment.

 

(7)

An employer may not require his employees to agree to anything unenforceable under Subsection (1) as a condition of employment or the continuation of employment.

 

(8)

Nothing in this chapter invalidates or renders unenforceable any employment agreement or provisions of an employment agreement unrelated to employment inventions.

If I am employed by the Company in the State of Washington, the following provision applies:

REVISED CODE OF WASHINGTON § 49.44.140

Requiring Assignment of Employees’ Rights to Inventions – Conditions.

(1) A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret

 

A-3


  information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

 

(2)

An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.

 

(3)

If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

 

A-4


Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Americans with Disabilities Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

The Parties expressly intend and agree that: (a) class action and representative action procedures are hereby waived and shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (b) each will not assert class action or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. To the extent that a dispute involves both timely filed Excluded Claims and claims subject to arbitration under this Agreement, the Parties agree that the party bringing such claims will bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

 

1


Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in New York City, New York unless prohibited by applicable law, in which case arbitration hearings shall be conducted within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of New York unless prohibited by applicable law, in which case the substantive law of the state of Employee’s primary worksite will apply. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer.

THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

2


Employee:
Signature:  

/s/ Eugene Bauer

Print Name:   Eugene Bauer
Date:   10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Luis Peña

Print Name:   Luis Peña
Print Title:   President and CEO
Date:   10/25/2024

Exhibit 10.7

AMENDMENT

TO

EMPLOYMENT AGREEMENT

This Amendment is entered into as of September 22, 2025 (“Amendment Signature Date”), by Eugene A. Bauer, MD, an individual with a residence at *** (“Employee”) and Evommune, Inc., with offices at 1841 Page Mill Road, Palo Alto, CA 94304 (“Evommune”) (together, the “Parties”), and amends that certain Employment Agreement entered into by the Parties as of November 1, 2024 (“Agreement”). Capitalized terms in this Amendment that are not otherwise defined have the meaning set forth in the Agreement.

A. Employee and Evommune entered into the Agreement to establish the terms under which Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

B. Employee and Evommune now wish to amend the Agreement as described below.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and other good and valuable consideration, the Parties hereby agree as follows:

Effective as of January 1, 2026 (“Amendment Effective Date”), Section 4 (a) of the Agreement shall be deleted in full and replaced with the following:

 

  a.

Base Salary. Employee’s annual base salary shall be $350,000, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

This Section shall remain unchanged from the Amendment Signature Date until the Amendment Effective Date. For the avoidance of doubt, this Amendment to the Agreement shall not be considered grounds for resignation for “Good Cause” under Section 5(d) of the Agreement.

Except as set forth in this Amendment, the Agreement is unaffected and shall continue in full force and effect in accordance with its terms. If there is conflict between this Amendment and the Agreement or any earlier amendment, the terms of this Amendment shall prevail.


WHEREAS the parties have caused this Amendment to be executed by a duly authorized representative to be effective as of the date first set forth above.

 

EMPLOYEE        Evommune, Inc.
By:  

/s/ Eugene A. Bauer, MD

    By:   

/s/ Luis Peña

Name: Eugene A. Bauer, MD     Name: Luis Peña
Date: 9/22/2025     Title: President and CEO
      Date: 9/23/2025

 

Page 2 of 2

Exhibit 10.8

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Kyle B. Carver, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated May 20, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as Chief Financial Officer, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Chief Executive Officer (the “CEO”) and/or the Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the CEO and the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at-will status of Employee’s employment.

 

1


  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $470,000, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 40% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the CEO or the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the CEO or the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the CEO or the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

4


  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self-employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to one and a half (1.5) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is

 

7


  required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A..

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of New York without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non-compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Luis Peña

  Luis Peña
 

Chief Executive Officer

 

Date:   10/25/2024

 

/s/ Kyle B. Carver

Kyle B. Carver

 

Date:10/25/2024

 

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Exhibit A

EVOMMUNE, INC. EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

This Employee Proprietary Information and Inventions Agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (“Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the Company (whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest. I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions”) to the Company. However, the foregoing does not purport to assign to the Company (and Assigned Inventions shall not include) any Invention that: (1) by law I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful

with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as

 

 

1


such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

  (1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

  (2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard-copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates”) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competitive Activities” means any direct or indirect non-Company activity (i) that is the same or substantially similar to Employee’s responsibilities for the Company that relates to, is substantially similar to, or competes with the Company (or its demonstrably planned interests) at the time of Employee’s termination from the Company; or (ii) involving the use or disclosure, or the likelihood of the use or disclosure, of Proprietary Information. Competitive Activities do not include being a holder of less than one percent (1%) of the outstanding equity of a public company. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so. “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and (C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

 

 

 

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v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than, in the course of my duties for the Company, terminating subordinate employees or reducing the work of or terminating consultants); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following my termination of employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; (ii) Solicit any Business Partner; or (iii) engage in any Competitive Activities (A) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (B) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (C) anywhere within a fifty

(50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and

Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival. I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement. I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder, also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over New Castle County, Delaware, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

[Signature Page Follows]

 

3


I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.   EMPLOYEE
By:   

/s/ Luis Pena

  By:   

/s/ Kyle Carver

Name:    LUIS PENA   Name:    KYLE CARVER
Title:    PRESIDENT & CEO   Address:    70 W 93rd Street, APT 10D
       

New York, NY 10025

 

Dated:    1/28/2022   Dated:    1/28/2022

SIGNATURE PAGE TO EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 


Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Americans with Disabilities Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

The Parties expressly intend and agree that: (a) class action and representative action procedures are hereby waived and shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (b) each will not assert class action or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. To the extent that a dispute involves both timely filed Excluded Claims and claims subject to arbitration under this Agreement, the Parties agree that the party bringing such claims will bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

 

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Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in New York City, New York unless prohibited by applicable law, in which case arbitration hearings shall be conducted within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of New York unless prohibited by applicable law, in which case the substantive law of the state of Employee’s primary worksite will apply. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer.

THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

2


Employee:
Signature:  

/s/ Kyle Carver

Print Name:  

Kyle Carver

 

Date:   10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Luis Peña

Print Name:   Luis Peña

Print Title:

 

  President and CEO
Date: 10/25/2024

Exhibit 10.9

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Janice Drew, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated May 20, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as EVP, Operations, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Chief Executive Officer (the “CEO”) and/or the Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the CEO and the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at-will status of Employee’s employment.

 

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  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $437,000, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 35% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the CEO or the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the CEO or the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the CEO or the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

4


  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self-employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to one and a half (1.5) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is

 

7


  required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of California without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non-compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Luis Peña

  Luis Peña
  Chief Executive Officer
Date:   10/25/2024

 

/s/ Janice Drew

Janice Drew
Date: 10/25/2024

 

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Exhibit A

EVOMMUNE, INC.

EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT

The following agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (the “Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the Company

(whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions’’) to the Company. However, the foregoing does not purport to assign to the company (and Assigned Inventions shall not include) any Invention that: (I) by law (including, without limitation, the applicable statutory provision for my state of employment set forth in Appendix A, if any) I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

 

 

1


e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under l8 USC Sections 1833(b) (1) or (2), which read as follows:

 

  (1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

  (2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard-copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates’’) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competitive Activities” means any direct or indirect non-Company activity (i) that is the same or substantially similar to Employee’s responsibilities for the Company that relates to, is substantially similar to, or competes with the Company (or its demonstrably planned interests) at the time of Employee’s termination from the Company; or (ii) involving the use or disclosure, or the likelihood of the use or disclosure, of Proprietary Information. Competitive Activities do not include being a holder of less than one percent (1%) of the outstanding equity of a public company. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so (provided that if I am a resident of California, “Cause” means to recruit, or otherwise solicit, induce or influence, or to attempt to do so). “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

 

 

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b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and (C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than terminating subordinate employees in the course of my duties for the Company); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following my termination of employment with the Company (for any or no reason, whether voluntary or involuntary),

I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; or (ii) unless I am a resident of California (A) Solicit any Business Partner or (B) engage in any Competitive Activities (I) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (II) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (III) anywhere within a fifty (50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival, I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement, I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers, I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder,

 

 

3


[****] also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware (provided that if I am a resident of California, any disputes shall be resolved in accordance with the laws of the State of California), without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over San Francisco County, California, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific

performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

-- Signature Page Follows --

 

4


I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.        EMPLOYEE
By:  

/s/ Luis Pena

    By:  

/s/ Janice Drew

Name:   Luis Pena     Name:   Janice Drew
Title:   PRESIDENT AND CEO     Address:   232 Scofield Drive
        Moraga, CA 94556
Dated:   7.1.2020     Dated:   July 6, 2020

 

SIGNATURE PAGE TO EVOMMUNE, INC. EMPLOYEE INVENTIONS AND PROPRIETARY INFORMATION AGREEMENT


Appendix A

If I am employed by the Company in the State of California, the following provision applies:

CALIFORNIA LABOR CODE § 2870

Inventions Made by an Employee

 

(a)

Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

 

(1)

Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

 

(2)

Result from any work performed by the employee for his employer.

 

(b)

To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

If I am employed by the Company in the State of Delaware, the following provision applies:

DELAWARE CODE, TITLE 19 § 805

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employee shall assign or offer to assign any of the employee’s rights in an invention to the employee’s employer shall not apply to an invention that the employee developed entirely on the employee’s own time without using the employer’s equipment, supplies, facility or trade secret information, except for those inventions that: (1) relate to the employer’s business or actual or demonstrably anticipated research or development, or (2) result from any work performed by the employee for the employer. To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and is unenforceable. An employer may not require a provision of an employment agreement made unenforceable under this section as a condition of employment or continued employment.

If I am employed by the Company in the State of Illinois, the following provision applies:

ILLINOIS COMPILED STATUTES 765 § 1060/2

Employee rights to inventions - conditions.

 

(1)

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this State and is to that extent void and unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this subsection.

 

(2)

An employer shall not require a provision made void and unenforceable by subsection (I) of this Section as a condition of employment or continuing employment. This Act shall not preempt existing common law applicable to any shop rights of employers with respect to employees who have not signed an employment agreement.

 

(3)

If an employment agreement entered into after January I, 1984, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

If I am employed by the Company in the State of Kansas, the following provision applies:

KANSAS CODE § 44-130

Employment agreements assigning employee rights in inventions to employer; restrictions; certain provisions void; notice and disclosure.

 

(a)

Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

A-1


(1)

The invention relates to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(b)

Any provision in an employment agreement which purports to apply to an invention which it is prohibited from applying to under subsection (a), is to that extent against the public policy of this state and is to that extent void and unenforceable. No employer shall require a provision made void and unenforceable by this section as a condition of employment or continuing employment.

 

(c)

If an employment agreement contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer shall provide, at the time the agreement is made, a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless:

 

(1)

The invention relates directly to the business of the employer or to the employer’s actual or demonstrably anticipated research or development; or

 

(2)

the invention results from any work performed by the employee for the employer.

 

(d)

Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.

If I am employed by the Company in the State of Minnesota, the following provision applies:

MINNESOTA STATUTES § 181.78

Agreements; Terms Relating to Inventions.

Subdivision 1. Inventions not related to employment.—Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

Subdivision 2. Effect of subdivision 1.—No employer shall require a provision made void and unenforceable by subdivision I as a condition of employment or continuing employment.

Subdivision 3. Notice to employee.—If an employment agreement entered into after August 1, 1977 contains a provision requiring the employee to assign or offer to assign any of the employee’s rights in any invention to an employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employer’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer.

If I am employed by the Company in the State of New Jersey, the following provision applies:

NEW JERSEY STATUTES § 34:IB-265

Employee rights to certain inventions.

Any provision in an employment contract between an employee and employer, which provides that the employee shall assign or offer to assign any of the employee’s rights to an invention to that employer, shall not apply to an invention that the employee develops entirely on the employee’s own time, and without using the employer’s equipment, supplies, facilities or information, including any trade secret information, except for those inventions that: (a) relate to the employer’s business or actual or demonstrably anticipated research or development; or (b) result from any work performed by the employee on behalf of the employer.

If I am employed by the Company in the State of North Carolina, the following provision applies:

NORTH CAROLINA GENERAL STATUTES § 66-57.1

Employee’s right to certain inventions.

Any provision in an employment agreement which provides that the employees shall assign or offer to assign any of his rights in an invention to his employer shall not apply to an invention that the employee developed entirely on his own time without using the employer’s equipment, supplies, facility or trade secret information except for those inventions that (i) relate to the employer’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by the employee for the employer.

 

A-2


To the extent a provision in an employment agreement purports to apply to the type of invention described, it is against the public policy of this State and in unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this section.

If I am employed by the Company in the State of Utah, the following provisions apply:

UTAH CODE, §§ 34-39-2, 34-39-3 34-39-2.

Definitions.

As used in this chapter:

 

(I)

“Employment invention” means any invention or part thereof conceived, developed, reduced to practice, or created by an employee which is:

 

(a)

conceived, developed, reduced to practice, or created by the employee:

 

(i)

within the scope of his employment;

 

(ii)

on his employer’s time; or

 

(iii)

with the aid, assistance, or use of any of his employer’s property, equipment, facilities, supplies, resources, or intellectual property;

 

(b)

the result of any work, services, or duties performed by an employee for his employer;

 

(c)

related to the industry or trade of the employer; or

 

(d)

related to the current or demonstrably anticipated business, research, or development of the employer.

 

(2)

“Intellectual property” means any and all patents, trade secrets, know-how, technology, confidential information, ideas, copyrights, trademarks, and service marks and any and all rights, applications, and registrations relating to them.

34-39-3.

Scope of act — When agreements between an employee and employer are enforceable or unenforceable with respect to employment inventions — Exceptions.

 

(1)

An employment agreement between an employee and his employer is not enforceable against the employee to the extent that the agreement requires the employee to assign or license, or to offer to assign or license, to the employer any right or intellectual property in or to an invention that is:

 

(a)

created by the employee entirely on his own time; and

 

(b)

not an employment invention.

 

(2)

An agreement between an employee and his employer may require the employee to assign or license, or to offer to assign or license, to his employer any or all of his rights and intellectual property in or to an employment invention.

 

(3)

Subsection (1) does not apply to:

 

(a)

any right, intellectual property or invention that is required by law or by contract between the employer and the United States government or a state or local government to be assigned or licensed to the United States; or

 

(b)

an agreement between an employee and his employer which is not an employment agreement.

 

(4)

Notwithstanding Subsection (1), an agreement is enforceable under Subsection (1) if the employee’s employment or continuation of employment is not conditioned on the employee’s acceptance of such agreement and the employee receives a consideration under such agreement which is not compensation for employment.

 

(5)

Employment of the employee or the continuation of his employment is sufficient consideration to support the enforceability of an agreement under Subsection (2) whether or not the agreement recites such consideration.

 

(6)

An employer may require his employees to agree to an agreement within the scope of Subsection (2) as a condition of employment or the continuation of employment.

 

(7)

An employer may not require his employees to agree to anything unenforceable under Subsection (1) as a condition of employment or the continuation of employment.

 

(8)

Nothing in this chapter invalidates or renders unenforceable any employment agreement or provisions of an employment agreement unrelated to employment inventions.

If I am employed by the Company in the State of Washington, the following provision applies:

REVISED CODE OF WASHINGTON § 49.44.140

Requiring Assignment of Employees’ Rights to Inventions - Conditions.

 

(1)

A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employee’s rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.

 

A-3


(2)

An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.

 

(3)

If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employee’s rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employer’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

 

A-4


Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

(for California employees)

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the California Fair Employment and Housing Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (including, but not limited to, harassment and/or discrimination claims to the extent excluded by applicable law) (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

Except to the extent that representative claims under California’s Private Attorneys General Act (“PAGA”) are excluded from this Agreement, Employee agrees that all Claims (including individual claims under PAGA) must be brought in Employee’s individual capacity, and not as a plaintiff or participating class member in any purported class, collective, or consolidated proceeding, and Employee expressly waives any right Employee had or may have had to have any dispute brought, heard, or arbitrated as a class action and/or as a collective action. The arbitrator has no authority to adjudicate class, collective, or consolidated proceedings, other than to enforce this provision. Also except for Excluded Claims and as provided otherwise by law and herein, Employee further understands and agrees that Employee may not bring any Claims as a plaintiff or participating class member in any purported representative action or proceeding, and Employee expressly waives any right Employee had or may have had to have any dispute brought, heard, or arbitrated as a representative action. The arbitrator has no authority to adjudicate representative proceedings, other than to enforce this provision. This class action waiver shall be interpreted consistent with applicable federal law and state law to the extent it is not preempted by federal law.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules.

 

1


The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in the State of California, within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of California. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer.

 

2


THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

3


Employee:
Signature:  

/s/ Janice Drew

Print Name:  

Janice Drew

 

Date:   10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Luis Peña

Print Name:   Luis Peña
Print Title:   President and CEO
Date:   10/25/2024

Exhibit 10.10

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Gregory S. Moss, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated June 29, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as Chief Business & Legal Officer, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Chief Executive Officer (the “CEO”) and/or the Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the CEO and the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at- will status of Employee’s employment.

 

1


  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $480,500, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 40% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long- term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the CEO or the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the CEO or the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the CEO or the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

4


  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self- employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to one and a half (1.5) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

7


  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of New York without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non- compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Luis Peña

  Luis Peña
  Chief Executive Officer
Date:   10/25/2024

 

/s/ Gregory S. Moss

Gregory S. Moss

 

Date:10/25/2024

 

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Exhibit A

EVOMMUNE, INC. EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

This Employee Proprietary Information and Inventions Agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (“Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the Company (whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest. I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions”) to the Company. However, the foregoing does not purport to assign to the Company (and Assigned Inventions shall not include) any Invention that: (1) by law I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful

with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as

 

 

1


such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

 

(1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

 

(2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard- copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates”) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competing Product” means any product or product candidate, or the research and development thereof, of any person or entity (other than the Company) that directly competes with a product or product candidate of the Company that was, immediately prior to my termination date, either approved by the by the U.S. Food & Drug Administration (“FDA”) for sale in the United States or being studied in a human clinical trial identified and governed by the FDA as a Phase 2 or Phase 3 clinical trial.. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so. “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and

(C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

 

 

2


v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than, in the course of my duties for the Company, terminating subordinate employees or reducing the work of or terminating consultants); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following the termination of my employment with the Company (excluding a termination by the Company without cause or a resignation by me for good reason, each as such terms are customarily defined), I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; (ii) with respect to any Business Partner unknown to me as of the date hereof, Solicit any Business Partner; or (iii) research, develop, market and/or sell, or attempt to research, develop, and/or provide Competing Products (A) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (B) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (C) anywhere within a fifty (50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

e. Approval/Investing. Notwithstanding any provision contained in this Section 4, nothing shall prevent me from engaging in any business activity approved in advance by the Company’s Chief Executive Officer and/or Board of Directors, or from investing in the securities of any company that are listed on a national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act, but only if I am not involved in the management of any such company in any material respect and provided that I do not own more than an aggregate of three percent (3%) of the outstanding equity securities of any such company.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival. I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement. I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder, also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over New Castle County, Delaware, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

 

[Signature Page Follows]

 

3


I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.     EMPLOYEE
By:  

/s/ Luis Pena

    By:  

/s/ Greg Moss

Name:   LUIS PENA          Name:   Greg Moss
Title:  

PRESIDENT & CEO

 

    Address:   401 East 74th St, 8D New York, NY 10021
Dated:   5/12/2022     Dated:   5/11/2022

SIGNATURE PAGE TO EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Americans with Disabilities Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

The Parties expressly intend and agree that: (a) class action and representative action procedures are hereby waived and shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (b) each will not assert class action or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. To the extent that a dispute involves both timely filed Excluded Claims and claims subject to arbitration under this Agreement, the Parties agree that the party bringing such claims will bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

 

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Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in New York City, New York unless prohibited by applicable law, in which case arbitration hearings shall be conducted within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of New York unless prohibited by applicable law, in which case the substantive law of the state of Employee’s primary worksite will apply. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer.

THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

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Employee:
Signature:  

/s/ Greg Moss

Print Name: Greg Moss

 

Date: 10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Luis Peña

Print Name: Luis Peña

Print Title: President and CEO

 

Date: 10/25/2024

Exhibit 10.11

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into between Evommune, Inc., a Delaware corporation (the “Company”), and Jeegar P. Patel, an individual with a residence at *** (“Employee”). Each of Company and Employee a “Party” and collectively, the “Parties”. This Agreement shall be effective as of November 1, 2024 (the “Effective Date”), and except with respect to any equity or equity-based or linked award agreements outstanding as of the Effective Date, supersedes in all respects all prior agreements between Employee and the Company regarding the subject matter herein, including without limitation (i) that certain letter agreement between Employee and the Company dated October 26, 2022 (the “Letter Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.

WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

  1.

Employment. Employee shall continue to be employed as Chief Scientific Officer, and shall have the duties, responsibilities and authority as may from time to time be assigned by the Company’s Chief Executive Officer (the “CEO”) and/or the Board of Directors of the Company (the “Board”), that are consistent with such positions in a company of the size and nature of the Company. Employee will report to the CEO and the Board. Employee agrees while they are employed by the Company to devote their full business time and attention to the activities of the Company and to not engage in other employment which could constitute a conflict of interest or otherwise materially interfere with their obligations or the performance of their duties to the Company as provided in this Agreement. Employee agrees to perform their duties hereunder diligently and to use their best efforts, skill and ability to promote the interests of the Company and its affiliates.

 

  2.

Term. The term of Employee’s employment pursuant to the terms and conditions of this Agreement shall be effective as of the Effective Date and shall continue until terminated by either Party in accordance with Section 5 hereof (the “Term”).

 

  3.

At-Will Employment. The nature of the employment relationship between Employee and the Company shall continue to be “at-will” and may be terminated at any time by either Employee or the Company upon notice to the other, for any or no reason, subject to the terms of Section 5. In addition, the Company reserves the right to modify Employee’s compensation, position, duties or reporting relationship at any time to meet business needs. Employee acknowledges that nothing in this Agreement, or in any written or unwritten policies of the Company, including the Company’s employee handbook, changes the at- will status of Employee’s employment.

 

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  4.

Compensation and Benefits

 

  a)

Base Salary. Employee’s annual base salary shall be $427,000, paid in accordance with the Company’s normal payroll schedule, procedures and policies (which schedule, procedures and policies may be modified from time to time) and subject to applicable deductions as required by law and elected by Employee. The base salary in effect at any given time is referred to herein as “Base Salary.” The Company shall review Employee’s salary on an annual basis and may, in its discretion, consider and declare from time to time increases in the Base Salary that it pays Employee.

 

  b)

Equity Incentives: Employee will be eligible to receive equity-based awards pursuant to any plans or arrangements the Company may have in effect from time to time. The Board or a committee of the Board shall determine in its discretion whether Employee shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Any such equity awards may be subject to accelerated vesting in accordance with this Agreement. The terms of any option awards granted to Employee on or after the Effective Date will provide that if Employee is involuntarily terminated without Cause (as defined in this Agreement) or if Employee terminates their employment with Good Reason (as defined in this Agreement), then Employee will be eligible to exercise any options that have vested as of the termination date until the earlier of: (i) the second anniversary of the termination date, and (ii) the date the options would otherwise expire pursuant to their terms.

 

  c)

Discretionary Bonus. Employee will be eligible for an annual (calendar year) target bonus of 35% of the Base Salary (the “Target Bonus”), based on Company performance and Employee performance. The evaluation of both Company performance and Employee performance, and the amount of any bonus awarded hereunder (the “Discretionary Bonus”), will be at the discretion of the Board’s Compensation Committee, and no bonus or amount of bonus is guaranteed. The Company shall review Employee’s Target Bonus percentage on an annual basis and may, in its discretion, consider and declare from time to time increases in the Target Bonus percentage, including with potential individual performance modifiers, that it pays Employee. Subject to the provisions of Section 5 of this Agreement, Employee must be employed on the date the bonus is paid in order to receive any Discretionary Bonus described hereunder.

 

  d)

Benefits. Employee will be entitled to coverage under or participation in all benefit plans provided to members of executive management of the Company. The Company may, in its sole discretion, at any time amend or terminate its benefit plans. Employee shall be entitled to participate in the Company’s flexible paid time off offerings, in accordance with the Company’s then-current policies.

 

  e)

Expenses. Employee shall be entitled to receive prompt reimbursement for all reasonable and documented out-of-pocket business expenses incurred by Employee during the course of employment in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company.

 

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  5.

Termination

 

  a)

Death or Disability. Employee’s employment hereunder shall terminate immediately upon their death or upon 30 days written notice by the Company to Employee that Employee’s employment has been terminated due to Employee’s Disability. For the purposes of this Agreement, “Disability” shall mean upon the earlier of: (i) the date Employee becomes entitled to receive disability benefits under the Company’s long- term disability plan; or (ii) Employee’s inability due to physical or mental disability to perform the essential functions of Employee’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of one hundred eighty (180) days (which need not be consecutive) in any twelve (12)-month period. Nothing in this Section 5(a) shall be construed to waive Employee’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

 

  b)

Termination for Cause. Employee’s employment with the Company may be terminated by the CEO or the Board immediately for Cause. In this context the term “Cause” shall mean: (i) Employee’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Employee with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Employee to carry out, in all material respects, the legal instructions of the CEO or the Board; (iv) a material breach by Employee of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Employee’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Employee’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Employee for ten (10) days following receipt by Employee of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Employee that the Company reasonably believes cannot be adequately cured.

 

  c)

Termination Without Cause. Employee’s employment may be terminated by the CEO or the Board without Cause, at any time, without prior notice.

 

  d)

Resignation by Employee for Good Reason. Employee may resign from their employment hereunder at any time for Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any of the following “Good Reason Conditions”: (i) a material adverse change in Employee’s function, duties or responsibilities, which change would cause Employee’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, it being expressly understood that a Change in Control (as defined below) would result in a material adverse change in Employee’s function, duties and responsibilities; (ii) a material diminution in Employee’s Base Salary; or (iii) a change in the geographic

 

3


  location at which Employee provides services to the Company by the Company which increases Employee’s one-way commuting distance more than 50 miles. In the case of clauses (i) to (iii) above, Employee may resign for Good Reason only to the extent they have complied with the Good Reason Process. “Good Reason Process” shall mean that (A) Employee reasonably determines in good faith that a Good Reason Condition has occurred; (B) Employee notifies the Company in writing of the first occurrence of the Good Reason Condition within sixty (60) days of the first occurrence of such Good Reason Condition; (C) Employee cooperates in good faith with the Company’s efforts, for a period not less than ten (10) days following such notice (the “Cure Period”), to remedy the Good Reason Condition; (D) notwithstanding such efforts, the Good Reason Condition continues to exist; and (E) Employee terminates their employment within ten (10) days after the end of the Cure Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

“Change in Control” shall mean (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

 

  e)

Resignation by Employee Without Good Reason. Employee may resign from his employment hereunder without Good Reason at any time upon written notice to the Company. Following any such notice, the Company may unilaterally accelerate the employment termination date or reduce or remove any and all of Employee’s duties, authority or responsibilities with the Company, and any such acceleration, reduction or removal shall not constitute Good Reason.

 

4


  f)

Effect of Termination.

 

  i.

Termination For Cause or due to Death, Disability or Resignation without Good Reason. In the event that Employee’s employment hereunder is terminated for Cause, due to Employee’s death or Disability or Employee resigns without Good Reason, the Company shall pay Employee (i) their Base Salary through the date of such termination, any unreimbursed business expense (in accordance with Company policy), on or before the time required by law; and (ii) any vested benefits Employee may have under any employee benefit plan of the Company through such date of termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).

 

  ii.

Termination Without Cause or for Good Reason (not in connection with Change in Control). In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason for any reason other than clause (iv) of the definition of Good Reason, then the Company shall pay Employee their Accrued Benefit. In addition, subject to Employee signing a separation and general release agreement in a form and manner satisfactory to the Company (the “Release Agreement”), the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay Employee severance in an amount equal to (x) twelve (12) months of their then-current Base Salary plus (y) an amount equal to the greater of (1) the full amount of their Target Bonus for the calendar year in which the termination of employment occurs and (2) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs (collectively, the “Severance”). This Severance will be combined together and paid in equal installments, and in accordance with the Company’s regular payroll schedule, and subject to required withholdings, over the one-year period following the date of termination of employment, provided, however, that the first payment shall be made on the date that is sixty (60) days following the date of termination and such payment shall include all installments that would have been payable during such sixty (60) day period following termination but for the delay of such first payment, and the remaining installments shall be paid in accordance with the Company’s regular payroll schedule thereafter through the end of such one-year period;

 

  (B)

Subject to Employee’s timely election of continuation coverage under COBRA, the Company will continue payment of Employee’s medical, dental and vision insurance coverage during the twelve (12) month period following the first day of the month following the date of termination or resignation (the “Coverage Period”) to the same extent that the Company paid for such coverage

 

5


  immediately prior to the date of termination or resignation, in a manner intended to avoid any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”), subject to the eligibility requirements and other terms and conditions of such insurance coverage, provided that in the event Employee becomes employed by another entity or individual (and not self- employed) during that one-year period, they will so notify the Company, and such employment will end the Company’s obligation to continued payments for medical, dental, and vision insurance coverage; and

 

  (C)

Each equity incentive award granted by the Company to Employee that is then outstanding, or any other then outstanding equity incentive award granted to Employee under any successor plan or otherwise (each an “Award” and, collectively the “Awards”), including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). For purposes of this Section 5(f)(ii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in this Section 5(f)(ii) above. This Section 5(f)(ii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

 

  iii.

Termination Without Cause or for Good Reason Upon or Following a Change in Control. In the event that Employee’s employment hereunder is terminated without Cause, or Employee resigns with Good Reason, in either case during the three (3) months prior to, as of, or within twelve (12) months following the effective date of a Change in Control, then, in lieu of the Severance and insurance continuation coverage described in Section 5(f)(ii) above and subject to Employee signing a Release Agreement, the Release Agreement becoming irrevocable, and fully effective all within sixty (60) days after the date of termination, and Employee not breaching any of their post-employment contractual obligations to the Company, the Company will provide Employee the following severance benefits:

 

  (A)

The Company shall pay to Employee, as severance, a lump sum equal to one and a half (1.5) times the sum of (x) the then-current Base Salary plus (y) the greater of (i) the Target Bonus for the calendar year of termination and (ii) the average annual bonus paid to Employee over the three (3) calendar years ending prior to the year in which such termination of employment occurs, minus any amounts paid pursuant to Section 5(f)(ii)(A) to the extent such payments commenced prior to such termination of employment, with payment of such lump sum on the sixtieth (60th) day following termination of employment;

 

6


  (B)

The Company shall increase the Coverage Period set forth in Section 5(f)(ii)(B) from twelve (12) months to twenty-four (24) months or until the date Employee becomes eligible for health insurance coverage from a new employer (excluding self-employment), if earlier, provided that Employee remains eligible for these benefits under COBRA and provided further that, if at any time the Company determines in its reasonable discretion that the payment of the COBRA premiums would result in a violation of the nondiscrimination rules of the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then the payments in this clause (ii) shall cease; and

 

  (C)

Each Award that is then outstanding, including Awards that would otherwise vest only upon satisfaction of performance criteria, shall accelerate and vest in full as of the date of such termination and, if applicable, become exercisable (with any such Awards subject to vesting based on satisfaction of performance criteria vesting at target). In the case of the consummation of a Change in Control in which an outstanding Award is not continued, assumed or substituted for by the Company or the acquiror or any of its affiliates as part of such Change in Control transaction, then such Award will become fully vested and exercisable on or immediately prior to the closing date of the Change in Control, whether Employee terminates employment or not. For purposes of this Section 5(f)(iii), the unvested portion of Awards will remain in effect for no less than three months in the case of a termination occurring before a Change in Control, but in any case no longer than the original term or expiration date of the Award. The provision of accelerated vesting hereunder is subject to a valid and fully effective comprehensive release of claims that can no longer be revoked as set forth in Section 5(f)(iii) above. This Section 5(f)(iii)(C) is in addition to, and is not intended to supersede or replace, any other provision for accelerated vesting of equity under the Plan, an Award or otherwise.

In no event shall Employee be eligible to receive severance and payments pursuant to both Sections 5(f)(ii) and 5(f)(iii) of this Agreement.

 

  g)

Excise Tax Adjustment.

 

  i.

If any payment or benefit Employee will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is

 

7


  required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Employee. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

  ii.

Notwithstanding any provision of this Section 5(g) to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Employee as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

  iii.

Unless Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 5(g). The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

 

  iv.

If Employee receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5(g)(i) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Employee agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.8(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5(g(i), Employee shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

8


  6.

Confidentiality and Proprietary Rights. As a condition of continued employment and in consideration of the benefits set forth herein, Employee agrees to continue to abide by the previously executed Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

  7.

Miscellaneous

 

  a)

Governing Law. This Agreement will be governed by the laws of the State of New Jersey without regard to conflict of laws principles.

 

  b)

Arbitration. Except as otherwise required by law, any dispute, claim, question or controversy arising under or relating to this letter, Employee’s employment with the Company or the termination thereof shall be resolved pursuant to the Arbitration Agreement attached hereto as Exhibit B.

 

  c)

Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), (ii) sent by email (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (iii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers of the Company and Employee as set forth in the records of the Company.

 

  d)

Section Headings: Construction. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word -including” does not limit the preceding words or terms.

 

  e)

Amendments; Entire Agreement; Severability; Successors and Assigns. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Party against which enforcement of such change, waiver, discharge or termination is sought. This Agreement, together with Exhibits A and B and any indemnification agreement entered into with the Company by Employee embodies the entire agreement and the understanding among the Parties, superseding all prior agreements and understandings relating to the subject matter hereof, including the Letter Agreement, but with the exception of any equity or equity-based or linked award agreements outstanding as of the Effective Date, and any Company employee benefit plan outstanding as of the Effective Date. Employee understands and agrees that this Agreement shall govern their employment with the Company and its related entities, and shall supersede in its

 

9


  entirety any other form of agreement, written or oral, relating to Employee’s employment with the Company, except for the agreements and plans set forth in the preceding sentence. If any provision of this Agreement shall be held illegal, invalid or unenforceable, in whole or in part, such provision shall be modified to the minimum extent necessary to make it legal, valid and enforceable, and the legality, validity and enforceability of the remaining provisions shall not be affected thereby. This Agreement shall be binding upon the Company’s successors and assigns.

 

  f)

Representations. Employee represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which Employee is bound, (ii) Employee has had the opportunity to review the Agreement with counsel, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms.

 

  g)

Cooperation. Following termination of employment with the Company for any reason, Employee shall cooperate with the Company, as requested by the Company, to effect a transition of Employee’s responsibilities and to ensure that the Company is aware of all matters being handled by Employee. Employee will be compensated at a reasonable rate for such cooperation, to be determined by the Parties in good faith at that time.

 

  h)

Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

 

  i)

Section 409A and Taxes. All forms of compensation paid to Employee by the Company, including any payments made pursuant to this Agreement, are subject to reduction (or payment by Employee, to the extent that additional amounts are required) to reflect applicable withholding and payroll taxes and other applicable deductions. Employee agrees that the Company does not have a duty to design its compensation policies in a manner that minimizes his tax liabilities, and Employee will not make any claim against the Company related to tax liabilities arising from his compensation. The payments and benefits under this Agreement are intended, and will be construed, to be exempt from or comply with Section 409A; provided, however, that nothing in this Agreement shall be construed or interpreted to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from Employee to the Company or to any other entity or person. Any payment to Employee under this Agreement that is subject to Section 409A and that is contingent on a termination of employment is contingent on a “separation from service” within the meaning of Section 409A. To the extent the period during which Employee may review and execute a Release Agreement begins in one taxable year and ends in a second taxable year, to the extent required to comply with Section 409A, any payments subject to Section 409A will not be made or commence until the second taxable year. If, upon separation from service, Employee is a “specified employee” within the meaning of Section 409A, any payment under this Agreement that is subject to Section

 

10


  409A and triggered by a separation from service and would otherwise be paid within six months after Employee’s separation from service will instead be paid in the seventh month following such separation from service or, if earlier, upon Employee’s death (to the extent required by Section 409A(a)(2)(B)(i)). Each installment of severance pay or compensation hereunder is considered a separate payment for purposes of Section 409A. Any taxable reimbursement due under the terms of this Agreement shall be paid no later than December 31 of the year after the year in which the expense is incurred, and all taxable reimbursements and in-kind benefits shall be provided in accordance with Treas. Reg. § 1.409A-3(i)(1)(iv). The Parties agree that if necessary to avoid non- compliance with Section 409A, they will cooperate in good faith to modify the terms of this Agreement or any applicable equity award, provided, that such modification shall endeavor to maintain the economic intent of this Agreement or any such equity award.

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first written above.

 

EVOMMUNE, INC.
By:  

/s/ Luis Peña

  Luis Peña
  Chief Executive Officer
Date:   10/25/2024

 

/s/ Jeegar P. Patel

Jeegar P. Patel
Date: 10/25/2024

 

11


Exhibit A

EVOMMUNE, INC. EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

This Employee Proprietary Information and Inventions Agreement (the “Agreement”) between Evommune, Inc., a Delaware corporation (“Company”), and the individual identified on the signature page to this Agreement (“Employee” or “I”) is effective as of the first day of Employee’s employment by the Company and confirms and memorializes the agreement that (regardless of the execution date hereof) the Company and I have had since the commencement of my employment (which term, for purposes of this Agreement, shall be deemed to include any relationship of service to the Company that I may have had prior to actually becoming an employee). I acknowledge that this Agreement is a material part of the consideration for my employment or continued employment by the Company. In exchange for the foregoing and for other good and valuable consideration, including my access to and use of the Company’s Inventions (defined below) and Proprietary Information (defined below) for performance of my employment, training and/or receipt of certain other valuable consideration, the parties agree as follows:

 

1. No Conflicts. I have not made, and agree not to make, any agreement, oral or written, that is in conflict with this Agreement or my employment with the Company. I will not violate any agreement with, or the rights of, any third party. When acting within the scope of my employment (or otherwise on behalf of the Company), I will not use or disclose my own or any third party’s confidential information or intellectual property (collectively, “Restricted Materials”), except as expressly authorized by the Company in writing. Further, I have not retained anything containing or reflecting any confidential information or intellectual property of a prior employer or other third party, whether or not created by me.

2. Inventions.

a. Definitions. “Company Interest” means any of the Company’s current and anticipated business, research and development, as well as any product, service, other Invention or Intellectual Property Rights (defined below) that is sold, leased, used, licensed, provided, proposed, under consideration or under development by the Company. “Intellectual Property Rights” means any and all patent rights, copyright rights, trademark rights, mask work rights, trade secret rights, sui generis database rights and all other intellectual and industrial property rights of any sort throughout the world (including any application therefor and any rights to apply therefor, as well as all rights to pursue remedies for infringement or violation thereof). “Invention” means any idea, concept, discovery, learning, invention, development, research, technology, work of authorship, trade secret, software, firmware, content, audio-visual material, tool, process, technique, know-how, data, plan, device, apparatus, specification, design, prototype, circuit, layout, mask work, algorithm, program, code, documentation or other material or information, tangible or intangible, and all versions, modifications, enhancements and derivative works thereof, whether or not it may be patented, copyrighted, trademarked or otherwise protected.

b. Assignment. The Company shall own, and I hereby assign and agree to assign, all right, title and interest in and to all Inventions (including all Intellectual Property Rights therein, related thereto or embodied therein) that are collected, made, conceived, developed, reduced to practice or set out in any tangible medium of expression or otherwise created, in whole or in part (collectively, “Created”), by me during the term of my employment with the Company that either (i) arise out of any use of the Company’s facilities, equipment, Proprietary Information or other assets (collectively, “Company Assets”) or any research or other activity conducted by, for or under the direction of the Company (whether or not conducted (A) at the Company’s facilities; (B) during working hours or (C) using Company Assets), or (ii) are useful with or in or relate directly or indirectly to any Company Interest. I will promptly disclose and provide all of the foregoing Inventions (the “Assigned Inventions”) to the Company. However, the foregoing does not purport to assign to the Company (and Assigned Inventions shall not include) any Invention that: (1) by law I cannot be required to so assign; or (2) otherwise meets all of the following requirements: (I) the Invention is Created entirely on my own time; (II) the Invention is Created entirely without use of any Company Assets and (III) the Invention is not useful

with or related to any Company Interest. Nevertheless, if I believe any Invention Created by me during the term of my employment is not within the definition of Assigned Inventions, I will nevertheless disclose it to the Company so that the Company may make its assessment.

c. Assurances. I hereby make and agree to make all assignments to the Company necessary to effectuate and accomplish the Company’s ownership in and to all Assigned Inventions. I will further assist the Company, at its expense, to evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights specified to be so owned or assigned. I hereby irrevocably designate and appoint the Company and its officers as my agents and attorneys-in-fact, coupled with an interest, to act for and on my behalf to execute and file any document and to perform all other lawfully permitted acts to further the purposes of the foregoing with the same legal force and effect as if executed by me.

d. Other Inventions. If (i) I use or disclose any Restricted Materials when acting within the scope of my employment (or otherwise to or on behalf of the Company) or (ii) any Assigned Invention cannot be fully made, used, reproduced, sold, distributed, modified, commercialized or otherwise exploited (collectively, “Exploited”) without using, misappropriating, infringing or violating any Restricted Materials, I hereby grant and agree to grant to the Company a perpetual, irrevocable, worldwide, fully paid-up, royalty-free, non-exclusive, assignable, transferable, sublicensable right and license to use, disclose, fully Exploit and exercise all rights in such Restricted Materials and all Intellectual Property Rights embodied therein or related thereto. I will not use or disclose any Restricted Materials for which I am not fully authorized to grant the foregoing license.

e. Moral Rights. To the extent allowed by applicable law, the terms of this Section 2 include all rights of paternity, integrity, disclosure, withdrawal and any other rights that may be known or referred to as moral rights, artist’s rights, droit moral or the like (collectively, “Moral Rights”). To the extent I retain any such Moral Rights under applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized by the Company, and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratification, consent or agreement from time to time as requested by the Company. Furthermore, I agree that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world and without any further compensation, the Company may and is hereby authorized to use my name, likeness and voice in connection with promotion of its business, products and services, and to allow others to do the same.

3. Proprietary Information.

a. Definition; Restrictions on Use. I agree that all Assigned Inventions (and all other financial, business, legal and technical information regarding or relevant to any Company Interest that is not generally publicly known), including the identity of and any other information relating to the Company’s employees, Affiliates and Business Partners (as

 

 

1


such terms are defined below), that I develop, learn or obtain during my employment or that are received by or for the Company in confidence, constitute “Proprietary Information.” I will hold in strict confidence and not directly or indirectly disclose or use any Proprietary Information, except as required within the scope of my employment. My obligation of nondisclosure and nonuse of Proprietary Information under this Section shall continue until I can document that it is or becomes readily generally available to the public without restriction through no fault of mine (understanding that breach of this Agreement would be such a fault) or, if a court requires a shorter duration, then the maximum time allowable by law will control. Furthermore, I understand that this Agreement does not affect my immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

  (1)

An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

  (2)

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

b. Upon Termination. Upon termination of my employment (for any or no reason, whether voluntary or involuntary), I will promptly identify and, as directed by the Company, destroy, delete or return to the Company all items containing or embodying Proprietary Information (including all original or copies of content, whether in electronic or hard- copy form), except that I may keep my personal copies of (i) my compensation records; (ii) materials distributed to shareholders generally and (iii) this Agreement.

c. Company Systems. I also recognize and agree that I have no expectation of privacy with respect to the Company’s networks, telecommunications systems or information processing systems (including, without limitation, stored computer files, email messages and voicemail messages or other devices (including personal devices)) in which Company Proprietary Information resides, is stored or is passed through (collectively, “Company Systems”), and in order to ensure compliance with work rules and safety concerns, the Company or its agents may monitor, at any time and without further notice to me, any Company Systems and any of my activity, files or messages on or using any Company Systems, regardless of whether such activity occurs on equipment owned by me or the Company. I further agree that any property situated on the Company’s premises and owned, leased or otherwise possessed by the Company, including computers, computer files, email, voicemail, storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. I understand and acknowledge that (A) any such searches or monitoring efforts are not formal accusations of wrongdoing but rather part of the procedure of an investigation and (B) refusal to consent to such a search may be grounds for discipline.

4. Restricted Activities. For the purposes of this Section 4, the term “the Company” includes the Company and all other persons or entities that control, are controlled by or are under common control with the Company (“Affiliates”) and for whom Employee performed responsibilities or about whom Employee has Proprietary Information.

a. Definitions. “Competitive Activities” means any direct or indirect non-Company activity (i) that is the same or substantially similar to Employee’s responsibilities for the Company that relates to, is substantially similar to, or competes with the Company (or its demonstrably planned interests) at the time of Employee’s termination from the Company; or (ii) involving the use or disclosure, or the likelihood of the use or disclosure, of Proprietary Information. Competitive Activities do not include being a holder of less than one percent (1%) of the outstanding equity of a public company. “Business Partner” means any past (i.e., within the twelve (12) months preceding Employee’s termination from the Company), present or prospective (i.e., actively pursued by the Company within the twelve (12) months preceding Employee’s termination from the Company) customer, vendor, supplier, distributor or other business partner of the Company with whom Employee comes into contact during Employee’s employment with the Company or about whom Employee had knowledge by reason of Employee’s relationship with the Company or because of Employee’s access to Proprietary Information. “Cause” means to recruit, employ, retain or otherwise solicit, induce or influence, or to attempt to do so. “Solicit”, with respect to Business Partners, means to (A) service, take orders from or solicit the business or patronage of any Business Partner for Employee or any other person or entity, (B) divert, entice or otherwise take away from the Company the business or patronage of any Business Partner, or to attempt to do so, or (C) solicit, induce or encourage any Business Partner to terminate or reduce its relationship with the Company.

b. Acknowledgments.

i. I acknowledge and agree that (A) the Company’s business is highly competitive; (B) secrecy of the Proprietary Information is of the utmost importance to the Company, and I will learn and use Proprietary Information in the course of performing my work for the Company and (C) my position may require me to establish goodwill with Business Partners and employees on behalf of the Company and such goodwill is extremely important to the Company’s success, and the Company has made substantial investments to develop its business interests and goodwill.

ii. I agree that the limitations as to time, geographical area and scope of activity to be restrained in this Section 4 are coextensive with the Company’s footprint and my performance of responsibilities for the Company and are therefore reasonable and not greater than necessary to protect the goodwill or other business interests of the Company. I further agree that such investments are worthy of protection and that the Company’s need for protection afforded by this Section 4 is greater than any hardship I may experience by complying with its terms.

iii. I acknowledge that my violation or attempted violation of the agreements in this Section 4 will cause irreparable damage to the Company or its Affiliates, and I therefore agree that the Company shall be entitled as a matter of right to an injunction out of any court of competent jurisdiction, restraining any violation or further violation of such agreements by me or others acting on my behalf. The Company’s right to injunctive relief shall be cumulative and in addition to any other remedies provided by law or equity.

iv. Although the parties believe that the limitations as to time, geographical area and scope of activity contained herein are reasonable and do not impose a greater restraint than necessary to protect the goodwill or other business interests of the Company, if it is judicially determined otherwise, the limitations shall be reformed to the extent necessary to make them reasonable and not to impose a restraint that is greater than necessary to protect the goodwill or other business interests of the Company.

 

 

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v. In any such case, the Company and I agree that the remaining provisions of this Section 4 shall be valid and binding as though any invalid or unenforceable provision had not been included.

c. As an Employee. During my employment with the Company, I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company (other than, in the course of my duties for the Company, terminating subordinate employees or reducing the work of or terminating consultants); (ii) Solicit any Business Partner; (iii) act in any capacity in or with respect to any commercial activity which competes, or is reasonably likely to compete, with any business that the Company conducts, proposes to conduct or demonstrably anticipates conducting, at any time during my employment with the Company or (iv) enter into in an employment, consulting or other similar relationship with another person or entity that requires a significant time commitment without the prior written consent of the Company.

d. After Termination. For the period of twelve (12) months immediately following my termination of employment with the Company (for any or no reason, whether voluntary or involuntary), I will not directly or indirectly: (i) Cause any person to cease or reduce their services (as an employee or otherwise) to the Company; (ii) Solicit any Business Partner; or (iii) engage in any Competitive Activities (A) anywhere the Company offers its services or has customers during my employment with the Company or where my use or disclosure of Proprietary Information could materially disadvantage the Company regardless of my physical location; or (B) anywhere the Company offers its services or has customers and where I have responsibility for the Company or (C) anywhere within a fifty (50) mile radius of any physical location I work for the Company. The foregoing timeframes shall be increased by the period of time beginning from the commencement of any violation of the foregoing provisions until such time as I have cured such violation.

5. Employment at Will. I agree that this Agreement is not an employment contract for any particular term. I have the right to resign and the Company has the right to terminate my employment at will, at any time, for any or no reason, with or without cause. This Agreement does not purport to set forth all of the terms and conditions of my employment, and as an employee of the Company, I have obligations to the Company which are not described in this Agreement. However, the terms of this Agreement govern over any such terms that are inconsistent with this Agreement, and supersede the terms of any similar form that I may have previously signed. This Agreement can only be changed by a subsequent written agreement signed by the Chief Executive Officer or President of the Company, or an officer designee authorized in writing by the foregoing or the Company’s Board of Directors.

6. Protected Activity Not Prohibited. I understand that nothing in this Agreement limits or prohibits me from filing a charge or complaint with, or otherwise communicating or cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and

Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the National Labor Relations Board, the state division of human rights, a local commission on human rights, or law enforcement (“Government Agencies”), or from communicating with my attorney, including disclosing documents or other information as permitted by law, without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, in making any such disclosures or communications, I agree to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Proprietary Information to any parties other than the Government Agencies or my attorney.

7. Survival. I agree that any change or changes in my employment title, duties, compensation, or equity interest after the signing of this Agreement shall not affect the validity or scope of this Agreement. I agree that the terms of this Agreement, and any obligations I have hereunder, shall continue in effect after termination of my employment, regardless of the reason, and whether such termination is voluntary or involuntary, and that the Company is entitled to communicate my obligations under this Agreement to any of my potential or future employers. I will provide a copy of this Agreement to any potential or future employers of mine, so that they are aware of my obligations hereunder. This Agreement, and any obligations I have hereunder, also shall be binding upon my heirs, executors, assigns and administrators, and shall inure to the benefit of the Company, its Affiliates, successors and assigns. This Agreement and any rights and obligations of the Company hereunder may be freely assigned and transferred by the Company, in whole or part, to any third party.

8. Miscellaneous. Any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. Any legal action or proceeding relating to this Agreement shall be brought exclusively in the state or federal courts located in or with jurisdiction over New Castle County, Delaware, and each party consents to the jurisdiction thereof; however, the Company may seek injunctive relief and specific performance in any court of competent jurisdiction. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. Unless expressly provided otherwise, each right and remedy in this Agreement is in addition to any other right or remedy, at law or in equity, and the exercise of one right or remedy will not be deemed a waiver of any other right or remedy. If one or more provisions of this Agreement is held to be illegal or unenforceable under applicable law, such illegal or unenforceable portion shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable. I acknowledge and agree that any breach or threatened breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, the Company is entitled to injunctive relief with respect thereto (without the necessity of posting any bond) in addition to any other remedies.

 

 

[Signature Page Follows]

 

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I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS THAT IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, WITH THE UNDERSTANDING THAT I EITHER (1) HAVE RETAINED A COPY OF THIS AGREEMENT OR (2) MAY REQUEST A COPY OF THIS AGREEMENT FROM THE COMPANY AT ANY TIME.

 

EVOMMUNE, INC.     EMPLOYEE
By:  

/s/ Luis Pena

    By:  

/s/ Jeegar Patel

Name:   LUIS PENA     Name:   Jeegar Patel
Title:   PRESIDENT & CEO     Address:   3 Galligen Drive
        Hillsborough NJ, 08844
Dated:   8/1/2022     Dated:   8/11/2022

SIGNATURE PAGE TO EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


Exhibit B

EMPLOYEE ARBITRATION AGREEMENT

Evommune, Inc. (the “Company”), and the undersigned (“Employee”, and together with the Company, the “Parties”) hereby agree that, to the fullest extent permitted by law, any and all claims or controversies between them (or between Employee and any present or former officer, director, agent, or employee of the Company or any parent, subsidiary, or other entity affiliated with the Company) relating in any manner to the employment or the termination of employment of Employee, including but not limited to the interpretation, applicability, or enforceability of this Employee Arbitration Agreement (this “Agreement”), shall be resolved by final and binding arbitration. The arbitration of any dispute is intended to facilitate a prompt, fair and efficient resolution of covered disputes. Except as specifically provided herein, any arbitration proceeding shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of JAMS (the “JAMS Rules”), available at https://www.jamsadr.com/rules-employment-arbitration/ or provided upon request by the Company. Claims subject to arbitration, which shall be decided exclusively by the arbitrator, include, but are not limited to, the interpretation, applicability, or enforceability of this Agreement, potential claims relating to employment and termination of employment, claims for violation of local, state or federal law, statute, regulation or ordinance or common law to the fullest extent permitted by law, whether such claims seek equitable relief, injunctive relief, damages or penalties including, but not limited to any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Americans with Disabilities Act (“Claims”). This Agreement pertains to all such disputes between the Parties and applies to all employment-related actions brought against any employee, officer, director, agent, benefit plan administrator, successor or assign of the Company which arise out of or relate to their actions on behalf of the Company. However, claims for unemployment compensation, workers’ compensation, claims under the National Labor Relations Act, claims related to sexual assault and sexual harassment, and other claims excluded by law shall not be subject to arbitration (the “Excluded Claims”). Nothing in this Agreement shall be interpreted to mean that Employee is precluded from filing complaints with the federal Equal Employment Opportunity Commission (or state equivalent) and National Labor Relations Board. The Parties agree that if any dispute involves both timely filed Excluded Claims and Claims subject to this Agreement, the Parties agree to bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

The Parties expressly intend and agree that: (a) class action and representative action procedures are hereby waived and shall not be asserted, nor will they apply, in any arbitration pursuant to this Agreement; (b) each will not assert class action or representative action claims against the other in arbitration or otherwise; and (c) the Parties shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. To the extent that a dispute involves both timely filed Excluded Claims and claims subject to arbitration under this Agreement, the Parties agree that the party bringing such claims will bifurcate and stay for the duration of the arbitration proceedings any such Excluded Claims.

A neutral and impartial arbitrator shall be chosen by mutual agreement of the Parties; however, if the Parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure set forth in the JAMS Rules. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the state in which the Employee is employed at the time the claim arose, and only such power, and shall follow the law. The Parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue a reasoned opinion, in writing, and therein state the essential findings of fact and conclusions of law on which the decision and award, if any, is based. The arbitration proceedings will allow for reasonable discovery under the JAMS Rules, and the arbitrator selected according to this Agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the Claims were brought in a court of law. The arbitrator shall have the authority to consider and decide pre-hearing motions, including dispositive motions. The Parties agree that the arbitration proceedings themselves will be considered confidential, and no outcome or award will be published by the arbitrator or the Parties, whether directly or through their agents. Judgment on the award may be entered in any court which would otherwise have had jurisdiction over the matter. The Parties agree that the arbitrator’s decision is final, conclusive and binding, and that they will abide by and perform any award rendered by the arbitrator.

 

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Either the Company or Employee may bring an action in court to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, neither Party shall initiate or prosecute any lawsuit in any way related to any arbitrable claim, including without limitation any claim as to the making, existence, validity, or enforceability of the agreement to arbitrate. All arbitration hearings under this Agreement shall be conducted in New York City, New York unless prohibited by applicable law, in which case arbitration hearings shall be conducted within 30 miles of Employee’s primary worksite. In ruling on procedural and substantive issues raised in the arbitration itself, the arbitrator shall in all cases apply the substantive law of the State of New York unless prohibited by applicable law, in which case the substantive law of the state of Employee’s primary worksite will apply. This Agreement is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and relates to matters involving interstate commerce.

Nothing in this Agreement precludes a Party from filing an administrative charge before an agency that has jurisdiction over an arbitrable claim. In addition, either Party may, at its option, seek injunctive relief in a court of competent jurisdiction.

The Company shall bear the costs of the arbitrator, forum and filing fees. Each Party shall pay its own costs and attorney’s fees, unless a Party prevails on a statutory claim, and the statute provides that the prevailing Party is entitled to payment of its attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’ fees and costs to the prevailing Party as provided by law.

This Agreement is not, and shall not be construed to create, any contract of employment, express or implied. This Agreement does not alter Employee’s at-will employment status. Either Employee or the Company may terminate Employee’s employment at any time, for any reason or no reason, with or without prior notice.

If any provision of this Agreement shall be held by a court or the arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. The Parties’ obligations under this Agreement shall survive the termination of Employee’s employment with the Company and the expiration of this Agreement.

The Company and Employee understand and agree that this Arbitration Agreement contains a full and complete statement of any agreements and understandings regarding resolution of disputes between the Parties, and the Parties agree that this Arbitration Agreement supersedes all previous agreements, whether written or oral, express or implied, relating to the subjects covered in this Agreement. The Parties also agree that the terms of this Arbitration Agreement cannot be revoked or modified except in a written document signed by both Employee and the Company’s Chief Executive Officer.

THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT. THE PARTIES AGREE THAT NONE OF THOSE CLAIMS OR CONTROVERSIES SHALL BE RESOLVED BY A JURY TRIAL.

THE PARTIES FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH THEIR LEGAL COUNSEL AND HAVE AVAILED THEMSELVES OF THAT OPPORTUNITY TO THE EXTENT THEY WISH TO DO SO.

[Signature page follows.]

 

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Employee:
Signature:  

/s/ Jeegar Patel

Print Name:   Jeegar Patel
Date:   10/25/2024
Company:
Evommune, Inc.
Signature:  

/s/ Luis Peña

Print Name:   Luis Peña
Print Title:   President and CEO
Date:   10/25/2024

Exhibit 10.12

EVOMMUNE, INC.

STOCK APPRECIATION RIGHT GRANT NOTICE

Evommune, Inc. (the “Company”) hereby grants to Participant a Stock Appreciation Right (“Stock Appreciation Right” or “SAR”) with respect to the number of Stock Units set forth below. The SAR is subject to all of the terms and conditions as set forth in this Grant Notice and in the Stock Appreciation Right Agreement (the “Agreement”), the latter of which is attached hereto and incorporated herein in its entirety. Capitalized terms not explicitly defined in this Grant Notice will have the meanings set forth in the Agreement. If the Company uses an electronic capitalization table system (such as Carta) and the fields below are blank or the information is otherwise provided in a different format electronically, the blank fields and other information (such as type of grant) shall be deemed to come from the electronic capitalization system and is considered part of this Grant Notice.

 

Participant:    Luis Peña             
Date of Grant:    December 9, 2024          
Vesting Commencement Date:    December 9, 2024          
Number of Stock Units Subject to SAR:    3,790,449             
Exercise Price of SAR:    $0.35

 

Expiration Date:   The “Expiration Date” for the SAR is the earlier of: (a) the 10-year anniversary of the Date of Grant or (b) the date of termination of Participant’s Service for any reason (with the exception of any termination of Service, whether alone or in connection with any other event, that results in acceleration of vesting of the SARs).
Vesting Schedule:   To vest, a SAR must meet each of the Service-Based Requirement and the Liquidity Event Requirement, each as defined below. For SARs that have satisfied the Service- Based Requirement prior to a Liquidity Event, such SARs will only become vested if and when the Liquidity Event Requirement is satisfied. Following the satisfaction of the Liquidity Event Requirement, SARs will only become vested if the Service- Based Requirement is satisfied with respect to those particular SARs.
  Notwithstanding the paragraph above, 2,142,428 Stock Units underlying the SAR (the “Series C Preferred SARs”) shall only vest if the Series C Preferred Stock Requirement is satisfied. For the avoidance of doubt, the Series C Preferred SARs will vest only if each of the Service-Based Requirement, the Liquidity Event Requirement, and the Series C Preferred Stock Requirement, are all satisfied.
  The “Service-Based Requirement” will be satisfied in installments as to the SARs as follows: one fourth (1/4) of the Stock Units subject to the SAR shall vest on each of the first four anniversaries of the Vesting Commencement Date, subject to Participant’s continued Service through each such date. For the avoidance of doubt, upon termination of Participant’s Service (other than for any termination of Service, whether alone or in connection with any other event, that results in acceleration of vesting of the SARs), any unvested Stock Units (whether or not they have satisfied the Service-Based Requirement) will be forfeited at no actual cost to the Company and Participant will have no further right, title or interest in or to such Stock Units.


  The “Liquidity Event Requirement” means the occurrence of a Liquidity Event (as defined in Section 23 of the Agreement), subject to Participant’s continued Service through such occurrence.
  The “Series C Preferred Stock Requirement” will be satisfied as to 0.052328895 of one Series C Preferred SAR for each share of Series C Preferred Stock issued in accordance with the Preferred Stock Purchase Agreement subsequent to October 30, 2024, subject to Participant’s continued Service from the Date of Grant through the applicable date of issuance. For purposes of this Grant Notice, Series C Preferred Stock shall mean a share of Series C Preferred Stock of the Company as set forth in that certain Preferred Stock Purchase Agreements dated October 30, 2024 (the “Preferred Stock Purchase Agreement”).
  On the date that the Stock Units underlying a SAR become fully vested (whether by satisfying the two vesting requirements, or three vesting requirements, as applicable), such Stock Units shall be a “Vested SAR”, and such date shall be the “Vesting Date”.
Settlement:   If a SAR vests as provided for above, the Company will issue one share of Common Stock, or deliver the cash equivalent, each as determined in the Company’s sole discretion, for an amount equal to the Fair Market Value of a share of Common Stock on the settlement date less the Exercise Price set forth herein for each Vested SAR. The shares (or cash equivalent) will be issued in accordance with the terms set forth in the Agreement.

Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and agrees to, this Grant Notice and the Agreement. Participant further acknowledges that as of the Date of Grant, this Grant Notice and the Agreement set forth the entire understanding between Participant and the Company regarding the SAR and supersedes all prior oral and written agreements, promises and/or representations on that subject, with the exception of any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law. This SAR functions as a restricted stock unit award.

 

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By accepting the SAR the undersigned Participant acknowledges having received and read this Grant Notice and the Agreement and agrees to all of the terms and conditions set forth in these documents. Participant consents to receive such documents by electronic delivery and to participate in the SAR through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. This Grant Notice may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

EVOMMUNE, INC.:     PARTICIPANT:
By:   /s/ Kyle Carver     /s/ Luis Peña
  Signature       Signature
Title:   Chief Financial Officer     Date:   1/17/2025
Date:   1/17/2025      

ATTACHMENT:    Stock Appreciation Right Agreement

 

3.


EVOMMUNE, INC.

STOCK APPRECIATION RIGHT AGREEMENT

Pursuant to the Stock Appreciation Right Grant Notice (the “Grant Notice”) and this Stock Appreciation Right Agreement (the “Agreement”) and in consideration of your services, Evommune, Inc. (the “Company”) has awarded you a Stock Appreciation Right (the “SAR”) in respect of the number of Stock Units set forth on the Grant Notice. Capitalized terms have the meanings given to them in Section 23 of this Agreement.

The details of your SAR, in addition to those set forth in the Grant Notice, are as follows.

1. GRANT OF THE SAR. This SAR was granted in consideration of your services to the Company. Except as otherwise provided herein, you will not be required to make any payment to the Company (other than past and future services to the Company) with respect to your receipt of the SAR, the vesting of the SAR or the delivery of consideration to be issued in respect of the SAR. The Company may settle the SAR Payment Amount (as defined below) in cash or other property, including shares of Common Stock, which SAR Payment Amount will be in partial or in full satisfaction of the settlement of your SAR in whole or in part, and, to the extent applicable, references in this Agreement and the Grant Notice to shares of Common Stock issuable in connection with the settlement of your SAR will include the potential payment of the SAR Payment Amount in cash or other property upon settlement of such right.

2. VESTING. Subject to the limitations contained herein, your SAR will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice.

3. NUMBER OF SHARES.

(a) The number of Stock Units subject to the Award may be adjusted from time to time for capitalization adjustments, as provided at Section 20.

(b) Any additional SARs, shares, cash or other property that become subject to the Award pursuant to this Section 3 if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of issuance as applicable to the other shares of Stock covered by the Award.

(c) Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section 3. The Board will, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the adjustments referred to in this Section 3.

4. TERM. Except as set forth in your Grant Notice, the term of your SAR expires upon the earliest of the following:

(a) immediately upon the termination of your Service for any reason; or

(b) the Expiration Date indicated in your Grant Notice.

5. ADMINISTRATION. The Board will administer the Award. The Board may delegate administration of the Award to a Committee or Committees. The Board will have the following powers:

 

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(a) To construe and interpret the Award, and to establish, amend and revoke rules and regulations for administration thereof. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Award, in a manner and to the extent it will deem necessary or expedient to make the Award fully effective.

(b) To settle all controversies regarding the Award.

(c) To accelerate, in whole or in part, the time at which the Award may be settlement or vest (or the time at which consideration may be issued in settlement thereof).

(d) To suspend or terminate the Award at any time. Except as otherwise provided herein, suspension or termination of the Award will not materially impair Participant’s rights without the Participant’s written consent.

(e) To amend the Award in any respect the Board deems necessary or advisable. If required by applicable law or listing requirements, and except as provided herein relating to Capitalization Adjustments as provided for in Section 20, the Company will seek Participant’s approval of any amendment to the extent required by applicable law. Except as otherwise provided herein, no amendment of the Award will materially impair Participant’s rights hereunder without the Participant’s written consent.

(f) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Award.

All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding, and conclusive on all persons.

6. SECURITIES LAW COMPLIANCE. Solely to the extent the Company determines, in its discretion, to settle the SAR in shares of Common Stock or other securities, you may not be issued any shares of Common Stock or other securities in respect of your SAR unless either (i) the shares are registered under the Securities Act; or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your SAR also must comply with other applicable laws and regulations governing the SAR, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.

7. TRANSFER RESTRICTIONS. In addition to any other limitation on transfer created by applicable securities laws, you will not sell, assign, hypothecate, donate, encumber or otherwise dispose of all or any part of the SARs subject to the Award or any interest in such SARs, whether voluntarily or by operation of law, by gift, by entering into a contract that requires shares to be issued at a future date, or otherwise, except in compliance with this Agreement, the Company’s bylaws and applicable securities law.

8. SETTLEMENT.

(a) Subject to the satisfaction of the Tax-Related Items set forth in Section 12 of this Agreement, in the event one or more Stock Units underlying the SAR vest, except as otherwise set forth herein, within sixty (60) days of the Vesting Date, for each vested Stock Unit underlying the SAR, the Company will issue one share of Common Stock, or deliver the cash equivalent, each as determined in the Company’s sole discretion, for an amount equal to the Fair Market Value of a share of Common Stock on the settlement date less the Exercise Price set forth in the Grant Notice for each Vested SAR. The shares (or cash equivalent) will be issued in accordance with the terms set forth herein) (such date, the “Original Issuance Date”).

 

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(b) To the extent applicable at a Vesting Date, when the Company elects to issue Common Stock with respect to the Vested SAR, the Common Stock is registered under the Securities Act, if:

(i) the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Arrangement”)), and

(ii) either (1) no Tax-Related Items apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Tax-Related Items by withholding shares of Common Stock from the shares of Common Stock otherwise due, on the Original Issuance Date, to you under this Agreement, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 12 of this Agreement (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit you to pay the Tax-Related Items in cash,

then the shares of Common Stock that would otherwise be issued to you on the Original Issuance Date will not be issued on such Original Issuance Date and will instead be issued on the first business day when you are not prohibited from selling shares of Common Stock in the open public market, but in no event later than (a) December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or (b) if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the year immediately following the year in which the shares of Common Stock covered by this Agreement are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).

(c) The form of such issuance (e.g., a stock certificate or electronic entry evidencing such shares of Stock) will be determined by the Company. In all cases, the issuance of shares under this Award is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner.

(d) If required by the Company, the settlement of SARs may be made contingent on your execution of any additional documents specified by the Company, including without limitation, any applicable securityholders’ agreement, investor rights agreement, voting agreement, drag-along agreement, right of first refusal and co-sale agreement or similar agreement that may be in effect from time to time among the Company and the holders of its capital securities (and which may contain, among other provisions, additional restrictions on transfer or rights of repurchase in favor of the Company).

(e) If and to the extent that all or a portion of the Stock Units under your SAR vest as provided for in the Grant Notice and are settled in cash, then the Company will deliver cash or other consideration having a Fair Market Value equal to (i) (a) the Fair Market Value per share of Common Stock on the settlement date less (b) the Exercise Price per SAR as set forth in the Notice Agreement, multiplied by (ii) the number of Stock Units that are vested (the “SAR Payment Amount”). If any portion of the SAR does not vest or is not settled on or prior to the Expiration Date or the termination date of the SAR, this SAR will terminate without any payment of consideration therefor and will not be settled hereunder.

(f) To the extent Participant is terminated by the Company for Cause, or following Participant’s separation from Service pursuant to Section 409A of the Code, it is determined that grounds for “Cause” existed, any cash or shares of Common Stock that are issuable or were issued pursuant to this Award shall be forfeited or subject to recoupment by the Company.

 

3.


9. DIVIDENDS. You will receive no benefit or adjustment to your SAR with respect to any dividend (cash or otherwise) or other distribution that does not result from a Capitalization Adjustment as provided in Section 20 of this Agreement.

10. RESTRICTIVE LEGENDS. Any shares of Common Stock issued in respect of your SAR will be endorsed with appropriate legends determined by the Company.

11. STOCK APPRECIATION RIGHT NOT AN EMPLOYMENT OR SERVICE CONTRACT.

(a) Your Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate in accordance with applicable law and your employment or engagement agreement, if any. Nothing in this Agreement (including, but not limited to, the vesting of your SAR pursuant to the schedule set forth in the Grant Notice herein or the settlement of your SAR), or any covenant of good faith and fair dealing that may be found implicit in this Agreement will: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement unless such right or benefit has specifically accrued under the terms of this Agreement; or (iv) deprive the Company or an Affiliate of any right it may have right to terminate you without regard to any future vesting opportunity that you may have.

(b) By accepting this SAR, you acknowledge and agree that the right to continue vesting in the SAR pursuant to the vesting schedule set forth in Section 2 and in the Grant Notice is earned only by continuing as an employee, director or consultant at the will of the Company or an Affiliate (not through the act of being hired, being granted this SAR or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You further acknowledge and agree that such a reorganization could result in the termination of your Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the SAR. You further acknowledge and agree that this Agreement, the transactions contemplated hereunder and the vesting schedule set forth in the Grant Notice or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant with the Company or an Affiliate for the term of this Agreement, for any period, or at all, and will not interfere in any way with your right or the right of the Company or an Affiliate to terminate your Service at any time, with or without cause and with or without notice.

12. RESPONSIBILITY FOR TAXES.

(a) You acknowledge that, regardless of any action taken by the Company, the ultimate liability for all income tax, payroll tax, fringe benefits tax, social security, payment on account or other tax- related items related to the Award and legally applicable to you or deemed by the Company in its discretion to be an appropriate charge to you even if legally applicable to the Company or an Affiliate (“Tax-Related Items”) is and remains your responsibility and may exceed the amount actually withheld by the Company or an Affiliate.

 

4.


(b) Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company to satisfy all Tax-Related Items.

(c) Finally, you agree to pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of your receipt and settlement of the Award that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares of Common Stock or the cash consideration (as applicable) if you fail to comply with your obligations in connection with the Tax-Related Items.

(d) The Company has no duty or obligation to minimize the tax or social security consequences to you of this SAR and will not be liable to you for any adverse tax or social security consequences to you arising in connection with this SAR. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax and social security consequences of this SAR and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so.

13. LOCK-UP PERIOD. By accepting your SAR, you agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to any shares of Common Stock or other securities held by you, for a period of 180 days following the effective date of a registration statement filed in connection with any going public transaction such as an IPO (the “Lock-Up Period”); provided, however, that nothing contained in this Section shall prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock-Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock or other securities until the end of such period. You also agree that any transferee of any shares of Common Stock (or other securities) of the Company held by you will be bound by this Section. The underwriters of the Company’s stock are intended third party beneficiaries of this Section and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

14. INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS. You acknowledge that, depending on your country, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell the shares of Common Stock or other securities or rights to the shares of Common Stock or other securities under the Award during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country or any country in which the Company’s shares of Common Stock or other securities are registered or listed). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal advisor on this matter.

15. MISCELLANEOUS.

(a) Your SAR is unfunded, and as a holder of a vested SAR, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Common Stock or other securities pursuant to this Agreement. You will not have voting or any other rights as a holder of the Company with respect to shares of Common Stock or other securities to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 8 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a holder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

 

5.


(b) Any notices provided in connection with your SAR will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five days after deposit in the national mail, postage prepaid, addressed to you at the last address you provided to the Company. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to this SAR by electronic means or to request your acceptance of this SAR by electronic means. By accepting this SAR you consent to receive such documents by electronic delivery and, if requested, to agree to the use of an on-line or electronic system established and maintained by the Company or another third party designated by the Company for purposes of managing or exercising this your SAR.

(c) The rights and obligations of the Company under your SAR may be transferred to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns. Your rights and obligations under your SAR may only be assigned with the prior written consent of the Company.

(d) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your SAR.

(e) You acknowledge and agree that you have reviewed your SAR in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your SAR, and fully understand all provisions of your SAR.

(f) This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(g) All obligations of the Company under this Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

16. NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your SAR, or your acquisition of the underlying Stock Units or other consideration thereunder. You should consult with your own personal tax, legal and financial advisors regarding your SAR before taking any action.

17. CHOICE OF LAW. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without regard to that state’s conflicts of laws rules.

18. SEVERABILITY. If all or any part of this Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

19. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the SAR subject to this Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.

 

6.


20. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; OTHER CORPORATE EVENTS.

(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: the class(es) and number of Stock Units or other securities and any price subject to the Agreement, including the Exercise Price. The Board will make such adjustments, and its determination will be final, binding, and conclusive.

(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, this Award will terminate immediately prior to the completion of such dissolution or liquidation.

(c) Corporate Transaction. In the event of a Corporate Transaction, then, notwithstanding any other provision herein, the Board may take one or more of the following actions with respect to the Award, contingent upon the closing or completion of the Corporate Transaction (and after accounting for any acceleration provided for by other agreements governing equity and equity-related interests held by the Participant):

(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Award or to substitute a similar Award (including, but not limited to, an Award(s) to acquire the same consideration paid to the holders of the Company pursuant to the Corporate Transaction);

(ii) accelerate the vesting, in whole or in part, of the Award (and, if applicable, the time at which the Award may be settled) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with the Award terminating if not settled (if applicable) at or prior to the effective time of the Corporate Transaction;

(iii) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Award.

(iv) cancel or arrange for the cancellation of the Award, to the extent not vested or not settled prior to the effective time of the Corporate Transaction, in exchange for such cash consideration (including no consideration) as the Board, in its sole discretion, may consider appropriate; and

(v) make a payment, in such form as may be determined by the Board equal to the excess, if any, of the value of the property the Participant would have received upon the settlement of the Award immediately prior to the effective time of the Corporate Transaction. For clarity, this payment may be zero ($0). Payments under this provision may be delayed to the same extent that payment of consideration to the holders of Common Stock in connection with the Corporate Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies, and the Board, in its sole discretion, may condition the Participant’s right to receive such payment upon the Participant’s delivery of an agreement (x) acknowledging such escrows, earn-outs, holdbacks or other contingencies, (y) appointing a representative to act on the Participant’s behalf following the Corporate Transaction with respect to matters relating to the Corporate Transaction, and/or (z) agreeing to or acknowledging any indemnification or other agreements or obligations required of recipients of proceeds pursuant to the Corporate Transaction.

 

7.


The Board may take different actions with respect to the vested and unvested portions of the Award.

(d) Change in Control. The Award(s) may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.

21. COMPLIANCE WITH SECTION 409A OF THE CODE. This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulations Section 1.409A-1(b)(4). Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule, then this Award shall be construed and administered so that such Award complies with Section 409A of the Code (including if any amendments are required for such compliance, as determined solely by the Company) and the related Treasury regulations promulgated thereunder. To the extent this Award is determined to constitute non-qualified deferred compensation subject to Section 409A of the Code, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulations Section 1.409A-1(h)), then the issuance of any cash or shares that would otherwise be made upon the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code. Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2). Notwithstanding any contrary provision of the the Grant Notice, or of this Agreement, under no circumstances will the Company reimburse you for any taxes or other costs under Section 409A or any other tax law or rule. All such taxes and costs are solely your responsibility.

22. DATA PRIVACY. You explicitly and unambiguously acknowledge and consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, your employer, the Company and its affiliates for the exclusive purpose of implementing, administering and managing your participation in this Agreement. You understand that the Company, its affiliates and your employer hold certain personal information about you, including, but not limited to, name, home address and telephone number, date of birth, social security number (or other identification number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all equity awards or any other entitlement to shares of Stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, managing and administering the Award (“Data”). You understand that the Data may be transferred to any third parties assisting in the implementation, administration and management of this Agreement, that these recipients may be located in your country or elsewhere, in particular in the US, and that the recipient country may have different data privacy laws providing less protections of your personal data than your country. You may request a list with the names and addresses of any potential recipients of the Data by contacting the stock plan administrator at the Company (the “Stock Plan Administrator”). You acknowledge that the recipients may receive, possess, process, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in this Agreement, including any requisite transfer of such Data, as may be required, to a broker or other third party with whom you may elect to deposit any shares of Stock acquired upon the vesting and settlement of the Award. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in this Agreement. You may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Stock Plan Administrator in writing

 

8.


23. DEFINITIONS. As used in the Grant Notice and this Agreement, the following definitions will apply to the capitalized terms indicated below:

(a) “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

(b) “Award” means this right to receive consideration relating to the value of the Stock Units granted hereunder.

(c) “Board” means the Board of Directors of the Company or an authorized committee thereof.

(d) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Stock Units subject to the Award after the Date of Grant without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, Common Stock or other equity dividend, Common Stock or other equity split, reverse Common Stock or other equity split, dividend in property or assets other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares of Common Stock, exchange of shares of Common Stock, change in corporate structure, or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

(e) “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term (including, for the avoidance of doubt, an employment agreement) and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) Participant’s conviction of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (ii) any material misconduct by Participant with respect to the Company, any affiliate of the Company, or any of their respective employees, customers, clients, business partners or suppliers; (iii) in carrying out their duties and responsibilities set forth herein, refusal, neglect or failure by Participant to carry out, in all material respects, the legal instructions of the Board; (iv) a material breach by Participant of any of the provisions contained in this Agreement, or in any material agreement between the Parties; or (v) Participant’s failure to comply in all material respects with the internal policies or procedures of the Company or its affiliates, or any laws or regulations applicable to Participant’s conduct as an employee of the Company; which in each case of clauses (ii) to (v) above, remains uncured by Participant for ten (10) days following receipt by Participant of written notice of same, which notice shall include reasonable detail as to the nature of the potential resulting Cause. However, no notice and opportunity to cure shall be required in the event of conduct by Participant that the Company reasonably believes cannot be adequately cured.

(f) “Change in Control” (i) the acquisition (other than from the Company) by any Person, as defined herein, of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act of 1934, as amended) of more than 50% of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Company Voting Stock”); (ii) the

 

9.


closing of a sale or other conveyance of all or substantially all of the assets of the Company; (iii) the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; in each case provided, however, that such transaction constitutes a “change in control event” as described in Section 409A of the Code. For purposes of this definition, a “Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, as amended, other than: employee benefit plans sponsored or maintained by the Company and by entities controlled by the Company or an underwriter of the Common Stock in a registered public offering. The Board will determine whether multiple events are related and to be treated in the aggregate as a single Change in Control, and its determination will be final, binding and conclusive.

(g) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

(h) “Committee” means a committee of the Board.

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means Evommune, Inc., a Delaware corporation.

(k) “Consultant” means a person, excluding Employees and Outside Directors, who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor and who qualifies as a consultant or advisor under Rule 701(c)(1) of the Securities Act or under Instruction A.1.(a)(1) of Form S-8 under the Securities Act.

(l) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii) a sale or other disposition of at least 50 percent of the outstanding securities of the Company;

(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation;

(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(v) a Change in Control.

(m) “Director” means a member of the Board.

(n) “Disability” means that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

10.


(o) “Employee” means any person employed by the Company or an Affiliate. However, service solely as an Outside Director, or payment of a fee for such services, will not cause an Outside Director to be considered an “Employee” for purposes of the Award.

(p) “Entity” means a corporation, partnership, limited liability company or other entity.

(q) “Fair Market Value” means, as of any date, the value of a Stock Unit determined by the Board. To determine the Stock Appreciation Value of each Stock Unit at the time of a Liquidity Event, the company will reduce the Fair Market Value at the time of a Liquidity Event by any debt owed to investors or creditors and any expenses required for and related to the Liquidity Event transaction.

(r) “IPO” means the effective date of a registration statement of the Company filed under the Securities Act of 1933 for the sale of the Company’s Stock (whether or not such registration was the result of an initial public offering).

(s) “Liquidity Event” means, prior to the 10-year anniversary of the Date of Grant, the first to occur of either of the below:

(i) immediately prior to the consummation of a Change in Control; or

(ii) after an IPO, at such time as the 30-day volume-weighted average price (“VWAP”) of the Common Stock is greater than three times the initial Series C price per share ($1.59453) on an as-converted equivalent ($4.78359).

(t) “Outside Director” means a member of the Board of Directors who is not an Employee.

(u) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares of Common Stock voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(v) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Date of Grant shall be considered a Parent commencing as of such date.

(w) “Participant” means the recipient of this Award as set forth in the Grant Notice.

(x) “Rule 405” means Rule 405 promulgated under the Securities Act.

(y) “Rule 701” means Rule 701 promulgated under the Securities Act.

(z) “Securities Act” means the Securities Act of 1933, as amended.

(aa) “Service” means service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

 

11.


(bb) “Stock Unit” means and represents the value equivalent to one share of Common Stock.

(cc) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation equivalent to a certain number of shares of Common Stock, granted pursuant to the terms and conditions of this Agreement.

(dd) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding equity having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

*   *   *

This Agreement will be deemed to be signed by you upon the signing or acceptance by you of the Grant Notice to which it is attached.

 

12.

Exhibit 10.13

***Certain identified information has been omitted from this exhibit because it is both (i) not material and (ii) of the type that the Registrant treats as private or confidential. Such omitted information is indicated by brackets (“[***]”) in this exhibit.***

LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

DATED AS OF DECEMBER 17, 2020

BY AND BETWEEN

DERMIRA, INC.

AND

EVOMMUNE, INC.


TABLE OF CONTENTS

 

 

     Page  

ARTICLE 1 DEFINITIONS

     1  

ARTICLE 2 LICENSES

     16  

2.1

  Grant to Licensee      16  

2.2

  Additional Licensing Provisions.      16  

2.3

  Performance by Affiliates and Sublicensees.      16  

2.4

  Restrictive Covenant      17  

2.5

  [***]      17  

2.6

  Data Transfer      17  

2.7

  Technology Transfer      17  

2.8

  Takeda License      18  

2.9

  [***]      18  

ARTICLE 3 DEVELOPMENT

     18  

3.1

  Overview of Development      18  

3.2

  Objectives under the Development Plan.      19  

3.3

  Development Plan.      19  

3.4

  Development Costs      20  

3.5

  Records, Reports and Information.      20  

3.6

  Ownership of Development Data      21  

3.7

  Development Diligence Failures      21  

ARTICLE 4 REGULATORY

     21  

4.1

  Regulatory Data and Regulatory Materials      21  

4.2

  Regulatory Filings and Regulatory Approvals.      21  

4.3

  No Other Regulatory Filings      22  

4.4

  Pharmacovigilance and Medical Inquiries.      22  

4.5

  Regulatory Authority Communications Received by a Party.      23  

4.6

  Recall, Withdrawal, or Market Notification of Product      24  

4.7

  Regulatory Diligence      24  

ARTICLE 5 COMMERCIALIZATION

     24  

5.1

  Commercialization in the Field in the Territory      24  

5.2

  Licensee’s Performance.      24  

 

i


5.3

  Reports      25  

5.4

  Promotional Materials.      25  

5.5

  Product Trademarks and Product Trade Dress.      26  

5.6

  Commercialization Data      26  

ARTICLE 6 MANUFACTURING

     27  

6.1

  General      27  

6.2

  Manufacturing      27  

6.3

  Packaging and Labeling; Certain Other Manufacturing Activities      27  

ARTICLE 7 PAYMENTS

     27  

7.1

  Upfront License Fee      27  

7.2

  Development Milestone Payments      27  

7.3

  Product Sales Milestone Payments      29  

7.4

  Royalty Payments      30  

7.5

  Generic Competition      30  

7.6

  Anti-Stacking      31  

7.7

  Takeda Payments      31  

7.8

  Payments.      31  

7.9

  Taxes and Withholding.      32  

7.10

  Currency Conversion      33  

7.11

  Late Payments      33  

7.12

  Records      33  

7.13

  Audits      34  

7.14

  Equity Issuance      34  

ARTICLE 8 INTELLECTUAL PROPERTY MATTERS

     35  

8.1

  Patent Filing, Prosecution and Maintenance      35  

8.2

  Patent and Trademark Oppositions      35  

8.3

  Abandoned Patents      35  

8.4

  Notice      36  

8.5

  Enforcement of Intellectual Property Rights      36  

8.6

  Cooperation in Enforcement Proceedings      37  

8.7

  Defense      37  

8.8

  Employees      38  

8.9

  Patent Marking      38  

8.10

  Patent Challenge      38  

 

ii


ARTICLE 9 REPRESENTATIONS, WARRANTIES AND COVENANTS; COMPLIANCE

     38  

9.1

  Mutual Representations and Warranties      38  

9.2

  Additional Representations and Warranties of Dermira      39  

9.3

  Additional Representations, Warranties and Covenants of Licensee      39  

9.4

  Financial Representations, Warranties and Covenants of Licensee.      40  

9.5

  Compliance Representations, Warranties and Covenants by Licensee.      41  

9.6

  Additional Compliance Covenants.      42  

9.7

  Disclaimer      42  

9.8

  No Other Representations or Warranties      42  

ARTICLE 10 INDEMNIFICATION

     43  

10.1

  Indemnification by Dermira      43  

10.2

  Indemnification by Licensee      43  

10.3

  Indemnification Procedures      43  

10.4

  Limitation of Liability      44  

10.5

  Insurance      44  

ARTICLE 11 CONFIDENTIALITY

     45  

11.1

  Confidential Information.      45  

11.2

  Publicity      47  

11.3

  Securities Filings      47  

11.4

  Publications      47  

11.5

  Use of Names      47  

11.6

  Unauthorized Disclosure of Confidential Information      48  

11.7

  Survival      48  

ARTICLE 12 TERM AND TERMINATION

     48  

12.1

  Term      48  

12.2

  Termination for Material Breach      48  

12.3

  Termination for Non-Payment      48  

12.4

  Termination Related to Financing      48  

12.5

  Termination as a Result of Bankruptcy      49  

12.6

  Termination for Convenience      49  

12.7

  Termination for Compliance Breach      49  

 

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ARTICLE 13 EFFECTS OF EXPIRATION OR TERMINATION

     49  

13.1

  Termination of Licenses      49  

13.2

  Assignments      50  

13.3

  Disclosure and Delivery      51  

13.4

  Disposition of Commercialization-Related Materials      51  

13.5

  Accrued Rights      51  

13.6

  Survival      51  

13.7

  Rights in Bankruptcy      52  

ARTICLE 14 DISPUTE RESOLUTION

     52  

14.1

  Disputes      52  

14.2

  Choice of Law; Jurisdiction      53  

ARTICLE 15 MISCELLANEOUS

     53  

15.1

  Entire Agreement; Amendment      53  

15.2

  Force Majeure      53  

15.3

  Notices      54  

15.4

  Assignment      54  

15.5

  [***]      55  

15.6

  Severability      55  

15.7

  Cumulative Remedies      55  

15.8

  Ambiguities; No Presumption      55  

15.9

  Headings      55  

15.10

  Interpretation      55  

15.11

  No Waiver      56  

15.12

  No Third-Party Beneficiaries      56  

15.13

  Independent Contractors      56  

15.14

  Counterparts; Facsimile Signatures      56  

 

iv


TABLE OF SCHEDULES AND EXHIBITS

 

Schedule A    Compounds
Schedule B    Licensed Patents
Schedule C    Initial Development Plan
Exhibit A    Licensee Press Release

 

v


LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

This License, Development and Commercialization Agreement (this “Agreement”), dated as of December 17, 2020 (the “Effective Date”), is made by and between Dermira, Inc., a Delaware corporation (“Dermira”) and Evommune, Inc., a Delaware corporation (“Licensee”). Dermira and Licensee are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Dermira was acquired by Eli Lilly and Company, an Indiana corporation (“Lilly”), on February 20, 2020 (“Acquisition Date”), and is now a wholly owned subsidiary of Lilly;

WHEREAS, prior to such acquisition, Dermira developed certain compounds relating to IRAK, RORg, and MRGPRX2, in each case, as further described herein;

WHEREAS, Licensee was founded after such acquisition by certain individuals who were executives of Dermira prior to such acquisition and who participated in or were otherwise familiar with the development of such compounds while they were at Dermira; and

WHEREAS, Dermira wishes to grant a license to Licensee under all of Dermira’s intellectual property rights related to such Compounds (as defined below) to develop, manufacture and commercialize the Products in the Field in the Territory, as more fully set forth herein, and Licensee wishes to take such license, in each case in accordance with the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following initially capitalized terms shall have the meanings set forth in this Article 1:

1.1 “Active Component” means a component that confers a therapeutic effect on a standalone basis.

1.2 “Affiliate” means any entity directly or indirectly controlled by, controlling or under common control with a Person, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by,” “controlling” and “under common control with”) means (a) possession, direct or indirect, of the power to direct or cause direction of the management or policies of an entity (whether through ownership of securities or other ownership interests, by contract or otherwise), or (b) beneficial ownership of more than 50% (or the maximum ownership interest permitted by Applicable Law) of the voting securities or other ownership or general partnership interest (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests of an entity.


1.3 “Analytical Release Testing and Characterization” means all activities associated with carrying out the analytical testing and release of the Products in the Territory. Such activities shall include: transferring test methods, developing and validating new analytical tests required in the Territory, amending the release specifications to be in compliance with local Applicable Laws, conducting the release testing of the Products in the Territory and final release of the Products (including raw materials, intermediates, drug substance and drug product).

1.4 “Applicable Law” means any applicable United States federal, state or local, or foreign or multinational law (including data protection and privacy laws), statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award entered by or with any Governmental Authority, or any license, franchise, permit or similar right granted under any of the foregoing, or any similar provision having the force or effect of law. For the avoidance of doubt, any specific references to any Applicable Law or any portion thereof shall be deemed to include all then-current amendments thereto or any replacement or successor law, statute, standard, ordinance, code, rule, regulation, resolution, order, writ, judgment, injunction, decree, stipulation, ruling or determination thereto.

1.5 “Business Day” means a day other than a Saturday, Sunday, or bank or other public holiday in New York, New York or Indianapolis, Indiana, United States.

1.6 “Calendar Quarter” means each three (3)-month period commencing January 1, April 1, July 1 or October 1 of any year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement.

1.7 “Calendar Year” means the period beginning on January 1 and ending on December 31 of the same year; provided, however, that (a) the first Calendar Year of the Term shall extend from the Effective Date through December 31 of the same year and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of expiration or termination of this Agreement.

1.8 “Clinical Trial” means a Phase I Clinical Trial, Phase II Clinical Trial (including a Phase IIa Clinical Trial and Phase IIb Clinical Trial), Phase III Clinical Trial, a Phase IIIb Clinical Trial or a Phase IV Clinical Trial, as the case may be.

1.9 “Combination Product” means (a) any product containing a Product and one or more other Active Components in a fixed-dose formulation, or (b) any combination of a Product sold together with another product containing an Active Component in a single package or container for a single price.

 

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1.10 “Commercialize” means, with respect to the Products, to promote, market, distribute, sell (and offer for sale or contract to sell), import, export, or otherwise commercially exploit or provide product support for the Products and to conduct activities, other than Development or Manufacturing, in preparation for conducting the foregoing activities, including activities to produce commercialization support data and to secure and maintain market access and reimbursement. “Commercializing” and “Commercialization” shall have correlative meanings. For the avoidance of doubt, Commercialization does not include Development and Manufacturing.

1.11 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, those reasonable, good-faith efforts to accomplish such objective in a diligent manner within a reasonable time period (or, if applicable, within any specified time period or by any specified or applicable deadline) as companies in the biopharmaceutical industry similarly situated to such Party at the relevant time would normally use to accomplish a similar objective under similar circumstances. With respect to any efforts relating to the Development, Regulatory Approval, Manufacturing or Commercialization, as applicable, of the Compounds or Products by a Party, generally or with respect to any particular country in the Territory or any particular Product, such Party will be deemed to have exercised Commercially Reasonable Efforts if such Party, subject to this Section 1.11, has exercised those efforts normally used by companies in the biopharmaceutical industry similarly situated to such Party at the relevant time, in the relevant country, with respect to a compound, product or product candidate, as applicable, (a) which is of similar market potential in such country, and (b) which is at a similar stage in its development or product life cycle, as the applicable Product, in each case, taking into account, at the time such efforts are to be expended, issues of safety, efficacy or stability; product profile; intellectual property protection; stage of development or life cycle status; the competitive environment; market potential; and other relevant scientific, technical, operational and commercial factors.

1.12 “Competing Product” means any [***].

1.13 “Compound” (when used in the singular form) means any one of the following, separate and apart from all other of the following: (a) the IRAK Compound; (b) the ROR Compound; or (c) the MRGPRX2 Compound. “Compounds” (when used in the plural form) means more than one of the foregoing, collectively.

1.14 “Control” and “Controlled by” means, with respect to any Know-How, Invention, Patent, technology, copyright, trademark or other intellectual property right, a Person’s possession (whether by ownership, license grant or other means) of the legal right to grant the right to access or use, or to grant a license or a sublicense to, such Know-How, Invention, Patent Right, technology, copyright, trademark or other intellectual property right as provided for herein without violating the proprietary rights of any Third Party or any terms of any agreement or other arrangement between such Person (or any of its Affiliates) and any Third Party.

1.15 “CTA” means an application to the applicable Regulatory Authority, such as a clinical trial application or a clinical trial exemption, the filing of which is necessary to commence or conduct clinical testing of a pharmaceutical product in humans in such jurisdiction.

 

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1.16 “Dermira-Owned Patents” means the Licensed Patents owned or Controlled by (but not including the Takeda-Owned Patents).

1.17 “Designated Officer” means a representative appointed by a Party for purposes of dispute resolution.

1.18 “Develop” means to research, develop, analyze, test and conduct preclinical trials, Clinical Trials (including, for the avoidance of doubt, Phase IV Clinical Trials and any preclinical/clinical/CMC commitments following Regulatory Approval) and all other regulatory trials, for the Compounds and Products, as well as any and all activities pertaining to manufacturing development, formulation development, medical affairs and lifecycle management (including the conduct of Phase IIIb Clinical Trials and Phase IV Clinical Trials not explicitly for registrational purposes and non-interventional studies), including new indications, new formulations and all other activities, including regulatory activities, related to securing and maintaining Regulatory Approval, for the Compounds and Product, all in accordance with the Development Plan. “Developing” and “Development” shall have correlative meanings.

1.19 “Development Activities” means those Development activities undertaken by or on behalf of a Licensee with respect to the Products in the Field in the Territory.

1.20 “Dollar” or “$” means the legal tender of the United States of America.

1.21 “European Marketing Approval” means a Regulatory Approval for a Product in one or more countries in the Key European Territory by the relevant Regulatory Authority that is necessary for the marketing and sale of such Product in the Key European Territory, as such approval may be amended from time to time as a consequence of any approved variation to the Product in the Key European Territory.

1.22 “Exclusivity Period” means, with respect to each Product, the period beginning on the Effective Date and ending on [***].

1.23 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder.

1.24 “FDA” means the United States Food and Drug Administration and any successor Regulatory Authority having substantially the same function.

1.25 “Field” means all uses including any and all therapeutic, diagnosis, prevention, amelioration and prophylactic uses.

1.26 “First Commercial Sale” means, with respect to a Product in any country in the Territory, the first shipment of such Product to a Third Party in such country for end use or consumption of the Product in such country after Regulatory Approval of the Product in such country.

1.27 “Force Majeure” means any unforeseeable circumstances whatsoever which are not within the reasonable control of the Party affected thereby, potentially including an act of God, war, act of terrorism, pandemic, insurrection, riot, strike or labor dispute, shortage of materials, fire, explosion, flood, government requisition or allocation, breakdown of or damage to plant, equipment or facilities, interruption or delay in transportation, fuel supplies or electrical power, embargo, boycott, order, or act of civil, military, or other Governmental Authority.

 

4


1.28 “Fully-Diluted Capital Stock” means, the sum of (i) all shares of the capital stock of Licensee that are issued and outstanding, (ii) any outstanding options, warrants or similar securities, vested or unvested, and (iii) any shares reserved under Licensee’s 2020 Stock Plan (the “Plan”), excluding any increase to the Plan in connection with the Qualified Financing.

1.29 “Generic Product” means, with respect to a Product with a single active pharmaceutical ingredient, with respect to a particular country, a pharmaceutical product that (a) contains the applicable Compound, (b) is approved for use in such country pursuant to a Regulatory Approval process governing approval of generic, interchangeable, or biosimilar biologics based on the then-current standards for Regulatory Approval in such country, whether or not such Regulatory Approval was based upon clinical data generated by one or more parties pursuant to this Agreement or was obtained using an abbreviated, expedited, or other process, and (c) is sold in the same country as such Product by any Third Party that is not a Related Party and did not purchase such product directly or indirectly from any of Licensee or its Related Parties. A Product shall not constitute a Generic Product under this Agreement with respect to any other Product.

1.30 “Good Clinical Practices” or “GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring, auditing, recording, analyses and reporting of clinical trials, including, as applicable, (a) as set forth in the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”) Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products in the Territory, (b) the Declaration of Helsinki (2004) as last amended at the 52nd World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) U.S. Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational New Drug Application), as may be amended from time to time, and (d) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity and confidentiality of trial subjects.

1.31 “Good Laboratory Practices” or “GLP” means all applicable Good Laboratory Practice standards, including, as applicable, (a) as set forth in the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, and (b) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

1.32 “Good Manufacturing Practices” or “GMP” means all applicable Good Manufacturing Practices including, as applicable, (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Sections 210, 211, 601 and 610, (b) the principles detailed in the ICH Q7 guidelines, and (c) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

 

5


1.33 “Government Official” means: (a) any officer or employee of: (i) a government, or any department, agency, or instrumentality thereof; (ii) a government-owned or -controlled company, institution or other entity, including a government-owned hospital or university; or (iii) a public international organization (such as the United Nations, the International Monetary Fund, the International Committee of the Red Cross, and the World Health Organization), or any department, agency, or instrumentality thereof; (b) any political party or party official or candidate for public or political party office; and (c) any person acting in an official capacity on behalf of any of the foregoing.

1.34 “Governmental Authority” means any United States federal, state or local, or any foreign government or political subdivision thereof, or any multinational organization or authority, or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body. For clarity, any Regulatory Authority shall be a Governmental Authority.

1.35 “IND” means an investigational new drug application, clinical trial authorization or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

1.36 “Initiation” means, with respect to a Clinical Trial, the first dosing of the first human patient in such Clinical Trial.

1.37 “Internal Compliance Codes” shall mean a Party’s internal policies and procedures intended to ensure that a Party complies with Applicable Laws, Party-Specific Regulations, and such Party’s internal ethical, medical and similar standards.

1.38 “Invention” means any discovery or invention, whether or not patentable, conceived or otherwise made by or on behalf of either Party, or by both Parties, or, in each case, their respective Affiliates, under this Agreement.

1.39 “IRAK” means interleukin-1 receptor associated kinase.

1.40 “IRAK Compound” means (a) the compounds described in Schedule A(i) and (b) any salt, free acid, free base, crystal, co-crystal, hydrate, hemihydrate, anhydride, solvate, polymorph, complex, prodrug, metabolite, ester, isomer, tautomer or enantiomer of such compounds.

1.41 “IRAK Patents” means the Patents set forth on Schedule B(i) and any Related Patents, in each case, to the extent Controlled by Dermira or its Subsidiaries as of the Effective Date or at any time during the Term.

1.42 “IRAK Product” means any and all pharmaceutical products containing or comprising an IRAK Compound in any form, dosage, presentation or formulation, and whether alone, or in combination with, one or more other pharmaceutically active or inactive ingredients.

 

6


1.43 “Key European Territory” means the United Kingdom, France, Germany, Spain, and Italy.

1.44 “Know-How” means all technical, scientific, regulatory and other information, results, knowledge, techniques and data, in whatever form and whether or not confidential, patented or patentable, including Inventions, invention disclosures, discoveries, plans, processes, practices, methods, knowledge, trade secrets, know-how, instructions, skill, experience, ideas, concepts, data (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, safety, quality control, and preclinical and clinical data), formulae, formulations, compositions, specifications, marketing, pricing, distribution, cost, sales and manufacturing data or descriptions. Know-How does not include any Patent claiming any of the foregoing.

1.45 “Lead Investor” means the investor purchasing securities in exchange for the largest amount of cash gross proceeds to Licensee in the Qualified Financing.

1.46 “Licensed Know-How” means any and all Know-How, whether or not patented or patentable, to the extent Controlled by Dermira or its Subsidiaries as of the Effective Date or at any time during the Term that is necessary or reasonably useful in connection with the Development, Manufacture, Commercialization or other use of the Compounds or Products. For the avoidance of doubt, “Licensed Know-How” shall [***].

1.47 “Licensed Patents” means the IRAK Patents, ROR Patents and MRGPRX2 Patents.

1.48 “Licensed Technology” means the Licensed Know-How and Licensed Patents.

1.49 “Licensee Know-How” means any and all Know-How, whether or not patented or patentable, to the extent Controlled by, or on behalf of, Licensee or its Affiliates as of the Effective Date or at any time during the Term that is necessary or reasonably useful in connection with the Development, Manufacture, Commercialization or other use of the Compounds or Products.

1.50 “Licensee Patent” means any Patent that (a) is Controlled by Licensee (or its Affiliates) as of the Effective Date or comes under the Control of Licensee (or its Affiliates) during the Term (other than as a result of the licenses granted by Dermira to Licensee under this Agreement) and (b) that would be infringed by the Development, Manufacture, Commercialization or use of the Compounds or Products or that claims or covers Licensee Know-How.

1.51 “Licensee Technology” means the Licensee Know-How and Licensee Patents.

1.52 “Manufacture” means, with respect to a Product, the receipt, handling and storage of active pharmaceutical ingredients, drug substance or drug product, medical devices and other materials, the manufacturing, processing, packaging and labeling, holding (including storage), quality assurance and quality control testing (including release) of such Product (other than quality assurance and quality control related to development of the manufacturing process, which activities shall be considered Development activities) and shipping of such Product. “Manufactured” or “Manufacturing” shall have correlative meanings.

 

7


1.53 “Manufacturing Development Activities” means development of test methods, stability testing, formulation development, process development, quality assurance activities, quality control activities, qualification and validation activities, analytic process development, manufacturing process validation, scale-up, and all other activities, including CMC-related activities, necessary for or related to the Manufacture of the Products for use in the Field in the Territory.

1.54 “Marketing Authorization Application” or “MAA” means an application to the appropriate Regulatory Authority for approval to sell the Products (but excluding Pricing Approval) in any particular country or regulatory jurisdiction.

1.55 “Medical Science Liaison” means an individual who is employed by or on behalf of Licensee or its Affiliates and who provides educational services and other educational efforts directed towards the medical or scientific community.

1.56 “Milestone Payment” means any Development Milestone Payment or Product Sales Milestone Payment.

1.57 “MRGPRX2” means Mas-related G-protein-coupled receptor X2.

1.58 “MRGPRX2 Compound” means (a) certain antagonists of MRGPRX2 more particularly described in Schedule A(iii); and (b) any salt, free acid, free base, crystal, co-crystal, hydrate, hemihydrate, anhydride, solvate, polymorph, complex, prodrug, metabolite, ester, isomer, tautomer or enantiomer of such compounds.

1.59 “MRGPRX2 Patents” means the Patents set forth on Schedule B(iii) and any Related Patents, in each case, to the extent Controlled by Dermira or its Subsidiaries as of the Effective Date or at any time during the Term.

1.60 “MRGPRX2 Product” means any and all pharmaceutical products containing or comprising an MRGPRX2 Compound in any form, dosage, presentation or formulation, and whether alone, or in combination with, one or more other pharmaceutically active or inactive ingredients.

1.61 “Net Sales” means, with respect to a Product, the gross amount invoiced by Licensee or a Related Party thereof to any Non-Related Party for such Product in the Territory, less the following items consistent with U.S. Generally Accepted Accounting Principles (“GAAP”) consistently applied (but only to the extent attributable to such Product and to the extent actually incurred, given, accrued or specifically allocated for):

(a) trade, quantity and cash discounts allowed;

(b) discounts, refunds, rebates, chargebacks, retroactive price adjustments, and any other allowances which effectively reduce the net selling price of such Product;

(c) Products returns and allowances; and

 

8


(d) any tax imposed on the production, sale, delivery or use of the Product, including sales, use, excise or value added taxes (to the extent that such value added taxes are not reimbursable or refundable), specifically excluding, for clarity, any income taxes assessed against the income arising from such sale.

In the event that the Licensed Product is sold as part of a Combination Product, the Net Sales of the Licensed Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product (as defined in the standard Net Sales definition) by the fraction, A / (A+B) where A is the weighted average sale price of the Licensed Product when sold separately in finished form, and B is the weighted average sale price of the other compound(s) or ingredient(s) sold separately in finished form.

In the event that the weighted average sale price of the Licensed Product can be determined but the weighted average sale price of the other compound(s) or ingredient(s) cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A / C where A is the weighted average sale price of the Product when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of the other compound(s) or ingredient(s) can be determined but the weighted average sale price of the Licensed Product cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the following formula: one (1) minus (B / C) where B is the weighted average sale price of the other compound(s) or ingredient(s) when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of both the Licensed Product and the other compound(s) or ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Licensed Product shall be deemed to be equal to the mutually agreed percentage of the Net Sales of the Combination Product; provided, that if the Parties are unable to agree on such relative value within 30 days of commencement of discussions with respect to such relative value, despite their good-faith efforts, then such percentage shall be [***].

The weighted average sale price for a Licensed Product, other compound(s) or ingredient(s), or Combination Product shall be calculated once each Calendar Year and such price shall be used during all applicable royalty-reporting periods for the entire following Calendar Year. When determining the weighted average sale price of a Licensed Product, other compound(s) or ingredient(s), or Combination Product, the weighted average sale price shall be calculated by dividing the sales dollars (translated into Dollars) by the units of active ingredient sold during the twelve (12) months (or the number of months sold in a partial calendar year) of the preceding Calendar Year for the respective Licensed Product, other compound(s) or ingredient(s), or Combination Product. In the initial Calendar Year, a forecasted weighted average sale price will be used for the Licensed Product, other compound(s) or ingredient(s), or Combination Product. Any over or under payment due to a difference between forecasted and actual weighted average sale prices will be paid or credited in the first royalty payment of the following Calendar Year. Such amounts shall be determined from the books and records of Licensee or a Related Party maintained in accordance with GAAP, consistently applied. Licensee further agrees in determining such amounts, it will use and will require its Related Parties to use Licensee’s then-current standard procedures and methodology, including currency conversion as provided in Section 7.10.

 

9


For the avoidance of doubt, under no circumstances will Net Sales be [***].

In no event shall any particular amount of deduction identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions).

1.62 “Non-Related Parties” means, with respect to a Party, any Person that is not a Related Party of such Person.

1.63 “Party-Specific Regulations” shall mean all judgments, decrees, orders or similar decisions issued by any Governmental Authority specific to a Party, and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement.

1.64 “Patent Rights” means Dermira’s rights in any subject matter claimed in any U.S. or foreign patent applications or patents that claim priority to any of the Licensed Patents.

1.65 “Patent Term Extension” means any term extensions, supplementary protection certificates, Regulatory Exclusivity and equivalents thereof offering Patent protection beyond the initial term with respect to any issued Patents.

1.66 “Patents” means any and all patent applications and issued patents.

1.67 “Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, Governmental Authority, association or other entity.

1.68 “Personal Information” means, in addition to any definition for any similar term (e.g., “personal data” or “personally identifiable information” or “PII”) provided by Applicable Laws, or by either Party in any of its own privacy policies, notices or contracts, all information that identifies, could be used to identify or is otherwise associated with an individual person, whether or not such information is associated with an identified individual person.

1.69 “Phase I Clinical Trial” means a human clinical trial in a country, the principal purpose of which is preliminary determination of the safety, metabolism and pharmacokinetic properties and clinical pharmacology of a Compound in healthy individuals or patients as described in 21 C.F.R. § 312.21(a), or similar clinical study in a country other than the U.S.

1.70 “Phase II Clinical Trial” means an adequate and well-controlled human clinical trial in a country, the principal purpose of which is a preliminary determination of the efficacy and safety of a Product for an indication in a target population of patients being studied, at the intended clinical dose or doses or range of doses, on a sufficient number of subjects and for a sufficient period of time to confirm the optimal manner of use of the applicable Compound (dose and dose regimen) for such indication prior to initiation of the pivotal Phase III Clinical Trials for such indication as described in 21 C.F.R. §312.21(b), or similar clinical study in a country other than the U.S.

 

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1.71 “Phase IIa Clinical Trial” means that part of the Phase II Clinical Trial designed to assess dosing requirements and efficacy of a Product. For the purposes of this Agreement, “completion of a Phase IIa Clinical Trial” means that stage of the Phase II Clinical Trial when the efficacy of a Product as specified in the Development Plan has been observed and properly recorded.

1.72 “Phase IIb Clinical Trial” means a clinical study subsequent to a Phase IIa Clinical Trial, specifically designed to include a comparison of a Product to an accepted standard of care in a larger number of patients which represents a more rigorous demonstration of the efficacy and safety of the Product in the target patient population to define the optimal regimen to evaluate in a Phase III Clinical Trial.

1.73 “Phase III Clinical Trial” means a human clinical trial of a compound or product for an indication on a sufficient number of subjects that is designed to establish that the compound or product is safe and efficacious for its intended use, and to determine warnings, precautions, and adverse reactions that are associated with the compound or product in the dosage range to be prescribed, and to support Regulatory Approval of the compound or product for such indication or label expansion of the compound or product. For clarity, the term “Phase III Clinical Trials” includes early access and compassionate use programs.

1.74 “Phase IIIb Clinical Trial” means a human clinical trial of a compound or product for an indication that (a) is not required for receipt of Regulatory Approval for such indication for a country but which may be useful in providing additional drug profile data in support of such Regulatory Approval or, as applicable, Pricing Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval), or (b) is required, requested or advised by a Regulatory Authority as a condition of, or in connection with, obtaining or maintaining such Regulatory Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval).

1.75 “Phase IV Clinical Trials” means a human clinical trial, or other test or study, of a compound or product for an indication that is commenced after receipt of the initial Regulatory Approval for such indication in the country for which such trial is being conducted and that is conducted within the parameters of the Regulatory Approval for the compound or product for such indication (and which may include investigator sponsored clinical trials), including a clinical trial conducted due to the request or requirement of a Regulatory Authority or as a condition of a previously granted Regulatory Approval.

1.76 “Pre-Marketing” means all sales and marketing activities undertaken prior to and in preparation for the launch of the Products in the Territory. Pre-Marketing shall include market research, key opinion leader development, advisory boards, medical education, disease-related public relations, health care economic studies, sales force training and other pre-launch activities prior to the First Commercial Sale of a Product in a given country or other regulatory jurisdiction in the Territory.

 

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1.77 “Pricing Approval” means, with respect to any country where a Governmental Authority authorizes reimbursement or access, or approves or determines pricing, for pharmaceutical products, receipt (or, if required to make such authorization, approval of determination effective publication) of such reimbursement or access authorization or pricing approval or determination (as the case may be).

1.78 “Product” (when used in the singular form) means any one of the following, separate and apart from all other of the following: (a) any and all IRAK Products; (b) any and all ROR Products; or (c) any and all MRGPRX2 Products. “Products” (when used in plural form) means more than one of the foregoing IRAK Products, ROR Products, and/or MRGPRX2 Products, collectively.

1.79 “Product Approval” means, with respect to a Product, the approval of a Governmental Authority necessary for the marketing and sale of such Product in a given country or regulatory jurisdiction, which may include the approval of an MAA (but shall not include any Pricing Approvals).

1.80 “Product Complaint” means any written, verbal or electronic expression of dissatisfaction regarding any Product sold by or on behalf of Licensee (or any of its Related Parties or permitted distributors) in the Territory, including reports of actual or suspected product tampering, contamination, mislabeling or inclusion of improper ingredients.

1.81 “Product Specifications” means those Manufacturing, performance, quality- control, and Packaging and Labeling specifications for the Products in the Territory, as such specifications may be amended from time to time pursuant to the terms of this Agreement.

1.82 “Promotional Materials” means all written, printed, video or graphic advertising, promotional, educational and communication materials (other than the Products labels and package inserts) for marketing, advertising and promoting of the Products in the Field in the Territory, for use (a) by a Sales Representative or (b) in advertisements, web sites or direct mail pieces.

1.83 “Qualified Financing” means the first equity financing in a transaction or series of related transactions resulting in aggregate gross proceeds to Licensee from a Person other than a founder of Licensee ([***]) of at least [***], including the principal amount of Licensee’s outstanding indebtedness that (a) is owed to unrelated third parties and (b) converts in such equity financing.

1.84 “Regulatory Approval” means, with respect to any Product in any regulatory jurisdiction for a given indication, approval from the applicable Regulatory Authority permitting the manufacture, distribution, use and sale of such Product in such regulatory jurisdiction for such indication in accordance with Applicable Law, including any Pricing Approvals.

1.85 “Regulatory Authority” means, in a particular country or regulatory jurisdiction, any applicable Governmental Authority involved in granting Regulatory Approval or, to the extent required in such country or regulatory jurisdiction, Pricing Approval of a Product in such country or regulatory jurisdiction.

 

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1.86 “Regulatory Data” means any and all research data, pharmacology data, chemistry, manufacturing and control data, preclinical data, clinical data and all other documentation submitted, or required to be submitted, to Regulatory Authorities in association with regulatory filings for the Products (including information in any applicable Drug Master Files (DMFs), Chemistry, Manufacturing and Control (“CMC”) data, or similar documentation).

1.87 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Governmental Authority with respect to the Products other than a Patent right.

1.88 “Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority that are necessary in order to Develop, Manufacture, obtain marketing authorization, market, sell or otherwise Commercialize the Products in a particular country or regulatory jurisdiction. Regulatory Materials include INDs, MAAs, CTAs, Imported Drug Licenses (IDLs), presentations, responses and applications for other Product Approvals.

1.89 “Related Parties” means, (a) with respect to Dermira, its Subsidiaries, and (b) with respect to Licensee, its (i) Affiliates and (ii) Sublicensees of the rights granted to Licensee hereunder (excluding distributors).

1.90 “Related Patents” means, with respect to a Patent, (a) any provisionals, re- examinations, continuations, continuations-in-part claiming the same subject matter, extensions, term restorations, renewals, divisionals, reissues, renewals and any Patents resulting therefrom; (b) corresponding international patent applications, including supplementary protection certificates, or other administrative protections; and (c) all rights to apply in any or all countries of the world for such patent applications and issued patents including all rights provided by multinational treaties or conventions for any of the foregoing.

1.91 “ROR” means retinoic-acid receptor related orphan receptor.

1.92 “ROR Compound” means (a) the compounds described in Schedule A(ii) and (b) any salt, free acid, free base, crystal, co-crystal, hydrate, hemihydrate, anhydride, solvate, polymorph, complex, prodrug, metabolite, ester, isomer, tautomer or enantiomer of such compounds.

1.93 “ROR Patents” means the Patents set forth on Schedule B(ii) and any Related Patents, in each case, to the extent Controlled by Dermira or its Subsidiaries as of the Effective Date or at any time during the Term.

1.94 “ROR Product” means any and all pharmaceutical products containing or comprising an ROR Compound in any form, dosage, presentation or formulation, and whether alone, or in combination with, one or more other pharmaceutically active or inactive ingredients.

1.95 “Royalty Term” means, with respect to each Product on a country-by-country basis in the Territory, the period of time beginning on the First Commercial Sale of such Product in such country and ending the later of (a) the expiration of the last to expire Valid Claim claiming or covering the Compound or Product or the Manufacture or use thereof in such country, (b) ten (10) years from the First Commercial Sale of such Product in such country, or (c) the Regulatory Exclusivity period for the Product in such country.

 

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1.96 “Sales Representative” means an individual who is employed by a Party and who performs details and other promotional efforts with respect to the Product.

1.97 “Specified Person” means any company in the biopharmaceutical industry with greater than [***] of pharmaceutical net sales or a market capitalization that exceeds [***].

1.98 “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which, (a) if a corporation, a majority of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a partnership, limited liability company, association or other business entity, either (i) a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or (ii) such Person is a general partner, managing member or managing director of such partnership, limited liability company, association or other entity.

1.99 “Takeda” means Takeda Pharmaceutical Company Limited.

1.100 “Takeda License” means that certain Exclusive Option and License Agreement, dated August 29, 2016, by and between Dermira and Takeda, as amended from time to time.

1.101 “Takeda-Owned Patents” means the Licensed Patents owned or Controlled by Takeda and licensed to Dermira pursuant to the Takeda License (but not including the Dermira-Owned Patents).

1.102 “Territory” means worldwide, with the exception of geographies subject to U.S. comprehensive sanctions at the relevant time (as of the Effective Date, Cuba, Crimea Region of Ukraine, Iran, North Korea, Syria, and Venezuela).

1.103 “Third Party” means any Person other than Lilly, Dermira, Licensee or their respective Affiliates.

1.104 “Training Materials” means all Product-related training materials, including learning units and other printed, audio, web-based or video training materials, branded or unbranded, relating or referring to Product, Product-related disease states and Product sales orientation assessment tests and refresher tests.

1.105 “United States” or “U.S.” means the United States of America and its possessions and territories.

 

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1.106 “Valid Claim” means, with respect to a particular country in the Territory, (a) a claim of an issued and unexpired Licensed Patent, or Licensee Patent that (i) has not been held permanently revoked, unenforceable or invalid by a decision of a court or other Governmental Authority of competent jurisdiction, which decision is unappealed or unappealable within the time allowed for appeal, and (ii) has not been cancelled, withdrawn, abandoned, disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (b) a bona fide claim of a pending patent application included within the Licensed Patents or Licensee Patents that has not been (i) cancelled, withdrawn or abandoned without being re-filed in another application in the applicable jurisdiction, or (ii) finally rejected by an administrative agency action from which no appeal can be taken or that has not been appealed within the time allowed for appeal.

1.107 Additional Definitions. The following terms have the meanings set forth in the corresponding Sections of this Agreement:

 

Term

  

Section

“[***]”

   2.5.5

“Anti-Corruption Laws”

   9.5.1

“Audit”

   7.12

“Bankrupt Party”

   13.7

“Breaching Party”

   12.2

“Claim”

   10.1

“Commercialization Data”

   5.6

“[***]”

   2.5.1

“[***]”

   2.5.1

“Confidential Information”

   11.1.1

“COVID Event”

   15.2

“Development Data”

   3.6

“Development Milestone”

   7.2

“Development Milestone Notice”

   7.2

“Development Milestone Payment”

   7.2

“Development Plan”

   3.3.1

“Dispute”

   14.1

“[***]”

   2.5.2

“Indemnified Party”

   10.3.1

“Indemnifying Party”

   10.3.1

“Initial Development Plan”

   3.3.2

“[***]”

   2.9

“Losses”

   10.1

“[***]”

   2.5.3

“Packaging and Labeling”

   6.3

“Product Sales Milestone”

   7.3

“Product Sales Milestone Notice”

   7.3

“Product Sales Milestone Payment”

   7.3

“Product Trade Dress”

   5.5.1

“Product Trademark”

   5.5.1

“Qualified Financing Closing”

   7.14

 

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“Qualified Financing Documentation”    7.14
“Royalty Payments”    7.4
“[***]”    2.5.5
“Sublicensee”    2.3.2
“Technology Transfer Period”    2.7
“Term”    12.1
“Trade Laws”    9.5.1
“Upfront License Fee”    7.1
“VAT”    7.9.1

ARTICLE 2

LICENSES

2.1 Grant to Licensee. Subject to the terms and conditions of this Agreement, Dermira hereby grants to Licensee during the Term an exclusive (even as to Dermira and its Affiliates, but subject to Sections 2.2.2 and 2.9), payment-bearing license (with the right to sublicense solely in accordance with Section 2.3.2) under and with respect to the Licensed Technology to (a) Develop and Manufacture the Products in the Field in the Territory for purposes of Commercializing the Products in the Field in the Territory and (b) Commercialize the Products in the Field in the Territory.

2.2 Additional Licensing Provisions.

2.2.1 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party grants any license, express or implied, under its intellectual property rights to the other Party, whether by implication, estoppel or otherwise.

2.2.2 Reserved Rights. The Parties hereby agree and acknowledge that nothing contained herein shall limit or otherwise restrict the ability of Dermira or its Affiliates or licensees to use the Licensed Technology for research purposes. and its Affiliates’

2.3 Performance by Affiliates and Sublicensees.

2.3.1 Performance by Affiliates. Dermira recognizes that Licensee may perform some or all of its obligations under this Agreement through Affiliates; provided, however, that Licensee shall remain responsible for and be guarantor of the performance by its Affiliates and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance, and Licensee shall be liable for the acts or omissions of its Affiliates under or in connection with this Agreement (as if such acts or omission were those of Licensee). Licensee hereby expressly waives any requirement that Dermira exhaust any right, power or remedy, or proceed against an Affiliate, for any obligation or performance hereunder prior to proceeding directly against Licensee.

 

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2.3.2 Sublicensees. Licensee shall have the right (but not the obligation) to sublicense those rights granted to it under Section 2.1 only as set forth in, and subject to the terms and conditions of, this Section 2.3.2. During the Exclusivity Period for a Product, Licensee may only grant sublicenses with respect to such Product with the prior written consent of Dermira, which consent may be withheld in Dermira’s sole discretion. After the end of the Exclusivity Period for a Product, Licensee may grant one or more sublicenses with respect to such Product to any Person (other than a Specified Person during the applicable [***]), provided that Licensee provides prior written notice (at least [***] Business Days in advance) to Dermira of any sublicenses to be granted, which shall include in each case a description of the rights to be granted and the purpose therefor, the identity of the proposed Sublicensee and the countries involved. Each Affiliate or other Person to which any such sublicense is granted is referred to herein as a “Sublicensee.” Licensee shall remain responsible for the performance by each of its Sublicensees and shall cause each of its Sublicensees to comply with the applicable provisions of this Agreement, and Licensee shall be liable for the acts or omissions of its Sublicensees under or in connection with this Agreement (as if such acts or omission were those of Licensee). Without limiting the foregoing, Licensee shall: (x) ensure that each of its Sublicensees accepts in writing all applicable terms and conditions of this Agreement, including the non-compete, reporting, audit, inspection and confidentiality provisions hereunder; (y) under the agreements between Licensee and each of its Sublicensees, include a provision pursuant to which either (a) [***] or (b) [***], provided that, in each case, [***], in each case, [***]; and (z) [***]. During the Exclusivity Period for a Product, a Sublicensee shall [***], and each Sublicensee shall [***]. For the avoidance of doubt, (i) Licensee will remain directly responsible for all amounts owed to Dermira under this Agreement, and (ii) each Sublicensee is subject to the negative and restrictive covenants set forth in Sections 2.3.2 and 2.4, respectively. Licensee hereby expressly waives any requirement that Dermira exhaust any right, power or remedy, or proceed against a subcontractor, for any obligation or performance hereunder prior to proceeding directly against Licensee. Notwithstanding anything to the contrary, (A) all sublicenses granted hereunder shall automatically terminate upon expiration or termination of this Agreement for any reason and (B) [***]. Without limiting Licensee’s responsibility for the performance of its Sublicensees hereunder or its liability for acts of omissions of its Sublicensees, any obligation of Licensee under this Agreement may be satisfied by a Related Party.

2.4 Restrictive Covenant. Licensee hereby covenants and agrees that it shall not (and shall cause its Related Parties not to), either directly or indirectly, perform late stage development of (i.e., initiate a Phase III Clinical Trial) or commercialize (i.e., submitting any application(s) for Regulatory Approval for and selling) any Competing Products in the Territory.

2.5 [***]

2.6 Data Transfer. During the [***] months after the Effective Date, Dermira will, at Dermira’s expense, provide to Licensee all information and Dermira Know-How pertaining to the Products in possession (including pre-clinical and clinical data).

2.7 Technology Transfer. During the [***] months following the Effective Date, Dermira, at Dermira’s expense, shall transfer to Licensee all (i) technical information, materials (including any material comprising a Compound held by a contract manufacturer on behalf of Dermira) and processes in Dermira’s possession necessary to permit and enable Licensee or its Affiliates to solely Develop and Manufacture the Products pursuant to the terms of this Agreement,

 

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and (ii) all regulatory filings or applications in Dermira’s name for any Product as provided in Section 4.2.2 (the “Technology Transfer Period”). For the avoidance of doubt, the foregoing shall [***]. The technology transfer shall occur in an orderly fashion and in a manner such that the value, usefulness and confidentiality of the transferred Dermira Know-How and regulatory documentation are preserved in all material respects. The implementation and transfer of information pursuant hereto shall be conducted through electronic, email and teleconference consultation between the Parties; provided that Dermira shall not be required to conduct any on-site or in-person consultation in connection therewith unless Licensee reimburses Dermira for any travel expenses. For clarity, Licensee shall not be responsible for any Development or Manufacturing related costs associated with such technology transfer, including lab runs, pilot scale testing and demo batches.

2.8 Takeda License. Licensee acknowledges that Dermira has sublicensed to Licensee under this Agreement certain Patents owned by Takeda and that the rights granted by Dermira to Licensee hereunder are limited to the maximum extent of the rights permitted to be sublicensed under the Takeda License. In the event of any conflict or inconsistency with respect to any rights that Dermira purports to grant to Licensee under this Agreement and the rights granted by Takeda to Dermira under the Takeda License, the Takeda License shall control (including with respect to Article 8). Licensee accepts and shall comply with all of the applicable terms and conditions of the Takeda License as if Licensee were a party thereto, and in connection therewith, Licensee shall remain responsible for the acts and omissions of its Affiliates, Sublicensees, and subcontractors; similarly, Dermira accepts and shall comply with all of the applicable terms and conditions of the Takeda License and shall not take or omit to take any action in its control that could be construed as a violation of such terms and conditions. Neither Dermira nor its Affiliates shall amend nor waive any right under the Takeda License that affects the Licensed Patents or Licensed Products, or otherwise affects the rights granted by Delmira to Licensee hereunder, without the express prior written consent of Licensee. Each Party acknowledges and agrees that any act or omission of such Party that would reasonably be expected to be a material breach under the Takeda License will be deemed a material breach of this Agreement. Licensee shall timely take all actions reasonably necessary, including timely providing to Dermira all information in Licensee’s possession reasonably necessary, for Dermira to comply with its obligations under the Takeda License. Without limiting the foregoing, Licensee shall provide to Dermira the information necessary, in the format necessary, for Dermira to comply with its royalty reporting obligations under the Takeda License, no later than five (5) Business Days prior to the date that the applicable reporting is due to Takeda under the Takeda License.

2.9 [***]

ARTICLE 3

DEVELOPMENT

3.1 Overview of Development. Subject to the terms and conditions of this Agreement, Licensee shall be responsible for the Development of the Products for use in the Field in the Territory as set forth herein. Licensee shall use Commercially Reasonable Efforts to conduct, in accordance with the Development Plan, the Development Activities, including bridging studies, clinical studies, and Clinical Trials (including post-Regulatory Approval studies). Licensee shall use Commercially Reasonable Efforts to perform the Development Activities for each Product to (a) enable obtaining Regulatory Approval in the Territory for each Product in the Field and (b) maximize the commercial potential for each Product in the Field in the Territory.

 

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3.2 Objectives under the Development Plan.

3.2.1 Development Activities. Licensee shall use Commercially Reasonable Efforts to carry out the Development Activities for each Product under the applicable Development Plan in accordance with the time frames set forth therein and in a manner designed to achieve successful Development and Regulatory Approval of the Compounds or Products in the Territory.

3.2.2 Compliance. Licensee shall conduct the Development Activities in accordance with sound and ethical business and scientific practices, and in compliance with all Applicable Laws, including GCPs and GLPs, and also including all applicable pharmacovigilance, data privacy and data protection laws in the Territory as applicable. In addition, Licensee shall not use in any capacity, in connection with its Development (or Commercialization) of the Compounds or Products hereunder, any Person who has been debarred pursuant to Section 306 of the FD&C Act (or similar Applicable Laws outside of the U.S.), or who is the subject of a conviction described in such section, and Licensee shall inform Dermira in writing promptly if it or any Person who is performing services for Licensee hereunder is debarred or is the subject of a conviction described in Section 306 (or similar Applicable Laws outside of the U.S.), or if any action, suit, claim, investigation or legal administrative proceeding is pending or, to Licensee’s knowledge, is threatened, relating to the debarment of Licensee or any Person used in any capacity by Licensee in connection with its Development (or Commercialization) of the Compounds or Products hereunder.

3.3 Development Plan.

3.3.1 General. In connection with the Development of the Products for use in the Field in the Territory, Licensee shall conduct Development Activities pursuant to a comprehensive development plan established by Licensee in its discretion (the “Development Plan”). The Development Plan shall set forth, among other things, the following:

(a) any preclinical studies, toxicology studies, pharmaco-economic studies and other clinical studies (including Phase IV Clinical Trials) necessary for obtaining and maintaining Regulatory Approval in the Territory, with respect to each Product in the Field in the Territory;

(b) all regulatory plans for obtaining and maintaining Regulatory Approvals in the Field for each Product in each country or regulatory jurisdiction in the Territory; and

(c) the timeline for completing such Development Activities.

3.3.2 Initial Development Plan. The initial Development Plan for the Products (the “Initial Development Plan”) is attached hereto as Schedule C.

 

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3.3.3 Updating and Amending Development Plan. Licensee shall, during the fourth (4th) Calendar Quarter of each Calendar Year, review and update, as appropriate, the then-current Development Plan to reflect any material changes, reprioritizations of, or additions to the Development Plan. Licensee shall provide such updated Development Plan to Dermira [***]. Dermira may, at its discretion, provide comments on such updated Development Plan within [***] days of receipt and Licensee will consider any such comments in good faith. Once Licensee has considered, and to the extent applicable, incorporated at Licensee’s discretion any comments by Dermira (but in no case later than [***] days from receipt of such comments), it shall provide Dermira with a copy of such amended Development Plan, which will become effective and supersede the previous Development Plan upon Dermira’s receipt or, if no comments are provided by Dermira, at the end of Dermira’s [***]-day comment period, provided that only the first two sentences of this Section 3.3.3 shall apply to a Product after the expiration of the applicable Exclusivity Period (and the applicable [***]) for such Product.

3.4 Development Costs. Licensee shall be solely responsible for 100% of all (a) Development costs incurred with respect to any Development Activities or any Analytical Release Testing and Characterization and (b) costs incurred associated with any Manufacturing Development Activities.

3.5 Records, Reports and Information.

3.5.1 General. Licensee shall, and shall cause each of its Related Parties to, maintain current and accurate records of all work conducted by it under the Development Plan and all data and other information resulting from such work (which records shall include, as applicable, books, records, reports, research notes, charts, graphs, comments, computations, analyses, recordings, photographs, computer programs and documentation thereof (e.g., samples of materials and other graphic or written data generated in connection with the Development Activities)). Such records shall properly reflect all work done and results achieved in the performance of the Development Activities in sufficient detail and in good scientific manner appropriate for regulatory and patent purposes. Licensee shall document all preclinical studies and clinical trials to be conducted pursuant to the Development Plan in formal written study reports according to applicable national and international (e.g., ICH, GCP and GLP) guidelines.

3.5.2 Status Updates in the Territory. Each Calendar Quarter, Licensee shall provide Dermira and, at Dermira’s request, Lilly with reports detailing the Development Activities under the Development Plan, and the results thereof, provided that after the expiration of the applicable Exclusivity Period (and the applicable [***]) for a Product, Licensee’s obligations pursuant to this Section 3.5.2 shall be semi-annual for such Product. Without limiting the foregoing, upon request by Licensee shall promptly, but in any event within [***] Business Days after receipt of request, provide to copies of any material documents or correspondence received from any Regulatory Authority related to Development Activities.

 

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3.5.3 Access to Records. Dermira shall have the right to review all records under the Development Plan maintained by Licensee at reasonable times, upon written request, in accordance with Section 7.13.

3.6 Ownership of Development Data. All data (including pre-clinical, clinical, technical, chemical, safety, and scientific data and information), Know-How and other results generated by or resulting from or in connection with the Development of the Products by Licensee, including relevant laboratory notebook information, screening data, Regulatory Data and synthesis schemes, including descriptions in any form, data and other information (collectively, the “Development Data”), shall be owned solely and exclusively by Licensee and shall be Confidential Information of Licensee (and Licensee shall obtain from all of its Affiliates, Sublicensees and subcontractors the right to use such Development Data).

3.7 Development Diligence Failures. If Licensee fails to satisfy the requirements set forth in Section 3.1 with respect to the Development of any of the Products in the Field in the Territory or Licensee is not using Commercially Reasonable Efforts with respect to the Development of any of the Products in a given country or countries in the Territory, then Dermira may raise such issue by notice to Licensee. If, within [***] days following Licensee’s receipt of any such notice from Dermira, Licensee has not remedied the issues identified by Dermira in such notice, then Dermira shall have the right to terminate this Agreement with respect to such Product, either in its entirety or on a country-by-country basis, at its option.

ARTICLE 4

REGULATORY

4.1 Regulatory Data and Regulatory Materials. Within 30 days after the Effective Date, Dermira and Licensee shall meet and agree upon the portion of Regulatory Materials and Regulatory Data in Dermira’s possession that relates to the Compounds, Products or Licensed Technology and that is necessary for Licensee to perform its obligations hereunder, and Dermira shall thereafter use Commercially Reasonable Efforts to provide Licensee with such Regulatory Materials and Regulatory Data in the current “as-is” form and format within 60 days after the Effective Date. Licensee may only use the Regulatory Materials and Regulatory Data provided by Dermira hereunder in accordance with the rights granted to Licensee under Section 2.1.

4.2 Regulatory Filings and Regulatory Approvals.

4.2.1 General Responsibilities; Ownership of Regulatory Approvals. Licensee shall be responsible for the preparation of all Regulatory Materials necessary or desirable for obtaining and maintaining the Regulatory Approvals for the Products in the Field in the Territory (including in connection with Patient Information Leaflets, labeling and packaging for the Products in the Field in the Territory) and Licensee shall submit such Regulatory Materials, as applicable, to the applicable Governmental Authorities in the Territory. For clarity, to the extent allowed by Applicable Laws, all Regulatory Approvals for the Products in the Field in the Territory shall be held and owned by Licensee in its name.

 

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4.2.2 Pricing Approvals. To the extent that a given country or regulatory jurisdiction in the Territory requires Pricing Approval for sale of the Products in the Field in such country or regulatory jurisdiction, Licensee shall (to the extent permitted by Applicable Laws) be solely responsible for (and shall use Commercially Reasonable Efforts toward) obtaining and maintaining Pricing Approvals in such countries and regulatory jurisdictions. Without limiting the foregoing, Licensee shall use Commercially Reasonable Efforts to apply for Pricing Approvals in each country or regulatory jurisdiction in the Territory where Pricing Approvals are required for the sale of the Products in the Field no later than [***] days following the receipt of the Product Approval in such country or regulatory jurisdiction.

4.2.3 Cost of Regulatory Activities. All regulatory costs incurred in connection with the preparation of Regulatory Materials for, and obtaining of Product Approvals in, the Field in the Territory for the Products shall be borne solely by Licensee, and Licensee shall be responsible for all regulatory costs involved in the maintenance of all Regulatory Approvals for the Products in the Field in the Territory.

4.2.4 Reporting and Review. Licensee acknowledges that Dermira is party to certain agreements with Lilly pursuant to which Dermira keeps Lilly apprised of the Development and Commercialization of the Products. In connection therewith, Dermira shall permit Licensee to communicate with Lilly directly to keep Lilly apprised of the Development Plan, and Licensee shall prepare written reports of such Development Activities no less frequently than every Calendar Quarter. Additionally, Licensee shall keep Dermira reasonably and regularly informed in connection with the preparation of all Regulatory Materials, Regulatory Authority review of Regulatory Materials, Regulatory Approvals and Pricing Approvals, in each case with respect to the Products for sale in the Field in the Territory. Such updates provided to Lilly and Dermira, respectively, under this Section 4.2.4 shall be provided in writing and shall include all data and results produced in such Development that is available to Licensee for the preceding Calendar Quarter, together with Licensee’s written assessment of such results. Upon completion of a Phase IIa Clinical Trial of a Product, such reports shall in any event be updated and promptly delivered to Dermira and to Lilly. Licensee shall make appropriate personnel reasonably available to answer questions from Dermira regarding such data or results. The reporting obligations in this Section 4.2.4 would continue for each Product until such Product is sublicensed or sold to a Third Party.

4.3 No Other Regulatory Filings. Except as otherwise expressly set forth in this Article 4, Licensee (and its Affiliates) shall not file any Regulatory Materials or Regulatory Approvals for any products other than the Licensed Products that are otherwise based on any Licensed Patents.

4.4 Pharmacovigilance and Medical Inquiries.

4.4.1 Pharmacovigilance. Licensee, as the holder of the Product Approvals in the Territory, shall be responsible for all Pharmacovigilance responsibilities related to the Products in the Field in the Territory in accordance with Applicable Laws.

 

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4.4.2 Medical Inquiries for the Product. Following the Effective Date, subject to Section 4.2.1, Licensee shall be responsible for handling all medical questions or inquiries in the Field in the Territory, including all Product Complaints, with regard to any Products sold by or on behalf of Licensee (or any of its Related Parties), in each case in accordance with Applicable Laws and this Agreement. Licensee shall be responsible for handling any Product Complaints related to the Development, Commercialization and Manufacture of the Products in the Field in the Territory, and Dermira shall refer all such Product Complaints to Licensee.

4.5 Regulatory Authority Communications Received by a Party.

4.5.1 General. Licensee shall promptly provide Dermira with a summary of notification of any action by, or notification or other information which it receives (directly or indirectly) from, any Regulatory Authority which (a) raises any material concerns regarding the safety or efficacy of the Products, (b) indicates or suggests a potential material liability of either Party to Third Parties in connection with the Products, (c) is reasonably likely to lead to a recall, market withdrawal or market notification with respect to the Products, or (d) relates to expedited and periodic reports of adverse events with respect to the Products or Product Complaints, and which may have an adverse impact on Regulatory Approval or the continued Commercialization of the Product. Licensee shall be solely responsible for responding to any such communications relating to the Products in the Field in the Territory. Upon request by Dermira, Licensee shall also promptly provide Dermira with a copy of all material correspondence received from a Regulatory Authority specifically regarding the matters referred to above.

4.5.2 Disclosures. In addition to its obligations under this Agreement, Licensee shall disclose to Dermira (and in the case of Dermira, Dermira shall have the right to subsequently disclose to its designees) the following regulatory information:

(a) All material information pertaining to actions taken by Regulatory Authorities, in connection with the Products in the Field, including any notice, audit notice, notice of initiation by Regulatory Authorities of investigations, inspections, detentions, seizures or injunctions concerning the Products in the Field, notice of violation letter (i.e., an untitled letter), warning letter, service of process or other inquiry; provided, however, that a Party shall be entitled to redact those portions thereof to the extent not related to the Product. Without limiting the generality of the foregoing, Licensee shall promptly inform Dermira of any inspections, proposed regulatory actions, investigations or requests for information or a meeting by any Regulatory Authority with respect to the Products in the Field.

(b) All information pertaining to notices from Regulatory Authorities, regarding non-compliance with Applicable Laws in connection with the Products in the Field, including receipt of a warning letter or other notice of alleged non- compliance from any Regulatory Authority relating to the Products in the Field promptly; provided, however, that Licensee shall be entitled to redact those portions thereof to the extent not related to the Products in the Field.

 

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4.6 Recall, Withdrawal, or Market Notification of Product. In the event that any Governmental Authority threatens or initiates any action to remove any Product from the market in the Field in the Territory, Licensee shall notify Dermira of such communication promptly. Licensee shall determine whether to initiate any recall, withdrawal or market notification of the Product in the Field in the Territory. Licensee shall use Commercially Reasonable Efforts to utilize a batch tracing system which will enable Licensee to identify, on a prompt basis, customers within the Territory who have been supplied with Product of any particular batch, and to recall such Product from such customers as set forth in this Section 4.6. All costs and expenses associated with implementing a recall, withdrawal or market notification with respect to the Products in the Field in the Territory shall be borne by Licensee.

4.7 Regulatory Diligence. In the event that Licensee determines at any time during the Term that it is not economically feasible to incur the costs necessary to obtain and maintain Regulatory Approval for any Product in a given country of the Territory, Licensee shall promptly notify Dermira in writing of such determination and Dermira shall have the right to terminate this Agreement with respect to such Product in such country.

ARTICLE 5

COMMERCIALIZATION

5.1 Commercialization in the Field in the Territory. Licensee shall be solely responsible for Commercializing each Product in the Territory for use in the Field, which Commercialization shall be in accordance with this Agreement. Licensee shall be responsible for 100% of the expenses (including Pre-Marketing and other Commercialization expenses) incurred in connection with the Commercialization of the Products in the Territory for use in the Field. Without limiting the foregoing, Licensee shall use Commercially Reasonable Efforts to Commercialize each Product for use in the Field in the Territory.

5.2 Licensee’s Performance.

5.2.1 Specific Commercialization Obligations. Without limiting the generality of the provisions of Section 5.1, in connection with the Commercialization of the Products in the Territory for use in the Field by Licensee hereunder:

(a) Licensee shall use Commercially Reasonable Efforts to (i) Commercialize each Product for use in the Field in the Territory, (ii) maximize the commercial potential for each Product in the Field in the Territory, (iii) represent Products accurately and fairly, and (iv) act in good faith to maximize the economic value of Products.

(b) Licensee shall not (i) utilize deceptive, misleading or unethical business practices, or (ii) intentionally take any action or inaction that would reasonably be likely to prejudice the value of any Product.

(c) Licensee shall be solely responsible for (i) receiving, accepting and filling orders for the Products in the Field in the Territory, (ii) handling all returns of the Products in the Field in the Territory, (iii) controlling invoicing, order processing and collection of accounts receivable for the sales of the Products in the Field in the Territory, and (iv) distributing and managing inventory of the Products in the Field in the Territory.

 

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(d) Licensee shall use Commercially Reasonable Efforts to launch each Product in each country (or other regulatory jurisdiction) as Licensee deems commercially appropriate to do so in the Territory after all applicable Regulatory Approvals for the Products in such country (or other regulatory jurisdiction) have been obtained. Licensee shall use Commercially Reasonable Efforts to (i) commercially launch each Product in the Territory as Licensee deems commercially reasonable to do so and (ii) ensure that once launched, each Product remains commercially available in each country in which it has been launched for the duration of the Royalty Term in such country, as Licensee deems commercially appropriate to do so.

5.2.2 Commercialization Diligence Failures. If Licensee fails to satisfy the requirements set forth in Section 5.2.1 with respect to the Commercialization of any of the Products in the Field in the Territory or Licensee is not using Commercially Reasonable Efforts with respect to the Commercialization of any of the Products in the Territory, then Dermira may raise such issue by notice to Licensee and the Parties shall discuss in good faith. If, within [***] days following Licensee’s receipt of any such notice from Dermira, Licensee has not remedied the issues identified by Dermira in such notice, then Dermira shall have the right to terminate this Agreement with respect to such Product, either in its entirety or on a country-by-country basis, at its option.

5.3 Reports. Without limiting Licensee’s other reporting obligations hereunder, Licensee shall, during each [***], provide Dermira a reasonably detailed report regarding its significant Commercialization activities involving Products during the preceding [***], provided that after [***] for a Product, Licensee’s obligations pursuant to this Section 5.3 shall be [***]l for such Product.

5.4 Promotional Materials.

5.4.1 Creation of Promotional Materials. Licensee will use Commercially Reasonable Efforts to create and develop Promotional Materials for the Territory in accordance with the Regulatory Approvals and Applicable Laws.

5.4.2 No Inclusion of Dermira Logos on Packaging and Promotional Materials. Notwithstanding anything to the contrary herein, neither Licensee nor any Related Party of Licensee shall use any of Dermira’s or its Affiliates’ trademarks, names, logos or housemarks in connection with any Promotional Materials or the Product. Without limiting the foregoing, Licensee will take no action that will interfere with or diminish Dermira’s or its Affiliates’ rights in their respective trademarks, names and logos, and if Dermira or Lilly reasonably believes that the use of any trademarks, names and logos by Licensee hereunder is interfering with or diminishing their respective rights, Dermira shall notify Licensee thereof in writing and the Parties shall discuss in good faith.

 

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5.4.3 Licensee Ownership of Promotional Materials. During the Term, Licensee shall own all right, title and interest in and to any Promotional Materials created by Licensee hereunder relating to the Products in the Field in the Territory including copyrights, but excluding trademarks (including the Product trademarks), names, logos and other marks owned by or on behalf of Dermira or its Affiliates.

5.4.4 Use of Promotional Materials Exclusively for the Product. The Promotional Materials, and any aspects of those uniquely tied to the Products, shall be used by Licensee exclusively in connection with the Manufacturing and Commercialization of the Products in the Field in the Territory in accordance with the terms of this Agreement, and Licensee shall not use, or allow any other Person to use, any such Promotional Materials except in accordance with this Agreement.

5.5 Product Trademarks and Product Trade Dress.

5.5.1 Product Trademarks. Licensee shall use Commercially Reasonable Efforts to Commercialize the Products in the Field in the Territory under the trademark and the trade dress selected by Licensee (the “Product Trademarks” and the “Product Trade Dress”, respectively). Notwithstanding the foregoing, in the event that Dermira reasonably believes that the use or registration of the Product Trademarks or the use of the Product Trade Dress in a particular country in the Territory would be against the Applicable Laws of such country, or in conflict with any Third Party’s intellectual property rights in that country, based on a review of market research, regulatory research, legal searches, investigation results, and any other relevant information that may have been collected by either Party that is relevant to the clearance for use and registration of a trademark or for use and registration of a trade dress, Dermira shall present such concern to Licensee, and Licensee shall take such concern into consideration in good faith.

5.5.2 Use and Ownership of Product Trademarks and Product Trade Dress. All uses of the Product trademarks and Product trade dress by Licensee (and its Related Parties) to identify or in connection with the Commercialization of the Products in the Field in the Territory shall be in accordance with Regulatory Approvals and all Applicable Laws. Licensee (and its Related Parties) shall use the Product Trademarks and Product Trade Dress pursuant to the terms of this Agreement to identify and in connection with the Commercialization of the applicable Products in the Territory for use in the Field. Licensee shall own and retain all rights to the Product trademarks and Product trade dress (in each case, together with all goodwill associated therewith throughout the Territory). Licensee shall also own rights to any Internet domain names incorporating the Product trademarks or any variation or part of such trademarks as its URL address.

5.5.3 Maintenance of Product Trademarks. During the Term, Licensee will use Commercially Reasonable Efforts to establish, maintain and enforce the Product Trademarks in the Territory, and will bear all costs and expenses relating thereto.

5.6 Commercialization Data. Licensee shall own all marketing and sales data and information resulting from its Commercialization of the Products in the Field in the Territory during the Term (the “Commercialization Data”), including promotional materials, marketing strategies and market research data.

 

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ARTICLE 6

MANUFACTURING

6.1 General. Licensee will use Commercially Reasonable Efforts to Manufacture (or have Manufactured) reasonable quantities of each Product for clinical and commercial use in the Field in the Territory, in each case in accordance with the terms of this Article 6.

6.2 Manufacturing. Licensee will be solely responsible for, and will bear all the costs and expenses of Manufacturing and supplying, all of its requirements of Products for its use in the Development of the Products in the Field, and the Commercialization of the Products in the Field within the Territory. All Products Manufactured by or on behalf of Licensee must be manufactured in compliance with Applicable Laws, Regulatory Approvals and applicable GMPs.

6.3 Packaging and Labeling; Certain Other Manufacturing Activities. Notwithstanding anything to the contrary contained herein, Licensee or its designated Third Party shall be responsible (at its sole cost and expense) for all final product labeling and packaging (whether in commercial or clinical packaging presentation), including insertion of materials such as patient inserts, patient medication guides, professional inserts and any other written, printed or graphic materials accompanying the Products and considered to be part of the finished Products packaging and labeling, and handling, storage, quality control, quality assurance, and the testing and release aspects of Analytical Release Testing and Characterization and related activities, of the Products in connection with the foregoing (collectively, “Packaging and Labeling”). Licensee or its designated Third Party shall ensure that all such Packaging and Labeling complies with Applicable Laws, GMPs and the Regulatory Approvals for the Products in the Territory, including the Product Specifications. Licensee or its designated Third Party shall also be responsible for performing the testing and release aspects of Analytical Release Testing and Characterization of the Product. To the extent that a Third Party is involved in Packaging and Labeling or other activities described in this Section 6.3, Licensee shall be wholly responsible for, and bear 100% of the costs related to, qualifying such Third Party to perform such activities.

ARTICLE 7

PAYMENTS

7.1 Upfront License Fee. In consideration of the license and rights granted hereunder, Licensee shall pay an upfront license fee in an amount equal to $7,500,000 (the “Upfront License Fee”), which shall be due and payable as follows: (i) $5,000,000 within ten (10) Business Days after the Effective Date and (ii) $2,500,000 on the first (1st) anniversary of the Effective Date.

7.2 Development Milestone Payments. In consideration of the license and rights granted hereunder, for each Product, Licensee shall pay to each of the milestone payments set forth in the table below (each, a “Development Milestone Payment”) upon the occurrence of the corresponding milestone set forth in such table with respect to such Product (each, a “Development Milestone”). Licensee shall promptly notify Dermira in writing of, but in no event later than [***] Business Days after, the occurrence of each Development Milestone for each

 

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Product (which notice shall specify the date of such occurrence, and such specified date shall be binding on Licensee) (each, a “Development Milestone Notice”); provided, however, that in no event shall a failure to deliver a Development Milestone Notice relieve Licensee of its obligation to pay the applicable Development Milestone Payment when due pursuant to this Section 7.2. Licensee shall pay each Development Milestone Payment within [***] days after the occurrence of the applicable Development Milestone.

 

Development Milestone

   Development Milestone Payment

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

Each Development Milestone Payment shall be made separately for each Product, but each Development Milestone Payment shall only be payable once for all products that fall within the definition of such Product taken together (e.g., all formulations and dosages), and shall be payable upon the first occurrence of the applicable Development Milestone for such Product (regardless of the specific Product or whether the specific Product for a Development Milestone is the same as the specific Product for any other Development Milestones). For clarity, and by way of example (with each of the following items occurring sequentially in the order set forth below):

 

  (i)

If there is [***] for a particular formulation/dosage of a ROR Product, the corresponding Development Milestone Payment of [***] would be payable with respect to the ROR Product.

 

  (ii)

If there is [***] for a particular formulation/dosage of a ROR Product that is a different formulation/dosage than in item (i), the corresponding Development Milestone Payment of [***] would be payable with respect to the ROR Product.

 

  (iii)

If there is [***] for a ROR Product in any formulation/dosage or for any indication within the Field, the corresponding milestone payment of [***] would be payable with respect to the ROR Product.

 

  (iv)

If there is [***] for a ROR Product for a different formulation/dosage or indication than in item (iii), there would be no Development Milestone Payment that is payable because the applicable Development Milestone Payment has already been made with respect to the ROR Product.

 

  (v)

If there is [***] for a particular formulation/dosage of an IRAK Product, the corresponding Development Milestone Payment of [***] would be payable with respect to the IRAK Product.

For the avoidance of doubt: (a) if all of the Development Milestones occur for a Product, the total amount of Development Milestone Payments required to be made for such Product will be $45,000,000; and (b) if all of the Development Milestones occur for each of the Products, the total amount of Development Milestone Payments required to be made for such Products will be $135,000,000.

 

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7.3 Product Sales Milestone Payments. In consideration of the license and rights granted hereunder, for each Product, Licensee shall pay to each of the milestone payments set forth in the table below (each, a “Product Sales Milestone Payment”) if the aggregate Net Sales for such Product (by Licensee, and all Related Parties) in any Calendar Year exceeds the corresponding Net Sales threshold set forth in such table (each, a “Product Sales Milestone”). Licensee shall promptly notify Dermira in writing of, but in no event later than [***] days after the end of the applicable Calendar Quarter, the occurrence of each Product Sales Milestone for each Product (each, a “Product Sales Milestone Notice”); provided, however, that in no event shall a failure to deliver a Product Sales Milestone Notice relieve Licensee of its obligation to pay the applicable Product Sales Milestone Payment when due pursuant to this Section 7.3. Licensee shall pay each Product Sales Milestone Payment within [***] days after the end of the Calendar Quarter in which the Product Sales Milestone occurred.

 

Product Sales Milestone

(Net Sales Threshold)

   Product Sales
Milestone Payment

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

The aggregate Net Sales of a Product shall be for all products that fall within the definition of such Product taken together (e.g., all formulations and dosages), and shall be calculated on a worldwide basis for all jurisdictions within the Territory. If applicable, the aggregate Net Sales in each jurisdiction shall be converted to Dollars in accordance with Section 7.10 for purposes of determining whether a Product Sales Milestone has occurred. Each Product Sales Milestone Payment shall be made separately for each Product, but each Product Sales Milestone Payment shall only be payable once for each Product for all products that fall within the definition of such Product taken together (e.g., all formulations and dosages), and shall be calculated on a worldwide basis for all jurisdictions within the Territory, and shall be payable upon the first occurrence of the applicable Product Sales Milestone for such Product. For clarity, the occurrence of a Product Sales Milestone for exceeding a particular Net Sales threshold shall also mean the occurrence of each Product Sales Milestone having a lower Net Sales threshold, and each such Product Sales Milestone Payment shall be separately due and payable (to the extent not previously paid with respect to the applicable Product). By way of example, if during a particular Calendar Quarter, the [***] Net Sales threshold for a Product is exceeded, but at the end of the prior Calendar Quarter, the [***] Net Sales threshold for such Product had not yet been exceeded, then the Product Sales Milestone Payments of [***] and [***] would both be due and payable within 30 days after the end of the Calendar Quarter during which the [***] Net Sales threshold was exceeded.

For the avoidance of doubt: (i) if all of the Product Sales Milestones occur for a Product, the total amount of Product Sales Milestone Payments required to be made for such Product will be $240,000,000; and (ii) if all of the Product Sales Milestones occur for each of the Products, the total amount of Product Sales Milestone Payments required to be made for such Products will be $720,000,000.

 

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7.4 Royalty Payments. In consideration of the license and rights granted hereunder, Licensee shall pay to Dermira a royalty, separately for each Product, in an amount equal to the aggregate Net Sales for such Product during the Calendar Year (by Licensee and all Related Parties) multiplied by the applicable royalty rate percentage(s) specified in the table below (with each royalty rate percentage applied only to the corresponding range of Net Sales specified in such table) (collectively, the “Royalty Payments”).

 

Net Sales

(each Calendar Year)

   Royalty Rate Percentage
   IRAK
Product
   ROR
Product
   MRGPRX2
Product

Up to [***]

   [***]    [***]    [***]

[***] – [***]

   [***]    [***]    [***]

[***] – [***]

   [***]    [***]    [***]

Over [***]

   [***]    [***]    [***]

Each Royalty Payment shall be calculated separately for each Product, based on the aggregate Net Sales of such Product, and shall be calculated on a worldwide basis for all jurisdictions within the Territory. If applicable, the aggregate Net Sales in each jurisdiction shall be converted to Dollars in accordance with Section 7.10 for purposes of determining the aggregate Net Sales in all jurisdictions. The aggregate Net Sales of a Product shall be for all products that fall within the definition of such Product taken together (e.g., all formulations and dosages). Each royalty rate percentage in the table above applies only to the specified range of Net Sales for each Product. For example, if the aggregate Net Sales of ROR Products during a Calendar Year was [***], the total Royalty Payments for such Calendar Year would be [***], calculated as [***].

7.5 Generic Competition. On a country-by-country and Product-by-Product basis, if during two consecutive Calendar Quarters for which Royalty Payments are payable hereunder for a particular Product, one or more products (excluding any products manufactured or sold by Licensee or its Related Parties) being sold in a particular country are Generic Products with respect to such Product, for a total market penetration exceeding [***], then the royalty rate percentage otherwise applicable to the Net Sales of such Product in such country during the second such Calendar Quarter and thereafter (for as long as such Generic Products are sold in such country) shall be reduced by [***], such market defined as approved pharmaceutical products which comprise a similar or identical active ingredient(s). Thereafter, with respect to such Product, if the Generic Product(s) market penetration falls below [***] during any two consecutive Calendar Quarters, then the royalty rate percentage otherwise applicable to the Net Sales of such Product in such country (i.e., without reduction subject to this Section 7.5) shall apply for the second such Calendar Quarter and thereafter. For purposes of this Section 7.5, “market” refers to the aggregate of the unit volume of the Generic Product(s) and the applicable Product in a country.

 

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7.6 Anti-Stacking. In the event the manufacture, use or sale of any of the Products under this Agreement would infringe the intellectual property rights of any Third Party (other than as licensed by Takeda and its Affiliates pursuant to the Takeda License) absent a license thereunder, [***] and Licensee, after consultation with Dermira, reasonably obtains a license under such intellectual property rights, then Licensee may deduct from the Royalty Payments (only for the applicable Product) due to Dermira pursuant to Section 7.4 [***] of the royalty payments actually paid to any such Third Party on an arm’s- length basis, solely as consideration for any such license to such intellectual property rights with respect to such Product; provided that in no event shall the Royalty Payments for any Product due to Dermira for a given Calendar Quarter be reduced under this Section 7.6 by more than [***] (as determined separately for each Product). [***]. For the avoidance of doubt, this Section 7.6 shall not apply to any amounts payable by Licensee to Takeda pursuant to the Takeda License.

7.7 Takeda Payments. Licensee shall be solely responsible for 100% of all amounts payable by Dermira to Takeda on and after the Effective Date under the Takeda License (including milestone payments and royalties) incurred as a result of Licensee’s exercise of its rights under this Agreement. Licensee shall pay such amounts to Dermira in accordance with Section 7.8.1 (unless otherwise directed by Dermira in writing to make payments directly to Takeda), in each case, no later than [***] Business Days prior to the date on which the applicable amount is due and payable by to Takeda under the Takeda License.

7.8 Payments.

7.8.1 General. Licensee shall make all payments required by this Article 7 by wire transfer of then immediately available funds into an account designated by Dermira, and shall make such payments by a U.S. entity from a bank account domiciled in the U.S. and in Dollars. Each payment of the Upfront License Fee and each Milestone Payment shall be nonrefundable and noncreditable against any other payments due hereunder.

7.8.2 Royalty Payments and Reports. Licensee shall pay the Royalty Payments on a Calendar Quarter basis, with respect to the aggregate Net Sales for such Calendar Quarter. At the end of each Calendar Quarter, Licensee shall calculate, separately for each Product, the Royalty Payments payable to Dermira pursuant to Section 7.4 for such Calendar Quarter, which amounts shall be converted to Dollars at such time in accordance with Section 7.10. Licensee shall pay to Dermira the Royalty Payment due for each Product for Net Sales during a given Calendar Quarter within [***] days after the end of such Calendar Quarter. Each Royalty Payment due to Dermira shall be accompanied by (a) a statement of the amount of aggregate gross sales of each Product (A) in the Territory as a whole and (ii) on a country-by-country basis, in each case, during the applicable Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars), (b) an itemized calculation of Net Sales of each Product (A) in the Territory as a whole and (B) on a country-by-country basis, in each case, during the applicable Calendar Quarter, showing for both (A) and (B) deductions provided for in the definition of “Net Sales” during such Calendar Quarter, and (c) information showing the applicable royalty rate percentage applied in accordance with Section 7.4. Without limiting the generality of the foregoing, Licensee shall require its Related Parties (and any distributors) to account for their respective Net Sales, separately for each Product, and to provide such reports with respect thereto as if such Net Sales were made by Licensee.

 

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7.8.3 Sales Forecast. Within [***] days after the end of each Calendar Quarter, Licensee shall provide Dermira with a sales forecast for the subsequent [***] Calendar Quarters. Licensee will mail such forecasts to the attention of: Eli Lilly and Company, [***], Lilly Corporate Center, Indianapolis, Indiana, 46285.

7.9 Taxes and Withholding.

7.9.1 VAT. The Parties agree to cooperate with one another and use reasonable efforts to ensure that value added tax or similar payment (“VAT”) in respect of any payments made by Licensee to Dermira under this Agreement does not represent an unnecessary cost in respect of payments made under this Agreement. For purposes of clarity, all sums payable under this Agreement shall be made by Licensee exclusive of VAT. In the event that any VAT is owing in any jurisdiction in respect of any such payment, Licensee shall pay such VAT, and (a) if such VAT is owing as a result of any action by Licensee, including any assignment or sublicense (including assignment to, or payment hereunder by, another Licensee-related entity or Affiliate), or any failure on the part of Licensee or its Affiliates to comply with Applicable Laws or filing or record retention requirements, that has the effect of modifying the tax treatment of the Parties hereto, then the payment in respect of which such VAT is owing shall be made without deduction for or on account of such VAT to ensure that Dermira receives a sum equal to the sum which it would have received had such VAT not been due or (b) otherwise, such payment shall be made after deduction of such VAT. In the event that any deducted VAT is later recovered by Licensee or an Affiliate, Licensee shall reimburse Dermira within [***] days for the deducted amount. For the sake of clarity, any increase in payments to Dermira under this Section 7.9.1 shall reflect only the incremental increase in VAT directly resulting from clause (a) above. In the event that any VAT is owed in any jurisdiction in respect of any such payment, Dermira will provide to Licensee tax invoices showing the correct amount of VAT in respect of such payments hereunder.

7.9.2 Withholding Tax Matters. If Licensee is required to make a payment to Dermira subject to a deduction of tax or withholding tax, the sum payable by Licensee (in respect of which such deduction or withholding is required to be made) shall be made to Dermira after deduction of the amount required to be so deducted or withheld, which deducted or withheld amount shall be remitted in accordance with Applicable Laws. If such withholding tax is owing as a result of any action by Licensee, including any assignment or sublicense (including assignment to, or payment hereunder by, another Licensee-related entity or Affiliate), or any failure on the part of Licensee or its Affiliates to comply with Applicable Laws or filing or record retention requirements, that has the effect of modifying the tax treatment of the Parties hereto, then the payment in respect of which such withholding tax is owing shall be made without deduction for such withholding tax to ensure that Dermira receives a sum equal to the sum which it would have received had such withholding tax not been due.

 

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7.9.3 Tax Cooperation. To the extent Licensee is required to deduct and withhold taxes on any payments to Dermira, Licensee shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to Dermira an official tax certificate or other evidence of such withholding sufficient to enable Dermira to claim such payments of taxes. In the event that Licensee is required to deduct and withhold taxes on payments to Dermira, Licensee shall provide Dermira prompt notice and identify any forms reasonably necessary in order for Licensee not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Dermira shall provide to Licensee any completed tax forms that may be reasonably necessary in order for Licensee not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Dermira shall use reasonable efforts to provide any such tax forms to Licensee at least [***] days prior to the due date for any payments for which Dermira desires that Licensee apply a reduced withholding rate. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by Applicable Laws, of withholding taxes, VAT or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or VAT.

7.10 Currency Conversion. All payments hereunder shall be made in Dollars. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than Dollars), any amount expressed in a foreign currency shall be converted into Dollars in a manner consistent with such Party’s normal practices used to prepare its audited financial statements for external reporting purposes, in accordance with GAAP, consistently applied, or by using a reputable source such as the Wall Street Journal or Reuters, at discretion.

7.11 Late Payments. Any amount required to be paid by a Party hereunder which is not paid on the date due shall bear interest at a rate equal to the 30-day U.S. dollar Prime rate effective for the date that payment was first due as reported by The Wall Street Journal [***]. Such interest shall be computed on the basis of a year of 360 days for the actual number of days payment is delinquent.

7.12 Records. Licensee and its Related Parties shall keep full, true and accurate records and books of account in reasonable detail and containing all particulars that may be necessary for the purpose of confirming the accuracy of, and calculating, as applicable, all Royalty Payments and other amounts payable to Dermira hereunder (including records of Net Sales), any records required by Applicable Law or for intellectual property protection purposes with respect to the Compounds and Products, and any other records reasonably required to be maintained with respect to Licensee’s obligations under this Agreement, during the Term and for [***] years thereafter or such longer period as required by Applicable Laws. Licensee and its Related Parties shall maintain internal accounting controls sufficient to provide reasonable assurances that all transactions are executed in accordance with management authorization and recorded as necessary to permit the preparation of financial statements that conform to generally accepted accounting principles, that access to assets is permitted only in accordance with management authorization, and that recorded accountability for assets is compared to existing assets regularly and appropriate action is taken for any differences.

 

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7.13 Audits. Dermira shall have a right to request an audit of Licensee in order to confirm the accuracy of the records described in Section 7.12 (an “Audit”); [***]. Upon the written request by Dermira to Audit Licensee, Dermira shall have the right to engage an independent, internationally recognized accounting firm reasonably acceptable to Licensee that has executed a reasonably acceptable nondisclosure agreement with Licensee to perform a review as is reasonably necessary to enable such accounting firm to calculate or otherwise confirm the accuracy of all Royalty Payments and other amounts payable to Dermira hereunder (including records of Net Sales) for the Calendar Year(s) requested by Dermira; provided that (a) such accountants shall be given access to, and shall be permitted to examine such books and records of Licensee upon [***] Business Days’ prior written notice to Licensee, and at all reasonable times on such Business Days, (b) prior to any such examination taking place, such accountants shall enter into a confidentiality agreement with Licensee reasonably acceptable to Licensee in order to keep all information and data contained in such books and records strictly confidential and shall not disclose such information or copies of such books and records to any third person including Dermira, but shall only use the same for the purpose of the reviews and calculations that they need to perform in order to determine any amounts being reviewed, and (c) such accountants shall use reasonable efforts to minimize any disruption to Licensee’s business. Licensee shall make personnel reasonably available during regular business hours to answer queries on all such books and records required for the purpose of the Audit. The accountants shall deliver a copy of their findings to each of the Parties within [***] Business Days of the completion of the review, and, in the absence of fraud or manifest error, the findings of such accountant shall be final and binding on each of the Parties. Any underpayments by Licensee shall be paid to Dermira within [***] Business Days of notification of the results of such inspection. Any overpayments made by Licensee shall be refunded by Dermira within [***] Business Days of notification of the results of such inspection. The cost of the accountants shall be the responsibility of Dermira unless the accountants’ calculation shows that the actual Royalty Payments payable, Net Sales or any other applicable amount audited hereunder to be greater, by more than [***], than the amounts as paid and reported by Licensee for the period subject to the Audit, in which case, Licensee shall reimburse Dermira for the cost of the Audit.

7.14 Equity Issuance. As consideration for the entry into this Agreement, Licensee agrees to issue to Dermira at the closing of the Qualified Financing (the “Qualified Financing Closing”) the same class and series of securities issued in the Qualified Financing to the Lead Investor (the “Securities”) in an amount equal to the lesser of (a) securities that represent or are convertible, as the case may be, into [***] of Licensee’s Fully-Diluted Capital Stock, calculated on an as-if-converted basis as of the date of, and immediately prior to the Qualified Financing Closing and (b) [***] of the Securities issued at the same price per share paid by the Lead Investor. At least [***] Business Days prior to the Qualified Financing Closing, Licensee shall notify Dermira of the pending Qualified Financing and provide Dermira with any executed term sheet between Licensee and the Lead Investor and drafts of any documents to be entered into with the Lead Investor to consummate the transaction (the “Qualified Financing Documentation”). Licensee and Dermira shall thereafter negotiate the terms of the Qualified Financing such that Dermira receives the same contractual rights as the Lead Investor in the Qualified Financing under the Qualified Financing Documentation (including representations and warranties, covenants made by Licensee and conditions to closing), which shall be mutually agreed by Licensee and Dermira. At the Qualified Financing Closing, Licensee shall deliver to Dermira a certificate representing the securities issued to Dermira, and Licensee and Dermira shall execute the relevant Qualified Financing Documentation. If Licensee forms a holding company that is the issuer in the Qualified Financing, this provision shall apply mutatis mutandis to such holding company.

 

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ARTICLE 8

INTELLECTUAL PROPERTY MATTERS

8.1 Patent Filing, Prosecution and Maintenance. Subject to the terms and conditions of this Agreement, Licensee shall have sole-decision-making authority for all actions, at its sole cost and expense, relating to Licensee’s Patents or the Licensed Patents, including Patent prosecution, defense, enforcement, listing in regulatory publications (such as the FDA Orange Book and any foreign equivalent) and patent term extension; provided, however, that decision-making authority relating to the Takeda-Owned Patents is described in Section 7 (Intellectual Property Matters) of the Takeda License. Licensee shall use Commercially Reasonable Efforts to in good faith establish an overall strategy for the actions described above in this Section 8.1, including the filing, prosecution and maintenance of the Licensed Patents; provided, that at option, may participate in the development of such strategy solely during the Exclusivity Period (and applicable [***]) for a Product. Subject to Section 2.9, an objective of such strategy shall be to provide patent exclusivity for the Products and uses thereof in the major pharmaceutical markets and other markets with respect to which Licensee or any of its Related Parties are Developing or Commercializing the Products and to protect the investments made and to be made by Licensee and its Related Parties in the Development and Commercialization of the Products where it is economically reasonable. Licensee shall keep Dermira informed of the status of all material actions taken with respect to the Licensed Patents and, in particular, shall (a) regularly and promptly provide Dermira with copies of all Licensed Patents and other material submissions and correspondence with government agencies concerning such Licensed Patents, (b) provide Dermira and its patent counsel with an opportunity to consult with Licensee and its patent counsel regarding the filing and contents of any such application, amendment, submission or response, and the advice and suggestions of Dermira and its patent counsel shall be taken into consideration in good faith by Licensee and its patent counsel, and (c) not settle, without Dermira’s prior written consent (not to be unreasonably withheld, conditioned or delayed), any proceeding with respect to a Licensed Patent in a manner that will materially adversely affect any of the Licensed Patents; provided that with respect to Takeda-Owned Patents, the foregoing obligations shall only apply to a Takeda-Owned Patent for which Licensee has assumed responsibility for the preparation, filing, prosecution and maintenance in accordance with Section 7.3(b) (Takeda Invention) of the Takeda License.

8.2 Patent and Trademark Oppositions. Subject to Section 7 (Intellectual Property Matters) of the Takeda License, Licensee shall, in its sole discretion and at its cost, decide whether and how to participate in Patent oppositions and other activities intended to invalidate a Third Party’s Patents or trademarks.

8.3 Abandoned Patents. Licensee may in its sole discretion elect to discontinue Patent prosecution of (i) a Dermira-Owned Patent or (ii) a Takeda-Owned Patent for which Licensee has assumed responsibility for the preparation, filing, prosecution and maintenance in accordance with Section 7.3(b) (Takeda Invention) of the Takeda License, in each case in any country, on a Patent-by-Patent basis. Licensee shall give prompt notice, of at least [***] days prior to the deadline for the next filing, office action or payment with the relevant patent office, to Dermira if it elects to discontinue Patent prosecution or any other action described in Section 8.1, or declines to pay costs for the filing, prosecution or maintenance, of a Licensed Patent in any country. Dermira will have the option, but not the obligation, to resume control of such patent prosecution and maintenance.

 

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If Dermira elects to exercise its option to maintain the patent, Licensee will reimburse Dermira for the reasonable cost of prosecuting and maintaining such patent. If Dermira elects not to exercise its option to maintain the patent, Licensee shall pay royalties as under Section 7.4 during any Regulatory Exclusivity period and then [***] of the royalty under Section 7.4, thereafter until what would have been the expiration of the patent plus any patent term extension that would have been otherwise allowable. If Dermira provides written notice to Licensee within such [***]-day period that Dermira has decided to file, prosecute or maintain, or otherwise conduct any such action with respect to, such Licensed Patent, Licensee shall promptly deliver to Dermira copies of all necessary files related to such Licensed Patent, shall take all actions and execute all documents to the extent reasonably necessary for Dermira to assume the right and responsibility to conduct all such Patent prosecution and other actions with respect to such Licensed Patent, and shall, or shall require its Affiliate to, promptly assign such Licensed Patent to

8.4 Notice. Each Party shall promptly provide written notice to the other Party reasonably detailing any known or alleged infringement of any Licensed Patent or if it receives notice by an ANDA applicant of a certification under 21 USC 355(b)(2)(a) or 355(j)(2)(A)(vii) with respect to any Licensed Patent.

8.5 Enforcement of Intellectual Property Rights. With respect to the Takeda- Owned Patents, the rights to enforce will be governed by the mechanism set forth in the Takeda License. Licensee shall have the first right to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating a Dermira- Owned Patent covering the Compounds or Products, and to defend the Dermira-Owned Patents from any claim of invalidity or unenforceability in connection therewith. If Licensee or any of its Related Parties does not undertake efforts to abate such violation of intellectual property rights, which may include commencement of a lawsuit against the accused person if necessary, within [***] days after receiving notice of such infringement of such Dermira-Owned Patent, then Dermira shall be entitled (but shall not be obligated) to take all actions reasonably necessary to abate such violation, including commencement of a lawsuit against the accused person if necessary; provided, however, that Dermira shall consult in advance with Licensee regarding such action. The primary objective of any such patent enforcement action shall be to preserve exclusivity for the Products and uses thereof in the major pharmaceutical markets and other markets with respect to which Licensee or any of its Related Parties are Developing or Commercializing the Products. All amounts recovered from enforcement of any such rights by an enforcing Party relating to such intellectual property licensed under this Agreement shall be first used to reimburse each Party’s reasonable out-of-pocket costs and expenses incurred in connection with such action, and any remainder of such recovery shall be allocated such that the Party that commenced the lawsuit retains [***] of such remainder, and the other [***] is promptly (but no later than [***] Business Days after receipt by the Party that commenced the lawsuit) paid to the other Party. The Parties shall keep each other informed of the status of and of their respective activities regarding any enforcement action pursuant to this Section 8.5. For the avoidance of doubt, Dermira reserves all rights to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating Know-How and Dermira Confidential Information.

 

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8.6 Cooperation in Enforcement Proceedings. For any action by a Party pursuant to Section 8.5, in the event that such Party is unable to initiate or prosecute such action solely in its own name, the other Party or its Affiliates, as applicable, will join such action voluntarily and will execute all documents necessary for such Party to initiate, prosecute and maintain such action. If either Party initiates an enforcement action pursuant to Section 8.5, then, at such Party’s request, the other Party shall cooperate to the extent reasonably necessary and at the first Party’s sole expense for reasonable, out-of-pocket costs (except for the expenses of the non- controlling Party’s counsel, if any). Upon the reasonable request of the Party instituting any such action or if necessary to continue such action, such other Party shall join the suit and can be represented in any such legal proceedings using counsel of its own choice at its own expense. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to any such action.

8.7 Defense. Each Party shall notify the other in writing of any allegations it receives from a Third Party that the manufacture, production, use, Development, Commercialization, sale or distribution of any Products, or any technology or intellectual property licensed under this Agreement, infringes the intellectual property rights of such Third Party. Such notice shall be provided promptly, but in no event after more than [***] Business Days, following receipt of such allegations.

In the event that a Party receives notice that it or any of its Affiliates or Sublicensees have been individually named as a defendant in a legal proceeding by a Third Party alleging infringement of a Third Party’s Patents or other intellectual property right as a result of the manufacture, production, use, Development, Commercialization, sale or distribution of Products, or any technology or intellectual property licensed under this Agreement, such Party shall promptly notify the other Party in writing, but in no event more than [***] Business Days after the receipt of such notice. Such written notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to such legal proceeding. In such event, the Parties shall use reasonable efforts to agree how best to mitigate or control the defense of any such legal proceeding; provided, however, that Licensee or any of its Affiliates or Sublicensees shall have the right to assume the primary responsibility for the conduct of the defense of any such claim at its expense. Dermira shall have the right, but not the obligation, to participate and be separately represented in any such suit at its sole option and at its own expense. Dermira shall reasonably cooperate with and assist Licensee or any of its Affiliates or Sublicensees. If a Party or any of its Affiliates have been individually named as a defendant in a legal proceeding relating to the alleged infringement of a Third Party’s Patents or other intellectual property right as a result of the manufacture, production, use, development, sale or distribution of Products, the other Party shall be allowed to join in such action, at its own expense, and agrees to be joined if the first Party reasonably believes that it is necessary to pursue a counterclaim or similar action.

The Parties shall keep each other informed of the status of and of their respective activities regarding any infringement litigation initiated by a Third Party concerning the manufacture, production, use, Development, Commercialization sale or distribution of Products or settlement thereof; provided, however, that no settlement or consent judgment or other voluntary final disposition of a suit under this Section 8.7 may be undertaken by a Party without the consent of the other Party which consent shall not be unreasonably withheld or delayed.

 

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8.8 Employees. To the extent allowed by Applicable Laws, Licensee will require all of its (and will cause each of its applicable Affiliates to require all of such Affiliate’s) employees to assign all Inventions that are developed, made or conceived by such employees during the period of such employees’ employment with Licensee (or the applicable Affiliate) to Licensee (or the applicable Affiliate) free and clear of all liens, encumbrances, charges, security interests, mortgages or other similar restrictions. Licensee will also use its Commercially Reasonable Efforts to require any agents or independent contractors performing an activity pursuant to this Agreement to assign all Inventions that are developed, made or conceived by such agents or independent contractors on behalf of Licensee during the period of such agents or independent contractors’ relationship with Licensee to Licensee free and clear of all liens, encumbrances, charges, security interests, mortgages or other similar restrictions.

8.9 Patent Marking. Licensee shall mark the Products marketed and sold by Licensee (or its Related Parties) hereunder with appropriate patent numbers or indicia.

8.10 Patent Challenge. Dermira will be permitted to terminate this Agreement upon written notice to Licensee, effective upon receipt, if Licensee, directly or indirectly, (a) initiates or requests an interference or opposition proceeding with respect to, (b) makes, files or maintains any claim, demand, lawsuit or cause of action to challenge the validity or enforceability of, or (c) opposes any extension of, or the grant of a supplementary protection certificate with respect to, any Licensed Patent. If any of the foregoing activities are commenced by a Related Party of Licensee, then Dermira will also be permitted to terminate this Agreement upon written notice to Licensee, effective [***] days after receipt, unless Licensee either terminates the rights of such Related Party with respect to this Agreement or causes such Related Party to, and such Related Party actually does, withdraw any such proceeding, claim, demand, lawsuit, cause of action, or opposition, in each case, within [***] days after receipt by Licensee of such notice.

ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS; COMPLIANCE

9.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows, as of the Effective Date:

9.1.1 Corporate Existence and Power. It is a company or corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement, including the right to grant the licenses granted by it hereunder.

9.1.2 Authority and Binding Agreement. (a) It has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, (b) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder, and (c) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid and binding obligation of such Party that is enforceable against it in accordance with its terms, except as enforcement may be affected by bankruptcy, insolvency or other similar laws and by general principles of equity.

 

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9.1.3 No Conflicts. The execution, delivery and performance of this Agreement by it does not (a) conflict with any agreement, instrument or understanding, oral or written, to which it is a party and by which it may be bound or (b) violate any Applicable Laws.

9.1.4 All Consents and Approvals Obtained. Except with respect to Regulatory Approvals for the Development, Manufacturing or Commercialization of the Products or as otherwise described in this Agreement, (a) all necessary consents, approvals and authorizations of, and (b) all notices to, and filings by such Party with, all Governmental Authorities and other Persons required to be obtained or provided by such Party as of the Effective Date in connection with the execution, delivery and performance of this Agreement have been obtained and provided, except for those approvals, if any, not required at the time of execution of this Agreement.

9.2 Additional Representations and Warranties of Dermira. Dermira hereby represents and warrants to Licensee that, as of the Effective Date: hereby

9.2.1 Dermira has not filed any Marketing Authorization Applications with a Governmental Authority in the Territory for the sale of the Products in the Field in the Territory.

9.2.2 Since the Acquisition Date, right to the Licensed Technology.

9.2.3 To its knowledge, Patents and Licensed Know-How. has not granted or assigned any is the owner or licensee of the Licensed

9.2.4 To its knowledge, since the Acquisition Date, Dermira has complied with all Applicable Laws in all material respects, including any disclosure requirements, in connection with the filing, prosecution and maintenance of the Licensed Patents owned by Dermira in the Territory.

9.2.5 Neither Dermira nor, to the knowledge of Dermira, its subcontractors, has since the Acquisition Date received written notice of any proceedings pending before or threatened by any Regulatory Authority with respect to the Product.

9.2.6 To the knowledge of Dermira, no Third Party (a) is infringing any Licensed Patents or has misappropriated any Dermira Know-How or (b) since the Acquisition Date has challenged the scope, duration, validity, enforceability, priority or right to use or license any Licensed Technology.

9.3 Additional Representations, Warranties and Covenants of Licensee. Licensee hereby represents, warrants and covenants to throughout the Term: that, as of the Effective Date and

 

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9.3.1 To the knowledge of Licensee, no claim or demand of any Person has been asserted in writing to Licensee that challenges the rights of Licensee to use or license any of the Licensee Technology.

9.3.2 To its knowledge, Licensee has complied and will comply with all Applicable Laws, in all material respects, including any disclosure requirements, in connection with the filing, prosecution and maintenance of the Licensee Patents owned by Licensee in the Territory.

9.3.3 Licensee’s compensation programs for its Sales Representatives will not provide financial incentives for the promotion, sales, and marketing of the Products in violation of any Applicable Laws or any professional requirements.

9.3.4 Licensee’s medical, regulatory and legal teams will review all training materials and programs prior to use by Licensee to ensure that all training materials and programs are in accordance with the Regulatory Approvals and Applicable Laws.

9.3.5 All Products Commercialized or Manufactured by, or under authority of, Licensee shall be packaged, labeled, handled, stored and shipped by Licensee in compliance with all Applicable Laws, including GMPs.

9.4 Financial Representations, Warranties and Covenants of Licensee.

9.4.1 Financial Status. Licensee hereby represents, warrants and covenants to Dermira that, as of the Effective Date and throughout the Term, Licensee has and shall have the financial wherewithal to perform its obligations under this Agreement. Licensee shall promptly notify Dermira of any material adverse change to said financial wherewithal that is adversely impacting, or will adversely impact, Licensee’s ability to perform, or to continue to perform, such obligations. Any such notice will include a description of Licensee’s short- and long-term plans to remediate its current financial situation and to mitigate any impact on the performance of its obligations hereunder. Licensee shall provide Dermira regular updates regarding such remediation plans.

9.4.2 Financial Statements.

(a) As soon as available, but in any event no later than the time of delivery to Licensee’s third-party investors, Licensee shall provide to Dermira a copy of an income statement for such fiscal year, a balance sheet of the Company as of the end of such year, and a statement of cash flows for such fiscal year of Licensee and its Affiliates, in each case in the same form provided to Licensee’s third-party investors.

(b) As soon as available, but in any event within [***] days after the end of each of the first three (3) fiscal quarters of the fiscal year of Licensee, Licensee shall provide to Dermira a copy of the unaudited consolidated balance sheet of Licensee and its Affiliates as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter.

 

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(c) All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or Chief Financial Officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

9.5 Compliance Representations, Warranties and Covenants by Licensee.

9.5.1 Compliance with Laws. In connection with this Agreement, Licensee has complied and will comply with all Applicable Laws and industry codes, including those dealing with government procurement, conflicts of interest, corruption or bribery, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, any anti- corruption or anti-bribery laws in jurisdictions where Licensee operates, and any laws enacted to implement the Organisation of Economic Cooperation and Development Convention on Combating Bribery of Foreign Officials in International Business Transactions (collectively, “Anti-Corruption Laws”), and all Applicable Laws related to sanctions and trade controls, including but not limited to any sanctions or export control laws administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, U.S. Department of State, U.S. Department of Commerce, the United Nations Security Council, or other relevant sanctions authority (collectively, “Trade Laws”), and has implemented and will maintain policies and procedures reasonably designed to ensure compliance with Anti-Corruption Laws and Trade Laws.

9.5.2 Prohibited Conduct. In connection with this Agreement, Licensee has not made, offered, given, promised to give, or authorized, and will not make, offer, give, promise to give, or authorize, any bribe, kickback, payment or transfer of anything of value, directly or indirectly, to any person or to any Government Official for the purpose of (a) improperly influencing any act or decision of the person or Government Official, (b) inducing the person or Government Official to do or omit to do an act in violation of a lawful or otherwise required duty, (c) securing any improper advantage, or (d) inducing the person or Government Official to improperly influence the act or decision of any organization, including any government or government instrumentality, to assist Licensee or Dermira in obtaining or retaining business.

9.5.3 Compliance with Privacy Laws. In connection with and to the extent applicable under this Agreement, Licensee and any Person acting for or on its behalf, will comply with all Applicable Laws with respect to the receipt, collection, compilation, use, storage, processing, sharing, safeguarding, security (technical, physical and administrative), disposal, destruction, disclosure, or transfer (including cross-border) of Personal Information, including providing any notice, obtaining any consent or prior authorization, and conducting any assessment required under Applicable Laws.

9.5.4 Requests for Information; Audits. Licensee will make Commercially Reasonable Efforts to comply with requests for disclosure of information, including answering questionnaires and audit inquiries, to enable Dermira to ensure compliance with all Applicable Laws, including Anti-Corruption Laws, Trade Laws, and this Agreement, and will comply with the terms of Section 7.13 with regard to any audit requested under that provision that relates to compliance with this Section 9.5.

 

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9.5.5 Notice of Inspections. Licensee shall provide Dermira with immediate notice of any governmental or regulatory review, audit or inspection of its facility, processes or products that might relate to the subject matter of this Agreement. Licensee shall provide with the results of any such review, audit or inspection.

9.5.6 Cooperation in Investigation. Licensee agrees to cooperate in good faith to investigate the extent of any potential violations of Applicable Law, including Anti-Corruption Laws and Trade Laws, in connection with this Agreement.

9.5.7 Disclosure Rights. At any time, and without notice to Licensee, Dermira may disclose information relating to a possible violation of Applicable Law, or the existence of the terms of this Agreement, including the compensation provisions, to a government agency and to anyone that Dermira determines to have a legitimate need to know.

9.6 Additional Compliance Covenants.

9.6.1 Compliance with Party Specific Regulations. The Parties agree to cooperate with each other as may reasonably be required to ensure that each is able to fully meet its obligations with respect to the Party-Specific Regulations applicable to it. Neither Party shall be obligated to pursue any course of conduct that would result in such Party being in material breach of any Party-Specific Regulation applicable to it. All Party-Specific Regulations are binding only in accordance with their terms and only upon the Party to which they relate.

9.6.2 Compliance with Internal Compliance Codes. All Internal Compliance Codes shall apply only to the Party to which they relate. The Parties agree to cooperate with each other to ensure that each Party is able to comply with the substance of its respective Internal Compliance Codes and, to the extent practicable, to operate in a manner consistent with its usual compliance-related processes.

9.7 Disclaimer. Licensee understands that the Products are the subject of ongoing non-clinical research and development and that Dermira cannot ensure the safety or usefulness of the Products or that the Products will receive Regulatory Approvals. In addition, Dermira makes no warranties except as set forth in this Article 9 concerning the Licensed Technology.

9.8 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR NON-MISAPPROPRIATION OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

 

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ARTICLE 10

INDEMNIFICATION

10.1 Indemnification by Dermira. Dermira hereby agrees to save, indemnify, defend and hold Licensee, its Affiliates, and their respective directors, officers, agents and employees harmless from and against any and all losses, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) arising in connection with any and all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations or injunctions by a Third Party (each, a “Claim”) to the extent resulting or otherwise arising from (a) any breach by Dermira of any of its representations, warranties, covenants or obligations pursuant to this Agreement or (b) the negligence or willful misconduct by or its Affiliates, sublicensees or subcontractors or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, in each case except to the extent that such Losses are subject to indemnification by Licensee pursuant to Section 10.2; provided that the foregoing indemnity shall not apply with respect to any Claims (or corresponding Losses) to the extent arising from facts or circumstances existing as of the Acquisition Date.

10.2 Indemnification by Licensee. Licensee hereby agrees to save, indemnify, defend and hold Dermira, its Affiliates, and their respective directors, agents and employees harmless from and against any and all Losses arising in connection with any and all Claims to the extent resulting or otherwise arising from (a) any breach by Licensee of any of its representations, warranties, covenants or obligations pursuant to this Agreement or any agreement between the Parties related to this Agreement, (b) the negligence or willful misconduct by Licensee (or its Affiliates, Sublicensees, subcontractors, wholesalers or distributors) or their respective officers, directors, employees, agents or consultants in performing any obligations under this Agreement, or (c) any matter, or acts or omissions, related to the Development, Manufacturing, Packaging and Labeling or Commercialization of the Products hereunder (including, for clarity, any product liability Losses resulting therefrom) by or on behalf of Licensee (or its Affiliates, Sublicensees, subcontractors, wholesalers or distributors) or their respective officers, directors, employees, agents or consultants, in each case except to the extent that such Losses are subject to indemnification by Dermira pursuant to Section 10.1.

10.3 Indemnification Procedures.

10.3.1 A Party believing that it is entitled to indemnification under, as applicable, Section 10.1 or Section 10.2 (an “Indemnified Party”) shall give prompt written notification to the other Party (the “Indemnifying Party”) of the commencement of any Claim for which indemnification may be sought or, if earlier, upon the assertion of any such Claim by a Third Party (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a Claim as provided in this Section 10.3.1 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually materially prejudiced as a result of such failure to give notice). Within [***] days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Claim with counsel reasonably satisfactory to the Indemnified Party. If a Party believes that a Claim presented to it for indemnification is one as to which the Party seeking indemnification is not entitled to indemnification under Section 10.1 or Section 10.2, as applicable, it shall so notify the Party seeking indemnification.

 

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10.3.2 If the Indemnifying Party elects to assume the defense of such Claim, the Indemnified Party may participate in such defense at its own expense; provided, that if the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such Claim, the Indemnified Party shall have the right, at its own expense, to appoint its own counsel solely in connection with the defense of such Claim.

10.3.3 The Indemnifying Party shall keep the Indemnified Party advised of the status of such Claim and the defense thereof and shall consider recommendations made by the Indemnified Party with respect thereto.

10.3.4 The Indemnified Party shall not agree to any settlement of such Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld. The Indemnifying Party shall not agree to any settlement of such Claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto or that imposes any liability or obligation on the Indemnified Party or adversely affects the Indemnified Party without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld.

10.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT, WHETHER OR NOT FORESEEABLE AND REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT, AND THIS SECTION 10.4 SHALL NOT APPLY TO: (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTIONS 10.1 OR 10.2, (B) A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 11, (C) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY OR ITS RELATED PARTIES, (D) LICENSEE’S OBLIGATIONS TO PAY ANY AMOUNTS REQUIRED TO BE PAID UNDER SECTIONS 7.1, 7.2, 7.3, 7.4, 7.7 OR 7.8, OR TO ISSUE EQUITY AS REQUIRED UNDER SECTION 7.14, OR (E) [***].

10.5 Insurance. Licensee shall procure and maintain insurance, including clinical trials insurance and product liability insurance, adequate to cover its obligations hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which the Products are being clinically tested in human subjects or commercially distributed or sold by Licensee pursuant to this Agreement, and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Products in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate, and product liability insurance coverage shall, after such First Commercial Sale in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate. It is understood that such insurance shall not be

 

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construed to create a limit of Licensee’s liability with respect to its indemnification obligations under this Article 10. Licensee shall provide Dermira with written evidence of such insurance prior to commencement of this Agreement and upon expiration of any one coverage. Licensee shall provide Dermira with written notice at least [***] days prior to the cancellation, nonrenewal or material change in such insurance or self-insurance that materially adversely affects the rights of Dermira hereunder.

ARTICLE 11

CONFIDENTIALITY

11.1 Confidential Information.

11.1.1 The Parties agree that during the Term, and for a period of [***] years thereafter, a Party receiving Confidential Information of the other Party will (a) maintain in confidence such Confidential Information to the same extent such Party maintains its own proprietary information of similar kind and value, (b) not disclose such Confidential Information to any Third Party without the prior written consent of the other Party, except as otherwise expressly permitted below, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement. As used herein, “Confidential Information” means all Know-How and other information and materials received by either Party from the other Party or its Affiliates pursuant to this Agreement. The foregoing obligations and the other obligations set forth in this Section 11.1 shall not apply with respect to any portion of such Confidential Information which:

(a) is publicly disclosed by the disclosing Party, either before or after it becomes known to the receiving Party;

(b) was known to the receiving Party or any or its Affiliates, without any obligation to keep it confidential, prior to when it was received from the disclosing Party;

(c) is subsequently disclosed to the receiving Party or any of its Affiliates by a Third Party that is lawfully in possession thereof without obligation to keep it confidential;

(d) has been published by a Third Party or otherwise enters the public domain through no fault of the receiving Party or any of its Affiliates in breach of this Agreement; or

(e) has been independently developed or acquired by the receiving Party or any of its Affiliates without the aid, application or use of the disclosing Party’s Confidential Information.

11.1.2 The receiving Party shall have the right to disclose any Confidential Information provided by the other Party hereunder if such disclosure is necessary to comply with the terms and conditions of this Agreement, or the requirements of any Applicable Law, but only to the extent of such necessity or requirements, and no such disclosure shall cause any such information to cease to be Confidential Information hereunder, except to

 

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the extent such disclosure results in a public disclosure of such information. Where reasonably possible, the receiving Party shall notify the disclosing Party of the receiving Party’s intent to make such disclosure of Confidential Information pursuant to the preceding sentence sufficiently prior to making such disclosure so as to allow the disclosing Party adequate time to take whatever action the disclosing Party may deem to be appropriate to protect the confidentiality of the Confidential Information.

11.1.3 Except as set forth above, each Party agrees that it shall provide or permit access to Confidential Information of the other Party only to (a) the receiving Party’s attorneys, independent accountants and financial advisors for the sole purpose of enabling such attorneys, independent accountants and financial advisors to provide advice to the receiving Party, (b) the receiving Party’s Affiliates, directors, officers, employees, consultants, advisors and permitted subcontractors, sub-licensees and sub- distributors, and to the directors, officers, employees, consultants, advisors and permitted subcontractors, sub-licensees and sub-distributors of such Affiliates, who have a need to know such Confidential Information to assist the receiving Party with the research, Development, Manufacturing or Commercialization activities contemplated or required of it by this Agreement; provided that in each case the Person to whom Confidential Information is being disclosed is subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Section 11.1, and (c) potential investors and acquirers in connection with bona fide financing or acquisition due diligence; and provided, further, that each Party shall remain responsible for any failure by its attorneys, independent accountants and financial advisors, Affiliates, and its and its Affiliates’ respective directors, officers, employees, consultants, advisors and permitted subcontractors, sub-licensees and sub-distributors, and any other parties to whom such Confidential Information is disclosed, to treat such Confidential Information as required under this Section 11.1.

For clarity, either Party may disclose without any limitation such Party’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions relating to such Party that are based on or derived from this Agreement, including a complete copy of this Agreement and any amendments thereto.

11.1.4 Each Party acknowledges that a Party in breach of any of its obligations under this Section 11.1 may cause the non-breaching Party irreparable harm, for which monetary damages may be an inadequate remedy. Therefore, notwithstanding anything to the contrary in this Agreement in the event of any such breach, the non-breaching Party shall be entitled, in addition to any other remedy available to it under this Agreement, at law or in equity, to seek injunctive relief, including an accounting for profits, specific performance of the terms hereof and other equitable relief for such breach, without the posting of bond or other security.

 

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11.2 Publicity. A press release mutually agreed to by the Parties shall be issued by Licensee within 30 days following the Effective Date in substantially the form attached as Exhibit A. It is understood that Dermira and Licensee may each desire or be required to issue subsequent press releases or other public statements relating to this Agreement or activities hereunder, and Dermira and Licensee each agree not to issue any additional press release or other public statement disclosing information relating to this Agreement or the transactions contemplated hereby or the terms hereof without the prior written consent of such Party, not to be unreasonably withheld. Notwithstanding the foregoing, no such consent shall be required by or Licensee with respect to (a) the publication of materials or information that have been previously disclosed, so long as the content of such publication remains accurate at the time of disclosure, or (b) any disclosure which is required by Applicable Law or the rules of the U.S. Securities and Exchange Commission or any securities exchange. In addition, following the initial press release announcing this Agreement, either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been publicly disclosed in accordance herewith.

11.3 Securities Filings. In the event Licensee proposes to file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law a registration statement or any other disclosure document which describes or refers to this Agreement, Licensee shall notify Dermira of such intention and shall provide Dermira with a copy of relevant portions of the proposed filing not less than [***] Business Days prior to such filing (and any revisions to such portions of the proposed filing a reasonable time prior to the filing thereof), and shall use reasonable efforts to obtain confidential treatment of any information that Dermira requests be kept confidential. For clarity, Dermira or any parent of Dermira may, at its discretion, file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law, a registration statement or any other disclosure document which describes or refers to this Agreement.

11.4 Publications. Except for disclosures permitted under this Agreement, if Licensee, its Affiliates, or their respective employee(s) or consultant(s) wishes to make a publication related to the Products or which otherwise may reasonably contain Licensed Know- How, or other Confidential Information, of Dermira, Licensee shall deliver to Dermira a copy of the proposed written publication or an outline of an oral disclosure at least [***] days prior to submission for publication or presentation. Notwithstanding anything to the contrary herein, neither Licensee nor any Related Party of Licensee shall use any of Dermira’s or its Affiliates’ trademarks, names, logos or housemarks in connection with any publication related to the Products, Licensee, or a Related Party of Licensee’s business without the express written consent of Dermira or its Affiliates.

11.5 Use of Names. Except as otherwise set forth in this Agreement, neither Party shall use the name of the other Party in relation to this transaction in any public announcement, press release or other public document without the written consent of such other Party, which consent shall not be unreasonably withheld; provided, however, that subject to Section 11.4, either Party may use the name of the other Party in any document filed with any Regulatory Authority or Governmental Authority, including the Securities and Exchange Commission.

 

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11.6 Unauthorized Disclosure of Confidential Information. Each Party shall have a response plan in place for any disclosure of Confidential Information that is not authorized or otherwise permitted under this Agreement. Such plan shall include considerations of, among other things, notification, remediation and retrieval. In the event that a Party becomes aware of an unauthorized disclosure of Confidential Information, then such Party shall notify the other Party promptly in writing.

11.7 Survival. The obligations and prohibitions contained in this Article 11 as they apply to Confidential Information shall survive the expiration or termination of this Agreement for a period of [***] years.

ARTICLE 12

TERM AND TERMINATION

12.1 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 12, shall remain in effect with respect to each Product on a country-by-country basis until the expiration of the Royalty Term for such Product in such country (the “Term”).

12.2 Termination for Material Breach. Either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety or with respect to one or more Products (at the non-breaching Party’s election) upon written notice to the other Party in the event that the other Party (the “Breaching Party”) materially breached or defaulted in the performance of any of its obligations (including a failure to perform). The Breaching Party shall have [***] days after written notice thereof was provided to the Breaching Party by the non-breaching Party to cure or remedy such breach or default. Unless the Breaching Party has cured or remedied any such breach or default prior to the expiration of such [***]-day period, such termination shall become effective upon the Breaching Party’s receipt of the written notice of termination to be given within [***] days of the end of such [***]-day period.

12.3 Termination for Non-Payment. Dermira may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety or with respect to one or more Products (at Dermira’s election) upon written notice to Licensee in the event that Licensee fails to (a) pay in full, when due, any amount required to be paid under Section 7.1, 7.2 or 7.7, or (b) pay in full, when due, any Royalty Payment required to be paid under Section 7.8 or fails to provide, when due, the information required to be provided under Section 7.8. Licensee shall have [***] days after written notice thereof was provided to it by Dermira to pay such amount in full (or, if applicable, provide such information). Unless Licensee has paid such amount in full (or, if applicable provided such information) prior to the expiration of such [***]-day period, such termination shall become effective upon Licensee’s receipt of the written notice of termination to be given within [***] days of the end of such [***]- day period.

12.4 Termination Related to Financing. Dermira may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety or with respect to one or more Products (at Dermira’s election) upon written notice to Licensee in the event that (a) the Qualified Financing Closing has not occurred by the Qualified Financing Deadline, (b) Licensee does not execute and provide to Dermira for its execution, which execution shall not be unreasonably withheld, at the Qualified Financing Closing the Qualified Financing Documentation on substantially the same terms as the Lead Investor, as set forth in Section 7.13, or (c) Licensee

 

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does not issue to Dermira the securities, or provide the certificates representing such securities, as set forth in Section 7.13. The “Qualified Financing Deadline” means [***]; provided that Licensee may request one or more reasonable extensions thereof, and shall not unreasonably withhold, condition or delay its approval of any such request (but shall be permitted to take into consideration the efforts taken by Licensee with respect thereto and the likelihood of success if such request is granted); provided, further, that, notwithstanding the foregoing, in no event shall Dermira have any obligation to extend the Qualified Financing Deadline to a date later than [***].

12.5 Termination as a Result of Bankruptcy. Each Party shall have the right to terminate this Agreement upon written notice as a result of the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of its assets for the benefit of creditors by the other Party; provided that such termination shall be effective only if such proceeding is not dismissed within [***] days after the filing thereof.

12.6 Termination for Convenience. Licensee may terminate this Agreement or its rights with respect to any Product in any Territory for convenience at any time upon [***] prior notice.

12.7 Termination for Compliance Breach. Without limitation of its rights under this Article 12, Dermira may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety upon written notice in the event of a breach by Licensee of any of the compliance representations, warranties and covenants set forth in Section 9.5. Licensee shall have [***] days after written notice thereof was provided to Licensee by Dermira to cure or remedy such breach. Unless Licensee has cured or remedied any such breach prior to the expiration of such [***]-day period, such termination shall become effective upon Licensee’s receipt of the written notice of termination to be given within [***] days of the end of such [***]-day period.

ARTICLE 13

EFFECTS OF EXPIRATION OR TERMINATION

13.1 Termination of Licenses. Upon the expiration of this Agreement or termination of this Agreement, in its entirety, or with respect to any given country(ies) or Product(s), all rights and licenses granted to Licensee hereunder shall immediately terminate and be of no further force and effect and Licensee shall cease Developing, Commercializing, Manufacturing and Packaging and Labeling the Products; provided that Licensee and its Affiliates will be entitled, during the period ending on [***] following the effective date of such expiration or termination, to sell any inventory of Products affected by such expiration or termination that remains on hand as of the effective date of the expiration or termination, so long as Licensee pays to Dermira the Royalty Payments and other amounts payable hereunder (including milestones) applicable to said subsequent sales, with respect to sales in the Territory, as applicable, in accordance with the terms and conditions set forth in this Agreement and otherwise complies with the terms set forth in this Agreement.

 

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13.2 Assignments. Upon the expiration of this Agreement or termination of this Agreement, in its entirety, or with respect to any given Product(s) or country(ies), Licensee will promptly, in each case within [***] days thereafter, and at no cost to Dermira, do the following (but to the extent this Agreement is only terminated with respect to one or more countries or one or more Products, then the following shall only apply with respect to terminated countries or Products):

(a) assign to Dermira, at Dermira’s sole discretion and direction, all of Licensee’s right, title and interest in and to any agreements (or portions thereof) between Licensee and Third Parties that relate to the Development, Commercialization or Manufacture of the Products, including the right to enforce any such agreements;

(b) assign to Dermira, at Dermira’s sole discretion and direction, all of Licensee’s right, title and interest in and to any (i) Promotional Materials, (ii) copyrights and trademarks (including the Product trademarks and Product trade dress), including any goodwill associated therewith, and any registrations and design patents for the foregoing, and (iii) any Internet domain name registrations for such trademarks and slogans, all to the extent solely related to the Products; provided, however, that in the event Dermira exercises such right to have assigned such Promotional Materials, Licensee shall grant, and hereby does grant, a royalty-free right and license to any housemarks, trademarks, names and logos of Licensee contained therein for a period of [***] in order to use such Promotional Materials in connection with the Commercialization of the Products;

(c) assign to Dermira, at Dermira’s sole discretion and direction, the management and continued performance of any clinical trials for the Products ongoing hereunder as of the effective date of such expiration or termination in respect of which Dermira shall assume full financial responsibility from and after the effective date of such expiration or termination;

(d) transfer to Dermira all of Licensee’s right, title and interest in and to any and all regulatory filings, Regulatory Approvals and other Regulatory Materials for the Products;

(e) transfer to Dermira all of Licensee’s right, title and interest in and to any and all Development Data and Commercialization Data Controlled by Licensee for the Products; and

(f) provide a copy of (i) the material tangible embodiments of the foregoing and (ii) any other material books, records, files and documents Controlled by Licensee solely to the extent related to the Products and which may be redacted to exclude Confidential Information of Licensee; provided, however, that to the extent that any agreement or other asset described in this Section 13.2 is not assignable by Licensee, then such agreement or other asset will not be assigned, and upon the request of Dermira, Licensee will take such steps as may be reasonably necessary to allow Dermira to obtain and to enjoy the benefits of such agreement or other asset. For purposes of clarity, (A) Dermira shall have the right to request that Licensee take any or all of the foregoing actions in whole or in part, or with respect to all or any portion of the assets set forth in the foregoing provisions and (B) to the extent Dermira requests Licensee to transfer its right, title and interest in the items set forth in this Section 13.2 to Dermira, Licensee shall also cause its Affiliates to transfer and assign to all of such Affiliates’ right, title and interest in and to the foregoing items set forth in this Section 13.2.

 

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13.3 Disclosure and Delivery. Upon the expiration or termination of this Agreement, in its entirety, or with respect to any particular Product(s), Licensee will promptly, in each case within [***] days thereafter, and at no cost to Dermira, do the following (but to the extent this Agreement is only terminated with respect to one or more countries or one or more Products, then the following shall only apply with respect to such terminated countries or terminated Products): (a) Licensee will promptly transfer to Dermira copies of any physical embodiment of any Licensee Know-How, to the extent then used in connection with the Development or Commercialization of the Products; and (b) such transfer shall be effected by the delivery of material documents, to the extent such Licensee Know-How is embodied in such documents, and to the extent that Licensee Know-How is not fully embodied in such documents, Licensee shall make its employees and agents who have knowledge of such Licensee Know-How in addition to that embodied in documents available to Dermira for interviews, demonstrations and training to effect such transfer in a manner sufficient to enable Dermira to practice such Licensee Know- How but only in a manner as set out as follows in this Section 13.3. The appropriate technical teams at Dermira and Licensee will meet to plan transfer for the Licensee Know-How as follows: (i) Licensee’s designated representative(s) for the Products will meet with representatives from Dermira to answer questions with respect to the Licensee Know-How and establish a plan for the transfer for such Licensee Know-How; and (ii) Licensee will allocate adequate appropriately qualified representatives to work with Dermira to review the Licensee Know-How to enable the completion of the transfer within [***] days of the completion of the initial transfer planning meetings to the extent reasonable, but in any event no longer than [***] days thereafter.

13.4 Disposition of Commercialization-Related Materials. Upon the expiration or termination of this Agreement, Licensee will promptly deliver to Dermira in electronic, sortable form (a) a list identifying all wholesalers and other distributors involved in the Commercialization of the Products in the Territory as well as any customer lists (e.g., purchasers) related to the Commercialization of the Products in the Territory and (b) all Promotional Materials, as well as any items bearing the Product trademarks or Product trade dress and/or any trademarks or housemarks otherwise associated with the Products or Dermira; provided that to the extent this Agreement is only terminated with respect to one or more countries, then this Section 13.4 shall only apply with respect to terminated countries.

13.5 Accrued Rights. Expiration or termination of this Agreement for any reason will be without prejudice to any rights that will have accrued to the benefit of a Party prior to the effective date of such expiration or termination. Such expiration or termination will not relieve a Party from obligations that are expressly indicated to survive the expiration or termination of this Agreement.

13.6 Survival. Notwithstanding anything to the contrary contained herein, the following provisions shall survive any expiration or termination of this Agreement: Articles 1 (Definitions), 13 (Effects of Expiration or Termination) and 14 (Dispute Resolution), the first sentence of Section 7.12, and Sections 7.13, 9.5.4-9.5.7, 9.8, 10.1-10.4, 11.1, 11.5-11.7, 15.1-15.3 and 15.3-15.14. Except as set forth in this Article 13 or otherwise expressly set forth herein, upon expiration or termination of this Agreement, all other rights and obligations of the Parties shall cease.

 

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13.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Dermira and Licensee are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that each Party, as licensee of certain rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party (such Party, the “Bankrupt Party”) under the U.S. Bankruptcy Code, (a) the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any intellectual property licensed to such other Party and all embodiments of such intellectual property, which, if not already in such other Party’s possession, shall be promptly delivered to it (i) upon any such commencement of a bankruptcy proceeding upon such other Party’s written request therefore, unless the Bankrupt Party elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under clause (i), following the rejection of this Agreement by the Bankrupt Party upon written request therefore by the other Party; and (b) the Bankrupt Party shall not unreasonably interfere with the other Party’s rights to intellectual property and all embodiments of intellectual property, and shall assist and not unreasonably interfere with the other Party in obtaining intellectual property and all embodiments of intellectual property from another entity. The “embodiments” of intellectual property include all tangible, intangible, electronic or other embodiments of rights and licenses hereunder, including all compounds and products embodying intellectual property, Products, filings with Regulatory Authorities and related rights and Dermira Know-How in the case that Dermira is the Bankrupt Party and Licensee Know-How in the case Licensee is the Bankrupt Party.

ARTICLE 14

DISPUTE RESOLUTION

14.1 Disputes. The Parties recognize that, from time to time, disputes, controversies or claim may arise which stem from or are related to a Party’s respective rights or obligations under this Agreement or a Party’s actual or alleged breach of this Agreement (a “Dispute”). It is the desire of the Parties to establish procedures to facilitate the resolution of Disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 14 if and when a Dispute arises under this Agreement. If the Parties are unable to resolve any Dispute within [***] days after such Dispute is submitted to it, either Party may, by written notice to the other Party, have such dispute referred to Designated Officers of each Party for attempted resolution. If the Designated Officers cannot reach resolution of the Dispute within [***] days after such referral, the Dispute shall be referred to the Parties’ designated executive officers or their delegates for attempted resolution. In the event the designated executive officers or their delegates are not able to resolve such Dispute within such [***]-day period after receipt of written notice, and a Party wishes to pursue the matter, then each Party may assert any remedy available at law or equity to enforce its rights under this Agreement. Notwithstanding anything else, any cure period set forth in this Agreement, including in Section 3.7 (Development Diligence Failures), Section 5.2.2 (Commercialization Diligence Failures) and Article 12 (Term and Termination), will only commence upon final resolution of such Dispute.

 

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14.2 Choice of Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of [***] and the patent laws of the United States without reference to any rules of conflict of laws. Each of the Parties hereby submits to the jurisdiction of the United States Federal District Court [***] in any proceeding arising out of or relating to this Agreement, agrees not to commence any suit, action or proceeding relating thereto except in such court, and waives, to the fullest extent permitted by law, the right to move to dismiss or transfer any action brought in such court on the basis of any objection to personal jurisdiction, venue or inconvenient jurisdiction. Each Party further agrees that service or any process, summons, notice or document by U.S. registered mail to such Party’s notice address provided for in this Agreement shall be effective service of process for any action, suit or proceeding in [***] with respect to any matters to which it has submitted to jurisdiction in this Section 14.2. Notwithstanding the foregoing, nothing contained in this Agreement will deny any Party the right to seek injunctive relief or other equitable relief from a court of competent jurisdiction applying the laws of the court in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any other ongoing proceeding. Any rights to trial by jury with respect to any suit, action, proceeding or claim (whether based upon contract, tort or otherwise), directly or indirectly, arising out of or relating to this Agreement hereunder are expressly and irrevocably waived by each of the Parties.

ARTICLE 15

MISCELLANEOUS

15.1 Entire Agreement; Amendment. This Agreement, together with the Schedules and Exhibits hereto, contains the entire understanding of the Parties with respect to the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, in respect to the subject matter hereof are superseded by the terms of this Agreement. The Schedules and Exhibits to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of each of the Parties.

15.2 Force Majeure. No Party shall be liable for any failure to perform, or be considered in breach of, its obligations under this Agreement (other than obligations to make payments of money) to the extent such performance has been delayed, interfered with or prevented by an event of Force Majeure, and the obligations of such Party under this Agreement (other than obligations to make payments of money) whose performance is affected by Force Majeure shall be suspended during, but not longer than, the continuance of the event of Force Majeure. Any Party that experiences an event of Force Majeure shall provide prompt notice of such event to the other Party, including and an estimate of the likely period of time during which its performance will be affected, and shall use reasonable efforts to remove the condition constituting Force Majeure. In the event of a prolonged condition of Force Majeure that makes it unreasonable to continue to perform other activities then being performed by the Parties and their Affiliates pursuant to this Agreement, the Parties shall consult directly or through the appropriate committees and may appropriately scale back their respective activities in order to avoid waste or inappropriate usage of resources under the circumstances, and neither Party shall be liable for any such reasonable scale back, or be considered in breach of its obligations under this Agreement (other than obligations to make payments of money to the other Party) as a result of such reasonable scale

 

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back. Notwithstanding anything to the contrary contained in this Section 15.2 or elsewhere in this Agreement, the Parties acknowledge and agree that a COVID- 19 pandemic and business disruptions related thereto (collectively, the “COVID Event”) are currently occurring as of the Effective Date and may worsen, and the Parties further acknowledge and agree that neither the COVID Event, nor any recurrence thereof, shall be considered to be an event of Force Majeure or otherwise excuse any failure or delay in performance by either Party under this Agreement (so long as performance is not thereby made unlawful) unless such COVID Event significantly worsens in a manner or to a degree that is not reasonably foreseeable to the Parties.

15.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement and shall be deemed to have been sufficiently given for all purposes if mailed by first class certified or registered mail, postage prepaid (which notice shall be effective five (5) Business Days after such mailing); express delivery service (which notice shall be effective on the first Business Day after delivery to such service); or personally delivered to the appropriate addresses (which notice shall be effective upon delivery to such addresses) set forth below or to such other addresses or numbers for a Party as such Party may inform the other Party by giving five (5) Business Days’ prior written notice:

 

  If to Dermira:

Dermira, Inc.

   

Lilly Corporate Center

   

Indianapolis, Indiana 46285

   

Attention: President

 

  With copies to

Eli Lilly and Company

   

Lilly Corporate Center

   

Indianapolis, Indiana 46285

   

Attention: General Counsel

 

  If to Licensee:

Evommune, Inc.

   

1452 Aura Way

   

Los Altos, CA 94024

   

Attention: Luis Pena

15.4 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that a Party may make such an assignment or transfer without the other Party’s written consent (i) to any of its Affiliates (but only for so long as such Person is and remains an Affiliate of such Party, it being agreed that such Party shall cause such assignment to terminate prior to such time, if any, as such Person ceases to be an Affiliate of such Party), and (ii) to any Third Party in connection with (a) the acquisition of such Party by or merger or consolidation of such Party with another entity or (b) a merger, consolidation, sale of stock, sale of all or substantially all of such Party’s assets or other similar transaction in which such Third Party either becomes the owner of all or substantially all of the business and assets of (i) such Party or (ii) that portion of such Party’s business or business unit relating to this Agreement. Any permitted successor or assignee of rights or obligations hereunder shall, in a writing delivered to the other Party, expressly assume the performance of such rights or obligations. Except as set forth in the immediately preceding sentence, in the event of an assignment or transfer as permitted above in this Section 15.4, if this Agreement is assigned

 

54


or transferred to an Affiliate, the assigning or transferring Party shall remain responsible (jointly and severally) with such Affiliate for the performance of such assigned or transferred obligations. Any assignment or transfer, or attempted assignment or transfer, by either Party in violation of the terms of this Section 15.4 shall be null and void and of no legal effect. This Agreement shall be binding on, and inure to the benefit of, each Party, its successors and permitted assigns.

15.5 [***].

15.6 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, such provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good-faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

15.7 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under Applicable Law.

15.8 Ambiguities; No Presumption. Each of the Parties acknowledges and agrees that this Agreement has been diligently reviewed by and negotiated by and between them, that in such negotiations each of them has been represented by competent counsel and that the final agreement contained herein, including the language whereby it has been expressed, represents the joint efforts of the Parties hereto and their counsel. Accordingly, in interpreting this Agreement or any provision hereof, no presumption shall apply against any Party hereto as being responsible for the wording or drafting of this Agreement or any such provision, and ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.

15.9 Headings. The headings for each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

15.10 Interpretation. Except where the context expressly requires otherwise: (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa); (b) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (e) any reference herein to any person shall be construed to include the person’s successors and assigns; (f) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (g) all references herein to Articles, Sections, Exhibits or Schedules shall be construed to refer to Articles, Sections, Exhibits or Schedules of this Agreement, and references to this Agreement include all Exhibits and Schedules hereto; (h)

 

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the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement; (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, email, approved minutes or otherwise (but excluding instant messaging); (j) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof; (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or”; and (l) the term “to the extent” shall be interpreted to mean the extent or degree to which a subject or thing extends, and shall not simply be construed to mean the word “if.”

15.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

15.12 No Third-Party Beneficiaries. No person or entity other than Licensee, Dermira and their respective Affiliates, successors and permitted assignees hereunder, shall be deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Agreement.

15.13 Independent Contractors. It is expressly agreed that Licensee and Dermira shall be independent contractors and that the relationship between Licensee and Dermira shall not constitute a partnership, joint venture or agency. Neither Licensee nor Dermira shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of such other Party.

15.14 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by delivery of electronically scanned copies of original signatures delivered by facsimile or electronic mail, and such signatures shall be deemed to bind each Party as if they were original signatures.

[No Further Text on This Page]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives as of the date first written above.

 

Evommune, Inc.       Dermira, Inc.
By:   

/s/ Luis Peña

      By:   

/s/ Andrew Hutchkins

Printed: Luis Peña       Printed: Andrew Hutchkins
Title: President and CEO       Title: CEO


Schedule A

Compounds

(i) IRAK Compound: [***]


(ii) ROR Compound: [***]

(iii) MRGPRX2 Compound: [***]


Schedule B

Licensed Patents

(i) IRAK Patents: [***]

(ii) ROR Patents: [***]

(iii) MRGPRX2 Patents: [***]


Schedule C

Initial Development Plan

See attached.

[***]


Exhibit A

Licensee Press Release

***


LOGO

Evommune In-Licenses Three Development Programs Focused on Treating Inflammatory Conditions from Dermira, a Wholly-Owned Subsidiary of Eli Lilly and Company

Los Altos, California – Jan. 5, 2021 – Evommune, Inc., a private R&D company and innovation engine in chronic inflammation, today announced it has entered into an exclusive license agreement with Dermira, Inc., a wholly-owned subsidiary of Eli Lilly and Company, to develop and commercialize three development programs for the treatment of various inflammatory diseases. These investigational compounds include IRAK4/TrkA, a small molecule that broadly inhibits innate inflammation; RORyt, a small molecule addressing Th17 mediated inflammation; and MRGPRX2, a small molecule to treat chronic pruritus (itch).

“These three promising investigational programs expand Evommune’s pipeline and position us for long-term growth as a research and development company,” said Luis Peña, president and chief executive officer of Evommune. “As our leadership team was pivotal in the original development of these compounds at Dermira, we are thrilled to have the opportunity to continue their development and potentially help the many patients living with these debilitating diseases who are in dire need of new treatment options to improve their quality of life.”

Financial terms of the agreement include an undisclosed upfront payment, potential future milestone payments per licensed compound to Dermira upon achievement of certain development and regulatory milestones as well as sales milestones and royalty payments.

About IRAK4/TrkA

IRAK4 plays a key role in innate immune responses and is critical for signaling through Toll-like and IL-1 family cytokine receptors. TrkA is the receptor for nerve growth factor, which can induce angiogenesis and vasodilation, as well as upregulation and heightened sensitivity of TRPV1 on nerves. The unique dual action of our IRAK4/TrkA small molecule inhibitor provides a novel approach for the treatment of a variety of inflammatory diseases, including atopic dermatitis, asthma, Behçet’s disease, conjunctivitis, and papulopustular rosacea.

About RORyt

RORyt is the key transcription factor induced by IL-23 signaling, resulting in Th17 cell polarization and downstream production of IL-17 (and other Th17 associated cytokines). Both anti-IL-17 and anti-IL-23 biologics have demonstrated a profound effect in treating psoriasis; targeting RORyt might provide similar utility, but with a small molecule approach. Additional indications include graft-versus-host disease, lichen planus, rosacea, and inflammatory bowel disease.


About MRGPRX2

MRGPRX2 is a member of the MAS-related G-protein coupled receptor (MRGPR) family and has evolved to be an important target for neuroinflammation and itch. MRPGRX2 is expressed on both sensory neurons and mast cells and responds to a variety of itch-causing agents. Neurons and mast cells are in close proximity in the skin and directly interact with each other.

Inhibiting MRGPRX2 signaling should reduce this neuro-inflammatory response and block itch- transmission at its source, thus providing immediate itch relief. Other itch treatments focus on targets in the brain and have proven to be slower acting and not without side effects. This novel investigational therapy has the potential to address itch associated with many underlying medical conditions.

About Evommune, Inc.

Evommune is a private R&D company and innovation engine in chronic inflammation. Evommune is taking a tissue-based approach to advance insights and accelerate the development of transformative medicines in inflammatory diseases. Evommune was founded in 2020 by a successful and experienced leadership team focused on building a robust pipeline of unique therapies that help patients with chronic inflammatory diseases. The company is headquartered in Los Altos, California. For more information, please visit Evommune.com.

# # #

Media Contact:

Sheryl Seapy

949-903-4750

sseapy@w2ogroup.com

Exhibit 10.14

***Certain identified information has been omitted from this exhibit because it is both (i) not material and (ii) of the type that the Registrant treats as private or confidential. Such omitted information is indicated by brackets (“[***]”) in this exhibit.***

SUBLICENSE AGREEMENT

This Sublicense Agreement (this “Agreement”), dated as of September 26, 2023 (the “Effective Date”), is made by and between Evommune, Inc., a Delaware corporation (“Evommune”), and Maruho Co., Ltd., a company organized under the laws of Japan (“Maruho”). Evommune and Maruho are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Evommune is engaged in the research and development of products for use in treating or preventing inflammatory diseases, including a program referred to as EVO756 to treat urticaria and interstitial cystitis;

WHEREAS, Maruho manufactures, develops, and commercializes pharmaceutical products primarily in the field of dermatology; and

WHEREAS, Evommune wishes to grant a license and sublicense to Maruho under certain intellectual property rights relating to EVO756, including, without limitation, certain rights granted by Dermira (as defined below) to Evommune under the Dermira License (as defined below), to develop, manufacture, and commercialize the Products (as defined below) in Japan, as more fully set forth herein, and Maruho wishes to take such license, in each case in accordance with the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants, and conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following initially capitalized terms shall have the meanings set forth in this Article 1:

1.1 “Active Component” means a component that confers a therapeutic effect on a standalone basis.

1.2 “Additional Restriction Period” means, solely if Evommune and Dermira do not enter into an agreement pursuant to Section 2.5 of the Dermira License, the period of time following the expiration of the Exclusivity Period until [***].


1.3 “Affiliate” means any entity directly or indirectly controlled by, controlling, or under common control with a Person, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by,” “controlling,” and “under common control with”) means (a) possession, direct or indirect, of the power to direct or cause direction of the management or policies of an entity (whether through ownership of securities or other ownership interests, by contract, or otherwise), or (b) beneficial ownership of more than 50% (or the maximum ownership interest permitted by Applicable Law) of the voting securities or other ownership or general partnership interest (whether directly or pursuant to any option, warrant, or other similar arrangement) or other comparable equity interests of an entity.

1.4 “Analytical Release Testing and Characterization” means all activities associated with carrying out the analytical testing and release of the Products in the Field in the Territory. Such activities shall include: transferring test methods, developing and validating new analytical tests required in the Field in the Territory, amending the release specifications to be in compliance with local Applicable Laws, conducting the release testing of the Products in the Territory, and final release of the Products (including raw materials, intermediates, drug substance, and drug product).

1.5 “Applicable Law” means any applicable United States federal, state, or local, or foreign or multinational law (including data protection and privacy laws), statute, standard, ordinance, code, rule, regulation, resolution, or promulgation, or any order, writ, judgment, injunction, decree, stipulation, ruling, determination, or award entered by or with any Governmental Authority, or any license, franchise, permit, or similar right granted under any of the foregoing, or any similar provision having the force or effect of law. For the avoidance of doubt, any specific references to any Applicable Law or any portion thereof shall be deemed to include all then-current amendments thereto or any replacement or successor law, statute, standard, ordinance, code, rule, regulation, resolution, order, writ, judgment, injunction, decree, stipulation, ruling, or determination thereto.

1.6 “Business Day” means a day other than a Saturday, Sunday, or bank or other public holiday in New York, New York, United States and in Tokyo, Japan.

1.7 “Calendar Quarter” means each three (3)-month period commencing January 1, April 1, July 1, or October 1 of any year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement.

1.8 “Calendar Year” means the period beginning on January 1 and ending on December 31 of the same year; provided, however, that (a) the first Calendar Year of the Term shall extend from the Effective Date through December 31 of the same year and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of expiration or termination of this Agreement.

1.9 “Clinical Trial” means a Phase I Clinical Trial, Phase II Clinical Trial (including a Phase IIa Clinical Trial and Phase IIb Clinical Trial), Phase III Clinical Trial, a Phase IIIb Clinical Trial, or a Phase IV Clinical Trial, as the case may be.

 

2


1.10 “COGS” means the fully-burdened costs incurred in connection with (a) testing, Manufacturing, or acquiring all active pharmaceutical ingredients, excipients, raw materials, components, packaging, and related materials required to Manufacture the Compound and/or any Product, and (b) the acquisition, Manufacturing, testing, and analysis of the finished dose of the Product, including in-process testing, labeling, and packaging, including Direct Labor and Benefits and Overhead, all determined in accordance with GAAP.

1.11 “Combination Product” means (a) any product containing the Compound and one or more other Active Components in a fixed-dose formulation, or (b) any combination of a Product sold together with another product containing an Active Component in a single package or container for a single price.

1.12 “Commercialize” means, with respect to the Products, to promote, market, distribute, sell (and offer for sale or contract to sell), import, export, or otherwise commercially exploit or provide product support for the Products and to conduct activities, other than Development or Manufacturing, in preparation for conducting the foregoing activities, including activities to produce commercialization support data and to secure and maintain market access and reimbursement. “Commercializing” and “Commercialization” shall have correlative meanings. For the avoidance of doubt, Commercialization does not include Development and Manufacturing.

1.13 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, those reasonable, good-faith efforts to accomplish such objective in a diligent manner within a reasonable time period (or, if applicable, within any specified time period or by any specified or applicable deadline) as companies in the pharmaceutical industry would normally use to accomplish a similar objective under similar circumstances. With respect to any efforts relating to the Development, Regulatory Approval, Manufacturing, or Commercialization, as applicable, of the Compound or Products by a Party, generally or with respect to the Territory or any particular Product, such Party will be deemed to have exercised Commercially Reasonable Efforts if such Party, subject to this Section 1.13, has exercised those efforts normally used by companies in the pharmaceutical industry, at the relevant time, in the Territory, with respect to a compound, product, or product candidate, as applicable, (a) which is of similar market potential in such country, (b) which is fully owned by such company without the obligation to compensate any third party in connection with commercialization thereof, and (c) which is at a similar stage in its development or product life cycle, as the applicable Product, in each case, taking into account, at the time such efforts are to be expended, issues of safety, efficacy, or stability; product profile; intellectual property protection; stage of development or life cycle status; the competitive environment; market potential; and other relevant scientific, technical, operational, and commercial factors.

1.14 “Competing Product” means any [***].

1.15 “Compound” means the compound referred to by Evommune internally as EVO756, as more particularly described in Schedule 1.15, together with any and all salts, pro-drugs, metabolites, solvates, esters, stereoisomers, polymorphs, conjugates and cocrystal of the foregoing and all derivatives (including deuterium) thereof, the use thereof would, but for the license granted in Section 2.1, be infringed by the Licensed Patents set forth on Schedule 1.46.

 

3


1.16 “Control” and “Controlled by” means, with respect to any Know-How, Invention, Patent, technology, copyright, trademark, or other Intellectual Property, a Person’s possession (whether by ownership, license grant, or other means) of the legal right to grant the right to access or use, or to grant a license or a sublicense to, such Know-How, Invention, Patent Right, technology, copyright, trademark, or other Intellectual Property as provided for herein without violating the proprietary rights of any Third Party or any terms of any agreement or other arrangement between such Person (or any of its Affiliates) and any Third Party.

1.17 “CTA” means an application to the applicable Regulatory Authority, such as a clinical trial application or a clinical trial exemption, the filing of which is necessary to commence or conduct clinical testing of a pharmaceutical product in humans in such jurisdiction.

1.18 “Dermira” means Dermira, Inc., a Delaware corporation.

1.19 “Dermira License” means that certain License, Development and Commercialization Agreement, dated December 17, 2020, by and between Dermira and Evommune, as amended by that certain letter, dated July 27, 2023, by and between Dermira and Evommune.

1.20 “Designated Officer” means a representative appointed by a Party for purposes of dispute resolution.

1.21 “Develop” means to research, develop, analyze, test, and conduct preclinical trials, Clinical Trials (including, for the avoidance of doubt, Phase IV Clinical Trials and any preclinical/clinical/CMC commitments following Regulatory Approval) and all other regulatory trials, for the Compound and Products, as well as any and all activities pertaining to manufacturing development, formulation development, medical affairs (in the course of foregoing), and lifecycle management (including the conduct of Phase IIIb Clinical Trials and Phase IV Clinical Trials not explicitly for registrational purposes and non-interventional studies), including new indications, new formulations, and all other activities, including regulatory activities, related to securing and maintaining Regulatory Approval, for the Compound and Products. “Developing” and “Development” shall have correlative meanings. For clarity, any activities of medical affairs conducted for the purposes other than obtaining/maintaining Regulatory Approval of the Products are excluded from definition “Develop,” “Developing,” and “Development.”

1.22 “Development Activities” means those Development activities undertaken by or on behalf of Maruho with respect to the Products in the Field for the sole purpose of Commercialization in the Territory.

1.23 “Direct Labor and Benefits” means that portion of internal basic wages, labor, and related payroll taxes and employee benefits spent specifically in Manufacture and/or supporting operation cost center, such as quality control of the Compound and/or any Product, that are directly related to the Manufacture and/or supply of the Products, as determined in accordance with GAAP consistently applied, provided that [***], provided, however, [***].

1.24 “Dollar” or “$” means the legal tender of the United States of America.

 

4


1.25 “Evommune Trademark” means the trademark that Evommune submits to the FDA (or, as applicable, any other applicable Regulatory Authority outside the Territory) and that the FDA (or such Regulatory Authority) approves for use as the brand name of the Product(s) in the Field in a particular country or region.

1.26 “Exclusivity Period” means the period beginning on the Effective Date and ending upon [***].

1.27 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder.

1.28 “FDA” means the United States Food and Drug Administration and any successor Regulatory Authority having substantially the same function.

1.29 “Field” means the prevention, diagnosis, and treatment of all indications in humans.

1.30 “First Commercial Sale” means, on a Product-by-Product basis, the first shipment of such Product to a Third Party in the Territory for end use or consumption of the Product in the Territory after Regulatory Approval of the Product in the Territory.

1.31 “Force Majeure” means any unforeseeable circumstances whatsoever which are not within the reasonable control of the Party affected thereby, potentially including an act of God, war, act of terrorism, pandemic, insurrection, riot, strike or labor dispute, shortage of materials, fire, explosion, flood, government requisition or allocation, breakdown of or damage to plant, equipment, or facilities, interruption or delay in transportation, fuel supplies, or electrical power, embargo, boycott, order, or act of civil, military, or other Governmental Authority.

1.32 “Generic Product” means, with respect to a Product with a single or more active pharmaceutical ingredients in the Territory, a pharmaceutical product that (a) contains the Compound, (b) is approved for use in the Territory pursuant to a Regulatory Approval process governing approval of generic, interchangeable, or biosimilar biologics based on the then-current standards for Regulatory Approval in such country, whether or not such Regulatory Approval was based upon clinical data generated by one or more Parties pursuant to this Agreement or was obtained using an abbreviated, expedited, or other process, and (c) is sold in the Territory as such Product for the same indication as such Product by any Third Party that is not a Related Party and did not purchase such pharmaceutical product directly or indirectly from any of Maruho or its Related Parties. A Product shall not constitute a Generic Product under this Agreement with respect to any other Product.

1.33 “Good Clinical Practices” or “GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring, auditing, recording, analyses, and reporting of clinical trials, including, as applicable, (a) as set forth in the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”) Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products in the Territory, (b) the Declaration of Helsinki (2004) as last amended at the 52nd World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) U.S. Code of Federal Regulations

 

5


Title 21, Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational New Drug Application), as may be amended from time to time, (d) the Ministerial Ordinance on Good Clinical Practice for Drugs (Ordinance of the Ministry of Health and Welfare No. 28 of March 27, 1997), and (e) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity, and confidentiality of trial subjects.

1.34 “Good Laboratory Practices” or “GLP” means all applicable Good Laboratory Practice standards, including, as applicable, (a) as set forth in the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, (b) the Ministerial Ordinance on Good Laboratory Practice for Nonclinical Safety Studies of Drugs (Ordinance of the Ministry of Health and Welfare No.21 of March 26, 1997), and (c) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

1.35 “Good Manufacturing Practices” or “GMP” means all applicable Good Manufacturing Practices including, as applicable, (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Sections 210, 211, 601 and 610, (b) the principles detailed in the ICH Q7 guidelines, (c) the Ministerial Ordinance on standards for Manufacturing Control and Quality Control for Drugs and Quasi-drugs (Ordinance of the Ministry of Health and Welfare No.179 of December 24, 2004), and (d) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

1.36 “Government Official” means: (a) any officer or employee of: (i) a government, or any department, agency, or instrumentality thereof; (ii) a government-owned or -controlled company, institution, or other entity, including a government-owned hospital or university; or (iii) a public international organization (such as the United Nations, the International Monetary Fund, the International Committee of the Red Cross, and the World Health Organization), or any department, agency, or instrumentality thereof; (b) any political party or party official or candidate for public or political party office; and (c) any person acting in an official capacity on behalf of any of the foregoing.

1.37 “Governmental Authority” means any United States federal, state, or local, or any foreign government or political subdivision thereof, or any multinational organization or authority, or any authority, agency, or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power, any court or tribunal (or any department, bureau, or division thereof), or any governmental arbitrator or arbitral body. For clarity, any Regulatory Authority is a Governmental Authority.

1.38 “IND” means an investigational new drug application, clinical trial authorization, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

1.39 “Initial Indication” means the first indication for which Evommune Develops a Product outside of the Territory.

 

6


1.40 “Initiation” means, with respect to a Clinical Trial, the first dosing of the first human patient in such Clinical Trial.

1.41 “Intellectual Property” means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) Patents, patent disclosures, inventions, utility models, utility model applications, petty patents, statutory invention registrations, certificates of invention, designs, unregistered industrial designs, design registrations and applications (including any continuations, continuations-in-part, divisionals, provisionals, non-provisionals, reexaminations, restorations, extensions, renewals, and reissues) for any of the foregoing, and all other indicia of invention ownership by any Governmental Authority; (b) copyrights (registered and unregistered), copyright applications, copyrightable subject matter, works of authorship (whether or not copyrightable), design rights, and design right registrations, and any and all renewals of any of the foregoing; (c) trademarks, service marks, trade dress, business names and trade names, assumed names, symbols, brand names, d/b/a’s, fictitious names, certification marks, logos, and product names whether registered, unregistered, or existing at common law, including the goodwill associated therewith (and all registrations and applications therefor), and any and all renewals of any of the foregoing; (d) industrial design rights; (e) domain names (and all registrations and applications therefor) whether or not trademarks, all associated web addresses, URLs, websites, and web pages, and all content and data thereon or relating thereto, whether or not copyrights; (f) Know-How and confidential information, (g) software, data processing, communications, inventory management, website content, programs, program interfaces, object code, source code, other computer systems, and all documentation relating to the foregoing; (h) all other proprietary information and intellectual property in all forms and media, and all goodwill associated therewith, now known or hereafter recognized in any jurisdiction throughout the Territory; (i) all rights pertaining to the foregoing, including those arising under international treaties and convention rights; (j) copies and tangible embodiments of all of the foregoing (in whatever form or medium); and (k) all rights and powers to assert, defend, and recover title to any of the foregoing; and to assert, defend, sue, and recover damages for any past, present, and future infringement, misuse, misappropriation, impairment, unauthorized use, or other violation of any rights in or to any of the foregoing.

1.42 “Internal Compliance Codes” means a Party’s internal policies and procedures intended to ensure that a Party complies with Applicable Laws, Party-Specific Regulations, and such Party’s internal ethical, medical, and similar standards.

1.43 “Invention” means any discovery or invention, whether or not patentable, conceived or otherwise made by or on behalf of either Party, or by both Parties, or, in each case, their respective Affiliates, under this Agreement.

1.44 “Know-How” means all technical, scientific, regulatory, and other information, results, knowledge, techniques, and data, in whatever form and whether or not confidential, patented or patentable, including inventions, invention disclosures, discoveries, plans, processes, practices, methods, knowledge, trade secrets, know-how, instructions, skill, experience, ideas, concepts, data (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, safety, quality control, and preclinical and clinical data), formulae, formulations, compositions, specifications, marketing, pricing, distribution, cost, sales and manufacturing data or descriptions. Know-How does not include any Patent claiming any of the foregoing.

 

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1.45 “Licensed Know-How” means any and all Know-How that is (a) Controlled by Evommune or its Affiliates as of the Effective Date or at any time during the Term, and (b) necessary or reasonably useful for Maruho to Commercialize the Compound and/or any Product in the Field in the Territory or to Develop or Manufacture the Compound and/or any Product in the Field for the sole purpose of Commercialization in the Territory.

1.46 “Licensed Patents” means (a) the Patents set forth on Schedule 1.46, (b) any Patents in the Territory that are (i) Controlled by Evommune or its Affiliates (including, for the avoidance of doubt, pursuant to the Dermira License), as of the Effective Date or at any time during the Term, and (ii) necessary for Maruho to Commercialize the Compound and/or any Product in the Field in the Territory or to Develop or Manufacture the Compound and/or any Product in the Field for the sole purpose of Commercialization in the Territory, and (c) any Related Patents in the Territory with respect to the Patents described in Section 1.46(a) and (b) above.

1.47 “Licensed Technology” means the Licensed Know-How and Licensed Patents.

1.48 “Manufacture” means, with respect to a Product, (a) the receipt, handling and storage of active pharmaceutical ingredients, drug substance or drug product, medical devices, and other materials, and (b) the manufacturing, processing, packaging, labeling, holding (including storage), quality assurance, and quality control testing (including release) of such Product (other than quality assurance and quality control related to development of the manufacturing process, which activities shall be considered Development activities). “Manufactured” or “Manufacturing” shall have correlative meanings.

1.49 “Marketing Authorization Application” or “MAA” means an application to the appropriate Regulatory Authority for approval to sell the Products (but excluding Pricing Approval) in any particular country or regulatory jurisdiction.

1.50 “MRGPRX2” means Mas-related G-protein-coupled receptor X2.

1.51 “Net Sales” means, with respect to a Product in a given period of time, the gross amount invoiced by Maruho or a Related Party thereof to any Non-Related Party for such Product in the Territory, less the following items consistent with U.S. Generally Accepted Accounting Principles (“GAAP”) consistently applied (but only to the extent attributable to such Product and to the extent actually incurred, given, accrued, or specifically allocated for):

(a) trade, quantity, and cash discounts allowed;

(b) discounts, refunds, rebates, chargebacks, retroactive price adjustments, and any other allowances which effectively reduce the net selling price of such Product;

(c) Products returns and allowances; and

 

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(d) any tax imposed on the production, sale, delivery, or use of the Product, including sales, use, excise, or value added taxes (to the extent that such value added taxes are not reimbursable or refundable), specifically excluding, for clarity, any income taxes assessed against the income arising from such sale.

In the event that the Product is sold as part of a Combination Product, the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product (as defined in the standard Net Sales definition) by the fraction, A / (A+B) where A is the weighted average sale price of the Product when sold separately in finished form, and B is the weighted average sale price of the other compound(s) or ingredient(s) sold separately in finished form.

In the event that the weighted average sale price of the Product can be determined but the weighted average sale price of the other compound(s) or ingredient(s) cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A / C where A is the weighted average sale price of the Product when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of the other compound(s) or ingredient(s) can be determined but the weighted average sale price of the Product cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the following formula: one (1) minus (B / C) where B is the weighted average sale price of the other compound(s) or ingredient(s) when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of both the Product and the other compound(s) or ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Product shall be deemed to be equal to the percentage of the Net Sales of the Combination Product agreed upon by Evommune and Dermira pursuant to the Dermira License, provided that, if the Parties mutually and reasonably agree that the balance of such weighted average sale price in Japan would differ materially from such weighted average sale price in U.S., the Parties shall discuss in good faith to resolve such discrepancy.

The weighted average sale price for a Product, other compound(s) or ingredient(s), or Combination Product shall be calculated once each Calendar Year and such price shall be used during all applicable royalty-reporting periods for the entire following Calendar Year. When determining the weighted average sale price of a Product, other compound(s) or ingredient(s), or Combination Product, the weighted average sale price shall be calculated by dividing the sales dollars (translated into Dollars) by the units of active ingredient sold during the twelve (12) months (or the number of months sold in a partial calendar year) of the preceding Calendar Year for the respective Product, other compound(s) or ingredient(s), or Combination Product. In the initial Calendar Year, a forecasted weighted average sale price will be used for the Product, other compound(s) or ingredient(s), or Combination Product. Any over or under payment due to a difference between forecasted and actual weighted average sale prices will be paid or credited in the first royalty payment of the following Calendar Year. Such amounts shall be determined from the books and records of Maruho or a Related Party maintained in accordance with GAAP, consistently applied. Maruho further agrees in determining such amounts, it will use and will require its Related Parties to use Maruho’s then-current standard procedures and methodology, including currency conversion as provided in Section 7.10.

 

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For the avoidance of doubt, under no circumstances will Net Sales be [***].

In no event shall any particular amount of deduction identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions).

1.52 “Net Sales Ratio” means the quotient of the Net Sales of all Products in the Field in the Territory during the subject period of time, divided by the Net Sales of all Products in the Field worldwide for the same such period of time.

1.53 “Non-Related Parties” means, with respect to a Party, any Person that is not a Related Party of such Person.

1.54 “Overhead” means all customary and usual operating expenses directly related to the Compound and/or any Product incurred by and in support of the particular Manufacturing cost centers, purchasing department, and quality assurance operations related to such Compound and/or Product (including labor, related payroll taxes, and employee benefits), provided that [***], provided, however, [***].

1.55 “Party-Specific Regulations” shall mean all judgments, decrees, orders, or similar decisions issued by any Governmental Authority specific to a Party, and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement.

1.56 “Patent Term Extension” means any term extensions, supplementary protection certificates, Regulatory Exclusivity, and equivalents thereof offering Patent protection beyond the initial term with respect to any issued Patents.

1.57 “Patents” means any and all patent applications and issued patents.

1.58 “Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, Governmental Authority, association, or other entity.

1.59 “Personal Information” means, in addition to any definition for any similar term (e.g., “personal data” or “personally identifiable information” or “PII”) provided by Applicable Laws, or by either Party in any of its own privacy policies, notices, or contracts, all information that identifies, could be used to identify, or is otherwise associated with an individual person, whether or not such information is associated with an identified individual person.

1.60 “Phase I Clinical Trial” means a human clinical trial in a country, the principal purpose of which is preliminary determination of the safety, metabolism, and pharmacokinetic properties and clinical pharmacology of the Compound in healthy individuals or patients as described in 21 C.F.R. § 312.21(a), or similar clinical study in a country other than the U.S.

 

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1.61 “Phase II Clinical Trial” means an adequate and well-controlled human clinical trial in a country, the principal purpose of which is a preliminary determination of the efficacy and safety of a Product for an indication in a target population of patients being studied, at the intended clinical dose or doses or range of doses, on a sufficient number of subjects and for a sufficient period of time to confirm the optimal manner of use of the Compound (dose and dose regimen) for such indication prior to initiation of the pivotal Phase III Clinical Trials for such indication as described in 21 C.F.R. §312.21(b), or similar clinical study in a country other than the U.S.

1.62 “Phase IIa Clinical Trial” means that part of the Phase II Clinical Trial designed to assess dosing requirements and efficacy of a Product. For the purposes of this Agreement, “completion of a Phase IIa Clinical Trial” means that stage of the Phase II Clinical Trial when the efficacy of a Product as specified in the Development Plan has been observed and properly recorded.

1.63 “Phase IIb Clinical Trial” means a clinical study subsequent to a Phase IIa Clinical Trial, specifically designed to include a comparison of a Product to an accepted standard of care and/or to a placebo in a larger number of patients which represents a more rigorous demonstration of the efficacy and safety of the Product in the target patient population to define the optimal regimen to evaluate in a Phase III Clinical Trial.

1.64 “Phase III Clinical Trial” means a human clinical trial of a compound or product for an indication on a sufficient number of subjects that is designed to establish that the compound or product is safe and efficacious for its intended use, and to determine warnings, precautions, and adverse reactions that are associated with the compound or product in the dose range to be prescribed, and to support Regulatory Approval of the compound or product for such indication or label expansion of the compound or product. For clarity, the term “Phase III Clinical Trials” includes early access and compassionate use programs.

1.65 “Phase IIIb Clinical Trial” means a human clinical trial of a compound or product for an indication that (a) is not required for receipt of Regulatory Approval for such indication for a country but which may be useful in providing additional drug profile data in support of such Regulatory Approval or, as applicable, Pricing Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval), or (b) is required, requested, or advised by a Regulatory Authority as a condition of, or in connection with, obtaining or maintaining such Regulatory Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval).

1.66 “Phase IV Clinical Trials” means a human clinical trial, or other test or study, of a compound or product for an indication that is commenced after receipt of the initial Regulatory Approval for such indication in the country for which such trial is being conducted and that is conducted within the parameters of the Regulatory Approval for the compound or product for such indication (and which may include investigator sponsored clinical trials), including a clinical trial conducted due to the request or requirement of a Regulatory Authority or as a condition of a previously granted Regulatory Approval.

 

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1.67 “Pre-Marketing” means all sales and marketing activities undertaken prior to and in preparation for the launch of the Products in the Territory. Pre-Marketing shall include market research, key opinion leader development, advisory boards, medical education, disease-related public relations, health care economic studies, sales force training, and other pre-launch activities prior to the First Commercial Sale of a Product in a given country or other regulatory jurisdiction in the Territory.

1.68 “Pricing Approval” means, with respect to any country where a Governmental Authority authorizes reimbursement or access, or approves or determines pricing, for pharmaceutical products, receipt (or, if required to make such authorization, approval of determination effective publication) of such reimbursement or access authorization or pricing approval or determination (as the case may be).

1.69 “Product” means any and all pharmaceutical products containing or comprising the Compound in any form, dose, presentation, or formulation, and whether alone or in combination with one or more other pharmaceutically active or inactive ingredients. For clarity, a Product shall be deemed distinct from another Product if [***].

1.70 “Product Approval” means, with respect to a Product, the approval of a Governmental Authority necessary for the marketing and sale of such Product in a given country or regulatory jurisdiction, which may include the approval of an MAA (but shall not include any Pricing Approvals).

1.71 “Product Complaint” means any written, verbal, or electronic expression of dissatisfaction regarding any Product sold by or on behalf of Maruho (or any of its Related Parties or permitted distributors) in the Territory, including reports of actual or suspected product tampering, contamination, mislabeling, or inclusion of improper ingredients.

1.72 “Promotional Materials” means all written, printed, video, or graphic advertising, promotional, educational, and communication materials (other than the Products labels and package inserts) for marketing, advertising, and promoting of the Products in the Field in the Territory, for use (a) by a Sales Representative or (b) in advertisements, websites, or direct mail pieces.

1.73 “Purchase Price” means [***].

1.74 “Regulatory Approval” means, with respect to any Product for a given indication, approval from the applicable Regulatory Authority permitting the manufacture, distribution, use, and sale of such Product in such regulatory jurisdiction for such indication in accordance with Applicable Law, including any Pricing Approvals.

1.75 “Regulatory Authority” means the Pharmaceuticals and Medical Devices Agency and/or any successor agency or authority (the “PMDA”) and any other applicable Governmental Authority involved in granting Regulatory Approval or, to the extent applicable, Pricing Approval of a Product in the Territory.

1.76 “Regulatory Data” means any and all research data, pharmacology data, chemistry, manufacturing and control data, preclinical data, clinical data, and all other documentation submitted, or required to be submitted, to Regulatory Authorities in association with regulatory filings for the Products (including information in any applicable Drug Master Files (DMFs), Chemistry, Manufacturing and Control (“CMC”) data, or similar documentation).

 

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1.77 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Governmental Authority with respect to the Products other than a Patent right.

1.78 “Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals, or other filings made to, received from, or otherwise conducted with a Regulatory Authority that are necessary in order to Develop, Manufacture, obtain marketing authorization, market, sell, or otherwise Commercialize the Products in a particular country or regulatory jurisdiction. Regulatory Materials include INDs, MAAs, CTAs, Imported Drug Licenses (IDLs), presentations, responses, and applications for other Product Approvals.

1.79 “Related Parties” means, (a) with respect to Evommune and its Affiliates, and (b) with respect to Maruho, its Affiliates, and Sublicensees (excluding distributors).

1.80 “Related Patents” means, with respect to a Patent, (a) proposed new patent applications, including international patent application in international phase, any provisionals, re-examinations, continuations, continuations-in-part claiming the same subject matter, extensions, term restorations, renewals, divisionals, reissues, renewals, and any Patents resulting therefrom; and (b) supplementary protection certificates or other administrative protections.

1.81 “Right of Reference” means the right to allow a Regulatory Authority, and solely to the extent required by Applicable Laws, Maruho or Evommune, as applicable, in a specified region or territory to reference data, including but not limited to Regulatory Data, and other information from Clinical Trials or other Development activities with respect to the Product that are Controlled by the granting Party (or, as applicable, its Related Parties and subcontractors) for the purpose of (a) supporting a Regulatory Approval for the Product in such region or territory, (b) supporting the Development, Manufacture, and/or Commercialization of the Product in accordance with the grantee’s rights with respect to such Product as contemplated by this Agreement, or (c) otherwise supporting an audit by a Regulatory Authority with respect to the Product in such region or territory, including the ability to allow such Regulatory Authority to review the underlying raw data as part of an investigation by such Regulatory Authority, if required by such Regulatory Authority.

1.82 “Royalty Term” means, with respect to each Product in the Territory, the period of time beginning on the First Commercial Sale of such Product in the Territory and ending the later of (a) the expiration of the last to expire Valid Claim claiming or covering such Product or the Manufacture or use thereof in the Territory, (b) ten (10) years from the First Commercial Sale of such Product in the Territory, or (c) the expiration of the Regulatory Exclusivity period for such Product in the Territory.

1.83 “Sales Representative” means an individual who is employed by a Party and who performs details and other promotional efforts with respect to the Product.

 

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1.84 “Specifications” means the specifications for the Products for clinical supply in the Territory delivered in accordance with Article 6, as mutually agreed upon by the Parties following the Effective Date and attached hereto as Exhibit B, as may be amended as mutually agreed upon by the Parties from time to time.

1.85 “Specified Person” means any company in the biopharmaceutical industry with greater than [***] of pharmaceutical net sales or a market capitalization that exceeds [***].

1.86 “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, or other business entity of which, (a) if a corporation, a majority of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a partnership, limited liability company, association, or other business entity, either (i) a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or (ii) such Person is a general partner, managing member, or managing director of such partnership, limited liability company, association, or other entity.

1.87 “Territory” means Japan.

1.88 “Third Party” means any Person other than Evommune, Maruho, or their respective Affiliates.

1.89 “Training Materials” means all Product-related training materials, including learning units and other printed, audio, web-based, or video training materials, branded or unbranded, relating or referring to Product, Product-related disease states, and Product sales orientation assessment tests and refresher tests.

1.90 “United States” or “U.S.” means the United States of America and its possessions and territories.

1.91 “Valid Claim” means (a) a claim of an issued and unexpired Licensed Patent that (i) has not been held permanently revoked, unenforceable, or invalid by a decision of a court or other Governmental Authority of competent jurisdiction, which decision is unappealed or unappealable within the time allowed for appeal, and (ii) has not been cancelled, withdrawn, abandoned, disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer, or otherwise, in the Territory, or (b) a bona fide claim of a pending patent application included within the Licensed Patents in the Territory that has not been (i) cancelled, withdrawn, or abandoned without being re-filed in another application in the applicable jurisdiction, or (ii) finally rejected by an administrative agency action from which no appeal can be taken or that has not been appealed within the time allowed for appeal.

1.92 Additional Definitions. The following terms have the meanings set forth in the corresponding Sections of this Agreement:

 

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Term

   Section  

“Anti-Corruption Laws”

     10.5.1  

“Arising IP”

     8.1.2 (a) 

“Audit”

     7.11  

“Bankrupt Party”

     14.7  

“Breaching Party”

     13.2  

“Claim”

     11.1  

“Clinical Supply Warranties”

     6.6  

“Commercialization Data”

     8.1.2 (a) 

“Commercialization Plan”

     5.1  

“Confidential Information”

     12.1.1  

“COVID Event”

     16.2  

“Defect”

     6.7.1  

“Development Data”

     8.1.2 (a) 

“Development Plan”

     3.3.1  

“Development Report”

     4.1.4  

“Dispute”

     15.1  

“Enforce the Licensed Patents”

     8.5.1  

“Enforcement Proceedings”

     8.5.1  

“Indemnified Party”

     11.3.1  

“Indemnifying Party”

     11.3.1  

“Infringement Notice”

     8.4  

“Initial Development Plan”

     3.3.2  

“JSC”

     9.1  

“Latent Defects”

     6.7.1  

“Lilly Programs”

     2.8  

“Losses”

     11.1  

“Milestone”

     7.2  

“Milestone Notice”

     7.2  

“Milestone Payment”

     7.2  

“MRCT”

     3.5.2  

“New Indication”

     3.1.2  

“Non-Conforming Material”

     6.7.1  

“Packaging and Labeling”

     6.5  

“Product CMO”

     6.9  

“Product Trade Dress”

     5.7.1  

“Product Trademark”

     5.7.1  

“Purchase Order”

     6.2  

“PV Agreement”

     4.3.1  

“Quality Agreement”

     6.1  

“Royalty Payment”

     7.3  

“Sublicensee”

     2.3.2  

“Term”

     13.1  

“Trade Laws”

     10.5.1  

“Upfront License Fee”

     7.1  

“VAT”

     7.7.1  

 

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ARTICLE 2

LICENSES

2.1 Grant to Maruho. Subject to the terms and conditions of this Agreement, Evommune hereby grants to Maruho during the Term an exclusive (even as to Evommune and its Affiliates, but subject to Sections 2.2.2 and 2.8), payment-bearing license and sublicense, as applicable (with the right to sublicense solely in accordance with Section 2.3.2), under and with respect to the Licensed Technology to (a) Develop and Manufacture the Products in the Field for the sole purpose of Commercializing the Products in the Field in the Territory and (b) Commercialize the Products in the Field in the Territory; provided, however, that Evommune reserves the right to use (or to permit its designee to use) the Licensed Technology in the Field in the Territory to perform its obligations under this Agreement. For clarity, the license granted herein: (x) includes a Right of Reference for use in connection with the Products in the Field in the Territory, and (y) includes the right to Develop and Manufacture the Products outside of the Territory for the sole purpose of Commercializing the Products in the Field in the Territory, provided, however, that Maruho shall not (i) conduct any Clinical Trials outside of the Territory, without Evommune’s prior written consent (not to be unreasonably withheld, provided, however, that Maruho acknowledges and agrees that, without limiting the generality of the foregoing, Evommune shall have the right to withhold consent if, in Evommune’s reasonable discretion, such Clinical Trial outside of the Territory could impede or impact Evommune’s recruitment efforts with respect to its Clinical Trials or could otherwise impact Evommune’s communications with any Regulatory Authority(ies) in such countries or regions outside the Territory), or (ii) with respect to the Compound and the Product, submit or make a publication and/or a presentation, submit or display a poster, have a table, or conduct any similar activity in an international conference, without Evommune’s prior written consent (not to be unreasonably withheld); and (z) does not preclude Evommune from Developing and/or Manufacturing the Products in the Territory for the purpose of Commercializing the Products outside the Field in the Territory or generally outside the Territory.

2.2 Additional Licensing Provisions.

2.2.1 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party grants any license, express or implied, under its Intellectual Property to the other Party, whether by implication, estoppel, or otherwise.

2.2.2 Reserved Rights. The Parties hereby agree and acknowledge that nothing contained herein shall limit or otherwise restrict the ability of Evommune, Dermira, or their respective Affiliates or licensees to use the Licensed Technology for research purposes.

 

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2.3 Performance by Affiliates and Sublicensees.

2.3.1 Performance by Affiliates. Evommune recognizes that Maruho may perform some or all of its obligations under this Agreement through Affiliates and subcontractors without notice to Evommune (except as set forth in Section 2.3.2); provided, however, that Maruho shall remain responsible for and be guarantor of the performance by its Affiliates and subcontractors and shall cause its Affiliates and subcontractors to comply with the provisions of this Agreement in connection with such performance, and Maruho shall be liable for the acts or omissions of its Affiliates and subcontractors under or in connection with this Agreement (as if such acts or omission were those of Maruho). Maruho hereby expressly waives any requirement that Evommune exhaust any right, power, or remedy, or proceed against such Affiliate and subcontractors, for any obligation or performance hereunder prior to proceeding directly against Maruho.

2.3.2 Sublicensees.

(a) Generally.

(i) During the Exclusivity Period, Maruho has no right to sublicense those rights granted to it under Section 2.1, other than to Maruho’s vendors or suppliers solely to enable them to provide contract Development and Commercialization services to Maruho.

(ii) During the Additional Restriction Period, if applicable, Maruho has no right to sublicense those rights granted to it under Section 2.1 to any Specified Person; provided, however, that, with respect to any Person other than a Specified Person, Maruho shall have the right (but not the obligation) to sublicense those rights granted to it under Section 2.1 to any Person only as set forth in, and subject to the terms and conditions of, Section 2.3.2(b).

(iii) Following the expiration of the Additional Restriction Period, Maruho shall have the rights (but not the obligation) to sublicense (including multi-tier) those rights granted to it under Section 2.1 only as set forth in, and subject to the terms and conditions of, Section 2.3.2(b).

(iv) For purposes of Section 2.3.2, each Affiliate or other Person to which any such sublicense (including through multi-tier) permitted in accordance with Section 2.3.2(a)-(b) is granted is referred to herein as a “Sublicensee.” For the avoidance of doubt, any and all Affiliates and/or Third Parties engaged by Maruho and/or its Affiliates to perform any services from which Arising IP is and/or can be discovered and/or developed shall be deemed Sublicensees under this Agreement for all purposes.

(b) Terms and Conditions of Permitted Sublicenses. With respect to any sublicense that Maruho grants, or intends to grant, in accordance with Section 2.3.2(a), the following terms and conditions shall apply:

(i) Maruho shall provide Evommune with prior written notice (at least [***] Business Days in advance) to Evommune of any sublicenses to be granted, which shall include in each case a description of the rights to be granted and the purpose therefor and the identity of the proposed Sublicensee.

(ii) Maruho shall ensure that Sublicensee affirmatively commits, and each Sublicensee shall affirmatively commit, in the applicable sublicense agreement to step into Maruho’s shoes and assume full responsibility for all payments and all other obligations owed by Maruho to Evommune under this Agreement with respect to such sublicensed Product and rights granted in the applicable sublicense agreement.

 

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(iii) Maruho shall remain responsible for the performance by each of its Sublicensees and shall cause each of its Sublicensees to comply with the applicable provisions of this Agreement, and Maruho shall be liable for the acts or omissions of its Sublicensees under or in connection with this Agreement (as if such acts or omission were those of Maruho).

(iv) Without limiting the generality of this Section 2.3.2, Maruho shall: (A) ensure that each of its Sublicensees accepts in writing all applicable terms and conditions of this Agreement, including the non-compete, reporting, audit, inspection, intellectual property, and confidentiality provisions hereunder; (B) under the agreements between Maruho and each of its Sublicensees, include a provision pursuant to which [***], provided that, in each case, [***], in each case, [***]; and (C) [***]. For the avoidance of doubt, (X) Maruho will remain directly responsible for all amounts owed to Evommune under this Agreement, and (Y) each Sublicensee is subject to the negative and restrictive covenants set forth in this Section 2.3.2 and Section 2.4, respectively.

(v) Maruho hereby expressly waives any requirement that Evommune exhaust any right, power, or remedy, or proceed against a subcontractor or other Sublicensee, for any obligation or performance hereunder prior to proceeding directly against Maruho.

(vi) Notwithstanding anything to the contrary, all sublicenses granted hereunder shall automatically terminate upon expiration or termination of this Agreement for any reason.

(vii) Without limiting Maruho’s responsibility for the performance of its Sublicensees hereunder or its liability for acts of omissions of its Sublicensees, any obligation of Maruho under this Agreement may be satisfied by a Related Party.

2.4 Restrictive Covenant. To the maximum extent permissible under Applicable Law and without limiting the generality of Section 2.7.2, Maruho hereby covenants and agrees that it shall not (and shall cause its Related Parties not to), either directly or indirectly, itself or through any Related Party or Third Party, (a) commercialize any Competing Products in the Field in the Territory or (b) develop or manufacture any Competing Product for the purpose of commercialization in the Field in the Territory.

2.5 Exchange of Information. Without limiting the generality of any other provision of this Agreement, Maruho shall keep Evommune fully and promptly informed as to its progress and activities relating to the Development, Manufacture, and Commercialization of the Products in accordance with this Agreement, including with respect to regulatory matters and meetings with Regulatory Authorities, by way of [***] updates, delivered no later than [***] Business Days following [***] of each Calendar Year during the Term, to Evommune and as otherwise specified in this Agreement, or as reasonably requested from time to time by Evommune. In connection therewith, Maruho shall provide Evommune with such information regarding such progress and activities under the Development Plan or otherwise relating to the Products as Evommune may reasonably request from time to time.

 

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2.6 Know-How Transfer. After the Effective Date, Evommune shall, upon Maruho’s request from time to time, at Evommune’s reasonable expense, provide to Maruho copies of material tangible documentation disclosing the Licensed Know-How for use solely in accordance with the terms and conditions of this Agreement.

2.7 Dermira License.

2.7.1 Maruho acknowledges that Evommune has sublicensed to Maruho under this Agreement certain Patents owned or Controlled by Dermira and that the rights granted by Evommune to Maruho hereunder are limited to the maximum extent of the rights permitted to be sublicensed under the Dermira License. In the event of any conflict or inconsistency with respect to any rights that Evommune purports to grant to Maruho under this Agreement and the rights granted by Dermira to Evommune under the Dermira License, the Dermira License shall control (including with respect to Article 8).

2.7.2 Maruho accepts and shall comply with all of the terms and conditions of the Dermira License as if Maruho were a party thereto to the extent such terms and conditions are applicable to the Products in the Field in the Territory, including, without limitation, the non-compete, reporting, audit, inspection, and confidentiality provisions thereunder; and, in connection therewith, Maruho shall remain responsible for the acts and omissions of its Affiliates, Sublicensees, and subcontractors. Maruho acknowledges and agrees that any act or omission of Maruho (or its Affiliates, Sublicensees, or subcontractors) that would reasonably be expected to be a material breach under the Dermira License will be deemed a material breach of this Agreement. Evommune shall not terminate or amend the Dermira License in a manner that materially adversely affects Maruho’s rights and obligations under this Agreement. Similarly, Evommune shall comply, in all material respects, with the applicable terms and conditions of the Dermira License. For the avoidance of doubt, Maruho acknowledges and agrees that it is not a third-party beneficiary of the Dermira License.

2.7.3 Upon written request by Evommune, Maruho shall timely take all actions reasonably necessary, including timely providing to Evommune all information in Maruho’s possession reasonably necessary, for Evommune to comply with its obligations under the Dermira License. Without limiting the foregoing, upon prior written request by Evommune, Maruho shall provide to Evommune the information necessary, in the format necessary, for Evommune to comply with its royalty reporting obligations under the Dermira License, no later than five (5) Business Days prior to the date that the applicable reporting is due to Dermira under the Dermira License.

2.7.4 The Parties acknowledge and agree that, as required under the Dermira License, [***].

2.7.5 The Parties acknowledge and agree that Maruho’s obligation to comply with the applicable terms and conditions of the Dermira License in accordance with Section 2.7.2 is subject to the condition that Evommune has provided to Maruho a complete and accurate copy of such applicable terms and conditions of the Dermira License. Notwithstanding any provision to the contrary, Maruho and its Related Party has no obligation to assume or otherwise discharge Evommune’s payment obligations under the Dermira License with respect to the Product, except as set forth in Section 2.7.6.

 

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2.7.6 In the event of a partial termination of the Dermira License that would affect Maruho’s rights hereunder or a complete termination of the Dermira License, in both cases, for reasons not attributable to Maruho’s acts or omissions, and, as of the effective date of such termination, this Agreement has not otherwise expired or been terminated, then the sublicense granted under Section 2.1 with respect to the Licensed Technology Controlled by Evommune pursuant to the Dermira License shall be deemed to be a direct license from Dermira to Maruho on the terms and conditions contained in the Dermira License (with Maruho assuming the applicable obligations of Evommune under the Dermira License solely with respect to the Products in the Field in the Territory).

2.8 Lilly Programs. Maruho acknowledges that, as of the Effective Date, Dermira’s Affiliate, Eli Lilly and Company (“Lilly”), or its Affiliates may, from time to time, Develop and/or Commercialize one or more compounds or products that target the same pathways or treat the same indications as the Compound, including that such compounds and/or products may be at a later stage of Development than the Compound. Provided that it does not violate the exclusive license set forth in the Dermira License, nor use any of Evommune’s Confidential Information disclosed pursuant to Dermira License: (a) nothing in this Agreement or the Dermira License prohibits or restricts Lilly or its Affiliates from continuing to Develop, or from Manufacturing or Commercializing, any such compounds or products (or any natural evolutions or successors thereto) (collectively the “Lilly Programs”) or from licensing or transferring to any other Person, or prosecuting or enforcing, any of its Know-How, Inventions, Patents, technology, copyrights, trademarks, or other Intellectual Property with respect thereto; and (b) to the extent that Evommune gains any information regarding any Lilly Program, Evommune has no obligation to share with Maruho any information regarding any Lilly Program (unless, for clarity, such information constitutes Licensed Know-How).

2.9 Evommune Support and Cooperation. Upon Maruho’s reasonable request, Evommune shall reasonably cooperate and provide reasonable assistance in connection with Maruho’s activities under this Agreement, including, without limitation, that Evommune will reasonably cooperate and provide reasonable assistance in connection with the following matters:

(a) Preparing responses to medical questions or inquiries in the Field in the Territory, including Product Complaints, with regard to Products sold by or on behalf of Maruho (or any of its Related Parties);

(b) investigations relating to Non-Conforming Material supplied by Evommune under Article 6;

(c) tax matters as contemplated by Section 7.7; and

(d) Enforcement Proceedings, to the extent that Maruho controls such Enforcement Proceedings in accordance with Section 8.5.2;

 

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provided, however, that (y) all such cooperation and assistance shall be at Maruho’s cost, and (z) for clarity, such obligation to cooperate and assist shall not obligate Evommune to expend significant resources or time or otherwise develop or generate documentation, records, or information not already in its possession.

ARTICLE 3

DEVELOPMENT

3.1 Overview of Development.

3.1.1 Subject to the terms and conditions of this Agreement, Maruho shall be responsible, at its cost, for the Development of the Products for use in the Field in the Territory as set forth herein. Maruho shall use Commercially Reasonable Efforts to Develop the Compound and Products for the Initial Indication in the Territory in accordance with the Development Plan, including, without limitation, conducting bridging studies, clinical studies, and Clinical Trials (including post-Regulatory Approval studies). Maruho shall use Commercially Reasonable Efforts to perform the Development Activities for each Product to (a) enable obtaining Regulatory Approval in the Territory for the Product(s) in the Initial Indication, and (b) maximize the commercial potential for such Product(s) for the Initial Indication in the Territory, and shall keep Evommune reasonably informed of the efforts contemplated by this Section 3.1.1 through the JSC.

3.1.2 In the event that Evommune (or any of its Affiliates or sublicensees) Develops any Product for indication(s) other than the Initial Indication in the Field for the purpose of Commercialization outside the Territory (each, a “New Indication”), then Evommune shall notify Maruho thereof and may request Maruho to Develop and seek Regulatory Approval of such Product for such New Indication for the sole purpose of Commercialization in the Territory; provided that Maruho may choose not to Develop or Commercialize such Product for such New Indication solely to the extent that Maruho notifies Evommune of commercially reasonable concerns with respect to such Product for such New Indication in the Territory. If Maruho chooses to Develop and/or Commercialize such Product for such New Indication in the Territory, then Maruho shall keep Evommune reasonably informed of such efforts through the JSC and shall use Commercially Reasonable Efforts to Develop and seek Product Approval of such Product for such New Indication in the Territory.

3.2 Objectives under the Development Plan.

3.2.1 Development Activities. Maruho shall use Commercially Reasonable Efforts to carry out the Development Activities for each Product under the applicable Development Plan in accordance with the timeframes set forth therein and in a manner designed to achieve successful Development and Regulatory Approval of the Compound and/or Products for the Initial Indication and, if applicable, any New Indication in the Territory. For clarity, Maruho shall not be obligated to obtain Evommune’s prior written consent with respect to its Development activities under this Article 3, provided that such activities are conducted in accordance with the Development Plan, and provided further that such Development activities are not likely to have a material negative impact on the worldwide commercialization of any Product in the Field.

 

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3.2.2 Compliance. Maruho shall conduct the Development Activities in accordance with sound and ethical business and scientific practices, and in compliance with all Applicable Laws, including GCPs and GLPs, and also including all applicable pharmacovigilance, data privacy, and data protection laws in the Territory as applicable. In addition, Maruho shall not use in any capacity, in connection with its Development, Manufacture, or Commercialization of the Compound or Products hereunder, any Person who has been debarred pursuant to Section 306 of the FD&C Act (or similar Applicable Laws outside of the U.S.), or who is the subject of a conviction described in such section, and Maruho shall inform Evommune in writing promptly if it or any Person who is performing services for Maruho hereunder is debarred or is the subject of a conviction described in Section 306 (or similar Applicable Laws outside of the U.S.), or if any action, suit, claim, investigation, or legal administrative proceeding is pending or, to Maruho’s knowledge, is threatened, relating to the debarment of Maruho or any Person used in any capacity by Maruho in connection with its Development, Manufacture, or Commercialization of the Compound or Products hereunder.

3.3 Development Plan.

3.3.1 General. Maruho shall conduct Development Activities pursuant to a comprehensive development plan (the “Development Plan”). The Development Plan shall set forth, among other things, the following:

(a) any preclinical studies, toxicology studies, pharmaco-economic studies, and other clinical studies (including Phase IV Clinical Trials) necessary for obtaining and maintaining Regulatory Approval in the Territory, with respect to each Product in the Field in the Territory, including, without limitation, with respect to each study, the number of expected patients, the quantity of Products that Maruho reasonably expects to require to conduct such study, and the estimated timeline for such study;

(b) all regulatory plans for obtaining and maintaining Regulatory Approvals in the Field for each Product in the Territory; and

(c) the timeline for completing such Development Activities.

3.3.2 Initial Development Plan. The initial Development Plan for the Products in the Field in the Territory (the “Initial Development Plan”) is attached hereto as Exhibit A.

3.3.3 Updating and Amending Development Plan. Maruho shall, on an annual basis, review and update, as appropriate, the then-current Development Plan to reflect any material changes, reprioritizations of, or additions to the Development Plan. Maruho shall provide such updated Development Plan to the JSC [***] during the Term. Evommune may, through the JSC, provide comments on such updated Development Plan within [***] days of receipt, and Maruho will consider any such comments in good faith and use Commercially Reasonable Efforts to incorporate such comments. Once Maruho has considered, and to the extent applicable, incorporated any comments by Evommune (but in no case later than [***] days from receipt of such comments), it shall provide Evommune with a copy of such amended Development Plan, which will become effective and supersede the previous Development Plan upon Evommune’s receipt or, if no comments are provided by Evommune, at the end of Evommune’s [***]-day comment period.

 

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3.4 Evommune’s Development Responsibilities.

3.4.1 Initial Indication. The Parties acknowledge and agree that, as of the Effective Date, Evommune intends for the Initial Indication to be chronic spontaneous urticaria. Evommune shall use Commercially Reasonable Efforts to Develop the Product for chronic spontaneous urticaria as the Initial Indication, and shall keep Maruho reasonably informed regarding such efforts through the JSC; provided, however, that Evommune’s obligation to use Commercially Reasonable Efforts shall be deemed satisfied upon [***]. Notwithstanding the foregoing, Evommune shall have the right to change the Initial Indication; provided, however, that if Evommune changes the Initial Indication, Evommune shall provide Maruho with written notice of such change, and the Parties shall discuss in good faith [***]; and, if the Parties agree accordingly, the Parties shall [***]. For the avoidance of doubt, in the event that the Parties fail to reach an agreement regarding [***], then [***], provided, however, that, in such case, [***].

3.4.2 Multi-Regional Clinical Trials. In the event that Evommune elects to launch and conduct any multi-regional Clinical Trials for the Product in the Field (each, an “MRCT”), Evommune shall deliver to Maruho reasonable prior written notice of such proposed MRCT (including that Evommune shall use reasonable efforts to deliver such notice no less than [***] prior to the initiation of any MRCT, and Evommune shall use reasonable efforts to provide notice sooner if Evommune determines to pursue an MRCT prior to [***] in advance of any MRCT), and the Parties shall discuss in good faith whether the Territory will be included in such MRCT. Without limiting the generality of the foregoing, the Parties acknowledge and agree that Evommune shall conduct an MRCT for the Product for the Initial Indication, and the Territory shall be included in such MRCT. With respect to any MRCT in which the Territory is included (including, without limitation, the MRCT for the Product for the Initial Indication), Maruho shall conduct, at its sole cost, all Territory-specific components of such MRCT, including, without limitation, PMDA requirements such as non-clinical studies and/or chemistry, manufacturing, and controls (CMC) requirements, and, as between the Parties, the other costs associated with such MRCT shall be [***]. In the event that the Parties agree that the Territory shall be included in such MRCT, then Evommune shall keep Maruho reasonably informed regarding the proposed formulation of the Product for such MRCT, and the advice and suggestions of Maruho with respect to such proposed formulation shall be taken into consideration in good faith by Evommune. In the event that the Regulatory Authority in the Territory requires a different formulation of the Product than that proposed by Evommune for the purpose of such MRCT, Evommune shall use good faith efforts to perform any additional Development work with respect to such formulation reasonably necessary to satisfy the applicable Regulatory Authority, provided, however, that (a) such additional Development work shall be at Maruho’s cost, and (b) Evommune does not, and shall not, provide any representations or warranties, whatsoever, whether express or implied, with respect to whether such formulation will be acceptable to the applicable Regulatory Authority in the Territory.

3.4.3 Phase I Clinical Trial – Initial Indication. Notwithstanding Section 3.4.2 or any other provisions in Article 3 hereof, Evommune shall, [***], use Commercially Reasonable Efforts to include Japanese population in its Phase I Clinical Trial supporting the Development of the Product for the Initial Indication, and, upon Evommune’s request and [***], Maruho shall cooperate and provide advice in connection with the foregoing.

 

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3.4.4 Other Studies and Clinical Trials. For the avoidance of doubt, the Parties acknowledge and agree that, as between the Parties, Evommune has the sole right to conduct worldwide non-clinical studies and/or Clinical Trials outside the Territory (and, for the avoidance of doubt, outside the Field within the Territory), in each case, at its own cost.

3.5 Records, Reports, and Information.

3.5.1 Status Updates in the Territory. In addition to the obligations set forth in Section 4.1.4, within [***] days of the conclusion of each Calendar Quarter during the Term, Maruho shall provide Evommune (and/or Dermira or Lilly, upon Evommune’s request) with reports detailing the Development Activities under the Development Plan and the results thereof and any Arising IP that was developed or generated during such Calendar Quarter as a result of Maruho’s activities under this Agreement and is reasonably deemed by Maruho to be sufficiently mature and describable so as to be reportable under this provision. Without limiting the foregoing, Maruho shall promptly (and, in any event, within [***] Business Days of receipt) provide to Evommune copies of any material documents or correspondence received from any Regulatory Authority related to Development Activities [***].

3.5.2 General. Maruho shall, and shall cause each of its Related Parties to, maintain current and accurate records of all work conducted by it under the Development Plan and all data and other information resulting from such work (which records shall include, as applicable, books, records, reports, research notes, charts, graphs, comments, computations, analyses, recordings, photographs, computer programs, and documentation thereof (e.g., samples of materials and other graphic or written data generated in connection with the Development Activities)). Such records shall properly reflect all work done and results achieved in the performance of the Development Activities in sufficient detail and in good scientific manner appropriate for regulatory and patent purposes. Maruho shall document all preclinical studies and Clinical Trials to be conducted pursuant to the Development Plan in formal written study reports according to applicable national and international (e.g., ICH, GCP, and GLP) guidelines.

3.5.3 Access to Records. Evommune shall have the right to review all records under the Development Plan maintained by Maruho at reasonable times, upon written request, in accordance with Section 7.11. [***].

3.6 Development Diligence Failures. If Maruho fails to satisfy the requirements set forth in this Article 3 with respect to the Development of any of the Products for the Initial Indication or, if applicable, any New Indication in the Territory or if Maruho is not using Commercially Reasonable Efforts with respect to the Development of any of the Products for the Initial Indication or, if applicable, any New Indication in the Territory, then Evommune shall have the right to terminate this Agreement with respect to such Product upon written notice if Maruho fails to cure such breach within [***] days following delivery by Evommune of any written notice of such breach.

 

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ARTICLE 4

REGULATORY

4.1 Regulatory Filings and Regulatory Approvals.

4.1.1 General Responsibilities; Ownership of Regulatory Approvals. Maruho shall be responsible for the preparation of all Regulatory Materials necessary or desirable for obtaining and maintaining the Regulatory Approvals for the Products in the Field in the Territory (including in connection with Patient Information Leaflets, labeling, and packaging for the Products in the Field in the Territory) at its discretion (but, for clarity, in accordance with the terms of this Agreement and all Applicable Laws), and Maruho shall submit such Regulatory Materials, as applicable, to the applicable Governmental Authorities in the Territory. For clarity, to the extent allowed by Applicable Laws, all Regulatory Approvals for the Products in the Field in the Territory shall be held and owned by Maruho in its name. Maruho shall use Commercially Reasonable Efforts to obtain and maintain Product Approvals and all other Regulatory Approvals for the Products for the Initial Indication and any New Indication that Maruho elects to Develop in accordance with Section 3.1.2 in the Field in the Territory. Upon Maruho’s request and at Maruho’s expense, Evommune shall provide reasonable assistance and cooperation in connection with the regulatory matters relating to the Product in the Field in the Territory contemplated by this Article 4.

4.1.2 Pricing Approvals. Maruho shall (to the extent permitted by Applicable Laws) be solely responsible for (and shall use Commercially Reasonable Efforts toward) obtaining and maintaining Pricing Approvals for the Products in the Field in the Territory, and shall, as quickly as commercially practicable (for the avoidance of doubt, subject to Applicable Laws) apply for Pricing Approvals following the receipt of the Product Approval for any Product in the Field in the Territory.

4.1.3 Cost of Regulatory Activities. All regulatory costs incurred in connection with the preparation of Regulatory Materials for, and obtaining of Product Approvals in, the Field in the Territory for the Products shall be borne solely by Maruho, and Maruho shall be responsible for all regulatory costs involved in the maintenance of all Regulatory Approvals for the Products in the Field in the Territory.

4.1.4 Reporting and Review. No later than [***] days following the conclusion of each Calendar Quarter during the Term and, additionally, upon [***] of a Product in the Field in the Territory, Maruho shall prepare and deliver to Evommune a written report summarizing (a) all Development Activities conducted by or on behalf of Maruho in connection with the Product in the Field in the Territory during the preceding Calendar Quarter, (b) all Development Data and all other data and results arising the activities described in the foregoing (a), and (c) a written assessment of the results of such Development Activities(collectively the “Development Report”). Additionally, Maruho shall keep the JSC reasonably and regularly informed in connection with the preparation of all Regulatory Materials, Regulatory Authority review of Regulatory Materials, Regulatory Approvals, and Pricing Approvals, in each case with respect to each Product in the Field in the Territory. Maruho shall make appropriate personnel reasonably available to answer questions regarding the data and results described in the Development Report. Maruho acknowledges and agrees that Evommune shall have the right to keep Dermira and/or Lilly apprised of all Development and Commercialization efforts relating to any Product in the Field in the Territory to the extent required under the Dermira License, including that Evommune shall have the right to share the Development Report with Dermira and/or Lilly.

 

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4.2 No Other Regulatory Filings. Except as otherwise expressly set forth in this Article 4, Maruho (and its Affiliates) shall not file any Regulatory Materials or Regulatory Approvals for any products other than the Products that are otherwise based on any Licensed Patents.

4.3 Pharmacovigilance and Medical Inquiries.

4.3.1 Pharmacovigilance. The Parties shall enter into a global pharmacovigilance and safety agreement, on customary terms (the “PV Agreement”) reasonably in advance of Initiation of the first Clinical Trial with respect to the Products in the Field in the Territory. Notwithstanding any provision to the contrary, Evommune shall be responsible for holding and maintaining a global safety database for the Products.

4.3.2 Medical Inquiries for the Product. Maruho shall be responsible for, and shall use Commercially Reasonable Efforts to respond to, all medical questions or inquiries in the Field in the Territory, including all Product Complaints, with regard to any Products sold by or on behalf of Maruho (or any of its Related Parties), in each case in accordance with Applicable Laws and this Agreement. Maruho shall be responsible for handling all Product Complaints related to the Development, Commercialization, and Manufacture of the Products in the Field in the Territory, and Evommune shall refer all such Product Complaints to Maruho.

4.4 Regulatory Authority Communications Received by a Party.

4.4.1 General. Maruho shall promptly provide Evommune with copies of any action by, or notification or other information that it receives (directly or indirectly), and any other communications, from any Regulatory Authority that (a) raises any concerns regarding the safety or efficacy of the Products, (b) indicates or suggests a potential liability of either Party to Third Parties in connection with the Products, (c) is reasonably likely to lead to a recall, market withdrawal, or market notification with respect to the Products, or (d) relates to expedited and periodic reports of adverse events with respect to the Products or Product Complaints, and which may have an adverse impact on Regulatory Approval or the continued Commercialization of the Product. Maruho shall be solely responsible for responding to any such communications relating to the Products in the Field in the Territory; provided, however, that Evommune shall be entitled to review and provide comments on any proposed communication with any Regulatory Authority relating to the Product in the Field in the Territory, and Maruho shall consider all such comments in good faith; provided further, that, notwithstanding the foregoing, Maruho’s obligation to consult with Evommune shall be subject to Maruho’s good faith determination that the time required to so consult would not materially impair the availability of rights or remedies, or increase exposure, in connection with such communication.

4.4.2 Disclosures. In addition to its obligations under this Agreement, Maruho shall promptly disclose to Evommune (and, for clarity, Evommune shall have the right to disclose to Dermira and its designees in accordance with the Dermira License) the following regulatory information, without any translations (provided that Maruho shall reasonably cooperate in the event that a translation is desired):

 

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(a) All material information pertaining to actions taken by Regulatory Authorities, in connection with the Products in the Field in the Territory, including any notice, audit notice, notice of initiation by Regulatory Authorities of investigations, inspections, detentions, seizures, or injunctions concerning the Products in the Field in the Territory, notice of violation letter (i.e., an untitled letter), warning letter, service of process, or other inquiry; provided, however, that Maruho shall be entitled to redact those portions thereof to the extent not related to the Product. Without limiting the generality of the foregoing, Maruho shall promptly inform Evommune of any inspections, proposed regulatory actions, investigations, or requests for information or a meeting by any Regulatory Authority with respect to the Products in the Field in the Territory.

(b) All information pertaining to notices from Regulatory Authorities regarding non-compliance with Applicable Laws in connection with the Products in the Field in the Territory, including receipt of a warning letter or other notice of alleged noncompliance; provided, however, that Maruho shall be entitled to redact those portions thereof to the extent not related to the Products in the Field.

4.5 Meetings with Regulatory Authorities in the Territory. Maruho shall provide Evommune with reasonable advance notice of any meeting with any Regulatory Authority in the Territory regarding any Product in the Field, or any inspection to be conducted by any Regulatory Authority at any site which Clinical Trials with respect to any Product in the Field are being conducted by or on behalf of Company, and Evomune may elect to send one (1) person to participate as an observer (at Evommune’s sole cost and expense) in such meeting or inspection to the extent that the Applicable Law or Regulatory Authority permits. Additionally, upon Maruho’s request and at Maruho’s expense, Evommune shall attend any meeting with any Regulatory Authority in the Territory regarding any Product in the Field, provided that Maruho provides Evommune with adequate advance written notice of such meeting.

4.6 Recall, Withdrawal, or Market Notification of Product. In the event that any Governmental Authority threatens or initiates any action to remove any Product from the market in the Field in the Territory, or in the event that Maruho reasonably believes that an event, incident, or circumstance has occurred that may result in the need for a recall, market withdrawal, or other corrective action regarding the Product in the Field in the Territory, then Maruho shall notify Evommune promptly. Maruho shall determine whether to initiate any recall, withdrawal, or market notification of the Product in the Field in the Territory. Maruho shall use Commercially Reasonable Efforts to utilize a batch tracing system which will enable Maruho to identify, on a prompt basis, customers within the Territory who have been supplied with Product of any particular batch, and to recall such Product from such customers as set forth in this Section 4.6. All costs and expenses associated with implementing a recall, withdrawal, or market notification with respect to the Products in the Field in the Territory shall be borne by Maruho, except in case such recall, withdrawal, or market notification arises as a direct result of Evommune’s breach of its obligations set forth in Article 6 and/or its gross negligence or willful misconduct (in which case, at Evommune’s reasonable cost).

 

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4.7 Regulatory Diligence. In the event that Maruho determines at any time during the Term that it is not economically feasible to incur the costs necessary to obtain and maintain Regulatory Approval for any Product in the Field in the Territory, Maruho shall promptly notify Evommune in writing of such determination and Evommune shall have the right to terminate this Agreement with respect to such Product in the Territory.

ARTICLE 5

COMMERCIALIZATION

5.1 Commercialization in the Field in the Territory. Maruho shall be solely responsible, at its cost, for Commercializing each Product in the Field in the Territory, including in accordance with the terms of this Agreement. Maruho shall keep Evommune reasonably informed of such efforts through the JSC. For clarity, Maruho shall not be obligated to obtain Evommune’s prior written consent with respect to its Commercialization activities under this Article 5, provided that (a) such activities are conducted in accordance with a commercialization plan proposed by Maruho promptly following the Effective Date (and, for the avoidance of doubt, no later than [***] days thereafter) (as amended from time to time in accordance with Section 5.3, the “Commercialization Plan”), and (b) such Commercialization activities are not likely to have a material negative impact on the worldwide Commercialization of any Product in the Field. Evommune shall have the right to provide comments on the initial Commercialization Plan, and Maruho will consider any such comments in good faith and use Commercially Reasonable Efforts to incorporate such comments. Without limiting the generality of the foregoing, and without limiting Maruho’s obligation to obtain Pricing Approvals in accordance with Section 4.1.2, Maruho shall, with the advice of Evommune, use Commercially Reasonable Efforts to obtain the most favorable pricing possible to maximize the economic value of the Products, in accordance with all Applicable Laws and customary pharmaceutical company practice.

5.2 Maruho’s Performance.

5.2.1 Specific Commercialization Obligations. Without limiting the generality of the provisions of Section 5.1, Maruho:

(a) shall (i) use Commercially Reasonable Efforts to Commercialize each Product in the Field in the Territory, (ii) use Commercially Reasonable Efforts to maximize the commercial potential for each Product in the Field in the Territory, (iii) represent Products accurately and fairly, and (iv) act in good faith to maximize the economic value of Products in the Field in the Territory. The Parties acknowledge and agree that the use of Commercially Reasonable Efforts in accordance with the foregoing Section 5.2.1(a)(i) shall include, without limitation, Maruho’s compliance with and execution of the Commercialization Plan.

(b) shall not (i) utilize deceptive, misleading, or unethical business practices, or (ii) intentionally take any action or inaction that would reasonably be likely to prejudice the value of any Product.

(c) shall be solely responsible for (i) receiving, accepting, and filling orders for the Products in the Field in the Territory, (ii) handling all returns of the Products in the Field in the Territory, (iii) controlling invoicing, order processing, and collection of accounts receivable for the sales of the Products in the Field in the Territory, and (iv) distributing and managing inventory of the Products in the Field in the Territory.

 

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(d) shall use Commercially Reasonable Efforts to launch each Product in the Territory as quickly as commercially practicable after all applicable Regulatory Approvals for the Products in the Territory have been obtained. Maruho shall use Commercially Reasonable Efforts to ensure that, once launched, each Product remains commercially available in in the Territory for the duration of the Royalty Term.

5.2.2 Commercialization Diligence Failures. If Maruho fails to satisfy the requirements set forth in Section 5.2.1 with respect to the Commercialization of any of the Products in the Field in the Territory or Maruho is not using Commercially Reasonable Efforts with respect to the Commercialization of any of the Products in the Territory, then Evommune shall have the right to terminate this Agreement with respect to such Product upon written notice if Maruho fails to cure such breath within [***] days following delivery by Evommune of any written notice of such breach.

5.3 Updating and Amending Commercialization Plan. Maruho shall, on an annual basis, review and update, as appropriate, the then-current Commercialization Plan to reflect any material changes, reprioritizations of, or additions to the Commercialization Plan. Maruho shall provide such updated Commercialization Plan to the JSC [***]. Evommune may, through the JSC, provide comments on such updated Commercialization Plan within [***] days of receipt, and Maruho will consider any such comments in good faith and use Commercially Reasonable Efforts to incorporate such comments. Once Maruho has considered, and to the extent applicable, incorporated any comments by Evommune (but in no case later than [***] days from receipt of such comments), it shall provide Evommune with a copy of such amended Commercialization Plan, which will become effective and supersede the previous Commercialization Plan upon Evommune’s receipt or, if no comments are provided by Evommune, at the end of Evommune’s [***]-day comment period.

5.4 Reports. Without limiting Maruho’s other reporting obligations hereunder, no later than [***] days following the conclusion of each Calendar Quarter during the Term, Maruho shall provide Evommune a reasonably detailed report regarding its significant Commercialization activities involving Products in the Field in the Territory during the preceding Calendar Quarter.

5.5 No Unauthorized Sales. Maruho acknowledges and agrees that the license grant set forth in Section 2.1 does not include any right to Commercialize the Products outside the Territory, and, to the fullest extent permissible under Applicable Law, Maruho shall not, and shall not permit any Related Party to, and shall require its distributors not to, directly or indirectly: (a) distribute, market, promote, offer for sale, sell, or otherwise Commercialize any Product to any customer outside the Territory; or (b) sell, distribute, market, promote, offer for sale, deliver, tender, or otherwise Commercialize any Product to, or solicit Product sales from a customer, whether in or outside the Territory, if Maruho (or its Related Party, customer, or distributor, as applicable) knows or has a reasonable basis to conclude that such customer intends to resell or use such Product outside the Territory.

 

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5.6 Promotional Materials.

5.6.1 Creation of Promotional Materials. Maruho will use Commercially Reasonable Efforts to create and develop Promotional Materials for the Products in the Field in the Territory in accordance with the Regulatory Approvals and Applicable Laws.

5.6.2 No Inclusion of Evommune or Dermira Logos on Packaging and Promotional Materials. Notwithstanding anything to the contrary herein, neither Maruho nor any Related Party of Maruho shall use any of Evommune’s, Dermira’s, or their respective Affiliates’ trademarks, names, logos, or housemarks in connection with any Promotional Materials or the Product, without prior consent in the sole discretion of Evommune or Dermira, as applicable. Without limiting the foregoing, Maruho will take no action that will interfere with or diminish Evommune’s, Dermira’s, or their respective Affiliates’ rights in their respective trademarks, names, and logos, and if Evommune (or Dermira or Lilly) reasonably believes that the use of any trademarks, names, and logos by Maruho hereunder is interfering with or diminishing their respective rights, Evommune shall notify Maruho thereof in writing and the Parties shall discuss in good faith.

5.6.3 Maruho Ownership of Promotional Materials. During the Term, Maruho shall own all right, title, and interest in and to any Promotional Materials created by Maruho hereunder relating to the Products in the Field in the Territory, including copyrights, but excluding trademarks (including the Product trademarks), names, logos, and other marks that are owned by or on behalf of Evommune, Dermira, or their respective Affiliates.

5.6.4 Use of Promotional Materials Exclusively for the Product. The Promotional Materials shall be used by Maruho exclusively in connection with the Manufacturing and Commercialization of the Products in the Field in the Territory in accordance with the terms of this Agreement, and Maruho shall not use, or allow any other Person to use, any such Promotional Materials except as contemplated by this Agreement and in accordance with the terms hereof; provided, however, that Maruho hereby grants Evommune a perpetual, irrevocable, royalty-free, fully paid up license to use the Promotional Materials for use in connection with the Manufacture and Commercialization of the Products outside the Territory and/or outside the Field in the Territory, provided, further, that Evommune shall be solely responsible for its use of such Promotional Materials outside the Territory and/or outside the Field in the Territory and shall hold harmless Maruho and its Related Party from any claim or damage incurred by them arising from such use by Evommune outside the Territory and/or outside the Field in the Territory.

5.7 Product Trademarks and Product Trade Dress.

5.7.1 Product Trademarks. Maruho shall use Commercially Reasonable Efforts to Commercialize the Products in the Field in the Territory under the trademark and the trade dress selected by Maruho (the “Product Trademarks” and the “Product Trade Dress”, respectively). Notwithstanding the foregoing, in the event that Evommune or Dermira reasonably believes that the use or registration of the Product Trademarks or the use of the Product Trade

 

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Dress in a particular country in the Territory would be against the Applicable Laws of such country, or in conflict with any Third Party’s Intellectual Property in that country, based on a review of market research, regulatory research, legal searches, investigation results, and any other relevant information that may have been collected by either Party or Dermira that is relevant to the clearance for use and registration of a trademark or for use and registration of a trade dress, Evommune or Dermira, as applicable, shall present such concern to Maruho, and Maruho shall take such concern into consideration in good faith.

5.7.2 Use and Ownership of Product Trademarks and Product Trade Dress. Maruho and its Related Parties shall use the Product Trademarks and Product Trade Dress in accordance with Regulatory Approvals, all Applicable Laws, and any brand guidelines to the extent delivered by Evommune to Maruho in advance of Maruho’s or its Related Party’s use of such Product Trademarks and/or Product Trade Dress. Maruho (and its Related Parties) shall use the Product Trademarks and Product Trade Dress pursuant to the terms of this Agreement to identify and in connection with the Commercialization of the applicable Products in the Field in the Territory. Except as set forth in Section 5.7.4, Maruho shall own and retain all rights to the Product Trademarks and Product Trade Dress (in each case, together with all goodwill associated therewith throughout the Territory). Maruho shall also own rights to any Internet domain names incorporating the Product Trademarks or any variation or part of such trademarks as its URL address.

5.7.3 Maintenance of Product Trademarks. During the Term, Maruho will use Commercially Reasonable Efforts to establish, maintain, and enforce the Product Trademarks in the Territory, and will bear all costs and expenses relating thereto.

5.7.4 Evommune Trademarks. Without limiting the generality of Section 5.6.2 and 5.7.1, upon Maruho’s request and solely to the extent that Evommune holds such rights in the Territory, Evommune shall grant to Maruho, without additional consideration, an exclusive, royalty-free license under the Evommune Trademark for use solely in connection with the Commercialization of the Product in the Field in the Territory. Notwithstanding any provision to the contrary, Evommune shall control the prosecution, maintenance, enforcement, and defense of all Evommune Trademarks, including in the Territory. Furthermore, upon Maruho’s reasonable request, Evommune shall consider in good faith whether to apply for registration of the Evommune Trademarks in the Territory for use in connection with the Products.

5.8 Sales Forecast. Within [***] days after the end of each Calendar Quarter, Maruho shall provide Evommune with a non-binding, good faith sales forecast, based on Maruho’s reasonable determination, for the Product in the Field in the Territory for the subsequent [***] Calendar Quarters.

ARTICLE 6

MANUFACTURING

6.1 General. Evommune shall use Commercially Reasonable Efforts to Manufacture (or have Manufactured) Maruho’s reasonable requirements of the Products, in the form of brite stock, for clinical use in the Field in the Territory, in accordance with the terms of this Article 6. For the avoidance of doubt, Evommune shall have the right to subcontract or otherwise delegate all or a portion of its obligations under this Article 6 to a Third Party contractor, with prior notice to (but, for clarity, not consent or approval of) Maruho. The Parties shall enter into a quality agreement (the “Quality Agreement”) with respect to such clinical supply reasonably in advance of the Manufacture of any Products to be used in the Clinical Trials conducted by Maruho.

 

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6.2 Purchase Orders. Maruho shall, from time to time, place purchase orders for the Products for clinical use in the Field in the Territory (each, a “Purchase Order”). Maruho shall place such Purchase Orders at least [***] months prior to the requested date of delivery in accordance with Section 6.4 and in multiples of batch size. Evommune shall accept or reject such Purchase Orders within [***] Business Days of receipt, provided that Evommune shall use Commercially Reasonable Efforts to accept any reasonable Purchase Orders. Notwithstanding any provision to the contrary, Evommune shall not, on an annual basis, be obligated to Manufacture and deliver any more than [***] of any amounts of Products projected, as set forth in the most recent Development Plan, to be required in connection with the performance of any studies for such Calendar Year. If any term or condition contained in any Purchase Order is inconsistent with the terms of this Agreement, then the terms and conditions provided in this Agreement will control unless otherwise clearly agreed in writing by the Parties including expressly referencing the term and/or condition set forth in this Agreement that the Parties desire to amend or supersede in such Purchase Order (solely with respect to such Purchase Order).

6.3 Delivery Deviation. For purposes of this Article 6, delivery of one or more shipments that total between [***] and [***] of Product ordered pursuant to any Purchase Order shall constitute delivery of the full quantity of Product ordered hereunder, provided that the payment of the Purchase Price for such Products shall be made based on the actual quantity of Product delivered.

6.4 Delivery; Risk of Loss. Products will be delivered, transfer of title will occur, and risk of loss will be assumed by Maruho EXW Evommune’s designated manufacturing facility. Simultaneous with delivery of such Product, Evommune shall deliver to Maruho a certificate of analysis and certificate of compliance with respect to such Product.

6.5 Packaging and Labeling; Certain Other Manufacturing Activities. Notwithstanding anything to the contrary contained herein, Maruho or its designated Third Party shall be responsible (at its sole cost and expense), with respect to all Products for clinical use, for labeling, packaging, handling, storage, quality control, quality assurance, and the testing and release aspects of Analytical Release Testing and Characterization and related activities, of such Products in connection with the foregoing (collectively, “Packaging and Labeling”), provided that, upon Maruho’s reasonable request, Evommune shall use Commercially Reasonable Efforts to provide, at Maruho’s reasonable cost, any information under Evommune’s control that is necessary or reasonably useful for performing the activities contemplated by this Section 6.5. Notwithstanding any provision to the contrary, Maruho or its designated Third Party shall ensure that all such Packaging and Labeling complies with Applicable Laws, GMPs, and the Specifications.

 

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6.6 Clinical Supply Warranties. Evommune represents and warrants to Maruho that, at the time of delivery of any Product in accordance with this Article 6, such Product shall (a) conform to the Specifications; (b) the ownership and title to such Product shall pass to Maruho free and clear of all security interests, loans, and other encumbrances; and (c) have been Manufactured in accordance with the terms of this Agreement and the Quality Agreement and all Applicable Laws and GMPs (except to the extent that Maruho is responsible for Packaging and Labeling in accordance with Section 6.5) (collectively, the “Clinical Supply Warranties”).

6.7 Acceptance and Rejection of Product for clinical use.

6.7.1 Maruho shall have the right to reject all or part of any shipment and delivery of Product it orders and receives from Evommune hereunder based on the grounds that such Products fail to conform to any of the Clinical Supply Warranties (such nonconformance, a “Defect,” and any unit with a Defect, “Non-Conforming Material”). Other than for Products delivered hereunder that have any Defects that cannot be timely discovered upon visual examination (“Latent Defects”), Maruho must deliver written notice to Evommune of any rejection permitted under this Section 6.7 for any Non-Conforming Material within [***] Business Days from delivery in accordance with Section 6.4. With respect to Non-Conforming Material with Latent Defects, Maruho must deliver written notice to Evommune of such Latent Defect within [***] Business Days from the date that Maruho becomes aware, or should have reasonably become aware, of such Latent Defect.

6.7.2 If a dispute arises as to where any Product constitutes Non-Conforming Material that is not resolved by good faith negotiating between the Parties within [***] days of delivery by Maruho of notice of Defect, then the matter (along with related samples, batch records, and/or other reasonable evidence) shall be submitted to an independent testing laboratory mutually agreed to by the Parties. The determination of the independent testing laboratory shall be binding upon the Parties, save for manifest error.

6.7.3 The cost and expenses of the laboratory that conducts the testing described above shall be borne by the Party deemed to be the cause of such non-conformance (or, if deemed conforming, then by Maruho), and if the cause cannot be determined, then such costs shall be shared equally between the Parties.

6.7.4 If the Parties agree or the independent laboratory confirms that any Product constitutes Non-Conforming Material, then Maruho, at its sole discretion, may decide whether, as its sole and exclusive remedy (except the remedy for third-party claims provided in Section 11.1 as limited by the last sentence of this Section 6.7.4), to (a) request replacement of such Non-Conforming Material, at no additional cost, or (b) if Maruho has already paid for such Non-Conforming Material, receive a credit or refund the payment to Maruho with respect to any Product subsequently delivered by Evommune to Maruho under this Article 6. Any Product that is determined to be Non-Conforming Material shall, at Evommune’s option, either be returned to Evommune at Evommune’s expense or destroyed by Maruho at Evommune’s expense, pursuant to Evommune’s written instructions. Notwithstanding any provision to the contrary, Evommune’s obligation to indemnify Maruho in accordance with Section 11.1 with respect to any Losses arising in connection with any and all Claims resulting or otherwise arising from Non-Conforming Material shall not exceed the greater of (i) the Purchase Price paid by Maruho with respect to such Non-Conforming Material, and (ii) the aggregate proceeds actually received by Evommune from its insurance provider with respect to such Claim (if any). For the avoidance of doubt, the foregoing clause (ii) shall not be deemed to expand, broaden, or change in any way the obligations set forth in Section 11.5.2.

 

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6.8 Commercial Manufacturing. Separate from the clinical supply obligations set forth in Sections 6.1 through 6.7, upon Maruho’s request, the Parties shall initiate good faith negotiations regarding commercial supply of the Products for Commercialization in the Field in the Territory, and Evommune shall supply the Products for Commercial use to Maruho.

6.9 Audits. In addition to the rights set forth in Section 7.11, to the extent permissible under any applicable manufacturing agreement between Evommune and its contract manufacturing organization (including subcontractor) for the Products (the “Product CMO”), Maruho shall have the right to audit Evommune and the Product CMO (and the Product CMO’s applicable manufacturing site) to confirm compliance with the terms of this Agreement and Applicable Law; provided, however, that Evommune shall use Commercially Reasonable Efforts to include in any future agreement with a Product CMO a right for Maruho to audit such Product CMO in accordance with this Section 6.9.

6.10 Technology Transfer. For the avoidance of doubt, the Parties acknowledge and agree that nothing in this Agreement shall be construed to limit Maruho’s ability to Manufacture, or have Manufactured, Compound and/or Products itself or through any Third Party. Upon Maruho’s request and at Maruho’s cost, Evommune shall use Commercially Reasonable Efforts to conduct technology transfer to Maruho or its designee in a manner designed to enable Maruho or such designee to Manufacture the Compound and/or the Products in a manner substantially similar to Evommune prior to such technology transfer with respect to supply management and quality management. For clarity, Maruho’s designee for purposes of this Section 6.10 may be a manufacturer that is located outside of the Territory, provided that such designee Manufactures Compound and/or Products solely for Development and/or Commercialization of any Product by Maruho in the Field in the Territory. Additionally, if Maruho requests to use Evommune’s Product CMO, Evommune shall seek to cause such Product CMO to supply Compound and/or Products directly to Maruho on substantially similar terms and conditions as those between Evommune and such Product CMO, for the sole purpose of Development or Commercialization of the Products in the Field in the Territory, except with respect to Territory-specific requirements or other factors that differentiate Evommune’s supply arrangement with such Product CMO from Maruho’s supply arrangement with such Product CMO.

ARTICLE 7

PAYMENTS

7.1 Upfront License Fee. In consideration of the license and rights granted hereunder, Maruho shall pay Evommune a one-time and non-refundable upfront license fee in an amount equal to $8,000,000 (the “Upfront License Fee”) within ten (10) Business Days from the execution of this Agreement.

7.2 Milestone Payments. In consideration of the license and rights granted hereunder, Maruho shall pay to Evommune each of the one-time milestone payments set forth in the table below (each, a “Milestone Payment”) upon the occurrence of the corresponding milestone set forth in such table with respect to any Product in the Field in the Territory (each, a “Milestone”).

 

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Maruho shall promptly notify Evommune in writing of, but in no event later than [***] Business Days after, the first occurrence of each Milestone (which notice shall specify the date of such occurrence) (each, a “Milestone Notice”), and Evommune shall use Commercially Reasonable Efforts to issue an invoice for such Milestone Payments; provided, however, that in no event shall a failure to deliver a Milestone Notice and/or an invoice relieve Maruho of its obligation to pay the applicable Milestone Payment when due pursuant to this Section 7.2. Maruho shall pay each Milestone Payment within [***] Business Days after the occurrence of the applicable Milestone.

 

Milestone

   Milestone Payment  

[***]

     [ ***] 

[***]

     [ ***] 

[***]

     [ ***] 

[***]

     [ ***] 

[***]

     [ ***] 

[***]

     [ ***] 

For the avoidance of doubt, the Parties acknowledge and agree that each Milestone Payment shall be payable one-time only, regardless of the number of times that the applicable Milestone is achieved, and shall be payable upon the first occurrence of the applicable Milestone.

7.3 Royalty Payment. In consideration of the license and rights granted hereunder, Maruho shall pay to Evommune a royalty in an amount equal to the sum of: (a) the aggregate royalty payment owed by Evommune to Dermira under the Dermira License with respect to all Products in the Field during the applicable period of time, multiplied by the Net Sales Ratio for such period of time; plus (b) [***] of Net Sales of all Products in the Field in the Territory during such period of time (collectively, the “Royalty Payment”). Exhibit C attached hereto sets forth an illustrative example of how to calculate the Royalty Payment.

7.4 Generic Competition; Loss of Exclusivity. On a Product-by-Product basis, if (a) during two consecutive Calendar Quarters for which Royalty Payments are payable hereunder for a particular Product, one or more products (excluding any products manufactured or sold by Maruho or its Related Parties) being sold in a particular country are Generic Products with respect to such Product, for a total market penetration exceeding [***] in the Field in the Territory, or (b) during the Royalty Term, (i) the last to expire Valid Claim claiming or covering such Product or Manufacture or use thereof in the Territory expires and (ii) the Regulatory Exclusivity Period for such Product in the Territory expires, then, in the case of (a) or (b), the royalty rate percentage set forth in Section 7.3(b) above shall, thereafter (for as long as such Generic Products are sold in the Territory or there is no Valid Claim and no Regulatory Exclusivity with respect to such Product in the Field in the Territory), be reduced by [***] (i.e., [***] from [***]), such market defined as

 

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approved pharmaceutical products which comprise a similar or identical active ingredient(s). Thereafter, with respect to such Product, if the Generic Product(s) market penetration falls below [***] during any two consecutive Calendar Quarters, or if any Patent claiming or covering such Product or Manufacture or use thereof is filed by or on behalf of either Party in the Territory, or if Regulatory Exclusivity is granted with respect to such Product in the Territory, then the royalty rate percentage set forth in Section 7.3(b) above shall be reinstated (i.e., to [***] from [***]) and shall apply thereafter. For purposes of this Section 7.4, “market” refers to the aggregate of the unit volume of the Generic Product(s) and the applicable Product in a country.

7.5 Purchase Price. Evommune shall promptly invoice Maruho for the Purchase Price for all quantities of Product for clinical use delivered in accordance with Article 6. All undisputed amounts set forth in such invoices will be due and payable within [***] days of delivery of the invoice.

7.6 Payments.

7.6.1 General. Maruho shall make all payments required by this Article 7 by wire transfer of then immediately available funds into an account designated by Evommune, and shall make such payments by a U.S. entity from a bank account domiciled in the U.S. and in Dollars. Each payment of the Upfront License Fee and each Milestone Payment shall be nonrefundable and noncreditable against any other payments due hereunder.

7.6.2 Royalty Payments and Reports. Maruho shall pay the Royalty Payments on a Calendar Quarter basis, with respect to the aggregate Net Sales for such Calendar Quarter. At the end of each Calendar Quarter, Maruho shall calculate, separately for each Product, the Royalty Payments payable to Evommune pursuant to Section 7.3 for such Calendar Quarter, which amounts shall be converted to Dollars at such time in accordance with Section 7.8. Maruho shall pay to Evommune the Royalty Payment due for each Product for Net Sales during a given Calendar Quarter within [***] days after the end of such Calendar Quarter, provided that Evommune has delivered to Maruho, no later than [***] days following the conclusion of such Calendar Quarter, written notice of Net Sales of all Products in the Field worldwide, less Net Sales of the Products in the Field in the Territory, for such Calendar Quarter, and, provided further, that Maruho’s sole and exclusive remedy in the event that Evommune fails to deliver the foregoing notice within such [***] day period is that the due date for Maruho’s corresponding Royalty Payment and report shall be tolled for each day that such notice is delayed. Each Royalty Payment due to Evommune shall be accompanied by a report that sets forth information reasonably required to calculate the Royalty Payment due hereunder, including, without limitation, (a) a statement of the amount of aggregate gross sales of each Product in the Field in the Territory during the applicable Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars in accordance with Section 7.8), (b) an itemized calculation of Net Sales of each Product in the Field in the Territory during the applicable Calendar Quarter, and (c) information showing the applicable royalty rate percentage applied in accordance with Section 7.3 (subject to Section 7.4, if applicable). Without limiting the generality of the foregoing, Maruho shall require its Related Parties (and any distributors) to account for their respective Net Sales, separately for each Product, and to provide such reports with respect thereto as if such Net Sales were made by Maruho. Notwithstanding any provision to the contrary, and without limiting the foregoing, the Parties shall collaborate in good faith to ensure that Maruho pays Evommune the Royalty Payment prior to the due date for any corresponding payments under the Dermira License and that Evommune has all information reasonably required with respect to the Product(s) in the Territory to satisfy its reporting obligations under the Dermira License.

 

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7.7 Taxes and Withholding.

7.7.1 VAT. The Parties agree to cooperate with one another and use reasonable efforts to ensure that value added tax or similar payment (“VAT”) in respect of any payments made by Maruho to Evommune under this Agreement does not represent an unnecessary cost in respect of payments made under this Agreement. For purposes of clarity, all sums payable under this Agreement shall be made by Maruho exclusive of VAT. In the event that any VAT is owing in any jurisdiction in respect of any such payment, Maruho shall pay such VAT, and (a) if such VAT is owing as a result of any action by Maruho, including any assignment or sublicense (including assignment to, or payment hereunder by, another Maruho-related entity or Affiliate), or any failure on the part of Maruho or its Affiliates to comply with Applicable Laws or filing or record retention requirements, that has the effect of modifying the tax treatment of the Parties hereto, then the payment in respect of which such VAT is owing shall be made without deduction for or on account of such VAT to ensure that Evommune receives a sum equal to the sum which it would have received had such VAT not been due or (b) otherwise, such payment shall be made after deduction of such VAT. In the event that any deducted VAT is later recovered by Maruho or an Affiliate, Maruho shall reimburse Evommune within [***] days for the deducted amount. For the sake of clarity, any increase in payments to Evommune under this Section 7.7.1 shall reflect only the incremental increase in VAT directly resulting from clause (a) above. In the event that any VAT is owed in any jurisdiction in respect of any such payment, Evommune will provide to Maruho tax invoices showing the correct amount of VAT in respect of such payments hereunder.

7.7.2 Withholding Tax Matters. Maruho shall not deduct or withhold any taxes from any amounts payable pursuant to this Agreement unless such deduction or withholding of taxes is required under Applicable Law. If any Applicable Law requires the deduction or withholding of any tax from such payments, then Maruho shall be entitled to make such deduction or withholding, and the sum payable by Maruho shall be increased as necessary so that after such deduction or withholding has been made, Evommune receives an amount equal to the sum it would have received had no such deduction or withholding been made, and, in accordance with Section 7.7.3, Evommune shall timely provide Maruho any documents controlled by Evommune that are reasonably necessary for Maruho to seek tax exemption.

7.7.3 Tax Cooperation. To the extent Maruho is required to deduct and withhold taxes on any payments to Evommune, Maruho shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to Evommune an official tax certificate or other evidence of such withholding sufficient to enable Evommune to claim such payments of taxes. In the event that Maruho is required to deduct and withhold taxes on payments to Evommune, Maruho shall provide Evommune prompt notice and identify any forms controlled by Evommune that are reasonably necessary in order for Maruho not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Evommune shall provide to Maruho any completed tax forms that may be reasonably necessary for Maruho not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Evommune shall use Commercially Reasonable Efforts to provide any such tax forms to Maruho at least [***] days prior to the due date for any payments. If Maruho does not receive all or a part of such completed tax forms from Evommune by [***] Business Days prior to the due date for the applicable payment under this Agreement, Maruho may extend such due date until [***] days after the receipt of such tax forms, provided that, if (i) such extension goes beyond [***] days past the original due date for such applicable payment, and (ii) Evommune’s failure to provide any such tax forms is caused by or otherwise attributable to something outside of Evommune’s reasonable control, then Maruho shall make the outstanding payment to Evommune in accordance with the terms and conditions of this Agreement, and Evommune and Maruho shall work together in good faith to try to resolve the issue. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by Applicable Laws, of withholding taxes, VAT or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or VAT.

 

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7.8 Currency Conversion. All payments hereunder shall be made in Dollars. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than Dollars), any amount expressed in a foreign currency shall be converted into Dollars in a manner consistent with such Party’s normal practices used to prepare its audited financial statements for external reporting purposes, in accordance with GAAP, consistently applied, or by using a reputable source such as the Wall Street Journal or Reuters, at Evommune’s discretion.

7.9 Late Payments. Any amount required to be paid by a Party hereunder which is not paid on the date due shall bear interest at a rate equal to the 30-day U.S. dollar Prime rate effective for the date that payment was first due as reported by The Wall Street Journal [***] to the extent permitted by the Applicable Laws. Such interest shall be computed on the basis of a year of 360 days for the actual number of days payment is delinquent.

7.10 Records.

7.10.1 Maruho and its Related Parties shall keep full, true, and accurate records and books of account in reasonable detail and containing all particulars that may be necessary for the purpose of confirming the accuracy of, and calculating, as applicable, all Royalty Payments and other amounts payable to Evommune hereunder (including records of Net Sales), any records required by Applicable Law or for intellectual property protection purposes with respect to the Compound and Products, and any other records reasonably required to be maintained with respect to Maruho’s obligations under this Agreement, during the Term and for [***] years thereafter or such longer period as required by Applicable Laws. Maruho and its Related Parties shall maintain internal accounting controls sufficient to provide reasonable assurances that all transactions are executed in accordance with management authorization and recorded as necessary to permit the preparation of financial statements that conform to generally accepted accounting principles, that access to assets is permitted only in accordance with management authorization, and that recorded accountability for assets is compared to existing assets regularly and appropriate action is taken for any differences.

7.10.2 Evommune shall keep full, true, and accurate records and books of account in reasonable detail and containing all particulars that may be necessary for the purpose of confirming the accuracy of, and calculating, as applicable, the Purchase Price for all Compound and/or Products supplied in accordance with Article 6, as well as the aggregate royalty payment owed by Evommune to Dermira under the Dermira License during the Royalty Term, during the Term and for [***] years thereafter or such longer period as required by Applicable Laws.

 

 

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7.11 Audits. Each Party shall have a right to request an audit of the other Party in order to confirm the accuracy of the records described in Section 7.10 and to otherwise confirm that such other Party is complying with the terms of this Agreement and Applicable Law (an “Audit”), including with respect to financial matters and supply management matters, solely to the extent permissible under applicable third-party agreements and consistent with any duties or obligations of confidentiality owed to any Third Party; provided, however, that each Party shall only have the right to request such Audit one time during any given Calendar Year, except that Evommune shall have the right to request such Audit more frequently in connection with compliance of Section 10.5 or otherwise upon good reason. Upon the written request by either Party to Audit the other Party, the requesting Party shall have the right to engage an independent, internationally recognized accounting firm reasonably acceptable to the audited Party that has executed a reasonably acceptable nondisclosure agreement with the audited Party to perform a review as is reasonably necessary to enable such accounting firm to calculate or otherwise confirm the accuracy of all amounts payable in accordance with this Article 7 for the Calendar Year(s) requested by the requesting Party; provided that (a) such accountants shall be given access to, and shall be permitted to examine such books and records of the audited Party upon [***] Business Days’ prior written notice to the audited Party, and at all reasonable times on such Business Days, (b) prior to any such examination taking place, such accountants shall enter into a confidentiality agreement with the audited Party reasonably acceptable to the audited Party in order to keep all information and data contained in such books and records strictly confidential and shall not disclose such information or copies of such books and records to any third person including the requesting Party, but shall only use the same for the purpose of the reviews and calculations that they need to perform in order to determine any amounts being reviewed, and (c) such accountants shall use reasonable efforts to minimize any disruption to the audited Party’s business. The audited Party shall make personnel reasonably available during regular business hours to answer queries on all such books and records required for the purpose of the Audit. The accountants shall deliver a copy of their findings to each of the Parties within [***] Business Days of the completion of the review, and, in the absence of fraud or manifest error, the findings of such accountant shall be final and binding on each of the Parties. Any underpayments by Maruho shall be paid to Evommune within [***] Business Days of notification of the results of such inspection. Any overpayments made by Maruho shall be refunded by Evommune within [***] Business Days of notification of the results of such inspection. The cost of the accountants shall be the responsibility of the requesting Party unless the accountants’ calculation shows a discrepancy of greater than [***] with respect to amounts paid/owed, in which case, the audited Party shall reimburse the requested Party for the cost of the Audit. For clarity, Dermira shall also have the right to audit Maruho, mutatis mutandis, in accordance with this Section 7.11, and, additionally, each Party’s rights relating to audits of the other Party with respect to quality assurance matters and pharmacovigilance matters shall be set forth in the Quality Agreement and the PV Agreement, respectively.

 

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ARTICLE 8

INTELLECTUAL PROPERTY MATTERS

8.1 Ownership.

8.1.1 Licensed Technology. As between Evommune and Maruho, Evommune is the sole and exclusive owner of the Licensed Technology. Evommune shall (a) prosecute and maintain the composition of matter patent set forth on Schedule 1.46 in the Field in the Territory during the Term and (b) use Commercially Reasonable Efforts to prosecute and maintain all other Licensed Patents in the Field in the Territory during the Term.

8.1.2 Arising IP.

(a) Maruho shall be the sole and exclusive owner of any Intellectual Property that Maruho develops or generates (in accordance with a determination of inventorship in accordance with U.S. patent law) under this Agreement during the Term (collectively, the “Arising IP”), including, without limitation, (i) all data (including pre-clinical, clinical, technical, chemical, safety, and scientific data and information), Know-How, and other results generated as a result of the Development Activities conducted by Maruho under this Agreement, including relevant laboratory notebook information, screening data, Regulatory Data, and synthesis schemes, including descriptions in any form, data, and other information (collectively, the “Development Data”), (ii) all marketing and sales data and information resulting from Maruho’s Commercialization of the Products in the Field in the Territory during the Term (the “Commercialization Data”), including promotional materials, marketing strategies, and market research data, and (iii) Product Trademarks and Product Trade Dress (but not including, for the avoidance of doubt, the Evommune Trademark). Maruho shall provide Evommune with written notice upon the development and/or generation of any Arising IP in accordance with Section 3.5.1. For clarity, Maruho shall have sole decision-making authority for all actions, at its sole cost and expense, relating to the Arising IP in the Field in the Territory, including Patent prosecution, defense, enforcement, listing in regulatory publications, and Patent Term Extension.

(b) Notwithstanding any provision to the contrary, Maruho hereby grants, and shall grant, to Evommune a perpetual, irrevocable, exclusive, fully-paid up, royalty-free, transferable license, with the right to grant sublicenses (including through multiple tiers), under the Arising IP (including, for the avoidance of doubt, the Development Data and the Commercialization Data) to (i) Commercialize the Compound and/or any Product outside the Territory and/or outside the Field in the Territory, and/or (ii) Develop and/or Manufacture the Compound and/or any Product for the purpose of Commercialization of the Compound and/or such Product outside the Territory and/or outside the Field in the Territory. (For the avoidance of doubt, Maruho acknowledges and agrees that it has no intention, as of the Effective Date and/or in the future, to file and/or prosecute any patent application relating to any Arising IP or to Commercialize any products using the Arising IP outside the Territory or outside the Field in the Territory.) The foregoing license grant shall include a Right of Reference with respect to the Development Data, Commercialization Data, and any other Arising IP and the Product Approval for any Product in the Field in the Territory, for use outside of the Field in the Territory or otherwise outside of the Territory. For the avoidance of doubt, Evommune shall have the sole and exclusive (even as to Maruho and its Affiliates) right (but not obligation) to file, prosecute,

 

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maintain, defend, and enforce Patents, at Evommune’s cost, that claim Arising IP and/or otherwise cover the Products (x) outside the Territory, and/or (y) outside the Field in the Territory. Upon Evommune’s request, Maruho shall reasonably cooperate and provide assistance in connection with any such filing, prosecution, maintenance, defense, and/or enforcement activities by or on behalf of Evommune contemplated by the immediately preceding sentence, at Evommune’s reasonable cost.

8.2 Patent Filing, Prosecution, and Maintenance. Subject to the terms and conditions of this Agreement, as between Evommune and Maruho, Evommune shall have sole decision-making authority for all actions, at its sole cost and expense, relating to the Licensed Patents, including Patent prosecution, defense, enforcement, listing in regulatory publications (such as the FDA Orange Book and any foreign equivalent), and Patent Term Extension. Evommune shall (a) provide Maruho in advance, with written notice and copies of all Licensed Patents in the Territory and other material submissions and correspondence with government agencies concerning such Licensed Patents in the Territory, including that Evommune shall provide Maruho in advance with written notice and copies of proposed new patent applications (including, for clarity, international patent application in international phase, and also including provisionals, re-examinations, continuations, continuations-in-part, extensions, term restorations, renewals, divisionals, reissues, or renewals) in the Territory that would otherwise constitute Licensed Patents subject to the license grant set forth in Section 2.1, (b) provide Maruho and its patent counsel an opportunity to consult with Evommune and its patent counsel regarding the contents of any such Licensed Patents, and the advice and suggestions of Maruho and its patent counsel shall be taken into consideration in good faith by Evommune and its patent counsel, and (c) not settle, without Maruho’s prior written consent (not to be unreasonably withheld, conditioned, or delayed), in a manner that will materially adversely affect any of Maruho’s rights under this Agreement.

8.3 Abandoned Patents. In the event that Evommune elects, in its sole discretion, to discontinue Patent prosecution and/or maintenance of any Licensed Patent in the Territory, on a Patent-by-Patent basis. Evommune shall give prompt notice, of at least [***] days prior to the deadline for the next filing, office action, or payment with the relevant patent office, to Maruho. Maruho will have the option, but not the obligation, to assume control of such Patent prosecution and/or maintenance, at Maruho’s cost (but for no additional consideration) and in Evommune’s (or Dermira’s, as applicable) name, by delivering to Evommune written notice of such election within [***] days (and, for clarity, failure to deliver such notice shall be deemed an election to not assume control). Maruho acknowledges and agrees that if Maruho elects not to maintain such Licensed Patent in the Territory, Dermira shall have the right to maintain such Licensed Patent in accordance with the Dermira License, and, in such case, Maruho shall reimburse Dermira for the reasonable cost of prosecuting and maintaining such Patent. If none of Evommune, Maruho, and/or Dermira elects to maintain such Licensed Patent in the Territory, then, in the event that the Royalty Term for a given Product would have been longer but for the abandonment of such Licensed Patent (including taking into consideration any Patent Term Extension for such Licensed Patent), Maruho shall pay royalties in accordance with Section 7.3. during the Royalty Term and, following the expiration of the Royalty Term and until what would have been the expiration of the abandoned Licensed Patent (plus any Patent Term Extension that would have been otherwise allowable), Maruho shall pay Evommune [***] of the royalty under Section 7.3. If Maruho provides written notice to Evommune within such [***] day period that Maruho has decided to prosecute or maintain such Licensed Patent, Maruho shall promptly deliver to Evommune copies of all filings and communications with the relevant patent office related to such Licensed Patent.

 

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8.4 Notice. Each Party shall promptly, within [***] days of becoming aware, provide written notice to the other Party reasonably detailing any known or alleged infringement of any Licensed Patent in the Territory (an “Infringement Notice”).

8.5 Enforcement of Intellectual Property Rights.

8.5.1 As between the Parties, Evommune shall have the first right (but not obligation), at its cost, to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating any Licensed Patent covering the Compound or any Product in the Field in the Territory, and to defend the Licensed Patents in the Territory from any claim of invalidity or unenforceability in connection therewith (collectively, to “Enforce the Licensed Patents”). Evommune shall keep Maruho reasonably informed with respect to any such proceedings (such proceedings, “Enforcement Proceedings”). Notwithstanding any provision to the contrary and for the avoidance of doubt, neither Evommune nor Dermira shall incur any liability to Maruho as a consequence of such Enforcement Proceeding or any unfavorable decision resulting therefrom, including any decision holding any such claim invalid, not infringed, or unenforceable. All amounts recovered from an Enforcement Proceeding contemplated by this Section 8.5.1 shall be first used to reimburse each Party’s (and, if applicable, Dermira’s) reasonable out-of-pocket costs and expenses incurred in connection with such action, then paid to Dermira in accordance with its right to such proceeds under Section 8.5 of the Dermira License, and any remainder shall be allocated as follows: [***] to Evommune and [***] to Maruho. For the avoidance of doubt, Evommune reserves on behalf of Dermira all of Dermira’s rights to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating Dermira’s Know-How, Patents, and confidential information (including to the extent included in the Licensed Technology).

8.5.2 Subject to the provisions of Section 8.5.3, in the event that Evommune fails to take any action to Enforce the Licensed Patents within [***] days of delivery of Infringement Notice, then Maruho shall have the right (but not obligation) to Enforce the Licensed Patents; provided, however, that, in the event that Maruho desires to Enforce the Licensed Patents, Maruho shall only proceed with such Enforcement Proceedings if (a) it has a bona fide and documented interest in maintaining the patent claims in the applicable Licensed Patents, (b) it has a reasonable chance of success on the merits in the view of outside patent counsel as shared with Evommune, and (c) it proceeds with such Enforcement Proceeding using Commercially Reasonable Efforts. Maruho shall keep Evommune reasonably informed with respect to any such Enforcement Proceedings. All amounts recovered from an Enforcement Proceeding contemplated by this Section 8.5.2 shall be first used to reimburse each Party’s (and, if applicable, Dermira’s) reasonable out-of-pocket costs and expenses incurred in connection with such action, then paid to Dermira in accordance with its right to such proceeds under Section 8.5 of the Dermira License, and any remainder shall be allocated as follows: [***] to Maruho and [***] to Evommune.

 

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8.5.3 Notwithstanding any provision to the contrary, Maruho acknowledges and agrees that, in the event that neither Evommune nor Maruho takes any action to Enforce the Licensed Patents within [***] days after delivery of an Infringement Notice, Dermira shall have the right to Enforce the Licensed Patents in accordance with Section 8.5 of the Dermira License. All amounts recovered from Dermira’s activities contemplated by this Section 8.5.3 and paid to Evommune in accordance with the terms of the Dermira License shall be first used to reimburse each Party’s reasonable out-of-pocket costs and expenses incurred in connection with such action, and any remainder shall be allocated as follows: [***] to Evommune and [***] to Maruho.

8.6 Cooperation in Enforcement Proceedings. For any action by Evommune pursuant to Section 8.5.1 or Dermira pursuant to Section 8.5.3, in the event that Evommune or Dermira is unable to initiate or prosecute such action solely in its own name, Maruho or its Affiliates, as applicable, will join such action voluntarily and will execute all documents necessary for Evommune or Dermira to initiate, prosecute, and maintain such action, at Evommune’s reasonable cost (which is to be deducted from the amounts recovered from such proceeding, and the rest shall be reimbursed to Maruho, if applicable). If Evommune or Dermira initiates an enforcement action pursuant to Section 8.5, then, at Evommune’s or Dermira’s request, Maruho shall cooperate to the extent reasonably necessary and at Evommune’s sole expense for reasonable, out-of-pocket costs (except for the expenses of Maruho’s counsel, if any). Upon the reasonable request of Evommune or Dermira, Maruho shall join the suit and can be represented in any such legal proceedings using counsel of its own choice at its own expense. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to any such action.

8.7 Defense. Each Party shall notify the other in writing of any allegations it receives from a Third Party that the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of any Products in the Territory, or any technology or Intellectual Property licensed under this Agreement, infringes the Intellectual Property of such Third Party. Such notice shall be provided promptly, but in no event after more than [***] Business Days, following receipt of such allegations.

In the event that a Party receives notice that it or any of its Affiliates or Sublicensees have been individually named as a defendant in a legal proceeding by a Third Party alleging infringement of a Third Party’s Patents or other Intellectual Property as a result of the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in the Territory, or any technology or Intellectual Property licensed under this Agreement, such Party shall promptly notify the other Party in writing, but in no event more than [***] Business Days after the receipt of such notice. Such written notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to such legal proceeding. In such event, the Parties shall use reasonable efforts to agree how best to mitigate or control the defense of any such legal proceeding; provided, however, that, as between the Parties, Evommune shall have the right to assume the primary responsibility for the conduct of the defense of any such claim at its expense. Maruho shall have the right, but not the obligation, to participate and be separately represented in any such suit at its sole option and at its own expense. Maruho shall reasonably cooperate with and assist Evommune. If Maruho or any of its Affiliates or Sublicensees have been individually named as a defendant in a legal proceeding relating to the alleged infringement of a Third Party’s Patents or other Intellectual Property as a result of the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in the Territory, Evommune shall be allowed to join in such action, at its own expense, and agrees to be joined (at Maruho’s expense) if Maruho reasonably believes that it is necessary to pursue a counterclaim or similar action.

 

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The Parties shall keep each other informed of the status of and of their respective activities regarding any infringement litigation initiated by a Third Party concerning the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in the Field in the Territory or settlement thereof; provided, however, that neither Party shall settle or enter into any consent judgment or other voluntary final disposition of a suit under this Section 8.7 without the consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed, in a manner that will materially adversely affect either Party’s rights under this Agreement.

8.8 Employees. To the extent allowed by Applicable Laws, each Party will require and cause all of its (and will cause each of its Affiliates performing on behalf of such Party under this Agreement to require and cause all of such Affiliate’s) employees to assign all Inventions that are developed, made, or conceived by such employees during the period of such employees’ employment with such Party (or the applicable Affiliate) to such Party (or the Affiliate performing on behalf of such Party under this Agreement) free and clear of all liens, encumbrances, charges, security interests, mortgages, or other similar restrictions, in order to enable the Parties to give effect to the provisions of Section 8.1. Each Party will also require and use Commercially Reasonable Efforts to cause any agents or independent contractors performing an activity pursuant to this Agreement to assign all Inventions that are developed, made, or conceived by such agents or independent contractors on behalf of such Party during the period of such agents or independent contractors’ relationship with such Party to such Party free and clear of all liens, encumbrances, charges, security interests, mortgages, or other similar restrictions, in order to enable the Parties to give effect to the provisions of Section 8.1.

8.9 Patent Marking. Maruho shall mark the Products marketed and sold by Maruho (or its Related Parties) hereunder with appropriate patent numbers or indicia.

8.10 Patent Challenge. To the fullest extent permissible under Applicable Law, each Party shall have the right to terminate this Agreement immediately upon written notice to the other Party if such other Party, directly or indirectly, (a) initiates or requests an interference or opposition proceeding with respect to, (b) makes, files, or maintains any claim, demand, lawsuit, or cause of action to challenge the validity or enforceability of, or (c) opposes any extension of, or the grant of a supplementary protection certificate with respect to, any Licensed Patent (if Evommune is the terminating Party) or Arising IP (if Maruho is the terminating Party). If any of the foregoing activities, as applicable, are commenced by a Related Party of such other Party, then each Party will also have the right to terminate this Agreement upon written notice to such other Party, effective [***] days after delivery, unless such other Party either terminates the rights of such Related Party with respect to this Agreement or causes such Related Party to, and such Related Party actually does, withdraw any such proceeding, claim, demand, lawsuit, cause of action, or opposition, in each case, within [***] days after delivery of such notice.

 

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ARTICLE 9

JOINT STEERING COMMITTEE; GLOBAL DEVELOPMENT &

COMMERCIALIZATION EFFORTS

9.1 JSC Formation. Promptly following the Effective Date, the Parties shall establish a joint steering committee (the “JSC”) consisting of up to three (3) representatives designated by each Party, with appropriate knowledge and expertise. The JSC shall operate in accordance with the provisions of this Article 9, and shall have no authority to alter or amend the terms and conditions of this Agreement. A Party may change one (1) or more of its representatives serving on the JSC at any time upon written notice to the other Party. Each Party may invite additional personnel of such Party to any regular or special JSC meeting; provided, however, any such additional invitee shall (a) not be deemed a member of the JSC; and (b) with respect to any Confidential Information of either Party such additional invitee learns, obtains, or otherwise has access to as a result of such invitation, be subject to confidentiality obligations and restrictions on use no less stringent than those set forth in Article 12, which such confidentiality obligations and restrictions on use shall be valid and enforceable by the Party whose Confidential Information is involved.

9.2 JSC Responsibilities. The JSC shall serve as a forum for the Parties to share information regarding the Development, Manufacture, and Commercialization of the Compound and/or Products in the Field in the Territory and to facilitate coordination between the Parties, but shall not have any decision-making authority with respect to the Parties’ activities under this Agreement. Additionally, Evommune shall share information relating to the Development and Commercialization of the Product outside of the Territory to the extent necessary or useful for Maruho to Develop, Manufacture, and/or Commercialization the Compound and any Product in the Field in the Territory.

9.3 JSC Meetings. The JSC shall meet at such times and frequency mutually agreed by the Parties at locations mutually agreed by the Parties. As of the Effective Date, the Parties intend to meet, at a minimum, once each Calendar Quarterly until the launch of the first Product in the Territory, and thereafter, once a Calendar Year during the Term. The JSC meetings may be held by audio or video teleconference at the request of either Party. Each Party shall bear its own costs associated with the attendance of its appointees at such meetings. A secretary shall be appointed for each meeting of the JSC and shall prepare draft minutes of the meeting promptly following the meeting and shall circulate such draft minutes for comment and finalization by the Parties.

9.4 Evommune’s Global Development and Commercialization Efforts. Upon Evommune’s request, Maruho will reasonably participate, from time to time, in telephonic, video, and/or in-person meetings in connection with the operation of Evommune’s global development and commercialization program with respect to the Compound and the Products.

ARTICLE 10

REPRESENTATIONS, WARRANTIES, AND COVENANTS

10.1 Mutual Representations, Warranties, and Covenants. Each Party hereby represents, warrants, and covenants to the other Party as follows, as of the Effective Date:

 

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10.1.1 Corporate Existence and Power. It is a company or corporation duly organized, validly existing, and in good standing (or its local law equivalent, to the extent applicable in the Territory) under the laws of the jurisdiction in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement, including the right to grant the licenses granted by it hereunder.

10.1.2 Authority and Binding Agreement. (a) It has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, (b) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder, and (c) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms, except as enforcement may be affected by bankruptcy, insolvency, or other similar laws and by general principles of equity.

10.1.3 No Conflicts. The execution, delivery, and performance of this Agreement by it does not (a) conflict with any agreement, instrument, or understanding, oral or written, to which it is a party and by which it or its assets may be bound, or (b) violate any Applicable Laws.

10.1.4 All Consents and Approvals Obtained. Except with respect to Regulatory Approvals for the Development, Manufacturing, or Commercialization of the Products or as otherwise described in this Agreement, (a) all necessary consents, approvals, and authorizations of, and (b) all notices to, and filings by such Party with, all Governmental Authorities and other Persons required to be obtained or provided by such Party as of the Effective Date in connection with the execution, delivery, and performance of this Agreement have been obtained and provided, except for those approvals, if any, not required at the time of execution of this Agreement.

10.1.5 Compliance with Applicable Laws. During the Term, each Party shall comply with Applicable Laws in connection with the performance of the activities contemplated by this Agreement.

10.2 Additional Representations and Warranties of Evommune. Evommune hereby represents, warrants, and covenants to Maruho that:

10.2.1 As of the Effective Date, without limiting the generality of Section 10.1.1, Evommune has the right to grant the license set forth herein; provided, however, this Section 10.2.1 shall not be construed or deemed to be a representation or warranty regarding the infringement or other violation of the Intellectual Property of any Third Party.

10.2.2 As of the Effective Date, Evommune has not previously entered into any agreement pursuant to which it granted a license with respect to the Compound or any Product in the Field in the Territory, or under the Licensed Technology in the Field in the Territory, to any Third Party, which license grant remains in effect or which agreement has surviving license rights, or other surviving terms, that are inconsistent with the rights and licenses granted to Maruho under this Agreement.

 

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10.2.3 As of the Effective Date, to the knowledge of Evommune: (a) no Third Party is infringing any Licensed Patents or has misappropriated any Evommune Know-How, (b) no Third Party has challenged the scope, duration, validity, enforceability, priority, or Evommune’s right to use or license any Licensed Technology with respect to the Compound or any Product in the Field in the Territory, and (c) use of the Licensed Technology as contemplated by this Agreement, in accordance with the terms of this Agreement, does not infringe or violate the Intellectual Property of any Third Party.

10.2.4 As of the Effective Date: Evommune has provided to Maruho, prior to the Effective Date, a complete and accurate copy of the Dermira License, and the Dermira License is in full force and effect, and, to the knowledge of Evommune, neither party thereto is in material breach of the Dermira License as of the Effective Date.

10.2.5 As set forth in Section 6.6, at the time of delivery of any Product in accordance with Article 6, such Product shall conform to the Clinical Supply Warranties.

10.3 Additional Representations, Warranties, and Covenants of Maruho. Maruho hereby represents, warrants, and covenants to Evommune that, as of the Effective Date and throughout the Term:

10.3.1 Without limiting the generality of Section 10.1.5: (a) Maruho’s compensation programs for its Sales Representatives will not provide financial incentives for the promotion, sales, and marketing of the Products in violation of any Applicable Laws or any professional requirements, and (b) all Products Commercialized or Manufactured by, or under authority of, Maruho in the Territory shall be packaged, labeled, handled, stored, and shipped by Maruho in compliance with all Applicable Laws, including GMPs.

10.3.2 Maruho’s medical, regulatory, and legal teams will be properly qualified to review, and will review, all Training Materials and programs prior to use by Maruho to ensure that all Training Materials and programs are in accordance with the Regulatory Approvals and Applicable Laws.

10.4 Financial Representations, Warranties, and Covenants of Maruho.

10.4.1 Financial Status. Maruho hereby represents, warrants, and covenants to Evommune that, as of the Effective Date and throughout the Term, Maruho has and shall have the financial wherewithal to perform its obligations under this Agreement. Maruho shall promptly notify Evommune of any material adverse change to said financial wherewithal that is adversely impacting, or will adversely impact, Maruho’s ability to perform, or to continue to perform, such obligations. Any such notice will include a description of Maruho’s short- and long-term plans to remediate its current financial situation and to mitigate any impact on the performance of its obligations hereunder. Maruho shall provide Evommune regular updates regarding such remediation plans.

10.4.2 Financial Statements.

(a) As soon as available, but in any event no later than the time of delivery to Maruho’s third-party investors, Maruho shall provide to Evommune a copy of its income statement for such fiscal year, its balance sheet as of the end of such year, and its statement of cash flows for such fiscal year of Maruho and its Affiliates, in each case in the same form provided to Maruho’s third-party investors.

 

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(b) As soon as available, but in any event within [***] days after the end of each of the first three (3) fiscal quarters of its fiscal year, Maruho shall provide to Evommune a copy of the unaudited consolidated balance sheet of Maruho and its Affiliates as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter.

(c) All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or Chief Financial Officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

10.5 Compliance Representations, Warranties, and Covenants by each Party. Without limiting the generality of Section 10.1.5:

10.5.1 Compliance with Laws. In connection with this Agreement, each Party has complied and will comply with all Applicable Laws and industry codes, including those dealing with government procurement, conflicts of interest, corruption or bribery, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, any anticorruption or anti-bribery laws in jurisdictions where it operates, and any laws enacted to implement the Organisation of Economic Cooperation and Development Convention on Combating Bribery of Foreign Officials in International Business Transactions (collectively, “Anti-Corruption Laws”), and all Applicable Laws related to sanctions and trade controls, including but not limited to any sanctions or export control laws administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, U.S. Department of State, U.S. Department of Commerce, the United Nations Security Council, or other relevant sanctions authority (collectively, “Trade Laws”), and has implemented and will maintain policies and procedures reasonably designed to ensure compliance with Anti-Corruption Laws and Trade Laws.

10.5.2 Prohibited Conduct. In connection with this Agreement, neither Party has made, offered, given, promised to give, or authorized, and neither Party will make, offer, give, promise to give, or authorize, any bribe, kickback, payment, or transfer of anything of value, directly or indirectly, to any person or to any Government Official for the purpose of (a) improperly influencing any act or decision of the person or Government Official, (b) inducing the person or Government Official to do or omit to do an act in violation of a lawful or otherwise required duty, (c) securing any improper advantage, or (d) inducing the person or Government Official to improperly influence the act or decision of any organization, including any government or government instrumentality, to assist Maruho or Evommune in obtaining or retaining business.

10.5.3 Compliance with Privacy Laws. In connection with and to the extent applicable under this Agreement, each Party and any Person acting for or on its behalf, will comply with all Applicable Laws with respect to the receipt, collection, compilation, use, storage, processing, sharing, safeguarding, security (technical, physical, and administrative), disposal, destruction, disclosure, or transfer (including cross-border) of Personal Information, including providing any notice, obtaining any consent, or prior authorization, and conducting any assessment required under Applicable Laws.

 

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10.5.4 Requests for Information; Audits. Each Party will use Commercially Reasonable Efforts to comply with requests for disclosure of information, including answering questionnaires and audit inquiries, to enable the other Party to ensure compliance with all Applicable Laws, including Anti-Corruption Laws, Trade Laws, and this Agreement, and will comply with the terms of Section 7.11 with regard to any audit requested under that provision that relates to compliance with this Section 10.5.

10.5.5 Notice of Inspections. Each Party shall provide the other Party with immediate notice of any governmental or regulatory review, audit, or inspection of its facility, processes, or products that might relate to the subject matter of this Agreement. It shall provide the other Party with the results of any such review, audit, or inspection.

10.5.6 Cooperation in Investigation. Each Party agrees to cooperate in good faith to investigate the extent of any potential violations of Applicable Law, including Anti-Corruption Laws and Trade Laws, in connection with this Agreement, in case that it is reasonably suspected hereof.

10.5.7 Disclosure Rights. At any time, and without notice to the other Party, each Party may disclose information relating to a possible violation of Applicable Law, or the existence of the terms of this Agreement, including the compensation provisions, to a government agency and to anyone that it determines to have a legitimate need to know.

10.6 Additional Compliance Covenants.

10.6.1 Compliance with Party Specific Regulations. Each Party agrees to reasonably cooperate with the other Party, at such other Party’s expense, as may be reasonably be required to ensure that such other Party is able to fully meet its obligations with respect to the Party-Specific Regulations applicable to such other Party. Neither Party shall be obligated to pursue any course of conduct that would result in such Party being in material breach of any Party-Specific Regulation applicable to it or any other Applicable Law. All Party-Specific Regulations are binding only in accordance with their terms and only upon the Party to which they relate.

10.6.2 Compliance with Internal Compliance Codes. All Internal Compliance Codes shall apply only to the Party to which they relate. The Parties agree to cooperate with each other to ensure that each Party is able to comply with the substance of its respective Internal Compliance Codes and, to the extent practicable, to operate in a manner consistent with its usual compliance-related processes.

10.7 Disclaimer. Maruho understands that the Compound and the Products are the subject of ongoing non-clinical research and development and that Evommune cannot ensure the safety or usefulness of the Compound and/or the Products or that the Compound and/or the Products will receive Regulatory Approvals. In addition, Evommune makes no warranties except as set forth in this Article 10 concerning the Licensed Technology.

 

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10.8 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD-PARTY INTELLECTUAL PROPERTY, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

ARTICLE 11

INDEMNIFICATION

11.1 Indemnification by Evommune. Evommune hereby agrees to save, indemnify, defend, and hold Maruho, its Affiliates, and their respective directors, officers, agents, and employees harmless from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) arising in connection with any and all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, or injunctions by a Third Party (each, a “Claim”) to the extent resulting or otherwise arising from (a) any breach by Evommune of any of its representations, warranties, covenants, or obligations pursuant to this Agreement or (b) the negligence or willful misconduct by Evommune or its Affiliates, sublicensees, or subcontractors or their respective officers, directors, employees, agents, or consultants in performing any obligations under this Agreement, in each case except to the extent that such Losses are subject to indemnification by Maruho pursuant to Section 11.2; provided, however, the foregoing is subject to the limitation of liability set forth in Section 6.7.4 with respect to matters covered in Section 6.7.4.

11.2 Indemnification by Maruho. Maruho hereby agrees to save, indemnify, defend, and hold Evommune, its Affiliates, and their respective directors, agents, and employees harmless from and against any and all Losses arising in connection with any and all Claims to the extent resulting or otherwise arising from (a) any breach by Maruho of any of its representations, warranties, covenants, or obligations pursuant to this Agreement or any agreement between the Parties related to this Agreement, (b) the negligence or willful misconduct by Maruho (or its Affiliates, Sublicensees, or subcontractors) or their respective officers, directors, employees, agents, or consultants in performing any obligations under this Agreement, or (c) any matter, or acts or omissions, related to the Development, Manufacturing, Packaging and Labeling, or Commercialization of the Compound and/or the Products in the Field in the Territory (including, for clarity, any product liability Losses resulting therefrom) by or on behalf of Maruho (or its Affiliates, Sublicensees, or subcontractors) or their respective officers, directors, employees, agents, or consultants, in each case except to the extent that such Losses are subject to indemnification by Evommune pursuant to Section 11.1.

 

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11.3 Indemnification Procedures.

11.3.1 A Party believing that it is entitled to indemnification under, as applicable, Section 11.1 or Section 11.2 (an “Indemnified Party”) shall give prompt written notification to the other Party (the “Indemnifying Party”) of the commencement of any Claim for which indemnification may be sought or, if earlier, upon the assertion of any such Claim by a Third Party (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a Claim as provided in this Section 11.3.1 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually materially prejudiced as a result of such failure to give notice). Within [***] days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Claim with counsel reasonably satisfactory to the Indemnified Party. If a Party believes that a Claim presented to it for indemnification is one as to which the Party seeking indemnification is not entitled to indemnification under Section 11.1 or Section 11.2, as applicable, it shall so notify the Party seeking indemnification.

11.3.2 If the Indemnifying Party elects to assume the defense of such Claim, the Indemnified Party may participate in such defense at its own expense; provided, that if the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such Claim, the Indemnified Party shall have the right, at its own expense, to appoint its own counsel solely in connection with the defense of such Claim.

11.3.3 The Indemnifying Party shall keep the Indemnified Party advised of the status of such Claim and the defense thereof and shall consider recommendations made by the Indemnified Party with respect thereto.

11.3.4 The Indemnified Party shall not agree to any settlement of such Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld. The Indemnifying Party shall not agree to any settlement of such Claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto or that imposes any liability or obligation on the Indemnified Party or adversely affects the Indemnified Party without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld.

11.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT, WHETHER OR NOT FORESEEABLE AND REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT, AND THIS SECTION 11.4 SHALL NOT APPLY TO: (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTIONS 11.1 OR 11.2, (B) A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 12, (C) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY OR ITS RELATED PARTIES, (D) MARUHO’S OBLIGATIONS TO PAY ANY AMOUNTS REQUIRED TO BE PAID UNDER ARTICLE 7, OR (E) [***].

 

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11.5 Insurance.

11.5.1 Maruho shall procure and maintain insurance or self-insurance, including clinical trials insurance and product liability insurance, adequate to cover its obligations hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which the Products are being clinically tested in human subjects or commercially distributed or sold by Maruho pursuant to this Agreement, and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Product in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate, and product liability insurance coverage shall, after such First Commercial Sale in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate. It is understood that such insurance shall not be construed to create a limit of Maruho’s liability with respect to its indemnification obligations under this Article 11. Maruho shall provide Evommune with written evidence of such insurance or self-insurance prior to commencement of this Agreement and upon expiration of any one coverage. Maruho shall provide Evommune with written notice at least [***] days prior to the cancellation, nonrenewal, or material change in such insurance or self-insurance that materially adversely affects the rights of Evommune hereunder.

11.5.2 Evommune shall procure and maintain insurance, including clinical trials insurance, adequate to cover its obligations hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which the Products are being clinically tested in human subjects pursuant to this Agreement (but not, for clarity, during the time period when Maruho is solely Commercializing the Products in the Territory), and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Product in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate. It is understood that (a) such insurance shall not be construed to create a limit of Evommune’s liability with respect to its indemnification obligations under this Article 11, and (b) the amount and scope of coverage of such insurance shall not be affected by the provisions of Section 6.7.4. Evommune shall provide Maruho with written evidence of such insurance prior to commencement of this Agreement and upon expiration of any one coverage. Evommune shall provide Maruho with written notice at least [***] days prior to the cancellation, nonrenewal, or material change in such insurance that materially adversely affects the rights of Maruho hereunder.

ARTICLE 12

CONFIDENTIALITY

12.1 Confidential Information.

12.1.1 The Parties agree that during the Term, and for a period of [***] years thereafter, a Party receiving Confidential Information of the other Party will (a) maintain in confidence such Confidential Information to the same extent such Party maintains its own proprietary information of similar kind and value (but, for clarity, using no less than Commercially Reasonable Efforts), (b) not disclose such Confidential Information to any Third Party without the prior written consent of the other Party, except as otherwise expressly permitted below, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement. As used herein, “Confidential Information” means all Know-How and other information and materials disclosed by or on behalf of either Party to the other Party or its Affiliates, or otherwise developed or generated, pursuant to this Agreement and/or in connection with the Development, Manufacture, and/or Commercialization of the Compound and/or the Products in the Field in the Territory. The foregoing obligations and the other obligations set forth in this Section 12.1 shall not apply with respect to any portion of such Confidential Information which, as demonstrated by competent and contemporaneous written evidence:

 

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(a) is publicly disclosed by the disclosing Party, either before or after it becomes known to the receiving Party;

(b) was known to the receiving Party or any or its Affiliates, without any obligation to keep it confidential, prior to when it was received from the disclosing Party;

(c) is subsequently disclosed to the receiving Party or any of its Affiliates by a Third Party that is lawfully in possession thereof without obligation to keep it confidential;

(d) has been published by a Third Party or otherwise enters the public domain through no fault of the receiving Party or any of its Affiliates in breach of this Agreement; or

(e) has been independently developed or acquired by the receiving Party or any of its Affiliates without the aid, application, or use of the disclosing Party’s Confidential Information.

12.1.2 The receiving Party shall have the right to disclose any Confidential Information provided by the other Party hereunder if such disclosure is necessary to comply with the terms and conditions of this Agreement, or the requirements of any Applicable Law, but only to the extent of such necessity or requirements, and no such disclosure shall cause any such information to cease to be Confidential Information hereunder, except to the extent such disclosure results in a public disclosure of such information. Where reasonably possible, the receiving Party shall notify the disclosing Party of the receiving Party’s intent to make such disclosure of Confidential Information pursuant to the preceding sentence sufficiently prior to making such disclosure so as to allow the disclosing Party adequate time to take whatever action the disclosing Party may deem to be appropriate to protect the confidentiality of the Confidential Information and, upon the disclosing Party’s request, the receiving Party shall reasonably cooperate with respect to such efforts.

12.1.3 Except as set forth above, each Party agrees that it shall provide or permit access to Confidential Information of the other Party only to (a) the receiving Party’s attorneys, independent accountants, and financial advisors for the sole purpose of enabling such attorneys, independent accountants, and financial advisors to provide advice to the receiving Party, (b) the receiving Party’s Affiliates, directors, officers, employees, consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors, and to the directors, officers, employees, consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors of such Affiliates, who have a need to know such Confidential Information to assist the receiving Party with the research, Development, Manufacturing, or Commercialization activities contemplated or required of it by this Agreement; provided that in each case the Person to whom Confidential Information is being disclosed is subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Section 12.1, (c) potential investors and acquirers in connection with bona fide financing or acquisition due diligence, and (d) with respect to Evommune: Dermira, Lilly, and any other Dermira Affiliates, to the extent reasonably required under the Dermira License; and provided, further, that each Party shall remain responsible for any failure by its attorneys, independent accountants, and financial advisors, Affiliates, and its and its Affiliates’ respective directors, officers, employees, consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors, and any other parties to whom such Confidential Information is disclosed, to treat such Confidential Information as required under this Section 12.1.

 

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For clarity, either Party may disclose without any limitation such Party’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions relating to such Party that are based on or derived from this Agreement, including a complete copy of this Agreement and any amendments thereto.

12.1.4 Each Party acknowledges that a Party in breach of any of its obligations under this Section 12.1 may cause the non-breaching Party irreparable harm, for which monetary damages may be an inadequate remedy. Therefore, notwithstanding anything to the contrary in this Agreement in the event of any such breach, the non-breaching Party shall be entitled, in addition to any other remedy available to it under this Agreement, at law or in equity, to seek injunctive relief, including an accounting for profits, specific performance of the terms hereof and other equitable relief for such breach, without the posting of bond or other security.

12.2 Publicity. Except as required by Applicable Laws (including disclosure requirements of the SEC or any stock exchange on which securities issued by a Party are traded), neither Party shall make any other public announcement concerning this Agreement nor the subject matter hereof, without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed. If either Party intends to make a public announcement relating to the subject matter of this Agreement (except scientific publication), it shall furnish to the other Party the draft text to be announced at least [***] Business Days prior to the proposed date of such announcement (or as otherwise agreed by the Parties), and the Parties shall subsequently discuss and review the draft in good faith during such [***] Business Day period (or such other time period agreed by the Parties), with the goal of reaching a resolution in a timely manner so as not to delay the proposed announcement. Notwithstanding the foregoing and any provision to the contrary, no such consent shall be required by Evommune or Maruho with respect to (a) the publication of materials or information that have been previously disclosed, so long as the content of such publication remains accurate at the time of disclosure, or (b) any disclosure which is required by Applicable Law or the rules of the U.S. Securities and Exchange Commission or any securities exchange. In addition, either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party, and those terms of the Agreement, in each case, to the extent that such information has already been publicly disclosed in accordance herewith.

 

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12.3 Securities Filings. In the event Maruho proposes to file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law, a registration statement or any other disclosure document which describes or refers to this Agreement, Maruho shall notify Evommune of such intention and shall provide Evommune with a copy of relevant portions of the proposed filing not less than [***] Business Days prior to such filing (and any revisions to such portions of the proposed filing a reasonable time prior to the filing thereof), and shall use reasonable efforts to obtain confidential treatment of any information that Evommune requests be kept confidential. For clarity, Evommune or any parent of Evommune may, at its discretion, file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law, a registration statement or any other disclosure document which describes or refers to this Agreement.

12.4 Publications; Conferences. With respect to the Product/Compound, Maruho shall not submit or make a publication and/or a presentation, submit or display a poster, have a table, or conduct any similar activity in an international conference, in each case, without Evommune’s prior written consent (not to be unreasonably withheld). Without limiting the generality of the foregoing, if Maruho, its Affiliates, or their respective employee(s) or consultant(s) wishes to make a publication related to the Compound, any Product, or any matter that otherwise may reasonably contain Licensed Know-How or other Confidential Information of Evommune, Maruho shall deliver to Evommune a copy of the proposed written publication or an outline of an oral disclosure at least [***] days prior to submission for publication or presentation, and Evommune shall approve, reject, or otherwise provide comments with respect to such proposed publication or outline during such [***] day period. Upon Evommune’s request, Maruho shall remove any of Evommune’s Confidential Information, and Maruho shall delay publication and/or presentation in order to allow Evommune to file for intellectual property protection under Applicable Law.

12.5 Use of Names. Except as otherwise set forth in this Agreement, neither Party shall use the name of the other Party in relation to this transaction in any public announcement, press release, or other public document, without the written consent of such other Party; provided, however, that subject to Section 12.3, either Party may use the name of the other Party in any document filed with any Regulatory Authority or Governmental Authority, including the Securities and Exchange Commission, to the extent required under Applicable Law.

12.6 Unauthorized Disclosure of Confidential Information. Each Party shall have a response plan in place for any disclosure of Confidential Information that is not authorized or otherwise permitted under this Agreement. Such plan shall include considerations of, among other things, notification, remediation, and retrieval. In the event that a Party becomes aware of an unauthorized disclosure of Confidential Information, then such Party shall notify the other Party promptly in writing.

12.7 Survival. The obligations and prohibitions contained in this Article 12 as they apply to Confidential Information shall survive the expiration or termination of this Agreement for a period of [***] years.

 

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ARTICLE 13

TERM AND TERMINATION

13.1 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 13, shall remain in effect until the expiration of the Royalty Term(s) for all Products in the Territory (or longer, to the extent that any payment obligations under Section 8.3 are ongoing) (the “Term”). Upon the expiration of this Agreement, the license grant set forth in Section 2.1 shall become perpetual, fully paid up, and non-exclusive in the Field in the Territory.

13.2 Termination for Material Breach. Either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice to the other Party in the event that the other Party (the “Breaching Party”) materially breached or defaulted in the performance of any of its obligations (including a failure to perform). The Breaching Party shall have [***] days after written notice thereof was provided to the Breaching Party by the non-breaching Party to cure or remedy such breach or default. Unless the Breaching Party has cured or remedied any such breach or default prior to the expiration of such [***]-day period, such termination shall become effective immediately upon the Breaching Party’s receipt of the written notice of termination following the expiration of such [***]-day period.

13.3 Termination for Non-Payment. Notwithstanding the provisions of Section 13.2 (and without limiting the generality thereof), Evommune may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice to Maruho in the event that Maruho fails to pay in full, when due, any undisputed amount required to be paid under Article 7 or fails to provide, when due, the information required to be provided under Section 7.6. Maruho shall have [***] days after written notice thereof was provided to it by Evommune to pay such amount in full (or, if applicable, provide such information). Unless Maruho has paid such amount in full (or, if applicable provided such information) prior to the expiration of such [***]-day period, such termination shall become effective upon Maruho’s receipt of the written notice of termination to be given following the end of such [***]-day period.

13.4 Termination as a Result of Bankruptcy. Each Party shall have the right to terminate this Agreement upon written notice as a result of the filing or institution of bankruptcy, reorganization, liquidation, or receivership proceedings, or upon an assignment of a substantial portion of its assets for the benefit of creditors by the other Party; provided that such termination shall be effective only if such proceeding is not dismissed within [***] days after the filing thereof.

13.5 Termination for Safety, Efficacy, and/or Technical Reasons, or Financial Infeasibility. Maruho may terminate this Agreement upon [***] days’ prior written notice in the event that (a) it identifies, in its reasonable discretion, safety, efficacy, and/or technical concerns regarding the Compound and/or any Product in the Field in the Territory, or (b) Maruho determines, in its reasonable discretion, that it is financially infeasible for Maruho to continue to perform its obligations under this Agreement (e.g., in the case of significantly exceeding the expected budget).

13.6 Termination for Convenience. Maruho may terminate this Agreement for convenience at any time upon [***] days’ prior written notice.

 

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13.7 Termination for Compliance Breach. Notwithstanding the provisions of Section 13.2 (and without limiting the generality thereof), each Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice in the event of a breach by the other Party of any of the compliance representations, warranties, and covenants set forth in Section 10.5, as follows: (a) immediately upon delivery of notice of termination in the event that such breach (i) presents an imminent threat to health or safety, (ii) is based on a failure to comply with Anti-Corruption Laws and/or Trade Laws, or (iii) is a breach of Section 10.5.2, or, otherwise, (b) immediately if the Breaching Party fails to cure or remedy such breach of default within [***] days after delivery of written notice thereof to such Breaching Party.

13.8 Other Rights of Termination

13.8.1 Evommune may terminate this Agreement pursuant to Sections 3.6, 4.7, 5.2.2, and 8.10.

13.8.2 Maruho may terminate this Agreement pursuant to Sections 3.4.1 and 8.10.

13.8.3 This Agreement automatically terminates in accordance with Section 2.7.6.

ARTICLE 14

EFFECTS OF EXPIRATION OR TERMINATION

14.1 Termination of Licenses. Upon the termination (but not expiration) of this Agreement, all rights and licenses granted to Maruho hereunder shall immediately terminate and be of no further force and effect and Maruho shall cease Developing, Commercializing, Manufacturing, and Packaging and Labeling the Products; provided that Maruho and its Affiliates will be entitled, during the [***] period immediately following the effective date of termination of this Agreement, to sell any inventory of Products on hand as of the effective date of the expiration or termination, so long as Maruho pays to Evommune the Royalty Payments and other amounts payable hereunder (including milestones) applicable to said subsequent sales, with respect to sales in the Territory, as applicable, in accordance with the terms and conditions set forth in this Agreement and otherwise complies with the terms set forth in this Agreement.

14.2 Assignments. Upon the termination (but not expiration) of this Agreement, and subject to the arrangement contemplated by Section 2.7.6 pursuant to which this Section 14.2 shall not apply, Maruho will promptly, in each case within [***] days thereafter (except as required in connection with the sell-off period contemplated by Section 14.1), and at no cost to Evommune (except, in the event that Maruho terminates this Agreement in accordance with Section 8.10, 13.2, or 13.4, then at Evommune’s reasonable cost), do the following:

(a) assign to Evommune, at Evommune’s sole discretion and direction, all of Maruho’s right, title, and interest in and to any agreements (or portions thereof) between Maruho and Third Parties to the extent related to the Development, Commercialization, or Manufacture of the Products, including the right to enforce any such agreements;

 

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(b) assign to Evommune, at Evommune’s sole discretion and direction, all of Maruho’s right, title, and interest in and to any (i) Promotional Materials, (ii) copyrights and trademarks (including the Product trademarks and Product trade dress), including any goodwill associated therewith, and any registrations and design patents for the foregoing, and (iii) any Internet domain name registrations for such trademarks and slogans, all to the extent related to the Products; provided, however, that in the event Evommune exercises such right to have assigned such Promotional Materials, Maruho shall grant, and hereby does grant, a royalty-free right and license to any housemarks, trademarks, names, and logos of Maruho contained therein for a period of [***] in order to use such Promotional Materials in connection with the Commercialization of the Products in the Field in the Territory in substantially the same manner as used by Maruho;

(c) assign to Evommune, at Evommune’s sole discretion and direction, the management and continued performance of any Clinical Trials for the Products ongoing hereunder as of the effective date of such termination in respect of which Evommune shall assume full financial responsibility from and after the effective date of such termination;

(d) transfer to Evommune all of Maruho’s right, title, and interest in and to any and all regulatory filings, Regulatory Approvals (including, without limitation, Product Approvals and Pricing Approvals), and other Regulatory Materials for the Products;

(e) transfer to Evommune all of Maruho’s right, title, and interest in and to any and all Arising IP (including, without limitation, Development Data and Commercialization Data), and any other Intellectual Property Controlled by Maruho relating primarily to the Compound and/or any Product, including, without limitation, that any Maruho shall transfer to Evommune its Confidential Information to the extent related to the Compound and/or any Product and such information shall, following the effective date of termination, constitute the Confidential Information of Evommune; and

(f) provide a copy of (i) the material tangible embodiments of the foregoing and (ii) any other material books, records, files, and documents Controlled by Maruho solely to the extent related to the Compound and/or the Products; provided, however, that to the extent that any agreement or other asset described in this Section 14.2 is not assignable by Maruho, then such agreement or other asset will not be assigned, and upon the request of Evommune, Maruho will use Commercially Reasonable Efforts to do what is reasonably necessary to allow Evommune to obtain and to enjoy the benefits of such agreement or other asset. For purposes of clarity, (A) Evommune shall have the right to request that Maruho take any or all of the foregoing actions set forth in this Section 14.2 in whole or in part, or with respect to all or any portion of the assets set forth in the foregoing provisions set forth in this Section 14.2 and (B) to the extent Evommune requests Maruho to transfer its right, title, and interest in the items set forth in this Section 14.2 to Evommune, Maruho shall cause its Affiliates to transfer and assign to Evommune all of such Affiliates’ right, title, and interest in and to the foregoing items set forth in this Section 14.2.

14.3 Disclosure and Delivery of Know-How. Upon the termination (but not expiration) of this Agreement, Maruho will promptly, in each case within [***] days thereafter, and at no cost to Evommune (except, in the event that Maruho terminates this Agreement in accordance with Section 13.2, then at Evommune’s reasonable cost), do the following: (a) Maruho will promptly transfer to Evommune copies of any physical embodiment of any Know-How Controlled by Maruho, to the extent then used in connection with the Development, Manufacture, and/or Commercialization of the Compound and/or any Product in the Field in the Territory; and

 

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(b) such transfer shall be effected by the delivery of material documents, to the extent such Know-How is embodied in such documents, and to the extent that Know-How is not fully embodied in such documents, Maruho shall make its employees and agents who have knowledge of such Know-How in addition to that embodied in documents available to Evommune for interviews, demonstrations, and training to effect such transfer in a manner sufficient to enable Evommune to practice such Know-How but only in a manner as set out as follows in this Section 14.3. The appropriate technical teams at Evommune and Maruho will meet to plan transfer for such Know-How as follows: (i) Maruho’s designated representative(s) for the Products will meet with representatives from Evommune to answer questions with respect to such Know-How and establish a plan for the transfer for such Know-How; and (ii) Maruho will allocate adequate appropriately qualified representatives to work with Evommune to review such Know-How to enable the completion of the transfer within [***] days of the completion of the initial transfer planning meetings to the extent reasonable, but in any event no longer than [***] days thereafter.

14.4 Disposition of Commercialization-Related Materials. Upon the termination (but not expiration) of this Agreement, Maruho will promptly deliver to Evommune in electronic, sortable form (a) a list identifying all wholesalers and other distributors involved in the Commercialization of the Products in the Territory as well as any customer lists (e.g., purchasers) related to the Commercialization of the Products in the Territory, and (b) all Promotional Materials, as well as any items bearing the Product trademarks or Product trade dress and/or any trademarks or housemarks otherwise associated with the Compound, any Product, and/or Evommune.

14.5 Accrued Rights. Expiration or termination of this Agreement for any reason will be without prejudice to any rights that will have accrued to the benefit of a Party prior to the effective date of such expiration or termination, including, without limitation, that all accrued but unpaid payments under this Agreement shall immediately become due and owing upon termination or expiration of this Agreement. Such expiration or termination will not relieve a Party from obligations that are expressly indicated to survive the expiration or termination of this Agreement.

14.6 Survival. Notwithstanding anything to the contrary contained herein, the following provisions shall survive any expiration or termination of this Agreement: Articles 1 (Definitions), 11 (Indemnification), 12 (Confidentiality), 14 (Effects of Expiration or Termination) 15 (Dispute Resolution), and 16 (Miscellaneous), the first sentence of each of Section 7.10.1 and 7.10.2, and Sections 7.11, 8.1 (subject to Sections 14.2 and 14.3), 10.5.4-10.5.7, 10.8, and 13.1. Except as set forth in this Article 14 or otherwise expressly set forth herein, upon expiration or termination of this Agreement, all other rights and obligations of the Parties shall cease.

14.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Evommune and Maruho are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that each Party, as licensee of certain rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party (such Party, the “Bankrupt Party”) under the U.S. Bankruptcy Code, (a) the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Intellectual Property licensed to such other Party and all embodiments of such Intellectual Property, which, if not already in such other Party’s possession, shall be promptly delivered to it (i) upon any such commencement of a bankruptcy proceeding upon such other Party’s written request therefore, unless the Bankrupt Party elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under clause (i), following the rejection of this Agreement by the Bankrupt Party upon written request therefore by the other Party; and (b) the Bankrupt Party shall not unreasonably interfere with the other Party’s rights to Intellectual Property and all embodiments of Intellectual Property, and shall assist and not unreasonably interfere with the other Party in obtaining Intellectual Property and all embodiments of Intellectual Property from another entity. The “embodiments” of Intellectual Property include all tangible, intangible, electronic, or other embodiments of rights and licenses hereunder, including all compounds and products embodying Intellectual Property, Products, filings with Regulatory Authorities, and related rights and Evommune Know-How in the case that Evommune is the Bankrupt Party and Know-How Controlled by Maruho and related to the Compound and/or any Product in the case Maruho is the Bankrupt Party.

 

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ARTICLE 15

DISPUTE RESOLUTION

15.1 Disputes. The Parties recognize that, from time to time, disputes, controversies, or claims may arise which stem from or are related to a Party’s respective rights or obligations under this Agreement or a Party’s actual or alleged breach of this Agreement (a “Dispute”). It is the desire of the Parties to establish procedures to facilitate the resolution of Disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 15 if and when a Dispute arises under this Agreement. If the Parties are unable to resolve any Dispute within [***] days after such Dispute is submitted to it, either Party may, by written notice to the other Party, have such dispute referred to Designated Officers of each Party for attempted resolution. If the Designated Officers cannot reach resolution of the Dispute within [***] days after such referral, the Dispute shall be referred to the Parties’ designated executive officers or their delegates for attempted resolution. In the event the designated executive officers or their delegates are not able to resolve such Dispute within such [***]-day period after receipt of written notice, and a Party wishes to pursue the matter, then each Party may assert any remedy available at law or equity to enforce its rights under this Agreement.

15.2 Choice of Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and the patent laws of the United States without reference to any rules of conflict of laws. Each of the Parties hereby submits to the jurisdiction of the United States Federal District Court for Delaware in any proceeding arising out of or relating to this Agreement, agrees not to commence any suit, action, or proceeding relating thereto except in such court, and waives, to the fullest extent permitted by law, the right to move to dismiss or transfer any action brought in such court on the basis of any objection to personal jurisdiction, venue, or inconvenient jurisdiction. Each Party further agrees that service or any process, summons, notice, or document by U.S. registered mail to such Party’s notice address provided for in this Agreement shall be effective service of process for any action, suit, or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction in this Section 15.2. Notwithstanding the foregoing, nothing contained in this Agreement will deny any Party the right to seek injunctive relief or other equitable relief from a court of competent jurisdiction applying the laws of the court in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any other ongoing proceeding. Any rights to trial by jury with respect to any suit, action, proceeding, or claim (whether based upon contract, tort, or otherwise), directly or indirectly, arising out of or relating to this Agreement hereunder are expressly and irrevocably waived by each of the Parties.

 

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ARTICLE 16

MISCELLANEOUS

16.1 Entire Agreement; Amendment. This Agreement, together with the Schedules and Exhibits hereto, contains the entire understanding of the Parties with respect to the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings, and commitments, either oral or written, in respect to the subject matter hereof are superseded by the terms of this Agreement. The Schedules and Exhibits to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of each of the Parties.

16.2 Force Majeure. No Party shall be liable for any failure to perform, or be considered in breach of, its obligations under this Agreement (other than obligations to make payments of money) to the extent such performance has been delayed, interfered with, or prevented by an event of Force Majeure, and the obligations of such Party under this Agreement (other than obligations to make payments of money) whose performance is affected by Force Majeure shall be suspended during, but not longer than, the continuance of the event of Force Majeure. Any Party that experiences an event of Force Majeure shall provide prompt notice of such event to the other Party, including and an estimate of the likely period of time during which its performance will be affected, and shall use reasonable efforts to remove the condition constituting Force Majeure. In the event of a prolonged condition of Force Majeure that makes it unreasonable to continue to perform other activities then being performed by the Parties and their Affiliates pursuant to this Agreement, the Parties shall consult directly or through the JSC and may appropriately scale back their respective activities in order to avoid waste or inappropriate usage of resources under the circumstances, and neither Party shall be liable for any such reasonable scale back, or be considered in breach of its obligations under this Agreement (other than obligations to make payments of money to the other Party) as a result of such reasonable scale back. Notwithstanding anything to the contrary contained in this Section 16.2 or elsewhere in this Agreement, the Parties acknowledge and agree that neither the COVID-19 pandemic and business disruptions related thereto (collectively, the “COVID Event”), nor any recurrence thereof, shall be considered to be an event of Force Majeure or otherwise excuse any failure or delay in performance by either Party under this Agreement (so long as performance is not thereby made unlawful) unless such COVID Event significantly worsens in a manner or to a degree that is not reasonably foreseeable to the Parties.

16.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement and shall be deemed to have been sufficiently given for all purposes if mailed by first class certified or registered mail, postage prepaid (which notice shall be effective five (5) Business Days after such mailing); express delivery service (which notice shall be effective on the first Business Day after delivery to such service); or personally delivered to the appropriate addresses (which notice shall be effective upon delivery to such addresses) set forth below or to such other addresses or numbers for a Party as such Party may inform the other Party by giving five (5) Business Days’ prior written notice:

 

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If to Evommune:   

Evommune, Inc.

1841 Page Mill Road

Suite 100

Palo Alto, CA 94304

Attention: Chief Legal Officer

E-Mail: [***]

With copies to:   

DLA Piper LLP (US)

650 South Exeter Street

Suite 1100

Baltimore, MD 21202

Attention: [***]

E-Mail: [***]

If to Maruho:   

Maruho Co., Ltd.

1-5-22 Nakatsu, Kita-ku

Osaka, 531-0071

Japan

Attention: General Manager, Global Business Development

E-Mail: [***]

16.4 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that a Party may make such an assignment or transfer without the other Party’s written consent (a) to any of its Affiliates (but only for so long as such Person is and remains an Affiliate of such Party, it being agreed that such Party shall cause such assignment to terminate prior to such time, if any, as such Person ceases to be an Affiliate of such Party), and (b) to any Third Party in connection with (i) the acquisition of such Party by or merger or consolidation of such Party with another entity, or (ii) a merger, consolidation, sale of stock, sale of all or substantially all of such Party’s assets, or other similar transaction in which such Third Party either becomes the owner of all or substantially all of the business and assets of (A) such Party or (B) that portion of such Party’s business or business unit relating to this Agreement. Any permitted successor or assignee of rights or obligations hereunder shall, in a writing delivered to the other Party, expressly assume the performance of such rights or obligations. Except as set forth in the immediately preceding sentence, in the event of an assignment or transfer as permitted above in this Section 16.4, if this Agreement is assigned or transferred to an Affiliate, the assigning or transferring Party shall remain responsible (jointly and severally) with such Affiliate for the performance of such assigned or transferred obligations. Any assignment or transfer, or attempted assignment or transfer, by either Party in violation of the terms of this Section 16.4 shall be null and void and of no legal effect. This Agreement shall be binding on, and inure to the benefit of, each Party, its successors and permitted assigns.

 

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16.5 Offset Rights. Notwithstanding anything to the contrary in this Agreement, neither Party may, at any time or for any reason, offset any payments due to the other Party or its Affiliates under this Agreement.

16.6 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, such provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good-faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

16.7 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under Applicable Law.

16.8 Ambiguities; No Presumption. Each of the Parties acknowledges and agrees that this Agreement has been diligently reviewed by and negotiated by and between them, that in such negotiations each of them has been represented by competent counsel and that the final agreement contained herein, including the language whereby it has been expressed, represents the joint efforts of the Parties hereto and their counsel. Accordingly, in interpreting this Agreement or any provision hereof, no presumption shall apply against any Party hereto as being responsible for the wording or drafting of this Agreement or any such provision, and ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.

16.9 Headings. The headings for each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

16.10 Interpretation. Except where the context expressly requires otherwise: (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa); (b) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (d) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (e) any reference herein to any person shall be construed to include the person’s successors and assigns; (f) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (g) all references herein to Articles, Sections, Exhibits, or Schedules shall be construed to refer to Articles, Sections, Exhibits, or Schedules of this Agreement, and references to this Agreement include all Exhibits and Schedules hereto; (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals, and other written communications contemplated under this Agreement; (i) provisions that require that a Party, the Parties, or any committee hereunder “agree,” “consent,” or “approve” or the like shall require that such agreement, consent, or approval be specific and in writing, whether by written agreement, letter, email, approved minutes, or otherwise (but excluding instant messaging); (j) references to any specific law, rule, or regulation, or article, section, or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule, or regulation thereof; (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or”; and (l) the term “to the extent” shall be interpreted to mean the extent or degree to which a subject or thing extends, and shall not simply be construed to mean the word “if.”

 

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16.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

16.12 No Third-Party Beneficiaries. Other than Dermira in accordance with Section 2.7.4 and Maruho, Evommune, and their respective Affiliates, successors, and permitted assignees hereunder, no Person shall be deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Agreement.

16.13 Independent Contractors. It is expressly agreed that Maruho and Evommune shall be independent contractors and that the relationship between Maruho and Evommune shall not constitute a partnership, joint venture, or agency. Neither Maruho nor Evommune shall have the authority to make any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of such other Party.

16.14 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by delivery of electronically scanned copies of original signatures delivered by facsimile or electronic mail, and such signatures shall be deemed to bind each Party as if they were original signatures.

[No Further Text on This Page]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives as of the date first written above.

 

Evommune, Inc.       Maruho Co., Ltd.
By:   

/s/ Luis Peña

          By:   

/s/ Atsushi Sugita

Name:    Luis Peña       Name:    Atsushi Sugita
Title:    President and CEO       Title:    Representative Director, President & CEO

[Signature Page to Sublicense Agreement]


Schedule 1.15

Compound

[***]


Schedule 1.46

Licensed Patents

[***]


Exhibit A

Initial Development Plan

[***]


Exhibit B

Specifications

As mutually agreed upon and attached hereto following the Effective Date


Exhibit C

Example of Royalty Payment Calculation

[***]

Exhibit 10.15

***Certain identified information has been omitted from this exhibit because it is both (i) not material and (ii) of the type that the Registrant treats as private or confidential. Such omitted information is indicated by brackets (“[***]”) in this exhibit.***

SUBLICENSE AGREEMENT

This Sublicense Agreement (this “Agreement”), dated as of March 19, 2024 (the “Effective Date”), is made by and between Evommune, Inc., a Delaware corporation (“Evommune”), and Maruho Co., Ltd., a company organized under the laws of Japan (“Maruho”). Evommune and Maruho are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Evommune is engaged in the research and development of products for use in treating or preventing inflammatory diseases, including a program referred to as EVO756 to treat urticaria and interstitial cystitis;

WHEREAS, Maruho manufactures, develops, and commercializes pharmaceutical products primarily in the field of dermatology;

WHEREAS, the Parties have previously entered into that certain Sublicense Agreement, dated as of September 23, 2023 (the “First Sublicense Agreement”), pursuant to which Evommune granted to Maruho a license and sublicense under certain intellectual property rights relating to EVO756 to develop, manufacture and commercialize certain products in Japan; and

WHEREAS, Evommune wishes to grant a license and sublicense to Maruho under certain intellectual property rights relating to EVO756, including, without limitation, certain rights granted by Dermira (as defined below) to Evommune under the Dermira License (as defined below), to develop, manufacture, and commercialize the Products in the Territory (as defined below), as more fully set forth herein, and Maruho wishes to take such license, in each case in accordance with the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants, and conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

As used in this Agreement, the following initially capitalized terms shall have the meanings set forth in this Article 1:

1.1 “Active Component” means a component that confers a therapeutic effect on a standalone basis.


1.2 “Additional Restriction Period” means, solely if Evommune and Dermira do not enter into an agreement pursuant to Section 2.5 of the Dermira License, the period of time following the expiration of the Exclusivity Period until [***].

1.3 “Affiliate” means any entity directly or indirectly controlled by, controlling, or under common control with a Person, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by,” “controlling,” and “under common control with”) means (a) possession, direct or indirect, of the power to direct or cause direction of the management or policies of an entity (whether through ownership of securities or other ownership interests, by contract, or otherwise), or (b) beneficial ownership of more than 50% (or the maximum ownership interest permitted by Applicable Law) of the voting securities or other ownership or general partnership interest (whether directly or pursuant to any option, warrant, or other similar arrangement) or other comparable equity interests of an entity.

1.4 “Analytical Release Testing and Characterization” means all activities associated with carrying out the analytical testing and release of the Products in the Field in the Territory. Such activities shall include: transferring test methods, developing and validating new analytical tests required in the Field in the Territory, amending the release specifications to be in compliance with local Applicable Laws, conducting the release testing of the Products in the Territory, and final release of the Products (including raw materials, intermediates, drug substance, and drug product).

1.5 “Applicable Law” means any applicable United States federal, state, or local, or foreign or multinational law (including data protection and privacy laws), statute, standard, ordinance, code, rule, regulation, resolution, or promulgation, or any order, writ, judgment, injunction, decree, stipulation, ruling, determination, or award entered by or with any Governmental Authority, or any license, franchise, permit, or similar right granted under any of the foregoing, or any similar provision having the force or effect of law. For the avoidance of doubt, any specific references to any Applicable Law or any portion thereof shall be deemed to include all then-current amendments thereto or any replacement or successor law, statute, standard, ordinance, code, rule, regulation, resolution, order, writ, judgment, injunction, decree, stipulation, ruling, or determination thereto.

1.6 “ASEAN Member State(s)” means each of or two or more of the member states of the Association of Southeast Asian Nations as of the Effective Date, which are Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam.

1.7 “Business Day” means a day other than a Saturday, Sunday, or bank or other public holiday in New York, New York, United States and in Tokyo, Japan.

1.8 “Calendar Quarter” means each three (3)-month period commencing January 1, April 1, July 1, or October 1 of any year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement.

 

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1.9 “Calendar Year” means the period beginning on January 1 and ending on December 31 of the same year; provided, however, that (a) the first Calendar Year of the Term shall extend from the Effective Date through December 31 of the same year and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of expiration or termination of this Agreement.

1.10 “China” means Mainland China, including, for purposes of this Agreement, Hong Kong and Macau.

1.11 “Clinical Trial” means a Phase I Clinical Trial, Phase II Clinical Trial (including a Phase IIa Clinical Trial and Phase IIb Clinical Trial), Phase III Clinical Trial, a Phase IIIb Clinical Trial, or a Phase IV Clinical Trial, as the case may be.

1.12 “COGS” means the fully-burdened costs incurred in connection with (a) testing, Manufacturing, or acquiring all active pharmaceutical ingredients, excipients, raw materials, components, packaging, and related materials required to Manufacture the Compound and/or any Product, and (b) the acquisition, Manufacturing, testing, and analysis of the finished dose of the Product, including in-process testing, labeling, and packaging, including Direct Labor and Benefits and Overhead, all determined in accordance with GAAP.

1.13 “Combination Product” means (a) any product containing the Compound and one or more other Active Components in a fixed-dose formulation, or (b) any combination of a Product sold together with another product containing an Active Component in a single package or container for a single price.

1.14 “Commercialize” means, with respect to the Products, to promote, market, distribute, sell (and offer for sale or contract to sell), import, export, or otherwise commercially exploit or provide product support for the Products and to conduct activities, other than Development or Manufacturing, in preparation for conducting the foregoing activities, including activities to produce commercialization support data and to secure and maintain market access and reimbursement. “Commercializing” and “Commercialization” shall have correlative meanings. For the avoidance of doubt, Commercialization does not include Development and Manufacturing.

1.15 “Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, those reasonable, good-faith efforts to accomplish such objective in a diligent manner within a reasonable time period (or, if applicable, within any specified time period or by any specified or applicable deadline) as companies in the pharmaceutical industry would normally use to accomplish a similar objective under similar circumstances. With respect to any efforts relating to the Development, Regulatory Approval, Manufacturing, or Commercialization, as applicable, of the Compound or Products by a Party, generally or with respect to the Territory or any particular Product, such Party will be deemed to have exercised Commercially Reasonable Efforts if such Party, subject to this Section 1.15, has exercised those efforts normally used by companies in the pharmaceutical industry, at the relevant time, in the Territory, with respect to a compound, product, or product candidate, as applicable, (a) which is of similar market potential in such country, (b) which is fully owned by such company without the obligation to compensate any third party in connection with commercialization thereof, and (c) which is at a similar stage in its development or product life cycle, as the applicable Product, in each case, taking into account, at the time such efforts are to be expended, issues of safety, efficacy, or stability; product profile; intellectual property protection; stage of development or life cycle status; the competitive environment; market potential; and other relevant scientific, technical, operational, and commercial factors.

 

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1.16 “Competing Product” means any [***].

1.17 “Compound” means the compound referred to by Evommune internally as EVO756, as more particularly described in Schedule 1.17, together with any and all salts, pro-drugs, metabolites, solvates, esters, stereoisomers, polymorphs, conjugates and cocrystal of the foregoing and all derivatives (including deuterium) thereof, the use thereof would, but for the license granted in Section 2.1, be infringed by the Licensed Patents set forth on Schedule 1.48.

1.18 “Control” and “Controlled by” means, with respect to any Know-How, Invention, Patent, technology, copyright, trademark, or other Intellectual Property, a Person’s possession (whether by ownership, license grant, or other means) of the legal right to grant the right to access or use, or to grant a license or a sublicense to, such Know-How, Invention, Patent Right, technology, copyright, trademark, or other Intellectual Property as provided for herein without violating the proprietary rights of any Third Party or any terms of any agreement or other arrangement between such Person (or any of its Affiliates) and any Third Party.

1.19 “CTA” means an application to the applicable Regulatory Authority, such as a clinical trial application or a clinical trial exemption, the filing of which is necessary to commence or conduct clinical testing of a pharmaceutical product in humans in such jurisdiction.

1.20 “Dermira” means Dermira, Inc., a Delaware corporation.

1.21 “Dermira License” means that certain License, Development and Commercialization Agreement, dated December 17, 2020, by and between Dermira and Evommune, as amended by that certain letter, dated July 27, 2023, by and between Dermira and Evommune.

1.22 “Designated Officer” means a representative appointed by a Party for purposes of dispute resolution.

1.23 “Develop” means to research, develop, analyze, test, and conduct preclinical trials, Clinical Trials (including, for the avoidance of doubt, Phase IV Clinical Trials and any preclinical/clinical/CMC commitments following Regulatory Approval) and all other regulatory trials, for the Compound and Products, as well as any and all activities pertaining to manufacturing development, formulation development, medical affairs (in the course of foregoing), and lifecycle management (including the conduct of Phase IIIb Clinical Trials and Phase IV Clinical Trials not explicitly for registrational purposes and non-interventional studies), including new indications, new formulations, and all other activities, including regulatory activities, related to securing and maintaining Regulatory Approval, for the Compound and Products. “Developing” and “Development” shall have correlative meanings. For clarity, any activities of medical affairs conducted for the purposes other than obtaining/maintaining Regulatory Approval of the Products are excluded from definition “Develop,” “Developing,” and “Development.”

 

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1.24 “Development Activities” means those Development activities undertaken by or on behalf of Maruho with respect to the Products in the Field for the sole purpose of Commercialization in the Territory.

1.25 “Direct Labor and Benefits” means that portion of internal basic wages, labor, and related payroll taxes and employee benefits spent specifically in Manufacture and/or supporting operation cost center, such as quality control of the Compound and/or any Product, that are directly related to the Manufacture and/or supply of the Products, as determined in accordance with GAAP consistently applied, provided that [***], provided, however, [***].

1.26 “Dollar” or “$” means the legal tender of the United States of America.

1.27 “Evommune Trademark” means the trademark that Evommune submits to the FDA (or, as applicable, any other applicable Regulatory Authority outside the Territory) and that the FDA (or such Regulatory Authority) approves for use as the brand name of the Product(s) in the Field in a particular country or region.

1.28 “Exclusivity Period” means the period beginning on the Effective Date and ending upon [***].

1.29 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder.

1.30 “FDA” means the United States Food and Drug Administration and any successor Regulatory Authority having substantially the same function.

1.31 “Field” means the prevention, diagnosis, and treatment of all indications in humans.

1.32 “First Commercial Sale” means, on a Product-by-Product basis, the first shipment of such Product to a Third Party in any country in the Territory for end use or consumption of the Product in the Territory after Regulatory Approval of the Product in the Territory.

1.33 “Force Majeure” means any unforeseeable circumstances whatsoever which are not within the reasonable control of the Party affected thereby, potentially including an act of God, war, act of terrorism, pandemic, insurrection, riot, strike or labor dispute, shortage of materials, fire, explosion, flood, government requisition or allocation, breakdown of or damage to plant, equipment, or facilities, interruption or delay in transportation, fuel supplies, or electrical power, embargo, boycott, order, or act of civil, military, or other Governmental Authority.

1.34 “Generic Product” means, with respect to a Product with a single or more active pharmaceutical ingredients in a particular country in the Territory, a pharmaceutical product that (a) contains the Compound, (b) is approved for use in such country in the Territory pursuant to a Regulatory Approval process governing approval of generic, interchangeable, or biosimilar biologics based on the then-current standards for Regulatory Approval in such country, whether or not such Regulatory Approval was based upon clinical data generated by one or more Parties pursuant to this Agreement or was obtained using an abbreviated, expedited, or other process, and (c) is sold in the same country in the Territory as such Product for the same indication as such Product by any Third Party that is not a Related Party and did not purchase such pharmaceutical product directly or indirectly from any of Maruho or its Related Parties. A Product shall not constitute a Generic Product under this Agreement with respect to any other Product.

 

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1.35 “Good Clinical Practices” or “GCP” means all applicable Good Clinical Practice standards for the design, conduct, performance, monitoring, auditing, recording, analyses, and reporting of clinical trials, including, as applicable, (a) as set forth in the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”) Harmonised Tripartite Guideline for Good Clinical Practice (CPMP/ICH/135/95) and any other guidelines for good clinical practice for trials on medicinal products in the Territory, (b) the Declaration of Helsinki (2004) as last amended at the 52nd World Medical Association in October 2000 and any further amendments or clarifications thereto, (c) U.S. Code of Federal Regulations Title 21, Parts 50 (Protection of Human Subjects), 56 (Institutional Review Boards) and 312 (Investigational New Drug Application), as may be amended from time to time, (d) the Ministerial Ordinance on Good Clinical Practice for Drugs (Ordinance of the Ministry of Health and Welfare No. 28 of March 27, 1997), and (e) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time and in each case, that provide for, among other things, assurance that the clinical data and reported results are credible and accurate and protect the rights, integrity, and confidentiality of trial subjects.

1.36 “Good Laboratory Practices” or “GLP” means all applicable Good Laboratory Practice standards, including, as applicable, (a) as set forth in the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, (b) the Ministerial Ordinance on Good Laboratory Practice for Nonclinical Safety Studies of Drugs (Ordinance of the Ministry of Health and Welfare No.21 of March 26, 1997), and (c) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

1.37 “Good Manufacturing Practices” or “GMP” means all applicable Good Manufacturing Practices including, as applicable, (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Sections 210, 211, 601 and 610, (b) the principles detailed in the ICH Q7 guidelines, (c) the Ministerial Ordinance on standards for Manufacturing Control and Quality Control for Drugs and Quasi-drugs (Ordinance of the Ministry of Health and Welfare No.179 of December 24, 2004), and (d) the equivalent Applicable Laws in any relevant country, each as may be amended and applicable from time to time.

1.38 “Government Official” means: (a) any officer or employee of: (i) a government, or any department, agency, or instrumentality thereof; (ii) a government-owned or -controlled company, institution, or other entity, including a government-owned hospital or university; or (iii) a public international organization (such as the United Nations, the International Monetary Fund, the International Committee of the Red Cross, and the World Health Organization), or any department, agency, or instrumentality thereof; (b) any political party or party official or candidate for public or political party office; and (c) any person acting in an official capacity on behalf of any of the foregoing.

 

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1.39 “Governmental Authority” means any United States federal, state, or local, or any foreign government or political subdivision thereof, or any multinational organization or authority, or any authority, agency, or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power, any court or tribunal (or any department, bureau, or division thereof), or any governmental arbitrator or arbitral body. For clarity, any Regulatory Authority is a Governmental Authority.

1.40 “IND” means an investigational new drug application, clinical trial authorization, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

1.41 “Initial Indication” means the first indication for which Evommune Develops a Product outside of the Territory.

1.42 “Initiation” means, with respect to a Clinical Trial, the first dosing of the first human patient in such Clinical Trial.

1.43 “Intellectual Property” means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) Patents, patent disclosures, inventions, utility models, utility model applications, petty patents, statutory invention registrations, certificates of invention, designs, unregistered industrial designs, design registrations and applications (including any continuations, continuations-in-part, divisionals, provisionals, non-provisionals, reexaminations, restorations, extensions, renewals, and reissues) for any of the foregoing, and all other indicia of invention ownership by any Governmental Authority; (b) copyrights (registered and unregistered), copyright applications, copyrightable subject matter, works of authorship (whether or not copyrightable), design rights, and design right registrations, and any and all renewals of any of the foregoing; (c) trademarks, service marks, trade dress, business names and trade names, assumed names, symbols, brand names, d/b/a’s, fictitious names, certification marks, logos, and product names whether registered, unregistered, or existing at common law, including the goodwill associated therewith (and all registrations and applications therefor), and any and all renewals of any of the foregoing; (d) industrial design rights; (e) domain names (and all registrations and applications therefor) whether or not trademarks, all associated web addresses, URLs, websites, and web pages, and all content and data thereon or relating thereto, whether or not copyrights; (f) Know-How and confidential information, (g) software, data processing, communications, inventory management, website content, programs, program interfaces, object code, source code, other computer systems, and all documentation relating to the foregoing; (h) all other proprietary information and intellectual property in all forms and media, and all goodwill associated therewith, now known or hereafter recognized in any jurisdiction throughout each country in the Territory; (i) all rights pertaining to the foregoing, including those arising under international treaties and convention rights; (j) copies and tangible embodiments of all of the foregoing (in whatever form or medium); and (k) all rights and powers to assert, defend, and recover title to any of the foregoing; and to assert, defend, sue, and recover damages for any past, present, and future infringement, misuse, misappropriation, impairment, unauthorized use, or other violation of any rights in or to any of the foregoing.

1.44 “Internal Compliance Codes” means a Party’s internal policies and procedures intended to ensure that a Party complies with Applicable Laws, Party-Specific Regulations, and such Party’s internal ethical, medical, and similar standards.

 

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1.45 “Invention” means any discovery or invention, whether or not patentable, conceived or otherwise made by or on behalf of either Party, or by both Parties, or, in each case, their respective Affiliates, under this Agreement.

1.46 “Know-How” means all technical, scientific, regulatory, and other information, results, knowledge, techniques, and data, in whatever form and whether or not confidential, patented or patentable, including inventions, invention disclosures, discoveries, plans, processes, practices, methods, knowledge, trade secrets, know-how, instructions, skill, experience, ideas, concepts, data (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, safety, quality control, and preclinical and clinical data), formulae, formulations, compositions, specifications, marketing, pricing, distribution, cost, sales and manufacturing data or descriptions. Know-How does not include any Patent claiming any of the foregoing.

1.47 “Licensed Know-How” means any and all Know-How that is (a) Controlled by Evommune or its Affiliates as of the Effective Date or at any time during the Term, and (b) necessary or reasonably useful for Maruho to Commercialize the Compound and/or any Product in the Field in the Territory or to Develop or Manufacture the Compound and/or any Product in the Field for the sole purpose of Commercialization in the Territory.

1.48 “Licensed Patents” means (a) the Patents set forth on Schedule 1.48, (b) any Patents in the Territory that are (i) Controlled by Evommune or its Affiliates (including, for the avoidance of doubt, pursuant to the Dermira License), as of the Effective Date or at any time during the Term, and (ii) necessary for Maruho to Commercialize the Compound and/or any Product in the Field in the Territory or to Develop or Manufacture the Compound and/or any Product in the Field for the sole purpose of Commercialization in the Territory, and (c) any Related Patents in the Territory with respect to the Patents described in Section 1.48(a) and (b) above.

1.49 “Licensed Technology” means the Licensed Know-How and Licensed Patents.

1.50 “Manufacture” means, with respect to a Product, (a) the receipt, handling and storage of active pharmaceutical ingredients, drug substance or drug product, medical devices, and other materials, and (b) the manufacturing, processing, packaging, labeling, holding (including storage), quality assurance, and quality control testing (including release) of such Product (other than quality assurance and quality control related to development of the manufacturing process, which activities shall be considered Development activities). “Manufactured” or “Manufacturing” shall have correlative meanings.

1.51 “Marketing Authorization Application” or “MAA” means an application to the appropriate Regulatory Authority for approval to sell the Products (but excluding Pricing Approval) in any particular country or regulatory jurisdiction.

1.52 “MRGPRX2” means Mas-related G-protein-coupled receptor X2.

1.53 “Net Sales” means, with respect to a Product in a given period of time, the gross amount invoiced by Maruho or a Related Party thereof to any Non-Related Party for such Product in the Territory, less the following items consistent with U.S. Generally Accepted Accounting Principles (“GAAP”) consistently applied (but only to the extent attributable to such Product and to the extent actually incurred, given, accrued, or specifically allocated for):

 

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(a) trade, quantity, and cash discounts allowed;

(b) discounts, refunds, rebates, chargebacks, retroactive price adjustments, and any other allowances which effectively reduce the net selling price of such Product;

(c) Products returns and allowances; and

(d) any tax imposed on the production, sale, delivery, or use of the Product, including sales, use, excise, or value added taxes (to the extent that such value added taxes are not reimbursable or refundable), specifically excluding, for clarity, any income taxes assessed against the income arising from such sale.

In the event that the Product is sold as part of a Combination Product, the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product (as defined in the standard Net Sales definition) by the fraction, A / (A+B) where A is the weighted average sale price of the Product when sold separately in finished form, and B is the weighted average sale price of the other compound(s) or ingredient(s) sold separately in finished form.

In the event that the weighted average sale price of the Product can be determined but the weighted average sale price of the other compound(s) or ingredient(s) cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A / C where A is the weighted average sale price of the Product when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of the other compound(s) or ingredient(s) can be determined but the weighted average sale price of the Product cannot be determined, Net Sales for purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the following formula: one (1) minus (B / C) where B is the weighted average sale price of the other compound(s) or ingredient(s) when sold separately in finished form and C is the weighted average sale price of the Combination Product.

In the event that the weighted average sale price of both the Product and the other compound(s) or ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Product shall be deemed to be equal to the percentage of the Net Sales of the Combination Product agreed upon by Evommune and Dermira pursuant to the Dermira License, provided that, if the Parties mutually and reasonably agree that the balance of such weighted average sale price in a particular country in the Territory would differ materially from such weighted average sale price in U.S., the Parties shall discuss in good faith to resolve such discrepancy.

 

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The weighted average sale price for a Product, other compound(s) or ingredient(s), or Combination Product shall be calculated once each Calendar Year and such price shall be used during all applicable royalty-reporting periods for the entire following Calendar Year. When determining the weighted average sale price of a Product, other compound(s) or ingredient(s), or Combination Product, the weighted average sale price shall be calculated by dividing the sales dollars (translated into Dollars) by the units of active ingredient sold during the twelve (12) months (or the number of months sold in a partial calendar year) of the preceding Calendar Year for the respective Product, other compound(s) or ingredient(s), or Combination Product. In the initial Calendar Year, a forecasted weighted average sale price will be used for the Product, other compound(s) or ingredient(s), or Combination Product. Any over or under payment due to a difference between forecasted and actual weighted average sale prices will be paid or credited in the first royalty payment of the following Calendar Year. Such amounts shall be determined from the books and records of Maruho or a Related Party maintained in accordance with GAAP, consistently applied. Maruho further agrees in determining such amounts, it will use and will require its Related Parties to use Maruho’s then-current standard procedures and methodology, including currency conversion as provided in Section 7.10.

For the avoidance of doubt, under no circumstances will Net Sales be [***].

In no event shall any particular amount of deduction identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions).

1.54 “Net Sales Ratio” means the quotient of the Net Sales of all Products in the Field in the Territory during the subject period of time, divided by the Net Sales of all Products in the Field worldwide for the same such period of time.

1.55 “Non-Related Parties” means, with respect to a Party, any Person that is not a Related Party of such Person.

1.56 “Overhead” means all customary and usual operating expenses directly related to the Compound and/or any Product incurred by and in support of the particular Manufacturing cost centers, purchasing department, and quality assurance operations related to such Compound and/or Product (including labor, related payroll taxes, and employee benefits), provided that [***], provided, however, [***].

1.57 “Party-Specific Regulations” shall mean all judgments, decrees, orders, or similar decisions issued by any Governmental Authority specific to a Party, and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement.

1.58 “Patent Term Extension” means any term extensions, supplementary protection certificates, Regulatory Exclusivity, and equivalents thereof offering Patent protection beyond the initial term with respect to any issued Patents.

1.59 “Patents” means any and all patent applications and issued patents.

1.60 “Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, Governmental Authority, association, or other entity.

 

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1.61 “Personal Information” means, in addition to any definition for any similar term (e.g., “personal data” or “personally identifiable information” or “PII”) provided by Applicable Laws, or by either Party in any of its own privacy policies, notices, or contracts, all information that identifies, could be used to identify, or is otherwise associated with an individual person, whether or not such information is associated with an identified individual person.

1.62 “Phase I Clinical Trial” means a human clinical trial in a country, the principal purpose of which is preliminary determination of the safety, metabolism, and pharmacokinetic properties and clinical pharmacology of the Compound in healthy individuals or patients as described in 21 C.F.R. § 312.21(a), or similar clinical study in a country other than the U.S.

1.63 “Phase II Clinical Trial” means an adequate and well-controlled human clinical trial in a country, the principal purpose of which is a preliminary determination of the efficacy and safety of a Product for an indication in a target population of patients being studied, at the intended clinical dose or doses or range of doses, on a sufficient number of subjects and for a sufficient period of time to confirm the optimal manner of use of the Compound (dose and dose regimen) for such indication prior to initiation of the pivotal Phase III Clinical Trials for such indication as described in 21 C.F.R. §312.21(b), or similar clinical study in a country other than the U.S.

1.64 “Phase IIa Clinical Trial” means that part of the Phase II Clinical Trial designed to assess dosing requirements and efficacy of a Product. For the purposes of this Agreement, “completion of a Phase IIa Clinical Trial” means that stage of the Phase II Clinical Trial when the efficacy of a Product as specified in the Development Plan has been observed and properly recorded.

1.65 “Phase IIb Clinical Trial” means a clinical study subsequent to a Phase IIa Clinical Trial, specifically designed to include a comparison of a Product to an accepted standard of care and/or to a placebo in a larger number of patients which represents a more rigorous demonstration of the efficacy and safety of the Product in the target patient population to define the optimal regimen to evaluate in a Phase III Clinical Trial.

1.66 “Phase III Clinical Trial” means a human clinical trial of a compound or product for an indication on a sufficient number of subjects that is designed to establish that the compound or product is safe and efficacious for its intended use, and to determine warnings, precautions, and adverse reactions that are associated with the compound or product in the dose range to be prescribed, and to support Regulatory Approval of the compound or product for such indication or label expansion of the compound or product. For clarity, the term “Phase III Clinical Trials” includes early access and compassionate use programs.

1.67 “Phase IIIb Clinical Trial” means a human clinical trial of a compound or product for an indication that (a) is not required for receipt of Regulatory Approval for such indication for a country but which may be useful in providing additional drug profile data in support of such Regulatory Approval or, as applicable, Pricing Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval), or (b) is required, requested, or advised by a Regulatory Authority as a condition of, or in connection with, obtaining or maintaining such Regulatory Approval (whether the trial is commenced prior to or after receipt of such Regulatory Approval).

 

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1.68 “Phase IV Clinical Trials” means a human clinical trial, or other test or study, of a compound or product for an indication that is commenced after receipt of the initial Regulatory Approval for such indication in the country for which such trial is being conducted and that is conducted within the parameters of the Regulatory Approval for the compound or product for such indication (and which may include investigator sponsored clinical trials), including a clinical trial conducted due to the request or requirement of a Regulatory Authority or as a condition of a previously granted Regulatory Approval.

1.69 “Pre-Marketing” means all sales and marketing activities undertaken prior to and in preparation for the launch of the Products in the Territory. Pre-Marketing shall include market research, key opinion leader development, advisory boards, medical education, disease-related public relations, health care economic studies, sales force training, and other pre-launch activities prior to the First Commercial Sale of a Product in a given country or other regulatory jurisdiction in the Territory.

1.70 “Pricing Approval” means, with respect to any country where a Governmental Authority authorizes reimbursement or access, or approves or determines pricing, for pharmaceutical products, receipt (or, if required to make such authorization, approval of determination effective publication) of such reimbursement or access authorization or pricing approval or determination (as the case may be).

1.71 “Product” means any and all pharmaceutical products containing or comprising the Compound in any form, dose, presentation, or formulation, and whether alone or in combination with one or more other pharmaceutically active or inactive ingredients. For clarity, a Product shall be deemed distinct from another Product if [***].

1.72 “Product Approval” means, with respect to a Product, the approval of a Governmental Authority necessary for the marketing and sale of such Product in a given country or regulatory jurisdiction, which may include the approval of an MAA (but shall not include any Pricing Approvals).

1.73 “Product Complaint” means any written, verbal, or electronic expression of dissatisfaction regarding any Product sold by or on behalf of Maruho (or any of its Related Parties or permitted distributors) in the Territory, including reports of actual or suspected product tampering, contamination, mislabeling, or inclusion of improper ingredients.

1.74 “Promotional Materials” means all written, printed, video, or graphic advertising, promotional, educational, and communication materials (other than the Products labels and package inserts) for marketing, advertising, and promoting of the Products in the Field in the Territory, for use (a) by a Sales Representative or (b) in advertisements, websites, or direct mail pieces.

1.75 “Purchase Price” means [***].

1.76 “Regulatory Approval” means, with respect to any Product for a given indication, approval from the applicable Regulatory Authority permitting the manufacture, distribution, use, and sale of such Product in such regulatory jurisdiction for such indication in accordance with Applicable Law, including any Pricing Approvals.

 

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1.77 “Regulatory Authority” means any applicable Governmental Authority involved in granting Regulatory Approval or, to the extent applicable, Pricing Approval of a Product in the Territory, including the National Medical Products Administration and/or any successor agency or authority (the “NMPA”).

1.78 “Regulatory Data” means any and all research data, pharmacology data, chemistry, manufacturing and control data, preclinical data, clinical data, and all other documentation submitted, or required to be submitted, to Regulatory Authorities in association with regulatory filings for the Products (including information in any applicable Drug Master Files (DMFs), Chemistry, Manufacturing and Control (“CMC”) data, or similar documentation).

1.79 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Governmental Authority with respect to the Products other than a Patent right, which prevent, or which are intended by the applicable Governmental Authority to prevent, Generic Products from entering the market.

1.80 “Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals, or other filings made to, received from, or otherwise conducted with a Regulatory Authority that are necessary in order to Develop, Manufacture, obtain marketing authorization, market, sell, or otherwise Commercialize the Products in a particular country or regulatory jurisdiction. Regulatory Materials include INDs, MAAs, CTAs, Imported Drug Licenses (IDLs), presentations, responses, and applications for other Product Approvals.

1.81 “Related Parties” means, (a) with respect to Evommune and its Affiliates, and (b) with respect to Maruho, its Affiliates, and Sublicensees (excluding distributors).

1.82 “Related Patents” means, with respect to a Patent, (a) proposed new patent applications, including international patent application in international phase, any provisionals, re-examinations, continuations, continuations-in-part claiming the same subject matter, extensions, term restorations, renewals, divisionals, reissues, renewals, and any Patents resulting therefrom; and (b) supplementary protection certificates or other administrative protections.

1.83 “Right of Reference” means the right to allow a Regulatory Authority, and solely to the extent required by Applicable Laws, Maruho or Evommune, as applicable, in a specified region or territory to reference data, including but not limited to Regulatory Data, and other information from Clinical Trials or other Development activities with respect to the Product that are Controlled by the granting Party (or, as applicable, its Related Parties and subcontractors) for the purpose of (a) supporting a Regulatory Approval for the Product in such region or territory, (b) supporting the Development, Manufacture, and/or Commercialization of the Product in accordance with the grantee’s rights with respect to such Product as contemplated by this Agreement, or (c) otherwise supporting an audit by a Regulatory Authority with respect to the Product in such region or territory, including the ability to allow such Regulatory Authority to review the underlying raw data as part of an investigation by such Regulatory Authority, if required by such Regulatory Authority.

 

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1.84 “Royalty Term” means, with respect to each Product in the Territory, the period of time beginning on the First Commercial Sale of such Product in a particular country in the Territory and ending the later of (a) the expiration of the last to expire Valid Claim claiming or covering such Product or the Manufacture or use thereof in such country in the Territory, (b) ten (10) years from the First Commercial Sale of such Product in such country in the Territory, or (c) the expiration of the Regulatory Exclusivity period for such Product in such country in the Territory.

1.85 “Sales Representative” means an individual who is employed by a Party and who performs details and other promotional efforts with respect to the Product.

1.86 “Specifications” means the specifications for the Products for clinical supply in each country in the Territory delivered in accordance with Article 6, as mutually agreed upon by the Parties following the Effective Date and attached hereto as Exhibit A, as may be amended as mutually agreed upon by the Parties from time to time.

1.87 “Specified Person” means any company in the biopharmaceutical industry with greater than [***] of pharmaceutical net sales or a market capitalization that exceeds [***].

1.88 “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, or other business entity of which, (a) if a corporation, a majority of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a partnership, limited liability company, association, or other business entity, either (i) a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or (ii) such Person is a general partner, managing member, or managing director of such partnership, limited liability company, association, or other entity.

1.89 “Territory” means, collectively, China, Taiwan, South Korea, and the ASEAN Member States.

1.90 “Third Party” means any Person other than Evommune, Maruho, or their respective Affiliates.

1.91 “Training Materials” means all Product-related training materials, including learning units and other printed, audio, web-based, or video training materials, branded or unbranded, relating or referring to Product, Product-related disease states, and Product sales orientation assessment tests and refresher tests.

1.92 “United States” or “U.S.” means the United States of America and its possessions and territories.

 

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1.93 “Valid Claim” means (a) a claim of an issued and unexpired Licensed Patent that (i) has not been held permanently revoked, unenforceable, or invalid by a decision of a court or other Governmental Authority of competent jurisdiction, which decision is unappealed or unappealable within the time allowed for appeal, and (ii) has not been cancelled, withdrawn, abandoned, disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer, or otherwise, in a country in the Territory, or (b) a bona fide claim of a pending patent application included within the Licensed Patents in a country in the Territory that has not been (i) cancelled, withdrawn, or abandoned without being re-filed in another application in the applicable jurisdiction, or (ii) finally rejected by an administrative agency action from which no appeal can be taken or that has not been appealed within the time allowed for appeal.

1.94 Additional Definitions. The following terms have the meanings set forth in the corresponding Sections of this Agreement:

 

Term

  

Section

“Anti-Corruption Laws”    10.5.1
“Arising IP”    8.1.2(a)
“Audit”    7.11
“Bankrupt Party”    14.7
“Breaching Party”    13.2
“Claim”    11.1
“Clinical Supply Warranties”    6.6
“Commercialization Data”    8.1.2(a)
“Commercialization Plan”    5.1
“Confidential Information”    12.1.1
“COVID Event”    16.2
“Defect”    6.7.1
“Development Data”    8.1.2(a)
“Development Plan”    3.3.1
“Development Report”    4.1.4
“Dispute”    15.1
“Enforce the Licensed Patents”    8.5.1
“Enforcement Proceedings”    8.5.1
“Existing JSC”    9.4
“First Sublicense Agreement”    Recitals
“Indemnified Party”    11.3.1
“Indemnifying Party”    11.3.1
“Infringement Notice”    8.4
“Initial Development Plan”    3.3.2
“JSC”    9.1
“Latent Defects”    6.7.1
“Lilly Programs”    2.8
“Local Dose Finding Study (China)”    3.4.3
“Losses”    11.1
“Milestone”    7.2
“Milestone Notice”    7.2
“Milestone Payment”    7.2
“MRCT”    3.5.2

 

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Term

  

Section

“New Indication”    3.1.2
“Non-Conforming Material”    6.7.1
“Packaging and Labeling”    6.5
“Product CMO”    6.9
“Product Trade Dress”    5.7.1
“Product Trademark”    5.7.1
“Purchase Order”    6.2
“PV Agreement”    4.3.1
“Quality Agreement”    6.1
“Royalty Payment”    7.3
“Sublicensee”    2.3.2
“Term”    13.1
“Trade Laws”    10.5.1
“Upfront License Fee”    7.1
“VAT”    7.7.1

ARTICLE 2

LICENSES

2.1 Grant to Maruho. Subject to the terms and conditions of this Agreement, Evommune hereby grants to Maruho during the Term an exclusive (even as to Evommune and its Affiliates, but subject to Sections 2.2.2 and 2.8), payment-bearing license and sublicense, as applicable (with the right to sublicense solely in accordance with Section 2.3.2), under and with respect to the Licensed Technology to (a) Develop and Manufacture the Products in the Field for the sole purpose of Commercializing the Products in the Field in the Territory and (b) Commercialize the Products in the Field in the Territory; provided, however, that Evommune reserves the right to use (or to permit its designee to use) the Licensed Technology in the Field in the Territory to perform its obligations under this Agreement. For clarity, the license granted herein: (x) includes a Right of Reference for use in connection with the Products in the Field in the Territory, and (y) includes the right to Develop and Manufacture the Products outside of the Territory for the sole purpose of Commercializing the Products in the Field in the Territory, provided, however, that Maruho shall not (i) conduct any Clinical Trials outside of the Territory, without Evommune’s prior written consent (not to be unreasonably withheld, provided, however, that Maruho acknowledges and agrees that, without limiting the generality of the foregoing, Evommune shall have the right to withhold consent if, in Evommune’s reasonable discretion, such Clinical Trial outside of the Territory could impede or impact Evommune’s recruitment efforts with respect to its Clinical Trials or could otherwise impact Evommune’s communications with any Regulatory Authority(ies) in such countries or regions outside the Territory), or (ii) with respect to the Compound and the Product, submit or make a publication and/or a presentation, submit or display a poster, have a table, or conduct any similar activity in an international conference, without Evommune’s prior written consent (not to be unreasonably withheld); and (z) does not preclude Evommune from Developing and/or Manufacturing the Products in the Territory for the purpose of Commercializing the Products outside the Field in the Territory or generally outside the Territory.

 

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2.2 Additional Licensing Provisions.

2.2.1 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party grants any license, express or implied, under its Intellectual Property to the other Party, whether by implication, estoppel, or otherwise.

2.2.2 Reserved Rights. The Parties hereby agree and acknowledge that nothing contained herein shall limit or otherwise restrict the ability of Evommune, Dermira, or their respective Affiliates or licensees to use the Licensed Technology for research purposes.

2.3 Performance by Affiliates and Sublicensees.

2.3.1 Performance by Affiliates. Evommune recognizes that Maruho may perform some or all of its obligations under this Agreement through Affiliates and subcontractors without notice to Evommune (except as set forth in Section 2.3.2); provided, however, that Maruho shall remain responsible for and be guarantor of the performance by its Affiliates and subcontractors and shall cause its Affiliates and subcontractors to comply with the provisions of this Agreement in connection with such performance, and Maruho shall be liable for the acts or omissions of its Affiliates and subcontractors under or in connection with this Agreement (as if such acts or omission were those of Maruho). Maruho hereby expressly waives any requirement that Evommune exhaust any right, power, or remedy, or proceed against such Affiliate and subcontractors, for any obligation or performance hereunder prior to proceeding directly against Maruho.

2.3.2 Sublicensees.

(a) Generally.

(i) During the Exclusivity Period, Maruho has no right to sublicense those rights granted to it under Section 2.1, other than to Maruho’s vendors or suppliers solely to enable them to provide contract Development and Commercialization services to Maruho.

(ii) During the Additional Restriction Period, if applicable, Maruho has no right to sublicense those rights granted to it under Section 2.1 to any Specified Person; provided, however, that, with respect to any Person other than a Specified Person, Maruho shall have the right (but not the obligation) to sublicense those rights granted to it under Section 2.1 to any Person only as set forth in, and subject to the terms and conditions of, Section 2.3.2(b).

(iii) Following the expiration of the Additional Restriction Period, Maruho shall have the rights (but not the obligation) to sublicense (including multi-tier) those rights granted to it under Section 2.1 only as set forth in, and subject to the terms and conditions of, Section 2.3.2(b).

 

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(iv) For purposes of Section 2.3.2, each Affiliate or other Person to which any such sublicense (including through multi-tier) permitted in accordance with Section 2.3.2(a)-(b) is granted is referred to herein as a “Sublicensee.” For the avoidance of doubt, any and all Affiliates and/or Third Parties engaged by Maruho and/or its Affiliates to perform any services from which Arising IP is and/or can be discovered and/or developed shall be deemed Sublicensees under this Agreement for all purposes.

(b) Terms and Conditions of Permitted Sublicenses. With respect to any sublicense that Maruho grants, or intends to grant, in accordance with Section 2.3.2(a), the following terms and conditions shall apply:

(i) Maruho shall provide Evommune with prior written notice (at least [***] Business Days in advance) to Evommune of any sublicenses to be granted, which shall include in each case a description of the rights to be granted and the purpose therefor and the identity of the proposed Sublicensee.

(ii) Maruho shall ensure that each Sublicensee affirmatively commits, and each Sublicensee shall affirmatively commit, in the applicable sublicense agreement to step into Maruho’s shoes and assume full responsibility for all payments and all other obligations owed by Maruho to Evommune under this Agreement with respect to such sublicensed Product and rights granted in the applicable sublicense agreement.

(iii) Maruho shall remain responsible for the performance by each of its Sublicensees and shall cause each of its Sublicensees to comply with the applicable provisions of this Agreement, and Maruho shall be liable for the acts or omissions of its Sublicensees under or in connection with this Agreement (as if such acts or omission were those of Maruho).

(iv) Without limiting the generality of this Section 2.3.2, Maruho shall: (A) ensure that each of its Sublicensees accepts in writing all applicable terms and conditions of this Agreement, including the non-compete, reporting, audit, inspection, intellectual property, and confidentiality provisions hereunder; (B) under the agreements between Maruho and each of its Sublicensees, include a provision pursuant to which [***], provided that, in each case, [***], in each case, [***]; (C) [***]; and (D) [***]. For the avoidance of doubt, (X) Maruho will remain directly responsible for all amounts owed to Evommune under this Agreement, and (Y) each Sublicensee is subject to the negative and restrictive covenants set forth in this Section 2.3.2 and Section 2.4, respectively.

(v) Maruho hereby expressly waives any requirement that Evommune exhaust any right, power, or remedy, or proceed against a subcontractor or other Sublicensee, for any obligation or performance hereunder prior to proceeding directly against Maruho.

(vi) Notwithstanding anything to the contrary, all sublicenses granted hereunder shall automatically terminate upon expiration or termination of this Agreement for any reason.

(vii) Without limiting Maruho’s responsibility for the performance of its Sublicensees hereunder or its liability for acts of omissions of its Sublicensees, any obligation of Maruho under this Agreement may be satisfied by a Related Party.

 

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2.4 Restrictive Covenant. To the maximum extent permissible under Applicable Law and without limiting the generality of Section 2.7.2, Maruho hereby covenants and agrees that it shall not (and shall cause its Related Parties not to), either directly or indirectly, itself or through any Related Party or Third Party, (a) commercialize any Competing Products in the Field in any country in the Territory or (b) develop or manufacture any Competing Product for the purpose of commercialization in the Field in any country in the Territory.

2.5 Exchange of Information. Without limiting the generality of any other provision of this Agreement, Maruho shall keep Evommune fully and promptly informed as to its progress and activities relating to the Development, Manufacture, and Commercialization of the Products in accordance with this Agreement, including with respect to regulatory matters and meetings with Regulatory Authorities, by way of [***] updates, delivered no later than [***] Business Days following [***] of each Calendar Year during the Term, to Evommune and as otherwise specified in this Agreement, or as reasonably requested from time to time by Evommune. In connection therewith, Maruho shall provide Evommune with such information regarding such progress and activities under the Development Plan or otherwise relating to the Products as Evommune may reasonably request from time to time.

2.6 Know-How Transfer. After the Effective Date, Evommune shall, upon Maruho’s request from time to time, at Evommune’s reasonable expense, provide to Maruho copies of material tangible documentation disclosing the Licensed Know-How for use solely in accordance with the terms and conditions of this Agreement.

2.7 Dermira License.

2.7.1 Maruho acknowledges that Evommune has sublicensed to Maruho under this Agreement certain Patents owned or Controlled by Dermira and that the rights granted by Evommune to Maruho hereunder are limited to the maximum extent of the rights permitted to be sublicensed under the Dermira License. In the event of any conflict or inconsistency with respect to any rights that Evommune purports to grant to Maruho under this Agreement and the rights granted by Dermira to Evommune under the Dermira License, the Dermira License shall control (including with respect to Article 8).

2.7.2 Maruho accepts and shall comply with all of the terms and conditions of the Dermira License as if Maruho were a party thereto to the extent such terms and conditions are applicable to the Products in the Field in the Territory, including, without limitation, the non-compete, reporting, audit, inspection, and confidentiality provisions thereunder; and, in connection therewith, Maruho shall remain responsible for the acts and omissions of its Affiliates, Sublicensees, and subcontractors. Maruho acknowledges and agrees that any act or omission of Maruho (or its Affiliates, Sublicensees, or subcontractors) that would reasonably be expected to be a material breach under the Dermira License will be deemed a material breach of this Agreement. Evommune shall not terminate or amend the Dermira License in a manner that materially adversely affects Maruho’s rights and obligations under this Agreement. Similarly, Evommune shall comply, in all material respects, with the applicable terms and conditions of the Dermira License. For the avoidance of doubt, Maruho acknowledges and agrees that it is not a third-party beneficiary of the Dermira License.

 

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2.7.3 Upon written request by Evommune, Maruho shall timely take all actions reasonably necessary, including timely providing to Evommune all information in Maruho’s possession reasonably necessary, for Evommune to comply with its obligations under the Dermira License. Without limiting the foregoing, upon prior written request by Evommune, Maruho shall provide to Evommune the information necessary, in the format necessary, for Evommune to comply with its royalty reporting obligations under the Dermira License, no later than five (5) Business Days prior to the date that the applicable reporting is due to Dermira under the Dermira License. Notwithstanding the foregoing, Evommune will use reasonable efforts to accommodate any notice from Maruho that Maruho requires more time to meet its obligations to Evommune under this Agreement, but only in the event that such accommodation will not cause Evommune to fail to meet its obligations under the Dermira License.

2.7.4 The Parties acknowledge and agree that, as required under the Dermira License, [***].

2.7.5 The Parties acknowledge and agree that Maruho’s obligation to comply with the applicable terms and conditions of the Dermira License in accordance with Section 2.7.2 is subject to the condition that Evommune has provided to Maruho a complete and accurate copy of such applicable terms and conditions of the Dermira License. Notwithstanding any provision to the contrary, Maruho and its Related Party has no obligation to assume or otherwise discharge Evommune’s payment obligations under the Dermira License with respect to the Product, except as set forth in Section 2.7.6.

2.7.6 In the event of a partial termination of the Dermira License that would affect Maruho’s rights hereunder or a complete termination of the Dermira License, in both cases, for reasons not attributable to Maruho’s acts or omissions, and, as of the effective date of such termination, this Agreement has not otherwise expired or been terminated, then the sublicense granted under Section 2.1 with respect to the Licensed Technology Controlled by Evommune pursuant to the Dermira License shall be deemed to be a direct license from Dermira to Maruho on the terms and conditions contained in the Dermira License (with Maruho assuming the applicable obligations of Evommune under the Dermira License solely with respect to the Products in the Field in the Territory).

2.8 Lilly Programs. Maruho acknowledges that, as of the Effective Date, Dermira’s Affiliate, Eli Lilly and Company (“Lilly”), or its Affiliates may, from time to time, Develop and/or Commercialize one or more compounds or products that target the same pathways or treat the same indications as the Compound, including that such compounds and/or products may be at a later stage of Development than the Compound. Provided that it does not violate the exclusive license set forth in the Dermira License, nor use any of Evommune’s Confidential Information disclosed pursuant to Dermira License: (a) nothing in this Agreement or the Dermira License prohibits or restricts Lilly or its Affiliates from continuing to Develop, or from Manufacturing or Commercializing, any such compounds or products (or any natural evolutions or successors thereto) (collectively the “Lilly Programs”) or from licensing or transferring to any other Person, or prosecuting or enforcing, any of its Know-How, Inventions, Patents, technology, copyrights, trademarks, or other Intellectual Property with respect thereto; and (b) to the extent that Evommune gains any information regarding any Lilly Program, Evommune has no obligation to share with Maruho any information regarding any Lilly Program (unless, for clarity, such information constitutes Licensed Know-How).

 

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2.9 Evommune Support and Cooperation. Upon Maruho’s reasonable request, Evommune shall reasonably cooperate and provide reasonable assistance in connection with Maruho’s activities under this Agreement, including, without limitation, that Evommune will reasonably cooperate and provide reasonable assistance in connection with the following matters:

(a) Preparing responses to medical questions or inquiries in the Field in the Territory, including Product Complaints, with regard to Products sold by or on behalf of Maruho (or any of its Related Parties);

(b) investigations relating to Non-Conforming Material supplied by Evommune under Article 6;

(c) tax matters as contemplated by Section 7.7; and

(d) Enforcement Proceedings, to the extent that Maruho controls such Enforcement Proceedings in accordance with Section 8.5.2;

provided, however, that (y) all such cooperation and assistance shall be at Maruho’s cost, and (z) for clarity, such obligation to cooperate and assist shall not obligate Evommune to expend significant resources or time or otherwise develop or generate documentation, records, or information not already in its possession.

ARTICLE 3

DEVELOPMENT

3.1 Overview of Development.

3.1.1 Subject to the terms and conditions of this Agreement, Maruho shall be responsible, at its cost, for the Development of the Products for use in the Field in the Territory as set forth herein. Maruho shall use Commercially Reasonable Efforts to Develop at least one (1) Product in the Territory in accordance with the Development Plan, including, without limitation, conducting bridging studies, clinical studies, and Clinical Trials (including post-Regulatory Approval studies). Maruho shall use Commercially Reasonable Efforts to perform the Development Activities for at least one (1) Product to (a) enable obtaining Regulatory Approval in the Territory for the Product(s), and (b) maximize the commercial potential for such Product(s) in the Territory, and shall keep Evommune reasonably informed of the efforts contemplated by this Section 3.1.1 through the JSC.

3.1.2 In the event that Evommune (or any of its Affiliates or sublicensees) Develops any Product for indication(s) other than the Initial Indication in the Field for the purpose of Commercialization outside the Territory (each, a “New Indication”), then Evommune shall notify Maruho thereof and may request Maruho to Develop and seek Regulatory Approval of such Product for such New Indication for the sole purpose of Commercialization in the Territory; provided that Maruho may choose not to Develop or Commercialize such Product for such New Indication solely to the extent that Maruho notifies Evommune of commercially reasonable concerns with respect to such Product for such New Indication in the Territory. If Maruho chooses to Develop and/or Commercialize such Product for such New Indication in the Territory, then Maruho shall keep Evommune reasonably informed of such efforts through the JSC and shall use Commercially Reasonable Efforts to Develop and seek Product Approval of such Product for such New Indication in the Territory.

 

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3.2 Objectives under the Development Plan.

3.2.1 Development Activities. Maruho shall use Commercially Reasonable Efforts to carry out the Development Activities for each Product under the applicable Development Plan in accordance with the timeframes set forth therein and in a manner designed to achieve successful Development and Regulatory Approval of at least one (1) Product in the Territory and, if applicable, any New Indication in the Territory, and including, without limiting the generality of the foregoing, [***]. For clarity, Maruho shall not be obligated to obtain Evommune’s prior written consent with respect to its Development activities under this Article 3, provided that such activities are conducted in accordance with the Development Plan, and provided further that such Development activities are not likely to have a material negative impact on the worldwide commercialization of any Product in the Field.

3.2.2 Compliance. Maruho shall conduct the Development Activities in accordance with sound and ethical business and scientific practices, and in compliance with all Applicable Laws, including GCPs and GLPs, and also including all applicable pharmacovigilance, data privacy, and data protection laws in the Territory as applicable. In addition, Maruho shall not use in any capacity, in connection with its Development, Manufacture, or Commercialization of the Compound or Products hereunder, any Person who has been debarred pursuant to Section 306 of the FD&C Act (or similar Applicable Laws outside of the U.S.), or who is the subject of a conviction described in such section, and Maruho shall inform Evommune in writing promptly if it or any Person who is performing services for Maruho hereunder is debarred or is the subject of a conviction described in Section 306 (or similar Applicable Laws outside of the U.S.), or if any action, suit, claim, investigation, or legal administrative proceeding is pending or, to Maruho’s knowledge, is threatened, relating to the debarment of Maruho or any Person used in any capacity by Maruho in connection with its Development, Manufacture, or Commercialization of the Compound or Products hereunder.

3.3 Development Plan.

3.3.1 General. Maruho shall conduct Development Activities pursuant to a comprehensive development plan (the “Development Plan”). The Development Plan shall set forth, among other things, the following:

(a) any preclinical studies, toxicology studies, pharmaco-economic studies, and other clinical studies (including Phase IV Clinical Trials) necessary for obtaining and maintaining Regulatory Approval in the Territory, with respect to each Product in the Field in the Territory, including, without limitation, with respect to each study, the number of expected patients, the quantity of Products that Maruho reasonably expects to require to conduct such study, and the estimated timeline for such study;

 

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(b) all regulatory plans for obtaining and maintaining Regulatory Approvals in the Field for each Product in the Territory; and

(c) the timeline and geographic sequence for completing such Development Activities.

3.3.2 Initial Development Plan. Maruho shall propose the initial Development Plan for the Products in the Field in the Territory (the “Initial Development Plan”) promptly following the Effective Date (and, for the avoidance of doubt, no later than [***] days thereafter). Evommune shall have the right to provide comments on the Initial Development Plan, and Maruho will consider any such comments in good faith, use Commercially Reasonable Efforts to incorporate such comments and finalize the Initial Development Plan.

3.3.3 Updating and Amending Development Plan. Maruho shall, on an annual basis, review and update, as appropriate, the then-current Development Plan to reflect any material changes, reprioritizations of, or additions to the Development Plan. Maruho shall provide such updated Development Plan to the JSC [***] during the Term. Evommune may, through the JSC, provide comments on such updated Development Plan within [***] days of receipt, and Maruho will consider any such comments in good faith, use Commercially Reasonable Efforts to incorporate such comments, and finalize such amended Development Plan. Once Maruho has considered, and to the extent applicable, incorporated any comments by Evommune, and finalized such amended Development Plan (but in no case later than [***] days from receipt of such comments), it shall provide Evommune with a copy of such amended Development Plan, which will become effective and supersede the previous Development Plan upon Evommune’s receipt or, if no comments are provided by Evommune, at the end of Evommune’s [***]-day comment period.

3.4 Evommune’s Development Responsibilities.

3.4.1 Initial Indication. The Parties acknowledge and agree that, as of the Effective Date, Evommune intends for the Initial Indication to be chronic spontaneous urticaria. Evommune shall use Commercially Reasonable Efforts to Develop the Product for chronic spontaneous urticaria as the Initial Indication, and shall keep Maruho reasonably informed regarding such efforts through the JSC; provided, however, that Evommune’s obligation to use Commercially Reasonable Efforts shall be deemed satisfied upon [***]. Notwithstanding the foregoing, Evommune shall have the right to change the Initial Indication; provided, however, that if Evommune changes the Initial Indication, Evommune shall provide Maruho with written notice of such change, and the Parties shall discuss in good faith [***]; and, if the Parties agree accordingly, the Parties shall [***]. For the avoidance of doubt, in the event that the Parties fail to reach an agreement regarding [***], then [***], provided, however, that, in such case, [***].

3.4.2 Multi-Regional Clinical Trials. In the event that Evommune elects to launch and conduct any multi-regional Clinical Trials for the Product in the Field (each, an “MRCT”), Evommune shall deliver to Maruho reasonable prior written notice of such proposed MRCT (including that Evommune shall use reasonable efforts to deliver such notice no less than [***] prior to the initiation of any MRCT, and Evommune shall use reasonable efforts to provide notice sooner if Evommune determines to pursue an MRCT prior to [***] in advance of any MRCT), and the Parties shall discuss in good faith whether any country(ies) in the Territory will be included in such MRCT. Without limiting the generality of the foregoing, the Parties acknowledge and agree that Evommune shall conduct an MRCT for the Product for the Initial Indication, and if the Parties mutually agree to include any country(ies) in the Territory in such MRCT , then each such country shall be included in such MRCT; provided that [***], including, without limitation, with respect to [***]. With respect to any MRCT in which the Territory is included (including, without limitation, the MRCT for the Product for the Initial Indication), Maruho shall conduct, at its sole cost, all Territory-specific components of such MRCT, including, without limitation, requirements of any Regulatory Authority such as non-clinical studies and/or chemistry, manufacturing, and controls (CMC) requirements, and, as between the Parties, the other costs associated with such MRCT shall be [***]. In the event that the Parties agree that the Territory shall be included in such MRCT, then Evommune shall keep Maruho reasonably informed regarding the proposed formulation of the Product for such MRCT, and the advice and suggestions of Maruho with respect to such proposed formulation shall be taken into consideration in good faith by Evommune. In the event that the Regulatory Authority in the Territory requires a different formulation of the Product than that proposed by Evommune for the purpose of such MRCT, Evommune shall use good faith efforts to perform any additional Development work with respect to such formulation reasonably necessary to satisfy the applicable Regulatory Authority, provided, however, that (a) such additional Development work shall be at Maruho’s cost, and (b) Evommune does not, and shall not, provide any representations or warranties, whatsoever, whether express or implied, with respect to whether such formulation will be acceptable to the applicable Regulatory Authority in the Territory.

 

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3.4.3 Local Dose Finding Study(China). Maruho shall, in accordance with the Development Plan, confirm whether the Regulatory Authority in China will require a Phase IIb Clinical Trial with a Chinese population as a local dose finding study for any Product in the Field in China (the “Local Dose Finding Study (China)”).

3.4.4 Other Studies and Clinical Trials. For the avoidance of doubt, the Parties acknowledge and agree that, as between the Parties, Evommune has the sole right to conduct worldwide non-clinical studies and/or Clinical Trials outside the Territory (and, for the avoidance of doubt, outside the Field within the Territory), in each case, at its own cost; provided, however, that, notwithstanding the foregoing right, the Parties acknowledge and agree that Maruho’s exercise of its rights under the First Sublicense Agreement shall not constitute a breach of this Section 3.4.4 and, for the avoidance of doubt, Maruho’s exercise of its rights under this Agreement shall not constitute a breach of Section 3.4.4 of the First Sublicense Agreement.

3.5 Records, Reports, and Information.

3.5.1 Status Updates in the Territory. In addition to the obligations set forth in Section 4.1.4, within [***] days of the conclusion of each Calendar Quarter during the Term, Maruho shall provide Evommune (and/or Dermira or Lilly, upon Evommune’s request) with reports detailing the Development Activities under the Development Plan and the results thereof and any Arising IP that was developed or generated during such Calendar Quarter as a result of Maruho’s activities under this Agreement and is reasonably deemed by Maruho to be sufficiently mature and describable so as to be reportable under this provision. Without limiting the foregoing, Maruho shall promptly (and, in any event, within [***] Business Days of receipt) provide to Evommune copies of any material documents or correspondence received from any Regulatory Authority related to Development Activities [***].

 

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3.5.2 General. Maruho shall, and shall cause each of its Related Parties to, maintain current and accurate records of all work conducted by it under the Development Plan and all data and other information resulting from such work (which records shall include, as applicable, books, records, reports, research notes, charts, graphs, comments, computations, analyses, recordings, photographs, computer programs, and documentation thereof (e.g., samples of materials and other graphic or written data generated in connection with the Development Activities)). Such records shall properly reflect all work done and results achieved in the performance of the Development Activities in sufficient detail and in good scientific manner appropriate for regulatory and patent purposes. Maruho shall document all preclinical studies and Clinical Trials to be conducted pursuant to the Development Plan in formal written study reports according to applicable national and international (e.g., ICH, GCP, and GLP) guidelines.

3.5.3 Access to Records. Evommune shall have the right to review all records under the Development Plan maintained by Maruho at reasonable times, upon written request, in accordance with Section 7.11. [***].

3.6 Development Diligence Failures. If Maruho fails to satisfy the requirements set forth in this Article 3 with respect to the Development of at least one (1) Product in the Territory or, if applicable, any New Indication in any country in the Territory or if Maruho is not using Commercially Reasonable Efforts with respect to the Development of at least one (1) Product in the Territory or, if applicable, any New Indication in any country in the Territory, then Evommune shall have the right to terminate this Agreement with respect to such Product in such country in the Territory upon written notice if Maruho fails to cure such breach within [***] days following delivery by Evommune of any written notice of such breach.

ARTICLE 4

REGULATORY

4.1 Regulatory Filings and Regulatory Approvals.

4.1.1 General Responsibilities; Ownership of Regulatory Approvals. Maruho shall be responsible for the preparation of all Regulatory Materials necessary or desirable for obtaining and maintaining the Regulatory Approvals for the Products in the Field in the Territory (including in connection with Patient Information Leaflets, labeling, and packaging for the Products in the Field in the Territory) at its discretion (but, for clarity, in accordance with the terms of this Agreement and all Applicable Laws), and Maruho shall submit such Regulatory Materials, as applicable, to the applicable Governmental Authorities in the Territory. For clarity, to the extent allowed by Applicable Laws, all Regulatory Approvals for the Products in the Field in the Territory shall be held and owned by Maruho or Maruho’s designated Related Party in such Person’s name; provided, that if any Regulatory Approval for the Products in the Field in the Territory is held and owned by a Related Party of Maruho, the agreement between Maruho and such Related Party shall explicitly provide Evommune the right to enforce the provisions of Section 14.2 of this Agreement with respect to Regulatory Approvals against such Related Party. Maruho shall use Commercially Reasonable Efforts to obtain and maintain Product Approvals and all other Regulatory Approvals for at least one (1) Product in the Territory and any New Indication that Maruho elects to Develop in accordance with Section 3.1.2 in the Field in the Territory. Upon Maruho’s request and at Maruho’s expense, Evommune shall provide reasonable assistance and cooperation in connection with the regulatory matters relating to the Product in the Field in the Territory contemplated by this Article 4.

 

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4.1.2 Pricing Approvals. Maruho shall (to the extent permitted by Applicable Laws and if applicable) be solely responsible for (and shall use Commercially Reasonable Efforts toward) obtaining and maintaining Pricing Approvals for the Products in the Field in the Territory, and shall, as quickly as commercially practicable (for the avoidance of doubt, subject to Applicable Laws) apply for Pricing Approvals following the receipt of the Product Approval for any Product in the Field in the Territory.

4.1.3 Cost of Regulatory Activities. All regulatory costs incurred in connection with the preparation of Regulatory Materials for, and obtaining of Product Approvals in, the Field in the Territory for the Products shall be borne solely by Maruho, and Maruho shall be responsible for all regulatory costs involved in the maintenance of all Regulatory Approvals for the Products in the Field in the Territory.

4.1.4 Reporting and Review. No later than [***] days following the conclusion of each Calendar Quarter during the Term and, additionally, upon [***] of a Product in the Field in the Territory, Maruho shall prepare and deliver to Evommune a written report summarizing: (a) all Development Activities conducted by or on behalf of Maruho in connection with the Product in the Field in the Territory during the preceding Calendar Quarter, (b) all Development Data and all other data and results arising the activities described in the foregoing (a), and (c) a written assessment of the results of such Development Activities (collectively the “Development Report”). Additionally, Maruho shall keep the JSC reasonably and regularly informed in connection with the preparation of all Regulatory Materials, Regulatory Authority review of Regulatory Materials, Regulatory Approvals, and Pricing Approvals, in each case with respect to each Product in the Field in the Territory. Maruho shall make appropriate personnel reasonably available to answer questions regarding the data and results described in the Development Report. Maruho acknowledges and agrees that Evommune shall have the right to keep Dermira and/or Lilly apprised of all Development and Commercialization efforts relating to any Product in the Field in the Territory to the extent required under the Dermira License, including that Evommune shall have the right to share the Development Report with Dermira and/or Lilly.

4.2 No Other Regulatory Filings. Except as otherwise expressly set forth in this Article 4, Maruho (and its Affiliates) shall not file any Regulatory Materials or Regulatory Approvals for any products other than the Products that are otherwise based on any Licensed Patents.

4.3 Pharmacovigilance and Medical Inquiries.

4.3.1 Pharmacovigilance. The Parties have agreed to enter into a global pharmacovigilance and safety agreement in accordance with the terms of the First Sublicense Agreement (the “PV Agreement”). The Parties will include pharmacovigilance and safety obligations arising under this Agreement in such PV Agreement, reasonably in advance of Initiation of the first Clinical Trial with respect to the Products in the Field in the Territory. Notwithstanding any provision to the contrary, Evommune shall be responsible for holding and maintaining a global safety database for the Products.

 

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4.3.2 Medical Inquiries for the Product. Maruho shall be responsible for, and shall use Commercially Reasonable Efforts to respond to, all medical questions or inquiries in the Field in the Territory, including all Product Complaints, with regard to any Products sold by or on behalf of Maruho (or any of its Related Parties), in each case in accordance with Applicable Laws and this Agreement. Maruho shall be responsible for handling all Product Complaints related to the Development, Commercialization, and Manufacture of the Products in the Field in the Territory, and Evommune shall refer all such Product Complaints to Maruho.

4.4 Regulatory Authority Communications Received by a Party.

4.4.1 General. Maruho shall promptly provide Evommune with copies of any action by, or notification or other information that it receives (directly or indirectly), and any other communications, from any Regulatory Authority that (a) raises any concerns regarding the safety or efficacy of the Products, (b) indicates or suggests a potential liability of either Party to Third Parties in connection with the Products, (c) is reasonably likely to lead to a recall, market withdrawal, or market notification with respect to the Products, or (d) relates to expedited and periodic reports of adverse events with respect to the Products or Product Complaints, and which may have an adverse impact on Regulatory Approval or the continued Commercialization of the Product. Maruho shall be solely responsible for responding to any such communications relating to the Products in the Field in the Territory; provided, however, that Evommune shall be entitled to review and provide comments on any proposed communication with any Regulatory Authority relating to the Product in the Field in the Territory, and Maruho shall consider all such comments in good faith; provided further, that, notwithstanding the foregoing, Maruho’s obligation to consult with Evommune shall be subject to Maruho’s good faith determination that the time required to so consult would not materially impair the availability of rights or remedies, or increase exposure, in connection with such communication.

4.4.2 Disclosures. In addition to its obligations under this Agreement, Maruho shall promptly disclose to Evommune (and, for clarity, Evommune shall have the right to disclose to Dermira and its designees in accordance with the Dermira License) the following regulatory information, without any translations (provided that Maruho shall reasonably cooperate in the event that a translation is desired):

(a) All material information pertaining to actions taken by Regulatory Authorities, in connection with the Products in the Field in the Territory, including any notice, audit notice, notice of initiation by Regulatory Authorities of investigations, inspections, detentions, seizures, or injunctions concerning the Products in the Field in the Territory, notice of violation letter (i.e., an untitled letter), warning letter, service of process, or other inquiry; provided, however, that Maruho shall be entitled to redact those portions thereof to the extent not related to the Product. Without limiting the generality of the foregoing, Maruho shall promptly inform Evommune of any inspections, proposed regulatory actions, investigations, or requests for information or a meeting by any Regulatory Authority with respect to the Products in the Field in the Territory.

 

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(b) All information pertaining to notices from Regulatory Authorities regarding non-compliance with Applicable Laws in connection with the Products in the Field in the Territory, including receipt of a warning letter or other notice of alleged noncompliance; provided, however, that Maruho shall be entitled to redact those portions thereof to the extent not related to the Products in the Field.

4.5 Meetings with Regulatory Authorities in the Territory. Maruho shall provide Evommune with reasonable advance notice of any meeting with any Regulatory Authority in the Territory regarding any Product in the Field, or any inspection to be conducted by any Regulatory Authority at any site which Clinical Trials with respect to any Product in the Field are being conducted by or on behalf of Maruho, and Evommune may elect to send one (1) person to participate as an observer (at Evommune’s sole cost and expense) in such meeting or inspection to the extent that the Applicable Law or Regulatory Authority permits. Additionally, upon Maruho’s request and at Maruho’s expense, Evommune shall attend any meeting with any Regulatory Authority in the Territory regarding any Product in the Field, provided that Maruho provides Evommune with adequate advance written notice of such meeting.

4.6 Recall, Withdrawal, or Market Notification of Product. In the event that any Governmental Authority threatens or initiates any action to remove any Product from the market in the Field in the Territory, or in the event that Maruho reasonably believes that an event, incident, or circumstance has occurred that may result in the need for a recall, market withdrawal, or other corrective action regarding the Product in the Field in the Territory, then Maruho shall notify Evommune promptly. Maruho shall determine whether to initiate any recall, withdrawal, or market notification of the Product in the Field in the Territory. Maruho shall use Commercially Reasonable Efforts to utilize a batch tracing system which will enable Maruho to identify, on a prompt basis, customers on a country-by-country basis within the Territory, where applicable, who have been supplied with Product of any particular batch, and to recall such Product from such customers as set forth in this Section 4.6. All costs and expenses associated with implementing a recall, withdrawal, or market notification with respect to the Products in the Field in the Territory shall be borne by Maruho, except in case such recall, withdrawal, or market notification arises as a direct result of Evommune’s breach of its obligations set forth in Article 6 and/or its gross negligence or willful misconduct (in which case, at Evommune’s reasonable cost).

4.7 Regulatory Diligence. In the event that Maruho determines at any time during the Term that it is not economically feasible to incur the costs necessary to obtain and maintain Regulatory Approval for any Product in the Field in any country in the Territory, Maruho shall promptly notify Evommune in writing of such determination and Evommune shall have the right to terminate this Agreement with respect to such Product in such country in the Territory.

ARTICLE 5

COMMERCIALIZATION

5.1 Commercialization in the Field in the Territory. Maruho shall be solely responsible, at its cost, for Commercializing each Product in the Field in the Territory, including in accordance with the terms of this Agreement. Maruho shall keep Evommune reasonably informed of such efforts through the JSC. For clarity, Maruho shall not be obligated to obtain Evommune’s prior written consent with respect to its Commercialization activities under this Article 5, provided that (a) such activities are conducted in accordance with a commercialization plan proposed by Maruho promptly following the Effective Date (and, for the avoidance of doubt, no later than [***] days thereafter) (as amended from time to time in accordance with Section 5.3, the “Commercialization Plan”), and (b) such Commercialization activities are not likely to have a material negative impact on the worldwide Commercialization of any Product in the Field. The initial Commercialization Plan shall set forth, at a minimum, [***]. Evommune shall have the right to provide comments on the initial Commercialization Plan, and Maruho will consider any such comments in good faith and use Commercially Reasonable Efforts to incorporate such comments. Without limiting the generality of the foregoing, and without limiting Maruho’s obligation to obtain Pricing Approvals in accordance with Section 4.1.2, Maruho shall, with the advice of Evommune, use Commercially Reasonable Efforts to obtain the most favorable pricing possible to maximize the economic value of the Products in the Territory, including taking into account [***], all in accordance with all Applicable Laws and customary pharmaceutical company practice.

 

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5.2 Maruho’s Performance.

5.2.1 Specific Commercialization Obligations. Without limiting the generality of the provisions of Section 5.1, Maruho:

(a) shall (i) use Commercially Reasonable Efforts to Commercialize each Product in the Field in the Territory, (ii) use Commercially Reasonable Efforts to maximize the commercial potential for each Product in the Field in the Territory, (iii) represent Products accurately and fairly, and (iv) act in good faith to maximize the economic value of Products in the Field in the Territory. The Parties acknowledge and agree that the use of Commercially Reasonable Efforts in accordance with the foregoing Section 5.2.1(a)(i) shall include, without limitation, Maruho’s compliance with and execution of the Commercialization Plan.

(b) shall not (i) utilize deceptive, misleading, or unethical business practices, or (ii) intentionally take any action or inaction that would reasonably be likely to prejudice the value of any Product.

(c) shall be solely responsible for (i) receiving, accepting, and filling orders for the Products in the Field in the Territory, (ii) handling all returns of the Products in the Field in the Territory, (iii) controlling invoicing, order processing, and collection of accounts receivable for the sales of the Products in the Field in the Territory, and (iv) distributing and managing inventory of the Products in the Field in the Territory.

(d) shall use Commercially Reasonable Efforts to launch each Product in the Territory as quickly as commercially practicable after all applicable Regulatory Approvals for the Products in the Territory have been obtained. Maruho shall use Commercially Reasonable Efforts to ensure that, once launched, each Product remains commercially available in the Territory for the duration of the Royalty Term.

 

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5.2.2 Commercialization Diligence Failures. If Maruho fails to satisfy the requirements set forth in Section 5.2.1 with respect to the Commercialization of any of the Products in the Field in any country in the Territory or Maruho is not using Commercially Reasonable Efforts with respect to the Commercialization of any of the Products in any country in the Territory, then Evommune shall have the right to terminate this Agreement with respect to such Product in such country in the Territory upon written notice if Maruho fails to cure such breach within [***] days following delivery by Evommune of any written notice of such breach.

5.3 Updating and Amending Commercialization Plan. Maruho shall, on an annual basis, review and update, as appropriate, the then-current Commercialization Plan to reflect any material changes, reprioritizations of, or additions to the Commercialization Plan. Maruho shall provide such updated Commercialization Plan to the JSC [***]. Evommune may, through the JSC, provide comments on such updated Commercialization Plan within [***] days of receipt, and Maruho will consider any such comments in good faith and use Commercially Reasonable Efforts to incorporate such comments and finalize the amended Commercialization Plan. Once Maruho has considered, and to the extent applicable, incorporated any comments by Evommune and finalized the amended Commercialization Plan (but in no case later than [***] days from receipt of such comments), it shall provide Evommune with a copy of such amended Commercialization Plan, which will become effective and supersede the previous Commercialization Plan upon Evommune’s receipt or, if no comments are provided by Evommune, at the end of Evommune’s [***]-day comment period.

5.4 Reports. Without limiting Maruho’s other reporting obligations hereunder, no later than [***] days following the conclusion of each Calendar Quarter during the Term, Maruho shall provide Evommune a reasonably detailed report regarding its significant Commercialization activities involving Products in the Field in the Territory, on a country-by-country basis, during the preceding Calendar Quarter.

5.5 No Unauthorized Sales. Maruho acknowledges and agrees that the license grant set forth in Section 2.1 does not include any right to Commercialize the Products outside the Territory, and, to the fullest extent permissible under Applicable Law, Maruho shall not, and shall not permit any Related Party to, and shall require its distributors not to, directly or indirectly: (a) distribute, market, promote, offer for sale, sell, or otherwise Commercialize any Product to any customer outside the Territory; or (b) sell, distribute, market, promote, offer for sale, deliver, tender, or otherwise Commercialize any Product to, or solicit Product sales from a customer, whether in or outside the Territory, if Maruho (or its Related Party, customer, or distributor, as applicable) knows or has a reasonable basis to conclude that such customer intends to resell or use such Product outside the Territory; provided, however, that, notwithstanding the foregoing restrictive covenants, the Parties acknowledge and agree that Maruho’s exercise of its rights under the First Sublicense Agreement shall not constitute a breach of this Section 5.5 and, for the avoidance of doubt, Maruho’s exercise of its rights under this Agreement shall not constitute a breach of Section 5.5 of the First Sublicense Agreement.

5.6 Promotional Materials.

5.6.1 Creation of Promotional Materials. Maruho will use Commercially Reasonable Efforts to create and develop Promotional Materials for the Products in the Field in the Territory in accordance with the Regulatory Approvals and Applicable Laws.

 

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5.6.2 No Inclusion of Evommune or Dermira Logos on Packaging and Promotional Materials. Notwithstanding anything to the contrary herein, neither Maruho nor any Related Party of Maruho shall use any of Evommune’s, Dermira’s, or their respective Affiliates’ trademarks, names, logos, or housemarks in connection with any Promotional Materials or the Product, without prior consent in the sole discretion of Evommune or Dermira, as applicable. Without limiting the foregoing, Maruho will take no action that will interfere with or diminish Evommune’s, Dermira’s, or their respective Affiliates’ rights in their respective trademarks, names, and logos, and if Evommune (or Dermira or Lilly) reasonably believes that the use of any trademarks, names, and logos by Maruho hereunder is interfering with or diminishing their respective rights, Evommune shall notify Maruho thereof in writing and the Parties shall discuss in good faith.

5.6.3 Maruho Ownership of Promotional Materials. During the Term, Maruho shall own all right, title, and interest in and to any Promotional Materials created by Maruho hereunder relating to the Products in the Field in the Territory, including copyrights, but excluding trademarks (including the Product trademarks), names, logos, and other marks that are owned by or on behalf of Evommune, Dermira, or their respective Affiliates.

5.6.4 Use of Promotional Materials Exclusively for the Product. The Promotional Materials shall be used by Maruho exclusively in connection with the Manufacturing and Commercialization of the Products in the Field in the Territory in accordance with the terms of this Agreement, and Maruho shall not use, or allow any other Person to use, any such Promotional Materials except as contemplated by this Agreement and in accordance with the terms hereof; provided, however, that Maruho hereby grants Evommune a perpetual, irrevocable, royalty-free, fully paid up license to use the Promotional Materials for use in connection with the Manufacture and Commercialization of the Products outside the Territory and/or outside the Field in the Territory, provided, further, that Evommune shall be solely responsible for its use of such Promotional Materials outside the Territory and/or outside the Field in the Territory and shall hold harmless Maruho and its Related Party from any claim or damage incurred by them arising from such use by Evommune outside the Territory and/or outside the Field in the Territory; provided, however, that, notwithstanding the foregoing covenants, the Parties acknowledge and agree that Maruho’s exercise of its rights under the First Sublicense Agreement shall not constitute a breach of this Section 5.6.4 and, for the avoidance of doubt, Maruho’s exercise of its rights under this Agreement shall not constitute a breach of Section 5.6.4 of the First Sublicense Agreement.

5.7 Product Trademarks and Product Trade Dress.

5.7.1 Product Trademarks. Maruho shall use Commercially Reasonable Efforts to Commercialize the Products in the Field in the Territory under the trademark and the trade dress selected by Maruho (the “Product Trademarks” and the “Product Trade Dress”, respectively). Notwithstanding the foregoing, in the event that Evommune or Dermira reasonably believes that the use or registration of the Product Trademarks or the use of the Product Trade Dress in a particular country in the Territory would be against the Applicable Laws of such country, or in conflict with any Third Party’s Intellectual Property in that country, based on a review of market research, regulatory research, legal searches, investigation results, and any other relevant information that may have been collected by either Party or Dermira that is relevant to the clearance for use and registration of a trademark or for use and registration of a trade dress, Evommune or Dermira, as applicable, shall present such concern to Maruho, and Maruho shall take such concern into consideration in good faith.

 

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5.7.2 Use and Ownership of Product Trademarks and Product Trade Dress. Maruho and its Related Parties shall use the Product Trademarks and Product Trade Dress in accordance with Regulatory Approvals, all Applicable Laws, and any brand guidelines to the extent delivered by Evommune to Maruho in advance of Maruho’s or its Related Party’s use of such Product Trademarks and/or Product Trade Dress. Maruho (and its Related Parties) shall use the Product Trademarks and Product Trade Dress pursuant to the terms of this Agreement to identify and in connection with the Commercialization of the applicable Products in the Field in the Territory. Except as set forth in Section 5.7.4, Maruho shall own and retain all rights to the Product Trademarks and Product Trade Dress (in each case, together with all goodwill associated therewith throughout the Territory). Maruho shall also own rights to any Internet domain names incorporating the Product Trademarks or any variation or part of such trademarks as its URL address.

5.7.3 Maintenance of Product Trademarks. During the Term, Maruho will use Commercially Reasonable Efforts to establish, maintain, and enforce the Product Trademarks in the Territory, and will bear all costs and expenses relating thereto.

5.7.4 Evommune Trademarks. Without limiting the generality of Section 5.6.2 and 5.7.1, upon Maruho’s request and solely to the extent that Evommune holds such rights in the Territory, Evommune shall grant to Maruho, without additional consideration, an exclusive, royalty-free license under the Evommune Trademark for use solely in connection with the Commercialization of the Product in the Field in the Territory. Notwithstanding any provision to the contrary, Evommune shall control the prosecution, maintenance, enforcement, and defense of all Evommune Trademarks, including in the Territory. Furthermore, upon Maruho’s reasonable request, Evommune shall consider in good faith whether to apply for registration of the Evommune Trademarks in the Territory for use in connection with the Products.

5.8 Sales Forecast. Within [***] days after the end of each Calendar Quarter, Maruho shall provide Evommune with a non-binding, good faith sales forecast, based on Maruho’s reasonable determination, for the Product in the Field in the Territory, on a country-by-country basis, for the subsequent [***] Calendar Quarters.

ARTICLE 6

MANUFACTURING

6.1 General. Evommune shall use Commercially Reasonable Efforts to Manufacture (or have Manufactured) Maruho’s reasonable requirements of the Products, in the form of brite stock, for non-clinical and/or clinical use in the Field in the Territory, in accordance with the terms of this Article 6. For the avoidance of doubt, Evommune shall have the right to subcontract or otherwise delegate all or a portion of its obligations under this Article 6 to a Third Party contractor, with prior notice to (but, for clarity, not consent or approval of) Maruho. The Parties have agreed to enter into a quality agreement in accordance with the terms of the First Sublicense Agreement (the “Quality Agreement”). The Parties will include the clinical supply obligations arising under this Agreement in such Quality Agreement, reasonably in advance of the Manufacture of any Products to be used in the Clinical Trials conducted by Maruho.

 

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6.2 Purchase Orders. Maruho shall, from time to time, place purchase orders for the Products for non-clinical and/or clinical use in the Field in the Territory (each, a “Purchase Order”). Maruho shall place such Purchase Orders at least [***] months prior to the requested date of delivery in accordance with Section 6.4 and in multiples of batch size. Evommune shall accept or reject such Purchase Orders within [***] Business Days of receipt, provided that Evommune shall use Commercially Reasonable Efforts to accept any reasonable Purchase Orders. Notwithstanding any provision to the contrary, Evommune shall not, on an annual basis, be obligated to Manufacture and deliver any more than [***] of any amounts of Products projected, as set forth in the most recent Development Plan, to be required in connection with the performance of any studies for such Calendar Year. If any term or condition contained in any Purchase Order is inconsistent with the terms of this Agreement, then the terms and conditions provided in this Agreement will control unless otherwise clearly agreed in writing by the Parties including expressly referencing the term and/or condition set forth in this Agreement that the Parties desire to amend or supersede in such Purchase Order (solely with respect to such Purchase Order).

6.3 Delivery Deviation. For purposes of this Article 6, delivery of one or more shipments that total between [***] and [***] of Product ordered pursuant to any Purchase Order shall constitute delivery of the full quantity of Product ordered hereunder, provided that the payment of the Purchase Price for such Products shall be made based on the actual quantity of Product delivered.

6.4 Delivery; Risk of Loss. Products will be delivered, transfer of title will occur, and risk of loss will be assumed by Maruho EXW Evommune’s designated manufacturing facility. Simultaneous with delivery of such Product, Evommune shall deliver to Maruho a certificate of analysis and certificate of compliance with respect to such Product.

6.5 Packaging and Labeling; Certain Other Manufacturing Activities. Notwithstanding anything to the contrary contained herein, Maruho or its designated Third Party shall be responsible (at its sole cost and expense), following the delivery of the Products to Maruho under Section 6.4 of this Agreement, with respect to all Products for non-clinical and clinical use, for labeling, packaging, handling, storage, quality control, quality assurance, and the testing and release aspects of Analytical Release Testing and Characterization and related activities, of such Products in connection with the foregoing (collectively, “Packaging and Labeling”), provided that, upon Maruho’s reasonable request, Evommune shall use Commercially Reasonable Efforts to provide, at Maruho’s reasonable cost, any information under Evommune’s control that is necessary or reasonably useful for performing the activities contemplated by this Section 6.5. Notwithstanding any provision to the contrary, Maruho or its designated Third Party shall ensure that all such Packaging and Labeling complies with Applicable Laws, GMPs, and the Specifications.

 

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6.6 Clinical Supply Warranties. Evommune represents and warrants to Maruho that, at the time of delivery of any Product in accordance with this Article 6, such Product shall (a) conform to the Specifications; (b) the ownership and title to such Product shall pass to Maruho free and clear of all security interests, loans, and other encumbrances; and (c) have been Manufactured in accordance with the terms of this Agreement and the Quality Agreement and all Applicable Laws and GMPs (except to the extent that Maruho is responsible for Packaging and Labeling in accordance with Section 6.5) (collectively, the “Clinical Supply Warranties”).

6.7 Acceptance and Rejection of Product for clinical use.

6.7.1 Maruho shall have the right to reject all or part of any shipment and delivery of Product it orders and receives from Evommune hereunder based on the grounds that such Products fail to conform to any of the Clinical Supply Warranties (such nonconformance, a “Defect,” and any unit with a Defect, “Non-Conforming Material”). Other than for Products delivered hereunder that have any Defects that cannot be timely discovered upon visual examination (“Latent Defects”), Maruho must deliver written notice to Evommune of any rejection permitted under this Section 6.7 for any Non-Conforming Material within [***] Business Days from delivery in accordance with Section 6.4. With respect to Non-Conforming Material with Latent Defects, Maruho must deliver written notice to Evommune of such Latent Defect within [***] Business Days from the date that Maruho becomes aware, or should have reasonably become aware, of such Latent Defect.

6.7.2 If a dispute arises as to where any Product constitutes Non-Conforming Material that is not resolved by good faith negotiating between the Parties within [***] days of delivery by Maruho of notice of Defect, then the matter (along with related samples, batch records, and/or other reasonable evidence) shall be submitted to an independent testing laboratory mutually agreed to by the Parties. The determination of the independent testing laboratory shall be binding upon the Parties, save for manifest error.

6.7.3 The cost and expenses of the laboratory that conducts the testing described above shall be borne by the Party deemed to be the cause of such non-conformance (or, if deemed conforming, then by Maruho), and if the cause cannot be determined, then such costs shall be shared equally between the Parties.

6.7.4 If the Parties agree or the independent laboratory confirms that any Product constitutes Non-Conforming Material, then Maruho, at its sole discretion, may decide whether, as its sole and exclusive remedy (except the remedy for third-party claims provided in Section 11.1 as limited by the last sentence of this Section 6.7.4), to (a) request replacement of such Non-Conforming Material, at no additional cost, or (b) if Maruho has already paid for such Non-Conforming Material, receive a credit or refund the payment to Maruho with respect to any Product subsequently delivered by Evommune to Maruho under this Article 6. Any Product that is determined to be Non-Conforming Material shall, at Evommune’s option, either be returned to Evommune at Evommune’s expense or destroyed by Maruho at Evommune’s expense, pursuant to Evommune’s written instructions. Notwithstanding any provision to the contrary, Evommune’s obligation to indemnify Maruho in accordance with Section 11.1 with respect to any Losses arising in connection with any and all Claims resulting or otherwise arising from Non-Conforming Material shall not exceed the greater of (i) the Purchase Price paid by Maruho with respect to such Non-Conforming Material, and (ii) the aggregate proceeds actually received by Evommune from its insurance provider with respect to such Claim (if any). For the avoidance of doubt, the foregoing clause (ii) shall not be deemed to expand, broaden, or change in any way the obligations set forth in Section 11.5.2.

 

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6.8 Commercial Manufacturing. Separate from the non-clinical and/or clinical supply obligations set forth in Sections 6.1 through 6.7, upon Maruho’s request, the Parties shall initiate good faith negotiations regarding commercial supply of the Products for Commercialization in the Field in the Territory, and Evommune shall supply the Products for Commercial use to Maruho.

6.9 Audits. In addition to the rights set forth in Section 7.11, to the extent permissible under any applicable manufacturing agreement between Evommune and its contract manufacturing organization (including subcontractor and/or external inspection organization) for the Compounds and/or the Products (the “Product CMO”), Maruho shall have the right to audit Evommune and the Product CMO (and the Product CMO’s applicable manufacturing site) to confirm compliance with the terms of this Agreement and Applicable Law; provided, however, that Evommune shall use Commercially Reasonable Efforts to include in any future agreement with a Product CMO a right for Maruho to audit such Product CMO in accordance with this Section 6.9.

6.10 Technology Transfer. For the avoidance of doubt, the Parties acknowledge and agree that nothing in this Agreement shall be construed to limit Maruho’s ability to Manufacture, or have Manufactured, Compound and/or Products itself or through any Third Party. Upon Maruho’s request and at Maruho’s cost, Evommune shall use Commercially Reasonable Efforts to conduct technology transfer to Maruho or its designee in a manner designed to enable Maruho or such designee to Manufacture the Compound and/or the Products in a manner substantially similar to Evommune prior to such technology transfer with respect to supply management and quality management. For clarity, Maruho’s designee for purposes of this Section 6.10 may be a manufacturer that is located outside of the Territory, provided that such designee Manufactures Compound and/or Products solely for Development and/or Commercialization of any Product by Maruho in the Field in the Territory. Additionally, if Maruho requests to use Evommune’s Product CMO, Evommune shall seek to cause such Product CMO to supply Compound and/or Products directly to Maruho on substantially similar terms and conditions as those between Evommune and such Product CMO, for the sole purpose of Development or Commercialization of the Products in the Field in the Territory, except with respect to Territory-specific requirements or other factors that differentiate Evommune’s supply arrangement with such Product CMO from Maruho’s supply arrangement with such Product CMO.

ARTICLE 7

PAYMENTS

7.1 Upfront License Fee. In consideration of the license and rights granted hereunder, Maruho shall pay Evommune a one-time and non-refundable upfront license fee in an amount equal to $7,000,000 (the “Upfront License Fee”) within ten (10) Business Days from the execution of this Agreement.

 

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7.2 Milestone Payments. In consideration of the license and rights granted hereunder, Maruho shall pay to Evommune each of the one-time milestone payments set forth in the table below (each, a “Milestone Payment”) upon the occurrence of the corresponding milestone set forth in such table with respect to any Product in the Field in the Territory (each, a “Milestone”). Maruho shall promptly notify Evommune in writing of, but in no event later than [***] Business Days after, the first occurrence of each Milestone (which notice shall specify the date of such occurrence) (each, a “Milestone Notice”), and Evommune shall use Commercially Reasonable Efforts to issue an invoice for such Milestone Payments; provided, however, that in no event shall a failure to deliver a Milestone Notice and/or an invoice relieve Maruho of its obligation to pay the applicable Milestone Payment when due pursuant to this Section 7.2. Maruho shall pay each Milestone Payment within [***] Business Days after the occurrence of the applicable Milestone.

 

Milestone

  

Milestone Payment

[***]    [***]
[***]    [***]
[***]    [***]
[***]    [***]
[***]    [***]
[***]    [***]
[***]    [***]

For the avoidance of doubt, the Parties acknowledge and agree that each Milestone Payment shall be payable one-time only, regardless of the number of times that the applicable Milestone is achieved, and shall be payable upon the first occurrence of the applicable Milestone.

7.3 Royalty Payment. In consideration of the license and rights granted hereunder, Maruho shall pay to Evommune a royalty in an amount equal to the sum of: (a) the aggregate royalty payment owed by Evommune to Dermira under the Dermira License with respect to all Products in the Field during the applicable period of time, multiplied by the Net Sales Ratio for such period of time; plus (b) [***] of Net Sales of all Products in the Field in the Territory during such period of time (collectively, the “Royalty Payment”). Exhibit B attached hereto sets forth an illustrative example of how to calculate the Royalty Payment.

7.4 Generic Competition; Loss of Exclusivity. On a country-by-country and Product-by-Product basis, if (a) during two consecutive Calendar Quarters for which Royalty Payments are payable hereunder for a particular Product, one or more products (excluding any products manufactured or sold by Maruho or its Related Parties) being sold in a particular country are Generic Products with respect to such Product, for a total market penetration exceeding [***] in the Field in the Territory, or (b) during the Royalty Term, (i) there is no Valid Claim claiming or covering such Product or Manufacture or use thereof in such country in the Territory (including the case that applicable Licensed Patents have not been issued) or the last to expire Valid Claim claiming or covering such Product or Manufacture or use thereof in such country in the Territory expires or becomes invalid and (ii) the Regulatory Exclusivity Period for such Product in such country in the Territory expires, then, in the case of (a) or (b), the royalty rate percentage set forth in Section 7.3(b) above shall, thereafter (for as long as such Generic Products are sold in such country in the Territory or there is no Valid Claim and no Regulatory Exclusivity with respect to such Product in the Field in such country in the Territory), be reduced by [***] (i.e., [***] from [***]), such market defined as approved pharmaceutical products which comprise a similar or identical active ingredient(s). Thereafter, with respect to such Product, if the Generic Product(s) market penetration falls below [***] during any two consecutive Calendar Quarters, or if any Patent claiming or covering such Product or Manufacture or use thereof is filed by or on behalf of either Party in such country in the Territory, or if Regulatory Exclusivity is granted with respect to such Product in such country in the Territory, then the royalty rate percentage set forth in Section 7.3(b) above shall be reinstated (i.e., to [***] from [***]) and shall apply thereafter. For purposes of this Section 7.4, “market” refers to the aggregate of the unit volume of the Generic Product(s) and the applicable Product in the applicable country in the Territory.

 

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7.5 Purchase Price. Evommune shall promptly invoice Maruho for the Purchase Price for all quantities of Product for clinical use delivered in accordance with Article 6. All undisputed amounts set forth in such invoices will be due and payable within [***] days of delivery of the invoice.

7.6 Payments.

7.6.1 General. Maruho shall make all payments required by this Article 7 by wire transfer of then immediately available funds into an account designated by Evommune, and shall make such payments by a U.S. entity from a bank account domiciled in the U.S. and in Dollars. Each payment of the Upfront License Fee and each Milestone Payment shall be nonrefundable and noncreditable against any other payments due hereunder.

7.6.2 Royalty Payments and Reports. Maruho shall pay the Royalty Payments on a Calendar Quarter basis, with respect to the aggregate Net Sales for such Calendar Quarter. At the end of each Calendar Quarter, Maruho shall calculate, separately for each Product, the Royalty Payments payable to Evommune pursuant to Section 7.3 for such Calendar Quarter, which amounts shall be converted to Dollars at such time in accordance with Section 7.8. Maruho shall pay to Evommune the Royalty Payment due for each Product for Net Sales during a given Calendar Quarter within [***] days after the end of such Calendar Quarter, provided that Evommune has delivered to Maruho, no later than [***] days following the conclusion of such Calendar Quarter, written notice of Net Sales of all Products in the Field worldwide, less Net Sales of the Products in the Field in the Territory, for such Calendar Quarter, and, provided further, that Maruho’s sole and exclusive remedy in the event that Evommune fails to deliver the foregoing notice within such [***] day period is that the due date for Maruho’s corresponding Royalty Payment and report shall be tolled for each day that such notice is delayed. Each Royalty Payment due to Evommune shall be accompanied by a report that sets forth information reasonably required to calculate the Royalty Payment due hereunder, including, without limitation, (a) a statement of the amount of aggregate gross sales of each Product in the Field (i) in the Territory as a whole and (ii) on a country-by-country basis, in each case, during the applicable Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars in accordance with Section 7.8), (b) an itemized calculation of Net Sales of each Product in the Field (A) in the Territory as a whole and (B) on a country-by-country basis, in each case, during the applicable Calendar Quarter, showing for both (A) and (B) deductions provided for in the definition of “Net Sales” during such Calendar Quarter, and (c) information showing the applicable royalty rate percentage applied in accordance with Section 7.3 (subject to Section 7.4, if applicable). Without limiting the generality of the foregoing, Maruho shall require its Related Parties (and any distributors) to account for their respective Net Sales, separately for each Product, and to provide such reports with respect thereto as if such Net Sales were made by Maruho. Notwithstanding any provision to the contrary, and without limiting the foregoing, the Parties shall collaborate in good faith to ensure that Maruho pays Evommune the Royalty Payment prior to the due date for any corresponding payments under the Dermira License and that Evommune has all information reasonably required with respect to the Product(s) in the Territory to satisfy its reporting obligations under the Dermira License.

 

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7.7 Taxes and Withholding.

7.7.1 VAT. The Parties agree to cooperate with one another and use reasonable efforts to ensure that value added tax or similar payment (“VAT”) in respect of any payments made by Maruho to Evommune under this Agreement does not represent an unnecessary cost in respect of payments made under this Agreement. For purposes of clarity, all sums payable under this Agreement shall be made by Maruho exclusive of VAT. In the event that any VAT is owing in any jurisdiction in respect of any such payment, Maruho shall pay such VAT, and (a) if such VAT is owing as a result of any action by Maruho, including any assignment or sublicense (including assignment to, or payment hereunder by, another Maruho-related entity or Affiliate), or any failure on the part of Maruho or its Affiliates to comply with Applicable Laws or filing or record retention requirements, that has the effect of modifying the tax treatment of the Parties hereto, then the payment in respect of which such VAT is owing shall be made without deduction for or on account of such VAT to ensure that Evommune receives a sum equal to the sum which it would have received had such VAT not been due or (b) otherwise, such payment shall be made after deduction of such VAT. In the event that any deducted VAT is later recovered by Maruho or an Affiliate, Maruho shall reimburse Evommune within [***] days for the deducted amount. For the sake of clarity, any increase in payments to Evommune under this Section 7.7.1 shall reflect only the incremental increase in VAT directly resulting from clause (a) above. In the event that any VAT is owed in any jurisdiction in respect of any such payment, Evommune will provide to Maruho tax invoices showing the correct amount of VAT in respect of such payments hereunder.

7.7.2 Withholding Tax Matters. Maruho shall not deduct or withhold any taxes from any amounts payable pursuant to this Agreement unless such deduction or withholding of taxes is required under Applicable Law. If any Applicable Law requires the deduction or withholding of any tax from such payments, then Maruho shall be entitled to make such deduction or withholding, and the sum payable by Maruho shall be increased as necessary so that after such deduction or withholding has been made, Evommune receives an amount equal to the sum it would have received had no such deduction or withholding been made, and, in accordance with Section 7.7.3, Evommune shall timely provide Maruho any documents controlled by Evommune that are reasonably necessary for Maruho to seek tax exemption.

 

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7.7.3 Tax Cooperation. To the extent Maruho is required to deduct and withhold taxes on any payments to Evommune, Maruho shall pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to Evommune an official tax certificate or other evidence of such withholding sufficient to enable Evommune to claim such payments of taxes. In the event that Maruho is required to deduct and withhold taxes on payments to Evommune, Maruho shall provide Evommune prompt notice and identify any forms controlled by Evommune that are reasonably necessary in order for Maruho not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Evommune shall provide to Maruho any completed tax forms that may be reasonably necessary for Maruho not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Evommune shall use Commercially Reasonable Efforts to provide any such tax forms to Maruho at least [***] days prior to the due date for any payments. If Maruho does not receive all or a part of such completed tax forms from Evommune by [***] Business Days prior to the due date for the applicable payment under this Agreement, Maruho may extend such due date until [***] days after the receipt of such tax forms, provided that, if (i) such extension goes beyond [***] days past the original due date for such applicable payment, and (ii) Evommune’s failure to provide any such tax forms is caused by or otherwise attributable to something outside of Evommune’s reasonable control, then Maruho shall make the outstanding payment to Evommune in accordance with the terms and conditions of this Agreement, and Evommune and Maruho shall work together in good faith to try to resolve the issue. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by Applicable Laws, of withholding taxes, VAT or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or VAT.

7.8 Currency Conversion. All payments hereunder shall be made in Dollars. For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than Dollars), any amount expressed in a foreign currency shall be converted into Dollars in a manner consistent with such Party’s normal practices used to prepare its audited financial statements for external reporting purposes, in accordance with GAAP, consistently applied, or by using a reputable source such as the Wall Street Journal or Reuters, at Evommune’s discretion.

7.9 Late Payments. Any amount required to be paid by a Party hereunder which is not paid on the date due shall bear interest at a rate equal to the 30-day U.S. dollar Prime rate effective for the date that payment was first due as reported by The Wall Street Journal [***] to the extent permitted by the Applicable Laws. Such interest shall be computed on the basis of a year of 360 days for the actual number of days payment is delinquent.

7.10 Records.

7.10.1 Maruho and its Related Parties shall keep full, true, and accurate records and books of account in reasonable detail and containing all particulars that may be necessary for the purpose of confirming the accuracy of, and calculating, as applicable, all Royalty Payments and other amounts payable to Evommune hereunder (including records of Net Sales), any records required by Applicable Law or for intellectual property protection purposes with respect to the Compound and Products, and any other records reasonably required to be maintained with respect to Maruho’s obligations under this Agreement, during the Term and for [***] years thereafter or such longer period as required by Applicable Laws. Maruho and its Related Parties shall maintain internal accounting controls sufficient to provide reasonable assurances that all transactions are executed in accordance with management authorization and recorded as necessary to permit the preparation of financial statements that conform to generally accepted accounting principles, that access to assets is permitted only in accordance with management authorization, and that recorded accountability for assets is compared to existing assets regularly and appropriate action is taken for any differences.

 

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7.10.2 Evommune shall keep full, true, and accurate records and books of account in reasonable detail and containing all particulars that may be necessary for the purpose of confirming the accuracy of, and calculating, as applicable, the Purchase Price for all Compound and/or Products supplied in accordance with Article 6, as well as the aggregate royalty payment owed by Evommune to Dermira under the Dermira License during the Royalty Term, during the Term and for [***] years thereafter or such longer period as required by Applicable Laws.

7.11 Audits. Each Party shall have a right to request an audit of the other Party in order to confirm the accuracy of the records described in Section 7.10 and to otherwise confirm that such other Party is complying with the terms of this Agreement and Applicable Law (an “Audit”), including with respect to financial matters and supply management matters, solely to the extent permissible under applicable third-party agreements and consistent with any duties or obligations of confidentiality owed to any Third Party; provided, however, that each Party shall only have the right to request such Audit one time during any given Calendar Year, except that Evommune shall have the right to request such Audit more frequently in connection with compliance of Section 10.5 or otherwise upon good reason. Upon the written request by either Party to Audit the other Party, the requesting Party shall have the right to engage an independent, internationally recognized accounting firm reasonably acceptable to the audited Party that has executed a reasonably acceptable nondisclosure agreement with the audited Party to perform a review as is reasonably necessary to enable such accounting firm to calculate or otherwise confirm the accuracy of all amounts payable in accordance with this Article 7 for the Calendar Year(s) requested by the requesting Party; provided that (a) such accountants shall be given access to, and shall be permitted to examine such books and records of the audited Party upon [***] Business Days’ prior written notice to the audited Party, and at all reasonable times on such Business Days, (b) prior to any such examination taking place, such accountants shall enter into a confidentiality agreement with the audited Party reasonably acceptable to the audited Party in order to keep all information and data contained in such books and records strictly confidential and shall not disclose such information or copies of such books and records to any third person including the requesting Party, but shall only use the same for the purpose of the reviews and calculations that they need to perform in order to determine any amounts being reviewed, and (c) such accountants shall use reasonable efforts to minimize any disruption to the audited Party’s business. The audited Party shall make personnel reasonably available during regular business hours to answer queries on all such books and records required for the purpose of the Audit. The accountants shall deliver a copy of their findings to each of the Parties within [***] Business Days of the completion of the review, and, in the absence of fraud or manifest error, the findings of such accountant shall be final and binding on each of the Parties. Any underpayments by Maruho shall be paid to Evommune within [***] Business Days of notification of the results of such inspection. Any overpayments made by Maruho shall be refunded by Evommune within [***] Business Days of notification of the results of such inspection. The cost of the accountants shall be the responsibility of the requesting Party unless the accountants’ calculation shows a discrepancy of greater than [***] with respect to amounts paid/owed, in which case, the audited Party shall reimburse the requested Party for the cost of the Audit. For clarity, Dermira shall also have the right to audit Maruho, mutatis mutandis, in accordance with this Section 7.11, and, additionally, each Party’s rights relating to audits of the other Party with respect to quality assurance matters and pharmacovigilance matters shall be set forth in the Quality Agreement and the PV Agreement, respectively.

 

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ARTICLE 8

INTELLECTUAL PROPERTY MATTERS

8.1 Ownership.

8.1.1 Licensed Technology. As between Evommune and Maruho, Evommune is the sole and exclusive owner of the Licensed Technology. Evommune shall: (a) prosecute and maintain the composition of matter patent set forth on Schedule 1.48 in the Field in China during the Term; (b) use Commercially Reasonable Efforts to prosecute and maintain all other Licensed Patents in the Field in each country in the Territory during the Term; and (c) use Commercially Reasonable Efforts to file new patent applications (including, for clarity, international patent applications in international phase, and also including provisionals, re-examinations, continuations, continuations-in-part, extensions, term restorations, renewals, divisionals, reissues, or renewals) in any country in the Territory with the good faith intention, but not the guarantee, of advancing the business goals of the Parties pursuant to this Agreement and that would otherwise constitute Licensed Patents subject to the license grant set forth in Section 2.1.

8.1.2 Arising IP.

(a) Maruho shall be the sole and exclusive owner of any Intellectual Property that Maruho, and/or any of its Affiliates and/or Third Parties engaged by Maruho or its Affiliates to perform any services from which Intellectual Property is and/or can be discovered and/or developed, develops or generates (in accordance with a determination of inventorship in accordance with U.S. patent law) under this Agreement during the Term (collectively, the “Arising IP”), including, without limitation, (i) all data (including pre-clinical, clinical, technical, chemical, safety, and scientific data and information), Know-How, and other results generated as a result of the Development Activities conducted by Maruho under this Agreement, including relevant laboratory notebook information, screening data, Regulatory Data, and synthesis schemes, including descriptions in any form, data, and other information (collectively, the “Development Data”), (ii) all marketing and sales data and information resulting from Maruho’s Commercialization of the Products in the Field in the Territory during the Term (the “Commercialization Data”), including promotional materials, marketing strategies, and market research data, and (iii) Product Trademarks and Product Trade Dress (but not including, for the avoidance of doubt, the Evommune Trademark). Maruho shall provide Evommune with written notice upon the development and/or generation of any Arising IP in accordance with Section 3.5.1. For clarity, Maruho shall have sole decision-making authority for all actions, at its sole cost and expense, relating to the Arising IP in the Field in each country in the Territory, including Patent prosecution, defense, enforcement, listing in regulatory publications, and Patent Term Extension.

 

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(b) Notwithstanding any provision to the contrary, Maruho hereby grants, and shall grant, to Evommune a perpetual, irrevocable, exclusive, fully-paid up, royalty-free, transferable license, with the right to grant sublicenses (including through multiple tiers), under the Arising IP (including, for the avoidance of doubt, the Development Data and the Commercialization Data) to (i) Commercialize the Compound and/or any Product outside the Territory and/or outside the Field in the Territory, and/or (ii) Develop and/or Manufacture the Compound and/or any Product for the purpose of Commercialization of the Compound and/or such Product outside the Territory and/or outside the Field in the Territory. (For the avoidance of doubt, Maruho acknowledges and agrees that it has no intention, as of the Effective Date and/or in the future, to file and/or prosecute any patent application relating to any Arising IP or to Commercialize any products using the Arising IP outside the Territory or outside the Field in the Territory.) The foregoing license grant shall include a Right of Reference with respect to the Development Data, Commercialization Data, and any other Arising IP and the Product Approval for any Product in the Field in the Territory, for use outside of the Field in the Territory or otherwise outside of the Territory. For the avoidance of doubt, except as set forth in the First Sublicense Agreement, Evommune shall have the sole and exclusive (even as to Maruho and its Affiliates) right (but not obligation) to file, prosecute, maintain, defend, and enforce Patents, at Evommune’s cost, that claim Arising IP and/or otherwise cover the Products (x) outside the Territory, and/or (y) outside the Field in the Territory; provided, however, that, notwithstanding the foregoing right, the Parties acknowledge and agree that Maruho’s exercise of its rights under Section 8.1.2(a) of the First Sublicense Agreement shall not constitute a breach of this 8.1.2(b) and, for the avoidance of doubt, Maruho’s exercise of its rights under Section 8.1.2(a) of this Agreement shall not constitute a breach of Section 8.1.2(b) of the First Sublicense Agreement. Upon Evommune’s request, Maruho shall reasonably cooperate and provide assistance in connection with any such filing, prosecution, maintenance, defense, and/or enforcement activities by or on behalf of Evommune contemplated by the immediately preceding sentence, at Evommune’s reasonable cost.

8.2 Patent Filing, Prosecution, and Maintenance. Subject to the terms and conditions of this Agreement, as between Evommune and Maruho, Evommune shall have sole decision-making authority for all actions, at its sole cost and expense, relating to the Licensed Patents, including Patent prosecution, defense, enforcement, listing in regulatory publications (such as the FDA Orange Book and any foreign equivalent), and Patent Term Extension. Evommune shall (a) provide Maruho in advance, with written notice and copies of all Licensed Patents in each country in the Territory and other material submissions and correspondence with government agencies concerning such Licensed Patents in each country in the Territory, including that Evommune shall provide Maruho in advance with written notice and copies of proposed new patent applications (including, for clarity, international patent application in international phase, and also including provisionals, re-examinations, continuations, continuations-in-part, extensions, term restorations, renewals, divisionals, reissues, or renewals) in any country in the Territory that would otherwise constitute Licensed Patents subject to the license grant set forth in Section 2.1, (b) provide Maruho and its patent counsel an opportunity to consult with Evommune and its patent counsel regarding the contents of any such Licensed Patents, and the advice and suggestions of Maruho and its patent counsel shall be taken into consideration in good faith by Evommune and its patent counsel, and (c) not settle, without Maruho’s prior written consent (not to be unreasonably withheld, conditioned, or delayed), in a manner that will materially adversely affect any of Maruho’s rights under this Agreement.

 

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8.3 Abandoned Patents. In the event that Evommune elects, in its sole discretion, to discontinue Patent prosecution and/or maintenance of any Licensed Patent in any country in the Territory, on a Patent-by-Patent basis. Evommune shall give prompt notice, of at least [***] days prior to the deadline for the next filing, office action, or payment with the relevant patent office, to Maruho. Maruho will have the option, but not the obligation, to assume control of such Patent prosecution and/or maintenance, at Maruho’s cost (but for no additional consideration) and in Evommune’s (or Dermira’s, as applicable) name, by delivering to Evommune written notice of such election within [***] days (and, for clarity, failure to deliver such notice shall be deemed an election to not assume control). Maruho acknowledges and agrees that if Maruho elects not to maintain such Licensed Patent in such country in the Territory, Dermira shall have the right to maintain such Licensed Patent in accordance with the Dermira License, and, in such case, Maruho shall reimburse Dermira for the reasonable cost of prosecuting and maintaining such Patent. If none of Evommune, Maruho, and/or Dermira elects to maintain such Licensed Patent in such country in the Territory, then, in the event that the Royalty Term for a given Product would have been longer but for the abandonment of such Licensed Patent (including taking into consideration any Patent Term Extension for such Licensed Patent), Maruho shall pay royalties in accordance with Section 7.3. during the Royalty Term and, following the expiration of the Royalty Term and until what would have been the expiration of the abandoned Licensed Patent (plus any Patent Term Extension that would have been otherwise allowable), Maruho shall pay Evommune [***] of the royalty under Section 7.3. If Maruho provides written notice to Evommune within such [***] day period that Maruho has decided to prosecute or maintain such Licensed Patent, Maruho shall promptly deliver to Evommune copies of all filings and communications with the relevant patent office related to such Licensed Patent.

8.4 Notice. Each Party shall promptly, within [***] days of becoming aware, provide written notice to the other Party reasonably detailing any known or alleged infringement of any Licensed Patent in any country in the Territory (an “Infringement Notice”).

8.5 Enforcement of Intellectual Property Rights.

8.5.1 As between the Parties, Evommune shall have the first right (but not obligation), at its cost, to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating any Licensed Patent covering the Compound or any Product in the Field in any country in the Territory, and to defend the Licensed Patents in any country in the Territory from any claim of invalidity or unenforceability in connection therewith (collectively, to “Enforce the Licensed Patents”). Evommune shall keep Maruho reasonably informed with respect to any such proceedings (such proceedings, “Enforcement Proceedings”). Notwithstanding any provision to the contrary and for the avoidance of doubt, neither Evommune nor Dermira shall incur any liability to Maruho as a consequence of such Enforcement Proceeding or any unfavorable decision resulting therefrom, including any decision holding any such claim invalid, not infringed, or unenforceable. All amounts recovered from an Enforcement Proceeding contemplated by this Section 8.5.1 shall be first used to reimburse each Party’s (and, if applicable, Dermira’s) reasonable out-of-pocket costs and expenses incurred in connection with such action, then paid to Dermira in accordance with its right to such proceeds under Section 8.5 of the Dermira License, and any remainder shall be allocated as follows: [***] to Evommune and [***] to Maruho. For the avoidance of doubt, Evommune reserves on behalf of Dermira all of Dermira’s rights to institute and direct legal proceedings against any Third Party believed to be infringing or misappropriating or otherwise violating Dermira’s Know-How, Patents, and confidential information (including to the extent included in the Licensed Technology).

 

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8.5.2 Subject to the provisions of Section 8.5.3, in the event that Evommune fails to take any action to Enforce the Licensed Patents within [***] days of delivery of Infringement Notice, then Maruho shall have the right (but not obligation) to Enforce the Licensed Patents; provided, however, that, in the event that Maruho desires to Enforce the Licensed Patents, Maruho shall only proceed with such Enforcement Proceedings if (a) it has a bona fide and documented interest in maintaining the patent claims in the applicable Licensed Patents, (b) it has a reasonable chance of success on the merits in the view of outside patent counsel as shared with Evommune, and (c) it proceeds with such Enforcement Proceeding using Commercially Reasonable Efforts. Maruho shall keep Evommune reasonably informed with respect to any such Enforcement Proceedings. All amounts recovered from an Enforcement Proceeding contemplated by this Section 8.5.2 shall be first used to reimburse each Party’s (and, if applicable, Dermira’s) reasonable out-of-pocket costs and expenses incurred in connection with such action, then paid to Dermira in accordance with its right to such proceeds under Section 8.5 of the Dermira License, and any remainder shall be allocated as follows: [***] to Maruho and [***] to Evommune.

8.5.3 Notwithstanding any provision to the contrary, Maruho acknowledges and agrees that, in the event that neither Evommune nor Maruho takes any action to Enforce the Licensed Patents within [***] days after delivery of an Infringement Notice, Dermira shall have the right to Enforce the Licensed Patents in accordance with Section 8.5 of the Dermira License. All amounts recovered from Dermira’s activities contemplated by this Section 8.5.3 and paid to Evommune in accordance with the terms of the Dermira License shall be first used to reimburse each Party’s reasonable out-of-pocket costs and expenses incurred in connection with such action, and any remainder shall be allocated as follows: [***] to Evommune and [***] to Maruho.

8.6 Cooperation in Enforcement Proceedings. For any action by Evommune pursuant to Section 8.5.1 or Dermira pursuant to Section 8.5.3, in the event that Evommune or Dermira is unable to initiate or prosecute such action solely in its own name, Maruho or its Affiliates, as applicable, will join such action voluntarily and will execute all documents necessary for Evommune or Dermira to initiate, prosecute, and maintain such action, at Evommune’s reasonable cost (which is to be deducted from the amounts recovered from such proceeding, and the rest shall be reimbursed to Maruho, if applicable). If Evommune or Dermira initiates an enforcement action pursuant to Section 8.5, then, at Evommune’s or Dermira’s request, Maruho shall cooperate to the extent reasonably necessary and at Evommune’s sole expense for reasonable, out-of-pocket costs (except for the expenses of Maruho’s counsel, if any). Upon the reasonable request of Evommune or Dermira, Maruho shall join the suit and can be represented in any such legal proceedings using counsel of its own choice at its own expense. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to any such action.

8.7 Defense. Each Party shall notify the other in writing of any allegations it receives from a Third Party that the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of any Products in any country in the Territory, or any technology or Intellectual Property licensed under this Agreement, infringes the Intellectual Property of such Third Party. Such notice shall be provided promptly, but in no event after more than [***] Business Days, following receipt of such allegations.

 

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In the event that a Party receives notice that it or any of its Affiliates or Sublicensees have been individually named as a defendant in a legal proceeding by a Third Party alleging infringement of a Third Party’s Patents or other Intellectual Property as a result of the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in any country in the Territory, or any technology or Intellectual Property licensed under this Agreement, such Party shall promptly notify the other Party in writing, but in no event more than [***] Business Days after the receipt of such notice. Such written notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Each Party shall, if possible, assert and not waive the joint defense privilege with respect to all communications between the Parties reasonably the subject thereof with respect to such legal proceeding. In such event, the Parties shall use reasonable efforts to agree how best to mitigate or control the defense of any such legal proceeding; provided, however, that, as between the Parties, Evommune shall have the right to assume the primary responsibility for the conduct of the defense of any such claim at its expense. Maruho shall have the right, but not the obligation, to participate and be separately represented in any such suit at its sole option and at its own expense. Maruho shall reasonably cooperate with and assist Evommune. If Maruho or any of its Affiliates or Sublicensees have been individually named as a defendant in a legal proceeding relating to the alleged infringement of a Third Party’s Patents or other Intellectual Property as a result of the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in any country in the Territory, Evommune shall be allowed to join in such action, at its own expense, and agrees to be joined (at Maruho’s expense) if Maruho reasonably believes that it is necessary to pursue a counterclaim or similar action.

The Parties shall keep each other informed of the status of and of their respective activities regarding any infringement litigation initiated by a Third Party concerning the Manufacture, production, use, Development, Commercialization, sale, and/or distribution of Products in the Field in any country in the Territory or settlement thereof; provided, however, that neither Party shall settle or enter into any consent judgment or other voluntary final disposition of a suit under this Section 8.7 without the consent of the other Party, which consent shall not be unreasonably withheld, conditioned, or delayed, in a manner that will materially adversely affect either Party’s rights under this Agreement.

8.8 Employees. To the extent allowed by Applicable Laws, each Party will require and cause all of its (and will cause each of its Affiliates performing on behalf of such Party under this Agreement to require and cause all of such Affiliate’s) employees to assign all Inventions that are developed, made, or conceived by such employees during the period of such employees’ employment with such Party (or the applicable Affiliate) to such Party (or the Affiliate performing on behalf of such Party under this Agreement) free and clear of all liens, encumbrances, charges, security interests, mortgages, or other similar restrictions, in order to enable the Parties to give effect to the provisions of Section 8.1. Each Party will also require and use Commercially Reasonable Efforts to cause any agents or independent contractors performing an activity pursuant to this Agreement to assign all Inventions that are developed, made, or conceived by such agents or independent contractors on behalf of such Party during the period of such agents or independent contractors’ relationship with such Party to such Party free and clear of all liens, encumbrances, charges, security interests, mortgages, or other similar restrictions, in order to enable the Parties to give effect to the provisions of Section 8.1.

 

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8.9 Patent Marking. Maruho shall mark the Products marketed and sold by Maruho (or its Related Parties) hereunder with appropriate patent numbers or indicia, if any.

8.10 Patent Challenge. To the fullest extent permissible under Applicable Law, each Party shall have the right to terminate this Agreement immediately upon written notice to the other Party if such other Party, directly or indirectly, (a) initiates or requests an interference or opposition proceeding with respect to, (b) makes, files, or maintains any claim, demand, lawsuit, or cause of action to challenge the validity or enforceability of, or (c) opposes any extension of, or the grant of a supplementary protection certificate with respect to, any Licensed Patent (if Evommune is the terminating Party) or Arising IP (if Maruho is the terminating Party). If any of the foregoing activities, as applicable, are commenced by a Related Party of such other Party, then each Party will also have the right to terminate this Agreement upon written notice to such other Party, effective [***] days after delivery, unless such other Party either terminates the rights of such Related Party with respect to this Agreement or causes such Related Party to, and such Related Party actually does, withdraw any such proceeding, claim, demand, lawsuit, cause of action, or opposition, in each case, within [***] days after delivery of such notice.

ARTICLE 9

JOINT STEERING COMMITTEE; GLOBAL DEVELOPMENT & COMMERCIALIZATION EFFORTS

9.1 JSC Formation. Promptly following the Effective Date, the Parties shall establish a joint steering committee (the “JSC”) consisting of up to three (3) representatives designated by each Party, with appropriate knowledge and expertise. The JSC shall operate in accordance with the provisions of this Article 9, and shall have no authority to alter or amend the terms and conditions of this Agreement. A Party may change one (1) or more of its representatives serving on the JSC at any time upon written notice to the other Party. Each Party may invite additional personnel of such Party to any regular or special JSC meeting; provided, however, any such additional invitee shall (a) not be deemed a member of the JSC; and (b) with respect to any Confidential Information of either Party such additional invitee learns, obtains, or otherwise has access to as a result of such invitation, be subject to confidentiality obligations and restrictions on use no less stringent than those set forth in Article 12, which such confidentiality obligations and restrictions on use shall be valid and enforceable by the Party whose Confidential Information is involved.

9.2 JSC Responsibilities. The JSC shall serve as a forum for the Parties to share information regarding the Development, Manufacture, and Commercialization of the Compound and/or Products in the Field in the Territory and to facilitate coordination between the Parties, but shall not have any decision-making authority with respect to the Parties’ activities under this Agreement. Additionally, Evommune shall share information relating to the Development and Commercialization of the Product outside of the Territory to the extent necessary or useful for Maruho to Develop, Manufacture, and/or Commercialization the Compound and any Product in the Field in the Territory.

 

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9.3 JSC Meetings. The JSC shall meet at such times and frequency mutually agreed by the Parties at locations mutually agreed by the Parties. As of the Effective Date, the Parties intend to meet, at a minimum, once each Calendar Quarter until the launch of the first Product in the Territory, and thereafter, once a Calendar Year during the Term. The JSC meetings may be held by audio or video teleconference at the request of either Party. Each Party shall bear its own costs associated with the attendance of its appointees at such meetings. A secretary shall be appointed for each meeting of the JSC and shall prepare draft minutes of the meeting promptly following the meeting and shall circulate such draft minutes for comment and finalization by the Parties.

9.4 JSC Coordination. The Parties acknowledge and agree that: (a) the Parties have established a joint steering committee pursuant to the First Sublicense Agreement (the “Existing JSC”); and (b) the Parties’ participation in the Existing JSC shall also satisfy the obligations of the Parties with respect to the JSC contemplated in this Agreement so long as the Parties incorporate all responsibilities of the JSC in this Agreement into the activities of the Existing JSC in a manner that distinguishes between the activities of the Existing JSC pursuant to the First Sublicense Agreement, on the one hand, and pursuant to this Agreement, on the other hand.

9.5 Evommune’s Global Development and Commercialization Efforts. Upon Evommune’s request, Maruho will reasonably participate, from time to time, in telephonic, video, and/or in-person meetings in connection with the operation of Evommune’s global development and commercialization program with respect to the Compound and the Products.

ARTICLE 10

REPRESENTATIONS, WARRANTIES, AND COVENANTS

10.1 Mutual Representations, Warranties, and Covenants. Each Party hereby represents, warrants, and covenants to the other Party as follows, as of the Effective Date:

10.1.1 Corporate Existence and Power. It is a company or corporation duly organized, validly existing, and in good standing (or its local law equivalent, to the extent applicable in the Territory) under the laws of the jurisdiction in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement, including the right to grant the licenses granted by it hereunder.

10.1.2 Authority and Binding Agreement. (a) It has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, (b) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder, and (c) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms, except as enforcement may be affected by bankruptcy, insolvency, or other similar laws and by general principles of equity.

 

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10.1.3 No Conflicts. The execution, delivery, and performance of this Agreement by it does not (a) conflict with any agreement, instrument, or understanding, oral or written, to which it is a party and by which it or its assets may be bound, or (b) violate any Applicable Laws.

10.1.4 All Consents and Approvals Obtained. Except with respect to Regulatory Approvals for the Development, Manufacturing, or Commercialization of the Products or as otherwise described in this Agreement, (a) all necessary consents, approvals, and authorizations of, and (b) all notices to, and filings by such Party with, all Governmental Authorities and other Persons required to be obtained or provided by such Party as of the Effective Date in connection with the execution, delivery, and performance of this Agreement have been obtained and provided, except for those approvals, if any, not required at the time of execution of this Agreement.

10.1.5 Compliance with Applicable Laws. During the Term, each Party shall comply with Applicable Laws in connection with the performance of the activities contemplated by this Agreement.

10.2 Additional Representations and Warranties of Evommune. Evommune hereby represents, warrants, and covenants to Maruho that:

10.2.1 As of the Effective Date, without limiting the generality of Section 10.1.1, Evommune has the right to grant the license set forth herein; provided, however, this Section 10.2.1 shall not be construed or deemed to be a representation or warranty regarding the infringement or other violation of the Intellectual Property of any Third Party.

10.2.2 As of the Effective Date, Evommune has not previously entered into any agreement pursuant to which it granted a license with respect to the Compound or any Product in the Field in the Territory, or under the Licensed Technology in the Field in the Territory, to any Third Party, which license grant remains in effect or which agreement has surviving license rights, or other surviving terms, that are inconsistent with the rights and licenses granted to Maruho under this Agreement.

10.2.3 As of the Effective Date, to the knowledge of Evommune: (a) no Third Party is infringing any Licensed Patents or has misappropriated any Evommune Know-How, (b) no Third Party has challenged the scope, duration, validity, enforceability, priority, or Evommune’s right to use or license any Licensed Technology with respect to the Compound or any Product in the Field in the Territory, and (c) use of the Licensed Technology as contemplated by this Agreement, in accordance with the terms of this Agreement, does not infringe or violate the Intellectual Property of any Third Party.

10.2.4 As of the Effective Date: Evommune has provided to Maruho, prior to the Effective Date, a complete and accurate copy of the Dermira License, and the Dermira License is in full force and effect, and, to the knowledge of Evommune, neither party thereto is in material breach of the Dermira License as of the Effective Date.

10.2.5 As set forth in Section 6.6, at the time of delivery of any Product in accordance with Article 6, such Product shall conform to the Clinical Supply Warranties.

 

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10.3 Additional Representations, Warranties, and Covenants of Maruho. Maruho hereby represents, warrants, and covenants to Evommune that, as of the Effective Date and throughout the Term:

10.3.1 Without limiting the generality of Section 10.1.5: (a) Maruho’s compensation programs for its Sales Representatives will not provide financial incentives for the promotion, sales, and marketing of the Products in violation of any Applicable Laws or any professional requirements, and (b) all Products Commercialized or Manufactured by, or under authority of, Maruho in the Territory shall be packaged, labeled, handled, stored, and shipped by Maruho in compliance with all Applicable Laws, including GMPs.

10.3.2 Maruho’s medical, regulatory, and legal teams will be properly qualified to review, and will review, all Training Materials and programs prior to use by Maruho to ensure that all Training Materials and programs are in accordance with the Regulatory Approvals and Applicable Laws.

10.4 Financial Representations, Warranties, and Covenants of Maruho.

10.4.1 Financial Status. Maruho hereby represents, warrants, and covenants to Evommune that, as of the Effective Date and throughout the Term, Maruho has and shall have the financial wherewithal to perform its obligations under this Agreement. Maruho shall promptly notify Evommune of any material adverse change to said financial wherewithal that is adversely impacting, or will adversely impact, Maruho’s ability to perform, or to continue to perform, such obligations. Any such notice will include a description of Maruho’s short- and long-term plans to remediate its current financial situation and to mitigate any impact on the performance of its obligations hereunder. Maruho shall provide Evommune regular updates regarding such remediation plans.

10.4.2 Financial Statements.

(a) As soon as available, but in any event no later than the time of delivery to Maruho’s third-party investors, Maruho shall provide to Evommune a copy of its income statement for such fiscal year, its balance sheet as of the end of such year, and its statement of cash flows for such fiscal year of Maruho and its Affiliates, in each case in the same form provided to Maruho’s third-party investors.

(b) As soon as available, but in any event within [***] days after the end of each of the first three (3) fiscal quarters of its fiscal year, Maruho shall provide to Evommune a copy of the unaudited consolidated balance sheet of Maruho and its Affiliates as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter.

(c) All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied (except as approved by such accountants or Chief Financial Officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

 

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10.5 Compliance Representations, Warranties, and Covenants by each Party. Without limiting the generality of Section 10.1.5:

10.5.1 Compliance with Laws. In connection with this Agreement, each Party and its Affiliates and their respective owners, directors, officers and employees, and to its knowledge, its agents, representatives, subcontractors, and any other Third Party acting for or on such Party’s behalf (collectively, “Representatives”) have complied and will comply with all Applicable Laws and industry codes, including those dealing with government procurement, conflicts of interest, corruption or bribery, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, any anti-corruption or anti-bribery laws in jurisdictions where it operates, and any laws enacted to implement the Organisation of Economic Cooperation and Development Convention on Combating Bribery of Foreign Officials in International Business Transactions (collectively, “Anti-Corruption Laws”), and all Applicable Laws related to sanctions and trade controls, including but not limited to any sanctions or export control laws administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control, U.S. Department of State, U.S. Department of Commerce, the United Nations Security Council, or other relevant sanctions authority (collectively, “Trade Laws”), and each Party has implemented and will maintain policies and procedures reasonably designed to ensure compliance with Anti-Corruption Laws and Trade Laws.

10.5.2 Prohibited Conduct. In connection with this Agreement, neither Party nor its Affiliates or their respective Representatives has made, offered, given, promised to give, or authorized, and neither Party nor its Affiliates or their respective Representatives will make, offer, give, promise to give, or authorize, any bribe, kickback, payment, or transfer of anything of value, directly or indirectly, to any person or to any Government Official for the purpose of (a) improperly influencing any act or decision of the person or Government Official, (b) inducing the person or Government Official to do or omit to do an act in violation of a lawful or otherwise required duty, (c) securing any improper advantage, or (d) inducing the person or Government Official to improperly influence the act or decision of any organization, including any government or government instrumentality, to assist Maruho or Evommune in obtaining or retaining business. If a Party becomes aware that any of its Representatives is (i) under investigation by any Governmental Authority for a breach of Anti-Corruption Laws, or (ii) acting in a manner prohibited by this Section 10.5.2, then such Party shall promptly notify the other Party (if the other Party is not yet aware of such potential breach); in the case of (ii) above, immediately terminate its relationship with such Representative; and, in the case of (i) above, conduct a prompt internal investigation of activities or circumstances giving rise to the investigation by such Governmental Authority with respect to such Representative. The investigating Party shall keep the other Party reasonably informed with respect to such internal investigation. Notwithstanding any provision to the contrary set forth in this Agreement, to the extent a Party has breached this Section 10.5.2 as a result of the conduct of its Representative(s) then compliance with the provisions of this Section 10.5.2 (including termination of such Party’s relationship with such Representative) will be deemed a cure of such breach.

10.5.3 Compliance with Privacy Laws. In connection with and to the extent applicable under this Agreement, each Party and any Person acting for or on its behalf, will comply with all Applicable Laws with respect to the receipt, collection, compilation, use, storage, processing, sharing, safeguarding, security (technical, physical, and administrative), disposal, destruction, disclosure, or transfer (including cross-border) of Personal Information, including providing any notice, obtaining any consent, or prior authorization, and conducting any assessment required under Applicable Laws.

 

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10.5.4 Requests for Information; Audits. Each Party will use Commercially Reasonable Efforts to comply with requests for disclosure of information, including answering questionnaires and audit inquiries, to enable the other Party to ensure compliance with all Applicable Laws, including Anti-Corruption Laws, Trade Laws, and this Agreement, and will comply with the terms of Section 7.11 with regard to any audit requested under that provision that relates to compliance with this Section 10.5.

10.5.5 Notice of Inspections. Each Party shall provide the other Party with immediate notice of any governmental or regulatory review, audit, or inspection of its facility, processes, or products that might relate to the subject matter of this Agreement. It shall provide the other Party with the results of any such review, audit, or inspection.

10.5.6 Cooperation in Investigation. Each Party agrees to cooperate in good faith to investigate the extent of any potential violations of Applicable Law, including Anti-Corruption Laws and Trade Laws, in connection with this Agreement, in case that it is reasonably suspected hereof.

10.5.7 Disclosure Rights. At any time, and without notice to the other Party, each Party may disclose information relating to a possible violation of Applicable Law, or the existence of the terms of this Agreement, including the compensation provisions, to a government agency and to anyone that it determines to have a legitimate need to know.

10.6 Additional Compliance Covenants.

10.6.1 Compliance with Party Specific Regulations. Each Party agrees to reasonably cooperate with the other Party, at such other Party’s expense, as may be reasonably be required to ensure that such other Party is able to fully meet its obligations with respect to the Party-Specific Regulations applicable to such other Party. Neither Party shall be obligated to pursue any course of conduct that would result in such Party being in material breach of any Party-Specific Regulation applicable to it or any other Applicable Law. All Party-Specific Regulations are binding only in accordance with their terms and only upon the Party to which they relate.

10.6.2 Compliance with Internal Compliance Codes. All Internal Compliance Codes shall apply only to the Party to which they relate. The Parties agree to cooperate with each other to ensure that each Party is able to comply with the substance of its respective Internal Compliance Codes and, to the extent practicable, to operate in a manner consistent with its usual compliance-related processes.

10.7 Disclaimer. Maruho understands that the Compound and the Products are the subject of ongoing non-clinical research and development and that Evommune cannot ensure the safety or usefulness of the Compound and/or the Products or that the Compound and/or the Products will receive Regulatory Approvals. In addition, Evommune makes no warranties except as set forth in this Article 10 concerning the Licensed Technology.

 

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10.8 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD-PARTY INTELLECTUAL PROPERTY, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

ARTICLE 11

INDEMNIFICATION

11.1 Indemnification by Evommune. Evommune hereby agrees to save, indemnify, defend, and hold Maruho, its Affiliates, and their respective directors, officers, agents, and employees harmless from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) arising in connection with any and all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, or injunctions by a Third Party (each, a “Claim”) to the extent resulting or otherwise arising from (a) any breach by Evommune of any of its representations, warranties, covenants, or obligations pursuant to this Agreement or (b) the negligence or willful misconduct by Evommune or its Affiliates, sublicensees, or subcontractors or their respective officers, directors, employees, agents, or consultants in performing any obligations under this Agreement, in each case except to the extent that such Losses are subject to indemnification by Maruho pursuant to Section 11.2; provided, however, the foregoing is subject to the limitation of liability set forth in Section 6.7.4 with respect to matters covered in Section 6.7.4.

11.2 Indemnification by Maruho. Maruho hereby agrees to save, indemnify, defend, and hold Evommune, its Affiliates, and their respective directors, agents, and employees harmless from and against any and all Losses arising in connection with any and all Claims to the extent resulting or otherwise arising from (a) any breach by Maruho of any of its representations, warranties, covenants, or obligations pursuant to this Agreement or any agreement between the Parties related to this Agreement, (b) the negligence or willful misconduct by Maruho (or its Affiliates, Sublicensees, or subcontractors) or their respective officers, directors, employees, agents, or consultants in performing any obligations under this Agreement, or (c) any matter, or acts or omissions, related to the Development, Manufacturing, Packaging and Labeling, or Commercialization of the Compound and/or the Products in the Field in the Territory (including, for clarity, any product liability Losses resulting therefrom) by or on behalf of Maruho (or its Affiliates, Sublicensees, or subcontractors) or their respective officers, directors, employees, agents, or consultants, in each case except to the extent that such Losses are subject to indemnification by Evommune pursuant to Section 11.1.

 

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11.3 Indemnification Procedures.

11.3.1 A Party believing that it is entitled to indemnification under, as applicable, Section 11.1 or Section 11.2 (an “Indemnified Party”) shall give prompt written notification to the other Party (the “Indemnifying Party”) of the commencement of any Claim for which indemnification may be sought or, if earlier, upon the assertion of any such Claim by a Third Party (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a Claim as provided in this Section 11.3.1 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually materially prejudiced as a result of such failure to give notice). Within [***] days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Claim with counsel reasonably satisfactory to the Indemnified Party. If a Party believes that a Claim presented to it for indemnification is one as to which the Party seeking indemnification is not entitled to indemnification under Section 11.1 or Section 11.2, as applicable, it shall so notify the Party seeking indemnification.

11.3.2 If the Indemnifying Party elects to assume the defense of such Claim, the Indemnified Party may participate in such defense at its own expense; provided, that if the Indemnified Party reasonably concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such Claim, the Indemnified Party shall have the right, at its own expense, to appoint its own counsel solely in connection with the defense of such Claim.

11.3.3 The Indemnifying Party shall keep the Indemnified Party advised of the status of such Claim and the defense thereof and shall consider recommendations made by the Indemnified Party with respect thereto.

11.3.4 The Indemnified Party shall not agree to any settlement of such Claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld. The Indemnifying Party shall not agree to any settlement of such Claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto or that imposes any liability or obligation on the Indemnified Party or adversely affects the Indemnified Party without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld.

11.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT, WHETHER OR NOT FORESEEABLE AND REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT, AND THIS SECTION 11.4 SHALL NOT APPLY TO: (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTIONS 11.1 OR 11.2, (B) A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 12, (C) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY OR ITS RELATED PARTIES, (D) MARUHO’S OBLIGATIONS TO PAY ANY AMOUNTS REQUIRED TO BE PAID UNDER ARTICLE 7, OR (E) [***].

 

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11.5 Insurance.

11.5.1 Maruho shall procure and maintain insurance or self-insurance, including clinical trials insurance and product liability insurance, adequate to cover its obligations hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which the Products are being clinically tested in human subjects or commercially distributed or sold by Maruho pursuant to this Agreement, and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Product in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate, and product liability insurance coverage shall, after such First Commercial Sale in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate. It is understood that such insurance shall not be construed to create a limit of Maruho’s liability with respect to its indemnification obligations under this Article 11. Maruho shall provide Evommune with written evidence of such insurance or self-insurance prior to commencement of this Agreement and upon expiration of any one coverage. Maruho shall provide Evommune with written notice at least [***] days prior to the cancellation, nonrenewal, or material change in such insurance or self-insurance that materially adversely affects the rights of Evommune hereunder.

11.5.2 Evommune shall procure and maintain insurance, including clinical trials insurance, adequate to cover its obligations hereunder and which is consistent with normal business practices of prudent companies similarly situated at all times during which the Products are being clinically tested in human subjects pursuant to this Agreement (but not, for clarity, during the time period when Maruho is solely Commercializing the Products in the Territory), and the clinical trials insurance coverage shall, prior to the First Commercial Sale of a Product in the Territory, in no event be less than [***] per loss occurrence and [***] in the aggregate. It is understood that (a) such insurance shall not be construed to create a limit of Evommune’s liability with respect to its indemnification obligations under this Article 11, and (b) the amount and scope of coverage of such insurance shall not be affected by the provisions of Section 6.7.4. Evommune shall provide Maruho with written evidence of such insurance prior to commencement of this Agreement and upon expiration of any one coverage. Evommune shall provide Maruho with written notice at least [***] days prior to the cancellation, nonrenewal, or material change in such insurance that materially adversely affects the rights of Maruho hereunder.

ARTICLE 12

CONFIDENTIALITY

12.1 Confidential Information.

12.1.1 The Parties agree that during the Term, and for a period of [***] years thereafter, a Party receiving Confidential Information of the other Party will (a) maintain in confidence such Confidential Information to the same extent such Party maintains its own proprietary information of similar kind and value (but, for clarity, using no less than Commercially Reasonable Efforts), (b) not disclose such Confidential Information to any Third Party without the prior written consent of the other Party, except as otherwise expressly permitted below, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement. As used herein, “Confidential Information” means all Know-How and other information and materials disclosed by or on behalf of either Party to the other Party or its Affiliates, or otherwise

 

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developed or generated, pursuant to this Agreement and/or in connection with the Development, Manufacture, and/or Commercialization of the Compound and/or the Products in the Field in the Territory. The foregoing obligations and the other obligations set forth in this Section 12.1 shall not apply with respect to any portion of such Confidential Information which, as demonstrated by competent and contemporaneous written evidence:

(a) is publicly disclosed by the disclosing Party, either before or after it becomes known to the receiving Party;

(b) was known to the receiving Party or any or its Affiliates, without any obligation to keep it confidential, prior to when it was received from the disclosing Party;

(c) is subsequently disclosed to the receiving Party or any of its Affiliates by a Third Party that is lawfully in possession thereof without obligation to keep it confidential;

(d) has been published by a Third Party or otherwise enters the public domain through no fault of the receiving Party or any of its Affiliates in breach of this Agreement; or

(e) has been independently developed or acquired by the receiving Party or any of its Affiliates without the aid, application, or use of the disclosing Party’s Confidential Information.

12.1.2 The receiving Party shall have the right to disclose any Confidential Information provided by the other Party hereunder if such disclosure is necessary to comply with the terms and conditions of this Agreement, or the requirements of any Applicable Law, but only to the extent of such necessity or requirements, and no such disclosure shall cause any such information to cease to be Confidential Information hereunder, except to the extent such disclosure results in a public disclosure of such information. Where reasonably possible, the receiving Party shall notify the disclosing Party of the receiving Party’s intent to make such disclosure of Confidential Information pursuant to the preceding sentence sufficiently prior to making such disclosure so as to allow the disclosing Party adequate time to take whatever action the disclosing Party may deem to be appropriate to protect the confidentiality of the Confidential Information and, upon the disclosing Party’s request, the receiving Party shall reasonably cooperate with respect to such efforts.

12.1.3 Except as set forth above, each Party agrees that it shall provide or permit access to Confidential Information of the other Party only to (a) the receiving Party’s attorneys, independent accountants, and financial advisors for the sole purpose of enabling such attorneys, independent accountants, and financial advisors to provide advice to the receiving Party, (b) the receiving Party’s Affiliates, directors, officers, employees, and actual or potential consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors, and to the directors, officers, employees, and actual or potential consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors of such Affiliates, who have a need to know such Confidential Information to assist the receiving Party with the research, Development, Manufacturing, or Commercialization activities contemplated or required of it by this Agreement; provided that in each case the Person to whom Confidential Information is being disclosed is subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Section 12.1, (c) potential investors and acquirers in connection with bona fide financing or acquisition due diligence, and (d) with respect to Evommune: Dermira, Lilly, and any other Dermira Affiliates, to the extent reasonably required under the Dermira License; and provided, further, that each Party shall remain responsible for any failure by its attorneys, independent accountants, and financial advisors, Affiliates, and its and its Affiliates’ respective directors, officers, employees, and actual or potential consultants, advisors, and permitted subcontractors, sub-licensees, and sub-distributors, and any other parties to whom such Confidential Information is disclosed, to treat such Confidential Information as required under this Section 12.1.

 

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For clarity, either Party may disclose without any limitation such Party’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions relating to such Party that are based on or derived from this Agreement, including a complete copy of this Agreement and any amendments thereto.

12.1.4 Each Party acknowledges that a Party in breach of any of its obligations under this Section 12.1 may cause the non-breaching Party irreparable harm, for which monetary damages may be an inadequate remedy. Therefore, notwithstanding anything to the contrary in this Agreement in the event of any such breach, the non-breaching Party shall be entitled, in addition to any other remedy available to it under this Agreement, at law or in equity, to seek injunctive relief, including an accounting for profits, specific performance of the terms hereof and other equitable relief for such breach, without the posting of bond or other security.

12.1.5 Notwithstanding the provisions of Section 12.1.1 of this Agreement or Section 12.1.1 of the First Sublicense Agreement, disclosure of “Confidential Information” under the First Sublicense Agreement shall, nonetheless, be deemed “Confidential Information” under this Agreement, and vice-versa.

12.2 Publicity. Except as required by Applicable Laws (including disclosure requirements of the SEC or any stock exchange on which securities issued by a Party are traded), neither Party shall make any other public announcement concerning this Agreement nor the subject matter hereof, without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed. If either Party intends to make a public announcement relating to the subject matter of this Agreement (except scientific publication), it shall furnish to the other Party the draft text to be announced at least [***] Business Days prior to the proposed date of such announcement (or as otherwise agreed by the Parties), and the Parties shall subsequently discuss and review the draft in good faith during such [***] Business Day period (or such other time period agreed by the Parties), with the goal of reaching a resolution in a timely manner so as not to delay the proposed announcement. Notwithstanding the foregoing and any provision to the contrary, no such consent shall be required by Evommune or Maruho with respect to (a) the publication of materials or information that have been previously disclosed, so long as the content of such publication remains accurate at the time of disclosure, or (b) any disclosure which is required by Applicable Law or the rules of the U.S. Securities and Exchange Commission or any securities exchange. In addition, either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party, and those terms of the Agreement, in each case, to the extent that such information has already been publicly disclosed in accordance herewith.

 

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12.3 Securities Filings. In the event Maruho proposes to file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law, a registration statement or any other disclosure document which describes or refers to this Agreement, Maruho shall notify Evommune of such intention and shall provide Evommune with a copy of relevant portions of the proposed filing not less than [***] Business Days prior to such filing (and any revisions to such portions of the proposed filing a reasonable time prior to the filing thereof), and shall use reasonable efforts to obtain confidential treatment of any information that Evommune requests be kept confidential. For clarity, Evommune or any parent of Evommune may, at its discretion, file with the U.S. Securities and Exchange Commission or the securities regulators of any state or other jurisdiction under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any other applicable securities law, a registration statement or any other disclosure document which describes or refers to this Agreement.

12.4 Publications; Conferences. With respect to the Product/Compound, Maruho shall not submit or make a publication and/or a presentation, submit or display a poster, have a table, or conduct any similar activity in an international conference, in each case, without Evommune’s prior written consent (not to be unreasonably withheld). Without limiting the generality of the foregoing, if Maruho, its Affiliates, or their respective employee(s) or consultant(s) wishes to make a publication related to the Compound, any Product, or any matter that otherwise may reasonably contain Licensed Know-How or other Confidential Information of Evommune, Maruho shall deliver to Evommune a copy of the proposed written publication or an outline of an oral disclosure at least [***] days prior to submission for publication or presentation, and Evommune shall approve, reject, or otherwise provide comments with respect to such proposed publication or outline during such [***] day period. Upon Evommune’s request, Maruho shall remove any of Evommune’s Confidential Information, and Maruho shall delay publication and/or presentation in order to allow Evommune to file for intellectual property protection under Applicable Law.

12.5 Use of Names. Except as otherwise set forth in this Agreement, neither Party shall use the name of the other Party in relation to this transaction in any public announcement, press release, or other public document, without the written consent of such other Party; provided, however, that subject to Section 12.3, either Party may use the name of the other Party in any document filed with any Regulatory Authority or Governmental Authority, including the Securities and Exchange Commission, to the extent required under Applicable Law.

12.6 Unauthorized Disclosure of Confidential Information. Each Party shall have a response plan in place for any disclosure of Confidential Information that is not authorized or otherwise permitted under this Agreement. Such plan shall include considerations of, among other things, notification, remediation, and retrieval. In the event that a Party becomes aware of an unauthorized disclosure of Confidential Information, then such Party shall notify the other Party promptly in writing.

 

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12.7 Survival. The obligations and prohibitions contained in this Article 12 as they apply to Confidential Information shall survive the expiration or termination of this Agreement for a period of [***] years.

ARTICLE 13

TERM AND TERMINATION

13.1 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 13, shall remain in effect until the expiration of the Royalty Term(s) for all Products in the Territory (or longer, to the extent that any payment obligations under Section 8.3 are ongoing) (the “Term”). Upon the expiration of this Agreement, the license grant set forth in Section 2.1 shall become perpetual, fully paid up, and non-exclusive in the Field in the Territory.

13.2 Termination for Material Breach. Either Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice to the other Party in the event that the other Party (the “Breaching Party”) materially breached or defaulted in the performance of any of its obligations (including a failure to perform). The Breaching Party shall have [***] days after written notice thereof was provided to the Breaching Party by the non-breaching Party to cure or remedy such breach or default. Unless the Breaching Party has cured or remedied any such breach or default prior to the expiration of such [***]-day period, such termination shall become effective immediately upon the Breaching Party’s receipt of the written notice of termination following the expiration of such [***]-day period. [***].

13.3 Termination for Non-Payment. Notwithstanding the provisions of Section 13.2 (and without limiting the generality thereof), Evommune may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice to Maruho in the event that Maruho fails to pay in full, when due, any undisputed amount required to be paid under Article 7 or fails to provide, when due, the information required to be provided under Section 7.6. Maruho shall have [***] days after written notice thereof was provided to it by Evommune to pay such amount in full (or, if applicable, provide such information). Unless Maruho has paid such amount in full (or, if applicable provided such information) prior to the expiration of such [***]-day period, such termination shall become effective upon Maruho’s receipt of the written notice of termination to be given following the end of such [***]-day period.

13.4 Termination as a Result of Bankruptcy. Each Party shall have the right to terminate this Agreement upon written notice as a result of the filing or institution of bankruptcy, reorganization, liquidation, or receivership proceedings, or upon an assignment of a substantial portion of its assets for the benefit of creditors by the other Party; provided that such termination shall be effective only if such proceeding is not dismissed within [***] days after the filing thereof.

13.5 Termination for Safety, Efficacy, and/or Technical Reasons, or Financial Infeasibility. Maruho may terminate this Agreement, in whole or with respect to a particular country in the Territory, upon [***] days’ prior written notice in the event that Maruho determines in good faith that it will not proceed with Development and/or Commercialization activities pursuant to this Agreement, in whole or with respect to a particular country in the Territory, on the basis of: (a) safety, efficacy, and/or technical concerns regarding the Compound and/or any Product in the Field that make it infeasible for Maruho to continue to perform its obligations under this Agreement, in whole or with respect to a particular country in the Territory, or (b) the financial infeasibility of Maruho continuing to perform its obligations under this Agreement, in whole or with respect to a particular country in the Territory (e.g., in the case of significantly exceeding the expected budget).

 

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13.6 Termination for Convenience. Maruho may terminate this Agreement for convenience at any time upon [***] days’ prior written notice.

13.7 Termination for Compliance Breach. Notwithstanding the provisions of Section 13.2 (and without limiting the generality thereof), each Party may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement upon written notice in the event of a breach by the other Party of any of the compliance representations, warranties, and covenants set forth in Section 10.5, as follows:(a) immediately upon delivery of notice of termination in the event that such breach (i) presents an imminent threat to health or safety, (ii) is based on a failure to comply with Anti-Corruption Laws and/or Trade Laws, or (iii) is a breach of Section 10.5.2, or, otherwise, or (b) immediately if the Breaching Party fails to cure or remedy such breach of default within [***] days after delivery of written notice thereof to such Breaching Party.

13.8 Cross-Termination Rights for Certain Material Occurrences. Evommune may terminate this Agreement with written notice to Maruho upon the termination of the First Sublicense Agreement pursuant to the terms of: (a) Section 13.2 of the First Sublicense Agreement, if the breach or default giving rise to such termination resulted from Maruho’s fraud, gross negligence, or willful misconduct; or (b) Section 13.7 of the First Sublicense Agreement. In addition, the Parties acknowledge and agree that Evommune may terminate the First Sublicense Agreement with written notice to Maruho upon the termination of this Agreement pursuant to the terms of: (a) Section 13.2 of this Agreement, if the breach or default giving rise to such termination resulted from Maruho’s fraud, gross negligence, or willful misconduct; or (b) Section 13.7 of this Agreement.

13.9 Other Rights of Termination

13.9.1 Evommune may terminate this Agreement pursuant to Sections 3.6, 4.7, 5.2.2, and 8.10.

13.9.2 Maruho may terminate this Agreement pursuant to Sections 3.4.1 and 8.10.

13.9.3 This Agreement automatically terminates in accordance with Section 2.7.6.

13.10 Upon the termination of this Agreement with respect to a particular country in the Territory or with respect to a Product in any country in the Territory, the provisions of Article 14 of this Agreement shall apply solely with respect to such country in the Territory or such Product in such country in the Territory.

 

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ARTICLE 14

EFFECTS OF EXPIRATION OR TERMINATION

14.1 Termination of Licenses. Upon the termination (but not expiration) of this Agreement, all rights and licenses granted to Maruho hereunder shall immediately terminate and be of no further force and effect and Maruho shall cease Developing, Commercializing, Manufacturing, and Packaging and Labeling the Products; provided that Maruho and its Affiliates will be entitled, during the [***] period immediately following the effective date of termination of this Agreement, to sell any inventory of Products on hand as of the effective date of the expiration or termination, so long as Maruho pays to Evommune the Royalty Payments and other amounts payable hereunder (including milestones) applicable to said subsequent sales, with respect to sales in the Territory, as applicable, in accordance with the terms and conditions set forth in this Agreement and otherwise complies with the terms set forth in this Agreement.

14.2 Assignments. Upon the termination (but not expiration) of this Agreement, and subject to the arrangement contemplated by Section 2.7.6 pursuant to which this Section 14.2 shall not apply, Maruho will promptly, in each case within [***] days thereafter (except as required in connection with the sell-off period contemplated by Section 14.1), and at no cost to Evommune (except, in the event that Maruho terminates this Agreement in accordance with Section 8.10, 13.2, or 13.4, then at Evommune’s reasonable cost), do the following:

(a) assign to Evommune, at Evommune’s sole discretion and direction, all of Maruho’s right, title, and interest in and to any agreements (or portions thereof) between Maruho and Third Parties to the extent related to the Development, Commercialization, or Manufacture of the Products, including the right to enforce any such agreements;

(b) assign to Evommune, at Evommune’s sole discretion and direction, all of Maruho’s right, title, and interest in and to any (i) Promotional Materials, (ii) copyrights and trademarks (including the Product trademarks and Product trade dress), including any goodwill associated therewith, and any registrations and design patents for the foregoing, and (iii) any Internet domain name registrations for such trademarks and slogans, all to the extent related to the Products; provided, however, that in the event Evommune exercises such right to have assigned such Promotional Materials, Maruho shall grant, and hereby does grant, a royalty-free right and license to any housemarks, trademarks, names, and logos of Maruho contained therein for a period of [***] in order to use such Promotional Materials in connection with the Commercialization of the Products in the Field in the Territory in substantially the same manner as used by Maruho;

(c) assign to Evommune, at Evommune’s sole discretion and direction, the management and continued performance of any Clinical Trials for the Products ongoing hereunder as of the effective date of such termination in respect of which Evommune shall assume full financial responsibility from and after the effective date of such termination;

(d) transfer to Evommune all of Maruho’s right, title, and interest in and to any and all regulatory filings, Regulatory Approvals (including, without limitation, Product Approvals and Pricing Approvals), and other Regulatory Materials for the Products;

 

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(e) transfer to Evommune all of Maruho’s right, title, and interest in and to any and all Arising IP (including, without limitation, Development Data and Commercialization Data), and any other Intellectual Property Controlled by Maruho relating primarily to the Compound and/or any Product, including, without limitation, that any Maruho shall transfer to Evommune its Confidential Information to the extent related to the Compound and/or any Product and such information shall, following the effective date of termination, constitute the Confidential Information of Evommune; and

(f) provide a copy of (i) the material tangible embodiments of the foregoing and (ii) any other material books, records, files, and documents Controlled by Maruho solely to the extent related to the Compound and/or the Products; provided, however, that to the extent that any agreement or other asset described in this Section 14.2 is not assignable by Maruho, then such agreement or other asset will not be assigned, and upon the request of Evommune, Maruho will use Commercially Reasonable Efforts to do what is reasonably necessary to allow Evommune to obtain and to enjoy the benefits of such agreement or other asset.

For purposes of clarity, (A) Evommune shall have the right to request that Maruho take any or all of the foregoing actions set forth in this Section 14.2 in whole or in part, or with respect to all or any portion of the assets set forth in the foregoing provisions set forth in this Section 14.2 and (B) to the extent Evommune requests Maruho to transfer its right, title, and interest in the items set forth in this Section 14.2 to Evommune, Maruho shall cause its Related Parties to transfer and assign to Evommune all of such Related Parties’ right, title, and interest in and to the foregoing items set forth in this Section 14.2.

14.3 Disclosure and Delivery of Know-How. Upon the termination (but not expiration) of this Agreement, Maruho will promptly, in each case within [***] days thereafter, and at no cost to Evommune (except, in the event that Maruho terminates this Agreement in accordance with Section 13.2, then at Evommune’s reasonable cost), do the following: (a) Maruho will promptly transfer to Evommune copies of any physical embodiment of any Know-How Controlled by Maruho, to the extent then used in connection with the Development, Manufacture, and/or Commercialization of the Compound and/or any Product in the Field in the Territory; and (b) such transfer shall be effected by the delivery of material documents, to the extent such Know-How is embodied in such documents, and to the extent that Know-How is not fully embodied in such documents, Maruho shall make its employees and agents who have knowledge of such Know-How in addition to that embodied in documents available to Evommune for interviews, demonstrations, and training to effect such transfer in a manner sufficient to enable Evommune to practice such Know-How but only in a manner as set out as follows in this Section 14.3. The appropriate technical teams at Evommune and Maruho will meet to plan transfer for such Know-How as follows: (i) Maruho’s designated representative(s) for the Products will meet with representatives from Evommune to answer questions with respect to such Know-How and establish a plan for the transfer for such Know-How; and (ii) Maruho will allocate adequate appropriately qualified representatives to work with Evommune to review such Know-How to enable the completion of the transfer within [***] days of the completion of the initial transfer planning meetings to the extent reasonable, but in any event no longer than [***] days thereafter.

 

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14.4 Disposition of Commercialization-Related Materials. Upon the termination (but not expiration) of this Agreement, Maruho will promptly deliver to Evommune in electronic, sortable form (a) a list identifying all wholesalers and other distributors involved in the Commercialization of the Products in any country in the Territory as well as any customer lists (e.g., purchasers) related to the Commercialization of the Products in any country in the Territory, and (b) all Promotional Materials, as well as any items bearing the Product trademarks or Product trade dress and/or any trademarks or housemarks otherwise associated with the Compound, any Product, and/or Evommune.

14.5 Accrued Rights. Expiration or termination of this Agreement for any reason will be without prejudice to any rights that will have accrued to the benefit of a Party prior to the effective date of such expiration or termination, including, without limitation, that all accrued but unpaid payments under this Agreement shall immediately become due and owing upon termination or expiration of this Agreement. Such expiration or termination will not relieve a Party from obligations that are expressly indicated to survive the expiration or termination of this Agreement.

14.6 Survival. Notwithstanding anything to the contrary contained herein, the following provisions shall survive any expiration or termination of this Agreement: Articles 1 (Definitions), 11 (Indemnification), 12 (Confidentiality), 14 (Effects of Expiration or Termination) 15 (Dispute Resolution), and 16 (Miscellaneous), the first sentence of each of Section 7.10.1 and 7.10.2, and Sections 7.11, 8.1 (subject to Sections 14.2 and 14.3), 10.5.4-10.5.7, 10.8, and 13.1. Except as set forth in this Article 14 or otherwise expressly set forth herein, upon expiration or termination of this Agreement, all other rights and obligations of the Parties shall cease.

14.7 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by Evommune and Maruho are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that each Party, as licensee of certain rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party (such Party, the “Bankrupt Party”) under the U.S. Bankruptcy Code, (a) the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Intellectual Property licensed to such other Party and all embodiments of such Intellectual Property, which, if not already in such other Party’s possession, shall be promptly delivered to it (i) upon any such commencement of a bankruptcy proceeding upon such other Party’s written request therefore, unless the Bankrupt Party elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under clause (i), following the rejection of this Agreement by the Bankrupt Party upon written request therefore by the other Party; and (b) the Bankrupt Party shall not unreasonably interfere with the other Party’s rights to Intellectual Property and all embodiments of Intellectual Property, and shall assist and not unreasonably interfere with the other Party in obtaining Intellectual Property and all embodiments of Intellectual Property from another entity. The “embodiments” of Intellectual Property include all tangible, intangible, electronic, or other embodiments of rights and licenses hereunder, including all compounds and products embodying Intellectual Property, Products, filings with Regulatory Authorities, and related rights and Evommune Know-How in the case that Evommune is the Bankrupt Party and Know-How Controlled by Maruho and related to the Compound and/or any Product in the case Maruho is the Bankrupt Party.

 

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ARTICLE 15

DISPUTE RESOLUTION

15.1 Disputes. The Parties recognize that, from time to time, disputes, controversies, or claims may arise which stem from or are related to a Party’s respective rights or obligations under this Agreement or a Party’s actual or alleged breach of this Agreement (a “Dispute”). It is the desire of the Parties to establish procedures to facilitate the resolution of Disputes arising under this Agreement in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 15 if and when a Dispute arises under this Agreement. If the Parties are unable to resolve any Dispute within [***] days after such Dispute is submitted to it, either Party may, by written notice to the other Party, have such dispute referred to Designated Officers of each Party for attempted resolution. If the Designated Officers cannot reach resolution of the Dispute within [***] days after such referral, the Dispute shall be referred to the Parties’ designated executive officers or their delegates for attempted resolution. In the event the designated executive officers or their delegates are not able to resolve such Dispute within such [***]-day period after receipt of written notice, and a Party wishes to pursue the matter, then each Party may assert any remedy available at law or equity to enforce its rights under this Agreement.

15.2 Choice of Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and the patent laws of the United States without reference to any rules of conflict of laws. Each of the Parties hereby submits to the jurisdiction of the United States Federal District Court for Delaware in any proceeding arising out of or relating to this Agreement, agrees not to commence any suit, action, or proceeding relating thereto except in such court, and waives, to the fullest extent permitted by law, the right to move to dismiss or transfer any action brought in such court on the basis of any objection to personal jurisdiction, venue, or inconvenient jurisdiction. Each Party further agrees that service or any process, summons, notice, or document by U.S. registered mail to such Party’s notice address provided for in this Agreement shall be effective service of process for any action, suit, or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction in this Section 15.2. Notwithstanding the foregoing, nothing contained in this Agreement will deny any Party the right to seek injunctive relief or other equitable relief from a court of competent jurisdiction applying the laws of the court in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any other ongoing proceeding. Any rights to trial by jury with respect to any suit, action, proceeding, or claim (whether based upon contract, tort, or otherwise), directly or indirectly, arising out of or relating to this Agreement hereunder are expressly and irrevocably waived by each of the Parties.

ARTICLE 16

MISCELLANEOUS

16.1 Entire Agreement; Amendment. This Agreement, together with the Schedules and Exhibits hereto, contains the entire understanding of the Parties with respect to the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings, and commitments, either oral or written, in respect to the subject matter hereof are superseded by the terms of this Agreement. The Schedules and Exhibits to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of each of the Parties. For the avoidance of doubt, each of this Agreement and the First Sublicense Agreement is a separate and standalone agreement and, except as set forth explicitly in each of Section 3.4.4, Section 5.5, Section 5.6.4, Section 8.1.2(b), Section 12.1.5, and Section 13.8, the terms of this Agreement shall not be deemed to amend or modify the terms of the First Sublicense Agreement and the terms of the First Sublicense Agreement shall not be deemed to amend or modify the terms of this Agreement. For the avoidance of doubt, the Parties acknowledge and agree that the exercise of their rights and the performance of their obligations under this Agreement shall not, alone, constitute a breach of the First Sublicense Agreement, but solely to the extent that such exercise of rights or performance of obligations is compliant with this Agreement; and the exercise of their rights and the performance of their obligations under the First Sublicense Agreement shall not, alone, constitute a breach of this Agreement, but solely to the extent that such exercise of rights or performance of obligations is compliant with the First Sublicense Agreement.

 

 

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16.2 Force Majeure. No Party shall be liable for any failure to perform, or be considered in breach of, its obligations under this Agreement (other than obligations to make payments of money) to the extent such performance has been delayed, interfered with, or prevented by an event of Force Majeure, and the obligations of such Party under this Agreement (other than obligations to make payments of money) whose performance is affected by Force Majeure shall be suspended during, but not longer than, the continuance of the event of Force Majeure. Any Party that experiences an event of Force Majeure shall provide prompt notice of such event to the other Party, including and an estimate of the likely period of time during which its performance will be affected, and shall use reasonable efforts to remove the condition constituting Force Majeure. In the event of a prolonged condition of Force Majeure that makes it unreasonable to continue to perform other activities then being performed by the Parties and their Affiliates pursuant to this Agreement, the Parties shall consult directly or through the JSC and may appropriately scale back their respective activities in order to avoid waste or inappropriate usage of resources under the circumstances, and neither Party shall be liable for any such reasonable scale back, or be considered in breach of its obligations under this Agreement (other than obligations to make payments of money to the other Party) as a result of such reasonable scale back. Notwithstanding anything to the contrary contained in this Section 16.2 or elsewhere in this Agreement, the Parties acknowledge and agree that neither the COVID-19 pandemic and business disruptions related thereto (collectively, the “COVID Event”), nor any recurrence thereof, shall be considered to be an event of Force Majeure or otherwise excuse any failure or delay in performance by either Party under this Agreement (so long as performance is not thereby made unlawful) unless such COVID Event significantly worsens in a manner or to a degree that is not reasonably foreseeable to the Parties.

16.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement and shall be deemed to have been sufficiently given for all purposes if mailed by first class certified or registered mail, postage prepaid (which notice shall be effective five (5) Business Days after such mailing); express delivery service (which notice shall be effective on the first Business Day after delivery to such service); or personally delivered to the appropriate addresses (which notice shall be effective upon delivery to such addresses) set forth below or to such other addresses or numbers for a Party as such Party may inform the other Party by giving five (5) Business Days’ prior written notice:

 

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   If to Evommune:   

Evommune, Inc.

1841 Page Mill Road

Suite 100

Palo Alto, CA 94304

Attention: Chief Legal Officer

E-Mail: [***]

   With copies to:   

DLA Piper LLP (US)

650 South Exeter Street

Suite 1100

Baltimore, MD 21202

Attention: [***]

E-Mail: [***]

   If to Maruho:   

Maruho Co., Ltd.

1-5-22 Nakatsu, Kita-ku

Osaka, 531-0071

Japan

Attention: General Manager, Global Business Development

E-Mail: [***]

16.4 Assignment. Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that a Party may make such an assignment or transfer without the other Party’s written consent (a) to any of its Affiliates (but only for so long as such Person is and remains an Affiliate of such Party, it being agreed that such Party shall cause such assignment to terminate prior to such time, if any, as such Person ceases to be an Affiliate of such Party), and (b) to any Third Party in connection with (i) the acquisition of such Party by or merger or consolidation of such Party with another entity, or (ii) a merger, consolidation, sale of stock, sale of all or substantially all of such Party’s assets, or other similar transaction in which such Third Party either becomes the owner of all or substantially all of the business and assets of (A) such Party or (B) that portion of such Party’s business or business unit relating to this Agreement. Any permitted successor or assignee of rights or obligations hereunder shall, in a writing delivered to the other Party, expressly assume the performance of such rights or obligations. Except as set forth in the immediately preceding sentence, in the event of an assignment or transfer as permitted above in this Section 16.4, if this Agreement is assigned or transferred to an Affiliate, the assigning or transferring Party shall remain responsible (jointly and severally) with such Affiliate for the performance of such assigned or transferred obligations. Any assignment or transfer, or attempted assignment or transfer, by either Party in violation of the terms of this Section 16.4 shall be null and void and of no legal effect. This Agreement shall be binding on, and inure to the benefit of, each Party, its successors and permitted assigns.

16.5 Offset Rights. Notwithstanding anything to the contrary in this Agreement, neither Party may, at any time or for any reason, offset any payments due to the other Party or its Affiliates under this Agreement.

 

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16.6 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, such provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good-faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

16.7 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under Applicable Law.

16.8 Ambiguities; No Presumption. Each of the Parties acknowledges and agrees that this Agreement has been diligently reviewed by and negotiated by and between them, that in such negotiations each of them has been represented by competent counsel and that the final agreement contained herein, including the language whereby it has been expressed, represents the joint efforts of the Parties hereto and their counsel. Accordingly, in interpreting this Agreement or any provision hereof, no presumption shall apply against any Party hereto as being responsible for the wording or drafting of this Agreement or any such provision, and ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.

16.9 Headings. The headings for each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

16.10 Interpretation. Except where the context expressly requires otherwise: (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa); (b) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (d) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (e) any reference herein to any person shall be construed to include the person’s successors and assigns; (f) the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (g) all references herein to Articles, Sections, Exhibits, or Schedules shall be construed to refer to Articles, Sections, Exhibits, or Schedules of this Agreement, and references to this Agreement include all Exhibits and Schedules hereto; (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals, and other written communications contemplated under this Agreement; (i) provisions that require that a Party, the Parties, or any committee hereunder “agree,” “consent,” or “approve” or the like shall require that such agreement, consent, or approval be specific and in writing, whether by written agreement, letter, email, approved minutes, or otherwise (but excluding instant messaging); (j) references to any specific law, rule, or regulation, or article, section, or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule, or regulation thereof; (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or”; and (l) the term “to the extent” shall be interpreted to mean the extent or degree to which a subject or thing extends, and shall not simply be construed to mean the word “if.”

 

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16.11 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

16.12 No Third-Party Beneficiaries. Other than Dermira in accordance with Section 2.7.4 and Maruho, Evommune, and their respective Affiliates, successors, and permitted assignees hereunder, no Person shall be deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Agreement.

16.13 Independent Contractors. It is expressly agreed that Maruho and Evommune shall be independent contractors and that the relationship between Maruho and Evommune shall not constitute a partnership, joint venture, or agency. Neither Maruho nor Evommune shall have the authority to make any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of such other Party.

16.14 Counterparts; Facsimile Signatures. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by delivery of electronically scanned copies of original signatures delivered by facsimile or electronic mail, and such signatures shall be deemed to bind each Party as if they were original signatures.

[No Further Text on This Page]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives as of the date first written above.

 

Evommune, Inc.     Maruho Co., Ltd.
By:  

/s/ Luis Peña

    By:  

/s /Atsushi Sugita

Name: Luis Peña     Name: Atsushi Sugita
Title: President and CEO     Title: Representative Director, President & CEO

[Signature Page to Sublicense Agreement]


Schedule 1.17

Compound

[***]


Schedule 1.48

Licensed Patents

[***]


Exhibit A

Specifications

As mutually agreed upon and attached hereto following the Effective Date


Exhibit B

Example of Royalty Payment Calculation

[***]

Exhibit 10.16

***Certain identified information has been omitted from this exhibit because it is both (i) not material and (ii) of the type that the Registrant treats as private or confidential. Such omitted information is indicated by brackets (“[***]”) in this exhibit.***

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is dated as of June 20, 2024 (the “Effective Date”) by and between AprilBio Co., Ltd., a company organized under the laws of the Republic of Korea (“AprilBio”), and Evommune, Inc., a corporation organized under Delaware law (“Evommune”). Each of AprilBio and Evommune may be referred to herein as a “Party” or, collectively, as the “Parties.”

RECITALS:

WHEREAS, AprilBio has developed certain technology and owns certain intellectual property rights relating to the Compound (as defined below);

WHEREAS, Evommune is engaged in the research, development, and commercialization of pharmaceutical products; and

WHEREAS, Evommune desires to license from AprilBio and AprilBio wishes to license to Evommune, on an exclusive basis, the right to Develop (as defined below) the Compound and Product (as defined below) and Commercialize (as defined below) the Product in the Field (as defined below) in the Territory (as defined below).

NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

Unless otherwise specifically provided herein, the following terms shall have the following meanings:

 

1.1

“Accounting Standards” means (a) with respect to Evommune, that Evommune shall maintain records and books of accounts in accordance with US GAAP, and (b) with respect to AprilBio, that AprilBio shall maintain records and books of accounts in accordance with IFRS, in each case, consistently applied.

 

1.2

“Acquirer” means any Third Party that is a counterparty in any Change of Control transaction, including such Third Party’s Affiliates (excluding AprilBio and its Affiliates that (a) exist prior to the consummation of such Change of Control, and (b) are formed after the consummation of such Change of Control and are directly or indirectly wholly-owned by AprilBio).

 

1.3

“Acquirer Intellectual Property” means any Patents and Know-How Controlled by any Acquirer of AprilBio (a) immediately prior to the consummation of such Change of Control, and (b) except as provided in Section 12.3(b), from and after the consummation of such Change of Control.

 

1.4

“Additional Revenue” means any consideration received by Evommune or its Affiliates in connection with the grant of a sublicense, sale of assets, or similar transaction to exploit the Licensed Technology to Develop and Commercialize Products or otherwise exploit the Compound in the Field in a territory that includes a Major Geography that is: (a) in excess of [***]; (b) in excess of [***]; or (c) in addition to [***]; in any event, (i) including, in any case, [***], but (ii) excluding [***].


1.5

“Adverse Event” means any untoward medical occurrence associated with the use of the Product, whether or not considered drug related.

 

1.6

“Affiliate” means a Person that controls, is controlled by, or is under common control with another Person, but only for so long as such control exists. For the purposes of this Section 1.6, the word “control” (including, with correlative meaning, the terms “controlled by” or “under the common control with”) means the actual power, either directly or indirectly through one (1) or more intermediaries, to direct the management and policies of such Person, by the ownership of more than fifty percent (50%) of the voting stock of such Person. Notwithstanding the foregoing, the term “Affiliate” shall not include any venture capital or other investment fund, registered investment company, investment, or account now or hereafter existing that is controlled by one (1) or more general partners, managing members, or investment advisor of, or shares the same management company or investment adviser with, a Person.

 

1.7

“Bankruptcy Event” means: (a) voluntary or involuntary proceedings by or against a Party are instituted under any bankruptcy or insolvency Law, which proceedings, if involuntary, shall not have been dismissed within [***] days after the date of filing; (b) a receiver or custodian is appointed for such Party or its assets; (c) proceedings are instituted by or against such Party for corporate reorganization, dissolution, liquidation, or winding-up of such Party, which proceedings, if involuntary, shall not have been dismissed within [***] days after the date of filing or commencement; or (d) substantially all of the assets of such Party are seized or attached and not released within [***] days thereafter.

 

1.8

“Biosimilar Product” means, for any Product, (a) for the U.S. market, any biological product that is approved by the FDA as biosimilar or interchangeable to the Product as a reference product under subsection (k)(4) of Section 351 of the PHSA for any of the same Indications as such Product, and (b) for all other jurisdictions, any biologic product that (i) is approved for marketing and sale for human therapeutic use pursuant to a framework that is analogous to Section 351(k) of the PHSA with reference to such Product, and (ii) is sold by a Third Party that is not a licensee or sublicensee of Evommune or one of its Affiliates.

 

1.9

“BLA” means a Biologics License Application (as more fully described in U.S. 21 C.F.R. Part 601.20 or its successor regulation), as may be amended from time to time, or any analogous application or submission with any Regulatory Authority outside of the United States.

 

1.10

“Bona Fide Program” means a program for which [***], as the case may be, [***], or if [***], [***]; provided that if [***]and either (a) [***], or (b) [***], in either case ((a) or (b)), [***], then [***].

 

1.11

“Business Day” means a day other than Saturday or Sunday on which banking institutions in New York, New York and Seoul, Korea are open for business.

 

1.12

“Calendar Quarter” means each three (3)-month period commencing January 1, April 1, July 1, or October 1 of any year; provided, however, that (a) the first Calendar Quarter of the Term shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the Term shall end upon the expiration or termination of this Agreement.

 

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1.13

“Calendar Year” means the period beginning on the 1st of January and ending on the 31st of December of the same year; provided, however, that (a) the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the same year and (b) the last Calendar Year of the Term shall commence on January 1 of the Calendar Year in which this Agreement terminates or expires and end on the date of termination or expiration of this Agreement.

 

1.14

“Cessation of Active Development” means (a) [***], (b) [***], or (c) [***], except if there is, in the case of either (a), (b), or (c), [***].

 

1.15

“Change of Control” means, with respect to a Person: (a) a transaction or series of related transactions that results in the sale or other disposition of all or substantially all of such Person’s assets; or (b) a merger or consolidation in which such Person is not the surviving corporation or in which, if such Person is the surviving corporation, the shareholders of such Person immediately prior to the consummation of such merger or consolidation do not, immediately after consummation of such merger or consolidation, possess, directly or indirectly through one (1) or more intermediaries, a majority of the voting power of all of the surviving entity’s outstanding stock and other securities and the power to elect a majority of the members of such Person’s board of directors; or (c) a transaction or series of related transactions (which may include a tender offer for such Person’s stock or the issuance, sale, or exchange of stock of such Person) if the shareholders of such Person immediately prior to such initial transaction do not, immediately after consummation of such transaction or any of such related transactions, own, directly or indirectly through one (1) or more intermediaries, stock or other securities of the entity that possess a majority of the voting power of all of such Person’s outstanding stock and other securities and the power to elect a majority of the members of such Person’s board of directors.

 

1.16

“Clinical Hold” means an order issued by any Regulatory Authority to the sponsor of a proposed or ongoing clinical investigation to delay or suspend such clinical investigation.

 

1.17

“Clinical Trial” means a clinical trial in human subjects that is designed to evaluate the safety and/or efficacy of the Product. Clinical Trials shall include, without limitation, Phase I Clinical Trials, Phase Ib Clinical Trials, Phase II Clinical Trials, Phase IIb Clinical Trials, and Phase III Clinical Trials.

 

1.18

“Combination Product” means a Product that includes one (1) or more active ingredients in addition to the Compound.

 

1.19

“Commercialization” or “Commercialize” means any and all activities directed to (a) the using, marketing, promoting, distributing, importing or exporting for sale, offering for sale, and selling of the Product, including manufacturing activities that are required for the foregoing, (b) interacting with Regulatory Authorities regarding the foregoing, (c) obtaining Price Approval, and (d) Clinical Trials conducted after obtaining Regulatory Approval of the Product.

 

1.20

“Commercially Reasonable Efforts” means: (a) with respect to the efforts and resources to be expended by a Party with respect to any objective, such efforts and resources as a biopharmaceutical company would use to accomplish a similar objective under similar circumstances; and (b) with respect to the efforts and resources to be expended by a Party with respect to the Development or Commercialization of the Product, such efforts that a biopharmaceutical company would use with respect to the development or commercialization of a product at a similar stage in its product life as the Product, taking into account, without limitation, commercial, legal, and regulatory factors, product labeling, the regulatory environment and competitive market conditions in the therapeutic area, safety and efficacy of the Product, the strength of its proprietary position, and such other factors as would reasonably be considered, all based on conditions then prevailing, but excluding such Party’s financial obligations under this Agreement. The term “Commercially Reasonable” shall have a correlative meaning to that of Commercially Reasonable Efforts.

 

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1.21

“Competing Product” means, other than the Compound and the Product, any compound or product that is intended to bind, functionally inhibit, and/or otherwise modulate IL-18 (whether singularly or together with other targets), including, without limitation [***].

 

1.22

“Compound” means a fusion protein of a recombinant Serum Albumin Fab-Associated (SAFA) fragment antigen-binding (Fab) protein linked to only one (1) bioactive moiety which is an Interleukin-18 binding protein (IL-18BP) as described in the patent application identified in Schedule 1.22, which is currently identified by AprilBio as APB-R3.

 

1.23

“Compulsory License” means a compulsory license under the Licensed Technology obtained by a Third Party through the order, decree, or grant of a competent Governmental Body or court (including any march-in rights under U.S. law), authorizing such Third Party to Commercialize a Product in the Field in any country in the Territory.

 

1.24

“Confidential Information” of a Party, means non-public, confidential, or proprietary information relating to the business, operations, or products of a Party or any of its Affiliates, including any Know-How or Licensed Technology, that such Party discloses to the other Party under this Agreement, or otherwise becomes known to the other Party by virtue of this Agreement. Notwithstanding the foregoing, (a) AprilBio Inventions shall be deemed to be the Confidential Information of AprilBio, and Evommune shall be deemed to be the receiving Party and AprilBio shall be deemed to be the disclosing Party with respect thereto, and (b) Evommune Inventions shall be deemed to be the Confidential Information of Evommune, and AprilBio shall be deemed to be the receiving Party and Evommune shall be deemed to be the disclosing Party with respect thereto.

 

1.25

“Controlled” means, with respect to Patents or Know-How, that a Person or one of its Affiliates owns or has a license or sublicense to such Patents or Know-How and has the ability to grant a license or sublicense to such Patents or Know-How as provided for in this Agreement without violating the terms of any agreement or other arrangement with any Third Party. Notwithstanding the foregoing, AprilBio and its Affiliates will not be deemed to Control any Acquirer Intellectual Property unless, and solely to the extent that, such Acquirer Intellectual Property (a) is (i) used by AprilBio or its Affiliates or the Acquirer to perform AprilBio’s obligations under this Agreement, or (ii) in the case of Acquirer Intellectual Property that is Know-How, disclosed by or on behalf of AprilBio or its Affiliates or the Acquirer to Evommune under this Agreement, and (b) is deemed to be Controlled by AprilBio in accordance with Section 12.3.

 

1.26

“Cover,” “Covering,” or “Covered” means, with respect to a Product, that the Development or Commercialization of such Product would, but for the license granted under this Agreement, infringe a Valid Claim.

 

1.27

“Current Product” means the pharmaceutical product containing the Compound in the form under Development by AprilBio as of the Effective Date through [***], including customary, future changes to support manufacture and scale-up of such pharmaceutical product.

 

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1.28

“Data Protection Laws” means all Laws regarding the processing of Personal Data, including but not limited to the Republic of Korea’s Personal Information Protection Act of 2011 (as amended in 2023), the European Union’s General Data Protection Regulation (2016/679), the California Consumer Privacy Act of 2018, as amended, and all other U.S. state consumer and health privacy laws, and all rules and regulations promulgated under any of those Laws, as may be applicable.

 

1.29

“Development” or “Develop” means, with respect to the Product, the performance of all pre-clinical and clinical research and development (including toxicology, pharmacology, test method development, and stability testing, manufacturing process development, formulation development, quality control development, statistical analysis), Clinical Trials (excluding Clinical Trials conducted after obtaining Regulatory Approval of the Product), manufacturing, and regulatory activities that are required to obtain Regulatory Approval of the Product in the Territory.

 

1.30

“Development and Manufacturing Contracts” means the contracts set forth on Schedule 1.30.

 

1.31

“EMA” means the European Medicines Agency or a successor agency thereto.

 

1.32

“Europe” means the United Kingdom, Germany, Italy, France, Spain, and any other country or jurisdiction in the European Union or within the territory set by the Council of Europe.

 

1.33

“European Commission” means the authority within the European Union that has the legal authority to grant Marketing Approvals in the European Union based on input received from the EMA or other competent Regulatory Authorities.

 

1.34

“European Union” or “EU” means the European Union, as may be redefined from time to time.

 

1.35

“Evommune Competitor” means any company that [***].

 

1.36

“Executive Officers” means, together, the Chief Executive Officer of Evommune and the Chief Executive Officer of AprilBio.

 

1.37

“Existing IL-18 Programs” means, AprilBio’s early stage research and development of: (a) a molecule that is intended to bind, functionally inhibit, and/or otherwise modulate IL-18 [***], which is [***]; and (b) [***], which is [***].

 

1.38

“FDA” means the United States Food and Drug Administration or a successor federal agency thereto.

 

1.39

“Field” means the prevention, treatment, control, and/or diagnosis of any and all disorders, diseases, and/or conditions in humans and animals.

 

1.40

“First Commercial Sale” means, on a country-by-country basis, the first commercial transfer or disposition for value of Product in such country to a bona fide Third Party by or on behalf of Evommune, or any of its Affiliates or Sublicensees, in each case, after all Regulatory Approvals have been obtained in such country.

 

1.41

“FTE” means, with respect to an individual, the equivalent of the work of one (1) employee (which might include temporary workers) working full-time under this Agreement for one (1) year (consisting of at least a total of [***] hours per year (excluding vacations and holidays)). One (1) FTE may constitute work performed by an individual whose time is dedicated solely to an individual activity hereunder, or may comprise the efforts of several individuals, each of whom dedicates only part of his or her time to work on an individual activity hereunder.

 

5


1.42

“Governmental Body” means any: (a) nation, principality, state, commonwealth, province, territory, county, municipality, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body, or entity and any court or other tribunal); (d) multi-national or supranational organization or body; or (e) individual, entity, or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military, or taxing authority or power of any nature.

 

1.43

“IFRS” means the International Financial Reporting Standards.

 

1.44

“IND” means an investigational new drug application, or its equivalent outside the United States, submitted to an applicable Regulatory Authority for approval to commence Clinical Trials in a given jurisdiction, where needed.

 

1.45

“IND Acceptance” means, with respect to an IND filed with the FDA, either (a) expiration of the thirty (30)-day period following the date the FDA receives such application, unless the FDA notifies the sponsor that the investigations described in the application are subject to a Clinical Hold or otherwise communicates a proposed study is not permitted to proceed; or (b) earlier notification by the FDA that the clinical investigations in the IND may begin. If the FDA issues a Clinical Hold, IND Acceptance shall be the date the hold issues are satisfactorily resolved, as evidenced by the FDA issuing a subsequent “study may proceed” letter or otherwise communicating to the sponsor that the study is permitted to proceed.

 

1.46

“Indication” means the prevention, diagnosis, mitigation, treatment, or cure of a discrete clinically recognized form of a disease or condition. Treatment of different subpopulations within a population of patients having a disease or condition may be treated as separate Indications for purposes of this Agreement if [***].

 

1.47

“Invention” means any Know-How that is first created, conceived, discovered or made, in each case by or on behalf of a Party or the Parties, or its or their Affiliates or sublicensees (individually or jointly, as applicable) in the course of performing activities under this Agreement, in each case, including all rights, title, and interest in and to the intellectual property rights therein.

 

1.48

“Know-How” means any scientific or technical information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain or otherwise publicly known, including discoveries, inventions, trade secrets, devices, databases, practices, protocols, Regulatory Filings, methods, processes (including manufacturing processes, specification, and techniques), techniques, concepts, ideas, specifications, formulations, formulae, data (including pharmacological, biological, chemical, toxicological, clinical and analytical information, quality control, trial and stability data), case reports forms, medical records, data analyses, reports, studies and procedures, designs for experiments and tests and results of experimentation and testing (including results of research or development), summaries and information contained in submissions to and information from ethical committees, or Regulatory Authorities, and manufacturing process development information, results and data, whether or not patentable, all to the extent not claimed or disclosed in a Patent. The fact that an item is known to the public shall not be taken to exclude the possibility that a compilation including the item, and/or a development relating to the item, is (and remains) not known to the public. “Know-How” includes any rights including copyright or rights protecting such Know-How. “Know-How” excludes Patents.

 

6


1.49

“Knowledge” means, with respect to a matter that is the subject of a given representation or warranty of AprilBio, [***]. “Knowingly” means with Knowledge.

 

1.50

“Law” or “Laws” means all applicable laws, statutes, rules, regulations, ordinances, and other pronouncements having the binding effect of law of any Governmental Body that may be in effect from time to time and applicable to the conduct of this Agreement, including, as applicable, the U.S. Federal Food, Drug, and Cosmetic Act (21 U.S.C. §301 et seq.), as amended from time to time, and any regulations promulgated thereunder; the PHSA, as amended from time to time, and any regulations promulgated under this Agreement; Prescription Drug Marketing Act of 1987 (21 U.S.C. §§331, 333, 353, 381); the Generic Drug Enforcement Act of 1992 (21 U.S.C. §335(a) et seq.); the U.S. Patent Act (35 U.S.C. §1 et seq.); Directive 2001/83/EC, Parliament and Council Regulation No. (EC) 726/2004, Directive 2003/94/EC; the Federal False Claims Act (31 U.S.C. §3729 et seq.); the Anti-Kickback Statute (42 U.S.C. §1320a-7b et seq.); Anti-Corruption Laws; applicable Data Protection Laws; laws, rules, regulations, and ordinances relating to the conduct of Clinical Trials, the use of investigational drugs in humans, and good clinical and medical practice; and environmental, health, and safety laws; all as amended from time to time.

 

1.51

“Licensed Know-How” means all Know-How that is Controlled by AprilBio or its Affiliates, as of the Effective Date or during the Term, and is necessary or reasonably useful in the Development or Commercialization of the Compound and/or Product.

 

1.52

“Licensed Patents” means the Patents, including the Patents listed in Schedule 1.52, containing claims that Cover the Commercialization of the Compound or Product, in each case, to the extent any such Patents are Controlled by AprilBio or its Affiliates, as of the Effective Date or during the Term, and that claim a benefit or priority directly or indirectly to, or have a common benefit or priority date with, any of the Patents listed in Schedule 1.52.

 

1.53

“Licensed Technology” means the Licensed Patents and the Licensed Know-How.

 

1.54

“MAA” means a Marketing Authorization Application submitted pursuant to the requirements of the FDA, as more fully defined in 21 U.S. C.F.R.§ 314.3 et seq, a BLA submitted pursuant to the requirements of the FDA, as more fully defined in 21 U.S. C.F.R. § 601, and any equivalent application submitted in any country in the Territory, including all additions, deletions, or supplements thereto, and as any and all such requirements may be amended, or supplanted, at any time.

 

1.55

“Major Geography” means the United States and/or Europe.

 

1.56

“Marketing Approval” means any and all Regulatory Approvals together with any applicable Price Approvals.

 

1.57

“Net Sales” means the gross amounts invoiced by Evommune or any of its Affiliates or Sublicensees for sales of Product to Third Party purchasers (including distributors of Evommune or any of its Affiliates or Sublicensees selling such Product) in an arm’s-length transaction for the sale or disposition of such Product, less the sum of the following deductions with respect to such sales that are documented as a deduction in accordance with its Accounting Standards and actually incurred, allowed, accrued, paid, or taken and are allocated with respect to such sale or disposition:

(a) trade, cash and/or quantity discounts, allowances, and credits for the Product, allowed in customary amounts in the trade;

 

7


(b) excise Taxes, use Taxes, tariffs, sales Taxes and customs duties and/or other Taxes (including value added Taxes), government charges or fees imposed on the sale of the Product, but specifically excluding, for clarity, any income or corporation Taxes assessed against or by reference to the income or profit arising from such sales or any withholding Taxes;

(c) compulsory or negotiated payments and cash rebates or other expenditures to Governmental Bodies (or designated beneficiaries thereof) in the context of any national or local health insurance programs or similar programs for the Product, including, but not limited to, pay-for-performance agreements, risk sharing agreements, and government-levied fees as a result of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 or any other successor program;

(d) rebates, returns, chargebacks, and discounts (or equivalent thereof) of the Product provided to managed health care organizations, group purchasing organizations, insurers, pharmacy benefit managers (or equivalent thereof), specialty pharmacy providers, governmental authorities, or their agencies or purchasers, reimbursers, or trade customers;

(e) freight, insurance costs, and other transportation charges; and

(f) administrative fees paid to group purchasing organizations or pharmaceutical benefit managers.

If a Product under this Agreement is sold in the form of a Combination Product, then Net Sales for such Combination Product shall be determined on a country-by-country basis by mutual agreement of the Parties in good faith taking into account the perceived relative value contributions of the Compound or Product and the other ingredient in the Combination Product, as reflected in their respective market prices. In case of disagreement, such relative value contributions shall be determined by the dispute resolution procedures set forth in ARTICLE 11.

For clarification, sale of Product by Evommune or any of its Affiliates or Sublicensees to another of these entities for resale by such entity to a Third Party shall not be deemed a sale for purposes of this definition of “Net Sales.” Further, transfers or dispositions of Product: (w) in connection with patient assistance programs; (x) for charitable or promotional purposes (including samples); (y) for preclinical, clinical, or other scientific testing purposes or under so-called “named patient,” “compassionate use,” or other limited access programs; or (z) for use in any tests or studies reasonably necessary to comply with any Law or written request by a Regulatory Authority shall not, in each case of (w) through (z), be deemed sales of such Product for purposes of this definition of “Net Sales.”

All the aforementioned deductions shall only be allowable to the extent they are commercially reasonable and shall be determined, on a country-by-country basis, as incurred in the ordinary course of business in type and amount verifiable based on Evommune’s and its Affiliates’ and Sublicensees’ (including distributors’) reporting system, in accordance with its Accounting Standards consistently applied from time to time. In no event will any particular amount identified above be deducted more than once in calculating Net Sales. In no event will any particular amount identified above result in an adjustment that exceeds the Net Sales amount such that AprilBio would owe Evommune a payment for such adjustment.

 

1.58

“[***]” means [***]. Notwithstanding the foregoing, for purposes of this Agreement, [***].

 

1.59

“Non-Product Licensed Patents” means Licensed Patents with claims that Cover the Compound and/or Product, and that are not Product Licensed Patents.

 

8


1.60

“Out-of-Pocket Expenses” means expenses actually paid by a Party or its Affiliate to any Third Party.

 

1.61

“Patents” means: (a) patent applications and issued patents therefor and equivalent rights (including any provisional applications, re-examinations, continuations, continuations-in-part claiming the same subject matter, extensions, term restorations, divisionals, reissues, renewals, and any issued patents resulting therefrom); and (b) corresponding international patent applications, including supplementary protection certificates, or other administrative protections.

 

1.62

“Person” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership, or other business entity, or any government or agency or political subdivision thereof.

 

1.63

“Personal Data” means any information relating to, directly or indirectly, an individual or household that is collected, accessed, used, disclosed, or otherwise processed by Evommune, and includes information included in the definition of the terms “personal information,” “biometric identifier,” or other similar terms under any applicable Data Protection Laws.

 

1.64

“Phase I Clinical Trial” means a human clinical trial in any country that satisfies the requirements of 21 C.F.R. 312.21(a) or that would satisfy the equivalent requirements in a jurisdiction other than the United States.

 

1.65

“Phase Ib Clinical Trial” means a Phase I Clinical Trial in any country that is designed to explore a surrogate efficacy endpoint and produce safety, pharmacokinetics, and exploratory pharmacodynamics results.

 

1.66

“Phase II Clinical Trial” means a human clinical trial in any country that is intended to initially evaluate the effectiveness of a Product for a particular indication or indications in patients with the disease or indication under study or that would otherwise satisfy the requirements of 21 C.F.R. 312.21(b) or that would satisfy the equivalent requirements in a jurisdiction other than the United States. For clarity, a Phase II Clinical Trial shall include any clinical trial (or portion thereof) designated as a “Phase 2a” clinical trial or “Phase 2b” clinical trial.

 

1.67

“Phase IIb Clinical Trial” means a Phase II Clinical Trial in any country that is designed to further evaluate the safety, efficacy, and dosing of a Product that was studied in a prior Phase II Clinical Trial in the same target patient population with dosing regimen and duration, clinical endpoints, study design, and sample size sufficient to enable the initiation of Phase III Clinical Trials.

 

1.68

“Phase III Clinical Trial” means a pivotal human clinical trial in any country, the results of which are intended to be used to establish safety and efficacy of a Product as a basis for a Regulatory Approval in the Territory or that would otherwise satisfy the requirements of 21 C.F.R. 312.21(c) or, in the event that such pivotal human clinical trial is intended to support an MAA in a jurisdiction other than the United States, that would satisfy the equivalent requirements in such jurisdiction.

 

1.69

“PHSA” means the Public Health Services Act, 42 U.S.C. §§ 201-291n.

 

9


1.70

“POC Development Plan” means a proof-of-concept development plan that is mutually agreed by the Parties, as may be amended from time to time in accordance with the terms hereof, that sets forth in reasonable detail (a) all Development activities to be conducted by the Parties for the POC Study, (b) associated estimated timelines to complete such activities, (c) the POC Study Budget, and (d) the POC Success Criteria. The POC Development Plan in effect as of the Effective Date is attached to this Agreement as Exhibit A.

 

1.71

“POC Study” means [***], as described in the POC Development Plan and provided for in the POC Study Budget.

 

1.72

“POC Study Budget” means the budget for the POC Study, which will be limited to all operational costs for the POC Study, all bioanalytical study costs for the POC Study, the costs to engage or hire a project manager and chemistry, manufacturing, and controls (CMC) consultant, and other customary, documented, internal and out-of-pocket costs and expenses.

 

1.73

“POC Success Criteria” means a criteria for [***], and thereby facilitating a decision to advance the Product after completion of the POC Study, as attached to this Agreement in Exhibit A.

 

1.74

“Price Approvals” means, in those countries in the Territory where Regulatory Authorities are legally required to approve or determine pricing and/or pricing reimbursement for pharmaceutical products, such pricing and/or pricing reimbursement approval or determination.

 

1.75

“Product” means a pharmaceutical product containing or comprising the Compound, in any dosage form, presentation, or formulation, and whether alone, or in combination with, one (1) or more other pharmaceutically active or inactive ingredients; provided, however, that any license grant or rights under this Agreement do not apply to such other ingredients. For clarity, Product does not include any compounds or products that use or are Covered by Patents or Know-How Controlled by AprilBio or its Affiliates other than the Compound.

 

1.76

“Product Licensed Patents” means Licensed Patents with claims that solely Cover the Compound and/or Product and that do not have claims that Cover any other compound or product. For clarity, as of the Effective Date, there are no Product Licensed Patents, however, subject to provisions of Section 6.4(d), the Parties intend to pursue one (1) or more existing Non-Product Licensed Patents to yield at least one (1) Product Licensed Patent as promptly as practicable following the Effective Date and as set forth in more detail in Schedule 6.4(d).

 

1.77

“PRV Net Proceeds” means any consideration (whether in the form of cash, equity, or other form of value) received by Evommune or any of its Affiliates or Sublicensees in connection with the sale of a PRV, less those customary transaction expenses incurred by Evommune or its Affiliates in connection with such sale, including reasonable legal, accounting, financial advisory, and consulting fees and expenses and, in any event, excluding all Development costs incurred by or on behalf of Evommune, its Affiliates, or Sublicensees in obtaining the Regulatory Approval giving rise to such PRV.

 

1.78

“Regulatory Approval” means any and all approvals, licenses, registrations, or authorizations of the relevant Regulatory Authority (excluding Price Approvals), necessary for the Development or Commercialization of Product in a particular country or jurisdiction. For clarity, Regulatory Approval shall include approval of an MAA by the applicable Regulatory Authority.

 

1.79

“Regulatory Authority” means: (a) in the US, the FDA; (b) in the EU, the EMA, or the European Commission; or (c) in any other jurisdiction anywhere in the world, any regulatory body with similar regulatory authority over pharmaceutical or biotechnology products.

 

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1.80

“Regulatory Exclusivity” means, with respect to any country, any exclusive marketing rights or exclusivity protection conferred by an applicable Regulatory Authority or other Governmental Body in such country with respect to a compound or pharmaceutical product, including any regulatory protection exclusivity (including any orphan drug designation or pediatric exclusivity) and any extensions to any such exclusivity rights. For the avoidance of doubt, Regulatory Exclusivity does not include Patent rights.

 

1.81

“Regulatory Filings” means (a) any regulatory applications, submissions, dossiers, notifications, registrations, or other filings made to or with, or Marketing Approvals or MAAs or other approvals, registration, licenses, or authorizations granted by, a Regulatory Authority that are necessary or reasonably useful in order to Develop or Commercialize a Product in a particular country or regulatory jurisdiction, and (b) all material correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings, telephone conferences, or discussions with the relevant Regulatory Authority.

 

1.82

“Representatives” means, with respect to a Party, such Party’s employees, consultants, contractors, advisors, and agents.

 

1.83

“Right of Reference” means the right to use and/or allow a Regulatory Authority in a specified region or territory to reference data, regulatory filings, and other information from Clinical Trials with respect to products, clinical data, and/or Regulatory Filings that are Controlled by the granting Party (or, as applicable, its Affiliates) for the purpose of (a) supporting a Regulatory Approval for a product or any other compound or product, as applicable, in such region or territory, or (b) otherwise supporting an audit by a Regulatory Authority with respect to a product or any other compound or product, as applicable, in such region or territory, including the ability to allow such Regulatory Authority to review the underlying raw data as part of an investigation by such Regulatory Authority, if required by such Regulatory Authority.

 

1.84

“Royalty Term” means, on a Product-by-Product and country-by-country basis, the period from the First Commercial Sale of such Product in such country until the later of (a) the last date on which such Product is Covered by a Valid Claim within the Licensed Patents in such country, (b) twelve (12) years after such First Commercial Sale of such Product in such country, and (c) the expiration of Regulatory Exclusivity.

 

1.85

“Senior Executive” means a member of senior management of a Party who is designated by such Party to resolve disputes under this Agreement.

 

1.86

“Sublicensee” means a Person other than an Affiliate of Evommune to which Evommune (or its Affiliate) has, pursuant to Section 2.2, granted sublicense rights under any of the license rights granted under Section 2.1; provided, that “Sublicensee” shall exclude subcontractors.

 

1.87

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

 

1.88

“Technology Transfer Costs” means the reasonable Out-of-Pocket Expenses incurred by or on behalf of AprilBio in connection with effecting the technology transfer described in Sections 2.5, 2.6, and 2.7 and performing any support and/or assistance relating thereto.

 

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1.89

“Technology Transfer Plan” means the technology transfer plan reasonably agreed to by the Parties in furtherance of Section 2.5, which describes all items in the data room that are required to be transferred to Evommune.

 

1.90

“Territory” means worldwide.

 

1.91

“Third Party” means any Person other than AprilBio, Evommune, or any of their respective Affiliates.

 

1.92

“Third Party Action” means any Action made by a Third Party against either Party that claims that the Compound or Product, or its Development or Commercialization infringes or misappropriates such Third Party’s intellectual property rights.

 

1.93

“Third Party License Agreement” means any agreement entered into by Evommune or its Affiliate with a Third Party who is not a Sublicensee, or any amendment or supplement thereto, in each case following the Effective Date, whereby royalties, fees, or other payments are to be made by Evommune or its Affiliate to such Third Party in connection with the grant of rights under intellectual property rights Controlled by such Third Party, which rights are necessary to Develop or Commercialize the Compound or Current Product.

 

1.94

“United States” or “U.S.” means the United States of America, its territories, and possessions.

 

1.95

“US GAAP” means United States Generally Accepted Accounting Principles.

 

1.96

“USD” or “$” means the lawful currency of the United States.

 

1.97

“Valid Claim” means: (a) a claim of an issued and unexpired patent which has not lapsed or been revoked, abandoned, or held unenforceable or invalid by a final decision of a court or governmental or supra-governmental agency of competent jurisdiction, unappealable, or unappealed within the time allowed for appeal, and which has not been disclaimed, denied, or admitted to be invalid or unenforceable through reissue, reexamination, disclaimer, or otherwise; or (b) a claim of a pending application which has not been finally cancelled, withdrawn, or abandoned by an administrative agency or other body of competent jurisdiction.

 

1.98

Other Terms. The definition of each of the following terms is set forth in the section of the Agreement indicated below:

 

Defined Term

   Section

“Action”

   6.5(a)(ii)

“Agreement”

   Preamble

“Alliance Manager”

   3.1(g)

“Anti-Corruption Laws”

   8.1(g)

“Applicable Percentage”

   5.6(b)

“AprilBio”

   Preamble

“AprilBio Indemnitees”

   9.1

“AprilBio Inventions”

   6.1(c)

“AprilBio Patents”

   6.1(c)

“Australian Phase I Clinical Trial”

   3.2(b)

“Cure Period”

   10.3(b)

“Development Support”

   3.3

 

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“Effective Date”

   Preamble

“Evommune”

   Preamble

“Evommune Indemnitees”

   9.2

“Evommune Inventions”

   6.1(b)

“Evommune Patents”

   6.1(b)

“Evommune Product Patents”

   6.4(c)

“Independent Expert”

   11.4

“Initial Fee”

   5.1

“Initial Press Release”

   7.6(a)

“Joint Steering Committee” or “JSC”

   3.1(a)

“Non-Escalable Dispute”

   11.1

“Non-Product Licensed Claims”

   6.4(d)

“Offer Trigger”

   2.12(a)

“Panel”

   11.4

“Party” and “Parties”

   Preamble

“Patent Challenge”

   10.4

“Phase Ib Trigger”

   2.12(a)

“Product Licensed Claims”

   6.4(d)

“Prosecution Cooperation Plan”

   6.4(d)

“PRV”

   5.7

“Regulatory Support”

   4.3

“ROFN Evaluation Period”

   2.12(b)

“ROFN Negotiation Notice”

   2.12(c)

“ROFN Negotiation Period”

   2.12(c)

“ROFN Notice”

   2.12(a)

“ROFN Notice Date”

   2.12(a)

“Tax Action”

   5.13(b)(iii)

“Term”

   10.1

“Third Party Infringement Action”

   6.6(a)

“Unauthorized IP”

   12.3(c)

“Unauthorized Use”

   12.3(c)

ARTICLE 2

LICENSES AND OTHER RIGHTS

 

2.1

Grant of License to Evommune. Subject to the terms and conditions of this Agreement, AprilBio hereby grants to Evommune and its Affiliates an exclusive (even as to AprilBio), worldwide, fee-bearing, transferable (subject to the provisions of Section 12.2), sublicensable (with the right to sublicense, subject to the provisions of Section 2.2) license under the Licensed Technology to Develop and Commercialize (through multiple tiers of distribution) Products and otherwise Develop and Commercialize the Compound in the Field in the Territory.

 

2.2

Grant of Sublicenses by Evommune. Evommune shall have the right, in its sole discretion, to grant sublicenses, in whole or in part, under the licenses granted in Section 2.1, subject to this Section 2.2 (except where such sublicense is granted solely for the procurement of services from a subcontractor, which shall be subject to Section 3.7), to any of its Affiliates or any Third Party; provided, however, that the granting by Evommune of a sublicense to such Affiliate or Third Party shall not relieve Evommune of any of its obligations hereunder. Any sublicense to an Affiliate or Sublicensee will be set forth in a written agreement. Evommune shall provide prompt written notice to AprilBio following the grant of a sublicense to an Affiliate or Sublicensee and shall provide to AprilBio a complete copy of the sublicense agreement; provided that Evommune may redact any financial terms and any terms that are not relevant to AprilBio’s ability to confirm that Evommune has complied with its obligations under this Agreement; provided further that Evommune may not redact any financial terms or triggers reasonably necessary for AprilBio to determine the occurrence, amount, or payment of Additional Revenue, Net Sales, PRV Net Proceeds, or other milestones. Any sublicense will be consistent with and expressly made subject to the terms and conditions of this Agreement and shall include (a) restrictions on the use and disclosure of Confidential Information of AprilBio at least as stringent as set forth herein, and (b) an assignment to Evommune of all rights to any and all results of the activities undertaken and other intellectual property made, invented, or generated by such Affiliate or Sublicensee with respect to the Compound or Product. Evommune will be responsible for compliance by its Affiliates and Sublicensees with the terms and conditions of this Agreement that are applicable to its Affiliates and/or Sublicensees.

 

 

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2.3

Grant of Sublicense to AprilBio. Evommune hereby grants to AprilBio a co-exclusive (i.e., subject to Evommune’s rights under Sections 2.1 and 2.2), worldwide, non-fee bearing sublicense under the Licensed Know-How to Develop the Compound. For clarity, all results of such Development if intended to bind, functionally inhibit, and/or otherwise modulate IL-18 are and shall be deemed Competing Products, and, consequently, subject to the provisions of Sections 2.11 (other than Section 2.11(a)(i)) and 2.12.

 

2.4

No Implied Licenses; Retained Rights. Neither Party grants to the other Party any rights or licenses in or to any Know-How, Patent, or other intellectual property right, whether by implication, estoppel, or otherwise, other than the rights and licenses that are expressly granted under this Agreement. For the avoidance of doubt, AprilBio retains the right to use the Licensed Technology for any applications not expressly and exclusively licensed hereunder to Evommune and its Affiliates, including, [***] and other Competing Products, subject to the provisions set forth in Sections 2.11 and 2.12.

 

2.5

Technology Transfer Plan. As soon as reasonably practicable after the Effective Date, AprilBio will transfer to Evommune and/or to Evommune’s designee, at AprilBio’s reasonable cost and expense, all Licensed Know-How pertaining to the Compound and/or Current Product in AprilBio’s possession and that is described in the Technology Transfer Plan in accordance with the timelines set forth therein; provided that, promptly following the Effective Date, AprilBio will establish and make available to Evommune a virtual data room where AprilBio will upload any and all manufacturing technology information, regulatory filing information, and all information or documents pertaining to such Licensed Know-How, Compound, and/or Current Product in AprilBio’s possession. AprilBio will maintain and, at Evommune’s reasonable request, update such data room to the extent AprilBio is in possession of information that has not already been uploaded to such data room, at AprilBio’s reasonable cost and expense, and grant Evommune access to such data room until completion of the POC Study or such earlier date as mutually agreed upon by the Parties.

 

2.6

Development and Manufacturing Contracts. As soon as reasonably practicable after the Effective Date, AprilBio shall introduce Evommune to its counterparties in the Development and Manufacturing Contracts and, as agreed by the Parties, either (a) assign (to the extent freely assignable without cost) the existing Development and Manufacturing Contracts; or (b) use reasonable efforts to, at Evommune’s sole cost and expense, reasonably assist Evommune in its efforts to enter into its own development and manufacturing contracts with such counterparties to (i) transfer all manufacturing Know-How and manufacturing technology for the Compound and/or Current Product to Evommune, and (ii) if and to the extent necessary, amend the Development and Manufacturing Contracts to exclude the manufacturing of Compound and/or Product. During the conduct of the POC Study, AprilBio will provide reasonable support to assist in the transition of activities under each Development and Manufacturing Contract to Evommune; provided that Evommune will reimburse AprilBio for any reasonable Out-of-Pocket Expenses incurred by or on behalf of AprilBio in connection with such support and/or assistance.

 

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2.7

Regulatory Filings Transfer. As soon as reasonably practicable after the Effective Date, AprilBio shall (to the extent permitted by Law), at AprilBio’s cost and expense, assign to Evommune or its designee all Regulatory Filings that relate to the Australian Phase I Clinical Trial.

 

2.8

Procedures for Technology Transfer. The Parties shall ensure that the technology transfers described in Sections 2.5, 2.6, and 2.7 shall occur in an orderly fashion and in a manner such that the value, usefulness, and confidentiality of the transferred Licensed Know-How and Regulatory Filings are preserved in all material respects. Following the end of each month during the period in which AprilBio incurs any such Technology Transfer Costs, AprilBio shall prepare and deliver to Evommune an invoice of such costs and expenses, and Evommune shall pay all invoiced amounts within [***] days after its receipt of the applicable invoice.

 

2.9

Additional Support. To the extent that Evommune requires support and/or assistance from AprilBio in addition to the activities assigned to AprilBio under the POC Development Plan and the activities set forth in Sections 2.5, 2.6, and 2.7, the Parties may amend the POC Development Plan in accordance with Section 3.1(c)(i) and/or enter into a separate written agreement in each Party’s sole discretion that sets forth such required support and/or assistance.

 

2.10

Disclosure of Licensed Technology. During the Term, each Party shall disclose to the other Party, as promptly as practicable, but in no event less frequently than semi-annually, of any Licensed Technology that becomes Controlled by it or any of its Affiliates after the Effective Date and that is necessary for the other Party to conduct its activities or exercise its rights as contemplated hereunder and shall promptly following such disclosure, transfer to the other Party any rights to such Licensed Technology as expressly required in this Agreement.

2.11 Exclusivity.

(a) AprilBio shall not, and shall cause its Affiliates not to, directly or indirectly, [***] (i) for a period of [***] following the Effective Date for [***], and (ii) for a period of [***] following the Effective Date for a Competing Product (excluding [***]).

(b) Notwithstanding anything in this Agreement, in the event of a Change of Control of AprilBio, subject to Section 12.3(b), the restrictions set forth in Section 2.11(a) shall not apply to any Competing Products Developed and/or Commercialized by or on behalf of an Acquirer of AprilBio.

(c) For clarity, during the restrictive periods set forth in Section 2.11(a), AprilBio shall be permitted to [***] for any Competing Product, including any [***].

 

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2.12 Right of First Negotiation and Information.

(a) Subject to the provisions of this Section 2.12, for a period of [***] following the Effective Date, if AprilBio or any of its Affiliates (i) completes [***] Clinical Trial with respect to any Competing Product (a “[***] Trigger”), or (ii) receives a bona fide offer in writing from a Third Party to in-license or otherwise acquire rights in any Competing Product (an “Offer Trigger”) (the date of such completion or offer, a “ROFN Notice Date”), then, in either case, AprilBio shall promptly notify Evommune in writing of such completion or offer, which notice shall, in the case of the [***] Trigger, include all information in AprilBio’s possession from such [***] Clinical Trial that is reasonably necessary to evaluate the results of such [***] Clinical Trial, including the [***] Clinical Trial study design detailing the design and intended target of the Competing Product and any corresponding data and/or results (which may include data demonstrating proof of mechanism and target engagement of the Competing Product to the extent generated), and in the case of an Offer Trigger, then, all information in AprilBio’s possession that is reasonably necessary to evaluate the Competing Product (each such notice, a “ROFN Notice”). For clarity, in no event will AprilBio be required to generate, produce, or otherwise create any new or additional information other than the information in AprilBio’s possession immediately following completion of such [***] Clinical Trial or receipt of such offer.

(b) During the period beginning on the ROFN Notice Date and continuing until [***] days after the date of Evommune’s receipt of the applicable ROFN Notice (or such later date as may be mutually agreed in writing from time to time in the sole discretion of each Party) (each such period, an “ROFN Evaluation Period”), Evommune shall have the right to evaluate the information provided in the ROFN Notice and determine whether it wishes to negotiate an exclusive license agreement for the further Development and Commercialization of such Competing Product. AprilBio shall cooperate in good faith with Evommune with respect to such evaluation.

(c) If, on or before the last day of the ROFN Evaluation Period, Evommune provides written notice (which shall contain proposed economics, exclusivity, and other obligations expected to be performed by AprilBio) to AprilBio that Evommune wishes to seek to negotiate an exclusive license agreement for the further Development and Commercialization of the applicable Competing Product (each, a “ROFN Negotiation Notice”), then the ROFN Evaluation Period shall be automatically extended by an additional [***] days (or such longer period as may be mutually agreed in writing from time to time in the sole discretion of each Party) (each a “ROFN Negotiation Period”) and the Parties shall, until the end of the ROFN Negotiation Period, negotiate in good faith regarding such exclusive license agreement. If Evommune fails to provide a ROFN Negotiation Notice prior to the expiration of the ROFN Evaluation Period, or, if a ROFN Negotiation Notice was timely provided, the Parties fail to consummate a definitive exclusive license agreement prior to the expiration of the ROFN Negotiation Period, then, for each such [***] Trigger, Evommune shall be deemed to have waived its rights under this Section 2.12 with respect to such Competing Product and AprilBio shall have the right to continue its Development and Commercialization and/or enter into a transaction with any Third Party with respect to such Competing Product on any terms; provided, however, for each such Offer Trigger, in the event that AprilBio does not enter into and consummate a transaction with any Third Party that initiates the Offer Trigger prior to any [***] Trigger with respect to a Competing Product, then Evommune’s right to exercise its right of first negotiation with respect to such Competing Product shall remain in place until a [***] Trigger or subsequent Offer Trigger.

(d) Prior to the expiration of the applicable ROFN Evaluation Period or, if a ROFN Negotiation Notice was timely provided, the applicable ROFN Negotiation Period with respect to an applicable Competing Product, AprilBio shall not, and shall cause its Affiliates not to, directly or indirectly, enter into a transaction with a Third Party with respect to such Competing Product. For clarity, neither AprilBio nor its Affiliates are prohibited from engaging in discussions with any Third Party with respect to any Competing Product that is subject to the process set forth in this Section 2.12. Nothing in this Section 2.12 limits AprilBio’s ability to (i) continue the Development of a Competing Product during the ROFN Evaluation Period and/or ROFN Negotiation Period, and (ii) engage in discussions with any Third Party regarding a transaction involving the Development and/or Commercialization of any Competing Product.

 

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(e) From and after the Effective Date and prior to the expiration of an applicable ROFN Evaluation Period or, if a ROFN Negotiation Notice was timely provided, the applicable ROFN Negotiation Period with respect to an applicable Competing Product, AprilBio shall keep Evommune fully and promptly informed as to its progress and activities relating to the Development and Commercialization of such Competing Product, including with respect to regulatory matters and meetings with Regulatory Authorities, by way of [***] written summary to Evommune. For clarity, in the event that AprilBio does not enter into and consummate a transaction with any Third Party that initiates the Offer Trigger prior to any [***] Trigger with respect to a Competing Product, and, consequently, Evommune’s right to exercise its right of first negotiation with respect to such Competing Product remains in place until a [***] Trigger or subsequent Offer Trigger pursuant to Section 2.12(c), then AprilBio shall continue to keep Evommune fully and promptly informed consistent with this Section 2.12(e) for such Competing Product.

(f) Notwithstanding anything in this Agreement, in the event of a Change of Control of AprilBio, subject to Section 12.3(b), this Section 2.12 shall not apply to any Competing Products Developed and/or Commercialized by or on behalf of an Acquirer of AprilBio.

ARTICLE 3

DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION OF PRODUCT

 

3.1

Joint Steering Committee.

(a) Formation. Within thirty (30) days following the Effective Date, the Parties will form a joint steering committee comprised of two (2) representatives of each of the Parties (the “Joint Steering Committee” or “JSC”). Each Party shall appoint its respective representatives to the JSC from time to time and may substitute one (1) or more of its representatives, in its sole discretion, effective upon written notice to the other Party of such change. Each JSC member shall have the requisite experience and seniority to enable such representative to make decisions on behalf of the Party who appointed such member with respect to the issues falling within the jurisdiction of the JSC. The size of the JSC may be changed from time to time by written agreement of the Parties, provided that the JSC shall at all times include an equal number of representatives of each Party. One (1) representative of each of Evommune and AprilBio at the JSC will be selected to act as the co-chairpersons of the JSC.

(b) Meetings. The JSC shall meet in accordance with a schedule established by mutual written agreement of the Parties. Each Party may also schedule a meeting of the JSC on an ad hoc basis at any time upon two (2) weeks’ notice to the other Party, subject to the reasonable availability of the JSC members. Meetings of the JSC may be conducted by videoconference, teleconference, or in person, as agreed by the Parties. The JSC will agree upon the time and location of the meetings. A quorum of the JSC shall exist whenever there is present at a meeting at least one (1) representative appointed by each Party. As appropriate, additional employees, consultants, or counsel of each Party may from time to time attend the JSC meetings as nonvoting observers; provided, that any such attendees, if not already bound by fiduciary obligations, shall agree in writing to comply with confidentiality, non-use, and intellectual property obligations at least as stringent as set forth herein; and provided, further, that no Third Party personnel may attend unless otherwise agreed by both Parties or otherwise reasonably necessary to facilitate discussion between the Parties. The co-chairpersons, or their respective designees, will circulate an agenda for each meeting approximately one (1) week before the date scheduled for the meeting, and will include all matters requested to be included on such agenda by either Party. The co-chairpersons, or their respective designees, will take complete and accurate minutes of all discussions occurring at the JSC meetings and all matters decided upon at the meetings, except those matters reflecting legal advice of counsel will not be included in such minutes. A copy of the draft minutes of each meeting will be provided to each Party by the co-chairpersons, or their respective designees, after each meeting, and such minutes will be reviewed by the JSC members, any needed changes discussed, and final minutes agreed to and provided to each Party within thirty (30) days after each meeting unless otherwise agreed. Each Party shall bear its own expenses related to the attendance of the JSC meetings by its representatives.

 

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(c) JSC Functions. The responsibilities of the JSC will be as follows:

(i) reviewing and approving amendments or other annual or interim updates to the POC Development Plan;

(ii) reviewing and discussing the status, progress, and results of each Party’s obligations under the POC Development Plan;

(iii) reviewing, resolving, and/or approving such matters as are referred to it by the Alliance Managers; and

(iv) performing such other functions as expressly set forth in this Agreement or as mutually agreed upon by the Parties in writing.

(d) Decision Making. The JSC will endeavor to make decisions by consensus of the members present at a meeting at which a quorum exists, with each of Evommune’s and AprilBio’s representatives having one (1) vote. If, despite using reasonable efforts, the JSC does not reach consensus on any matter within its decision-making authority within a period of fourteen (14) days (or such other period as the Parties may agree in writing) after it has met and attempted to reach such consensus, then either Party may, by written notice to the other Party, escalate such matter for resolution by the Parties’ Executive Officers pursuant to Section 11.2. Notwithstanding the foregoing, in the event that the Executive Officers are unable to resolve the dispute pursuant to Section 11.2, Evommune shall have the final decision-making authority to the extent such dispute relates to the Development and Commercialization of the Compound and Product in the Territory; provided, however, notwithstanding anything in this Agreement, that Evommune shall not exercise its final decision-making authority under this Section 3.1(d) with respect to a matter to [***]. For clarity, any [***] may only be made by consensus of the JSC or the Executive Officers.

(e) Authority. The JSC shall have only such powers as are specifically delegated to it under this Agreement, and for clarity the JSC shall not have any authority or ability to: (i) modify, amend, or waive the terms or conditions of this Agreement, including the milestone and royalty payment provisions, license rights provisions, and delegations of authority provisions; (ii) make any decision that, under the terms of this Agreement, requires AprilBio’s or Evommune’s consent, approval, or agreement or the consent, approval, or agreement of both Parties; or (iii) require AprilBio or Evommune to conduct any activities outside the scope of the Development of the Compound and Product.

(f) JSC Disbandment. Unless the Parties mutually agree to extend it, the JSC shall disband and be of no further force or effect under this Agreement upon the earliest to occur of the following: (i) completion (final clinical study report) of the first Phase II Clinical Trial of the Product, (ii) expiration or earlier termination of this Agreement, and (iii) mutual written agreement of the Parties to disband the JSC.

 

18


(g) Alliance Managers. Each Party shall designate a single alliance manager to help coordinate the Parties’ activities under this Agreement during the Term (each, an “Alliance Manager”). The Alliance Managers will facilitate communication between the Parties to assure a successful relationship between the Parties. The Alliance Managers shall be the primary point of contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate all such activities hereunder, except to the extent that such matters are coordinated by the JSC. Each Party may change is designated Alliance Manager from time to time upon notice to the other Party.

 

3.2

Clinical Development of the Product.

(a) Except as provided in Section 3.2(b) and the POC Development Plan, subject to Section 3.6, Evommune shall have the exclusive right, and sole responsibility and decision-making authority, at its sole cost and expense (except as set forth herein), to Develop the Compound and Product and to conduct (either itself or through its Affiliates, agents, subcontractors, and/or Sublicensees) all Clinical Trials and non-clinical studies Evommune believes appropriate to obtain Regulatory Approval for the Product in the Field in the Territory.

(b) AprilBio shall be responsible, at AprilBio’s sole expense, for completing the currently in-process Phase I Clinical Trial of the Compound taking place in Australia under the public title “Assessment of Safety, Tolerability, Pharmacokinetics, and Pharmacodynamics of APB-R3” (the “Australian Phase I Clinical Trial”) in accordance with the existing protocol, including healthy human volunteer dosing, data analysis, and completion of the clinical study report.

(c) The Parties shall conduct the activities assigned to such Party under the POC Development Plan in accordance with this Agreement and the POC Development Plan. Evommune will be the sponsor of the POC Study. The POC Development Plan may be amended only by approval of the JSC. Either Party may propose amendments to the POC Development Plan for review, discussion, and approval by the JSC. Evommune will invoice AprilBio on a quarterly basis for reimbursement of [***] of its documented reasonable expenses for the POC Study, excluding the cost of clinical supply of Product (whether existing or newly manufactured) for which Evommune shall be solely responsible; provided that all such costs and expenses are within the POC Study Budget. AprilBio shall pay such quarterly invoices of such amounts within [***] days of receipt. Evommune will pay for AprilBio’s existing inventory of clinical Product to the extent necessary or used for the Development of the Compound and/or Product and for any additional clinical supply of Product. If Evommune requires a supply of existing inventory of clinical Product from AprilBio, the Parties will promptly enter into a material transfer agreement to be in substantially the same form as the Material Transfer and Confidentiality Agreement between the Parties, dated [***], and updated as necessary as agreed between the Parties. Notwithstanding the foregoing, AprilBio shall have no obligation to reimburse Evommune more than [***] with respect to its obligation to reimburse Evommune under this Section 3.2(c).

 

3.3

AprilBio Support in Development. During the conduct of the POC Study, AprilBio shall make its Representatives that are knowledgeable regarding the Licensed Technology, the Compound, or Product (including the properties and functions thereof) reasonably available to Evommune for scientific and technical explanations, advice, and on-site support that may reasonably be required by Evommune relating to the Development of the Compound and Product (the “Development Support”); provided that Evommune will reimburse AprilBio for any reasonable Out-of-Pocket Expenses incurred by or on behalf of AprilBio in connection with the Development Support. To the extent that Evommune requires more than [***] hours of AprilBio’s Representatives’ time in one (1) week, or Evommune requires additional Development Support following completion of the POC Study, the Parties may enter into a separate written agreement in each Party’s sole discretion that sets forth the terms and conditions for such additional Development Support.

 

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3.4

Commercialization. Subject to Section 3.6, Evommune shall have the exclusive right, and sole responsibility and decision-making authority, at its sole cost and expense, to Commercialize Product itself or through one (1) or more Affiliates or Sublicensees or other Third Parties selected by Evommune and shall have the sole decision-making authority and responsibility in all matters relating to the Commercialization of the Product.

 

3.5

Clinical and Commercial Manufacturing. Evommune shall have the exclusive right to manufacture the Compound and Product itself or through one (1) or more Affiliates or Sublicensees or other Third Parties selected by Evommune.

 

3.6

Diligence by Evommune.

(a) Evommune (or its Affiliate or Sublicensee) shall use Commercially Reasonable Efforts to (i) Develop and Commercialize at least one (1) Product in the United States, (ii) after receiving Regulatory Approval for at least one (1) Product in the United States, Develop and Commercialize at least one (1) Product in at least one (1) country in each of the European Union and Asia, and (iii) after receiving Regulatory Approval for at least one (1) Product in the European Union and at least one (1) country in Asia, Develop and Commercialize Product in any additional jurisdictions that Evommune determines would be Commercially Reasonable. Evommune shall have the exclusive right to determine, in its sole discretion, the launch strategy for Product, subject to its exercise of Commercially Reasonable Efforts and the availability of any necessary Third Party licenses or other necessary rights. Activities by Evommune’s Affiliates and Sublicensees will be considered as Evommune’s activities under this Agreement for purposes of determining whether Evommune has complied with its obligation to use Commercially Reasonable Efforts. For clarity, Evommune shall have no obligation to Develop or Commercialize Product in any particular country or countries, except as expressly provided in this Section 3.6.

(b) Notwithstanding the foregoing, Evommune will: (i) [***] within [***], and (ii) [***] within [***]; provided that if there is any delay in meeting the time specified in either (i) or (ii) caused by the FDA, AprilBio, and/or any manufacturer, or not otherwise caused by an action or inaction of Evommune, then such time specified in (i) or (ii) shall be extended by an amount of time corresponding to the length of such delay.

 

3.7

Right to Subcontract.

(a) Evommune may exercise any of its rights, or perform any of its obligations, under this Agreement (including any of the rights licensed in Section 2.1) by subcontracting the exercise or performance of all or any portion of such rights and obligations on Evommune’s behalf.

(b) AprilBio may subcontract the exercise of any of its rights and/or the performance of any of its obligations (i) under this Agreement to an Affiliate, and (ii) under Section 5.12 and ARTICLE 6 to a Third Party, in each case ((i) and (ii)), without Evommune’s consent. To the extent that AprilBio needs to engage a subcontractor with respect to other rights and obligations under this Agreement, AprilBio shall seek Evommune’s consent, not to be unreasonably withheld, conditioned, or delayed.

 

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(c) Any subcontract granted or entered into by a Party as contemplated by this Section 3.7 of the exercise or performance of all or any portion of the rights or obligations that such Party may have under this Agreement shall (i) not relieve such Party from any of its obligations under this Agreement, (ii) will be set forth in a written contract with the applicable subcontractor, and (iii) each such subcontract will be consistent with and expressly made subject to the terms and conditions of this Agreement and shall include (A) restrictions on the use and disclosure of Confidential Information of the other Party at least as stringent as set forth herein, and (B) an assignment to the applicable Party entering into such contract of all rights to any and all results of the activities undertaken and other intellectual property made, invented, or generated by such subcontractor with respect to the Compound or Product.

 

3.8

Trademarks. As between AprilBio and Evommune, Evommune shall have the sole authority to select trademarks, generic naming, and brand naming for the Product and shall own all such names and trademarks; provided, however, Evommune shall not, and shall not permit its Affiliates, to use in their respective business (a) any trademarks, generic naming, or brand naming of AprilBio or (b) any trademarks, generic naming, or brand naming that is confusingly similar to, misleading, or deceptive with respect to or that disputes any (or any part) of the trademarks, generic naming, and brand naming of AprilBio.

 

3.9

Reporting. Evommune shall, (a) prior to [***], within [***] days of the end of each Calendar Year, (b) after [***] and prior to [***], within [***] days of the end of each Calendar Quarter, and (c) after [***], within [***] days of the end of each Calendar Year, in each case ((a), (b), and (c)), provide AprilBio with a written report summarizing in reasonable detail its major Development and, as applicable, Commercialization activities conducted during the prior Calendar Year or Calendar Quarter, as applicable, and anticipated to be conducted in the following Calendar Year or Calendar Quarter, as applicable. Such report shall include reasonably detailed information regarding Evommune’s progress against milestones and timelines, threats to the timeline, delays, positive and negative observations regarding any experiments or assays conducted in the prior period, Marketing Approval status, and other material updates regarding each Clinical Trial. Evommune shall, upon reasonable advance written request and during normal business hours, make its relevant functional leads available to discuss such written report and answer any reasonable questions AprilBio may have regarding the information contained in such written report. All information and reports provided to AprilBio pursuant to this Section 3.9 (which do not otherwise include AprilBio’s Confidential Information) shall be Confidential Information of Evommune. Notwithstanding the foregoing, Evommune’s obligation to provide reports under this Section 3.9 shall: (i) expire with respect to Development, upon receipt of Regulatory Approval for Product, (ii) expire with respect to Commercialization, upon the [***] anniversary of the First Commercial Sale of Product hereunder, and (iii) if AprilBio undergoes a Change of Control to or with a Evommune Competitor, be modified as provided in Section 12.3.

ARTICLE 4

REGULATORY MATTERS

 

4.1

Regulatory Filings; Right of Reference. Except as otherwise provided herein, as between Evommune and AprilBio, Evommune shall be responsible, at its own expense, for making, owning, and maintaining all Regulatory Filings for the Product, including all MAAs. To the extent allowed by applicable Laws, AprilBio shall transfer to Evommune any Regulatory Filings for the Product in AprilBio’s name; provided, however, that until such transfer, AprilBio will continue to maintain all Regulatory Filings for the Australian Phase I Clinical Trial and thereafter Evommune will be responsible. AprilBio hereby grants Evommune an exclusive Right of Reference to Current Product clinical data and Regulatory Filings that relate solely to the Current Product held by AprilBio for use in connection with Regulatory Filings for the Product. Evommune hereby grants AprilBio an exclusive Right of Reference to Product clinical data for the Australian Phase I Clinical Trial and the POC Study held by Evommune for use in connection with Regulatory Filings for any compound or product of AprilBio.

 

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4.2

Communications with Authorities. Subject to this Section 4.2, Evommune (or one of its Affiliates or Sublicensees) shall be responsible at its sole cost and expense, and act as the sole point of contact, for communications with Regulatory Authorities in connection with the Development and Commercialization of the Product. Following the Effective Date, AprilBio shall not initiate, with respect to the Product, any meetings or contact with Regulatory Authorities, other than meetings or contact with Regulatory Authorities in connection with the Australian Phase I Clinical Trial or POC Study, without Evommune’s prior written consent (not to be unreasonably withheld, conditioned, or delayed); provided, however, that AprilBio shall not be required to obtain Evommune’s consent of any such meeting or contact if it would impact or prejudice any rights or abilities of AprilBio, including the ability of AprilBio to respond to an inspection of any Regulatory Authority in a complete, accurate, or timely manner. To the extent either Party receives any written or oral communication from any Regulatory Authority relating to Product, such Party shall, to the extent not prohibited by Law, (a) refer such Regulatory Authority to the other Party, and (b) as soon as reasonably practicable (but in any event within [***] Business Days), notify the other Party and provide such other Party with a copy of any written communication or, if applicable, a reasonably complete and accurate summary of such oral communication. Subject to potential redactions for Third Party confidential information not directly relating to Licensed Technology, Evommune shall provide AprilBio, in a timely manner, with copies of all material Regulatory Filings and coordinate any responses to Regulatory Authorities that relate to the Licensed Technology. For clarity, nothing herein shall preclude AprilBio from responding directly to inquiries or other communications from Regulatory Authorities relating to (x) the Australian Phase I Clinical Trial or POC Study, where such response is required of AprilBio by applicable Laws or at the direction of a Regulatory Authority, or (y) any compound or product that is not the Compound or Product.

 

4.3

AprilBio Support in Regulatory Matters. AprilBio shall during the conduct of the POC Study make its Representatives that are knowledgeable regarding the Licensed Technology, the Compound, or Product reasonably available to Evommune for regulatory explanations, advice, and on-site support, that may reasonably be required by Evommune relating to regulatory matters for the conduct of the POC Study (the “Regulatory Support”); provided that Evommune will reimburse AprilBio for any reasonable Out-of-Pocket Expenses incurred by or on behalf of AprilBio in connection with the Regulatory Support. To the extent that Evommune requires more than [***] hours of AprilBio’s Representatives’ time in one (1) week, or Evommune requires additional Regulatory Support after completion of the POC Study, the Parties may enter into a separate written agreement in each Party’s sole discretion that sets forth the terms and conditions for such additional Regulatory Support.

 

4.4

Adverse Event Reporting. The Parties agree to comply with all Laws in connection with Product safety data collection and reporting. If AprilBio has or receives any information regarding any Adverse Event that relates to the use of Product, then AprilBio shall provide Evommune with all such information in English within such reasonable timelines which enable Evommune to comply with all applicable Laws. To the extent not prohibited by Law, Evommune shall promptly report to AprilBio any Adverse Event or complaint associated with the Product. The information exchanged between the Parties pursuant to this Section 4.4 shall be transmitted by e-mail or facsimile to the following address:

 

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Transmission to AprilBio:

[***]

Manager, Clinical Operation

[***]

Transmission to Evommune:

[***]

Senior Vice President, Clinical Development

[***]

4.5 Recalls. Evommune shall have the sole right to determine whether and how to implement any recall or other market withdrawal of the Product, but shall notify AprilBio in writing prior to initiating any Product recall or other field action. Evommune shall be solely responsible, at its sole cost and expense, for the conduct of all activities related to a recall or other market withdrawal of the Product.

ARTICLE 5

FINANCIAL PROVISIONS

 

5.1

Initial Fee. In partial consideration of AprilBio’s grant of the rights and licenses to Evommune hereunder, Evommune shall pay to AprilBio an initial, non-refundable, non-creditable fee of US$15,000,000 (the “Initial Fee”), within thirty (30) days following the Effective Date.

 

5.2

Development Milestone Payments. As further partial consideration for AprilBio’s grant of the rights and licenses to Evommune hereunder, Evommune shall pay to AprilBio the following one-time, non-refundable, non-creditable milestone payments with respect to the first Product to achieve the development milestone events described below.

 

Development Milestone Event

   Milestone Payment
(USD)
 

1. [***]:

  

1(A). [***]

     [ ***] 

1(B). [***]

     [ ***] 

2. [***]

     [ ***] 

3. [***]

     [ ***] 

4. [***]

     [ ***] 

5. [***]

     [ ***] 

6. [***]

     [ ***] 

7. [***]

     [ ***] 

8. [***]

     [ ***] 

9. [***]

     [ ***] 

Evommune shall promptly (and in any event within [***] days after achievement of such development milestone event) notify AprilBio in writing of the achievement of any such development milestone event and AprilBio shall issue Evommune an invoice for the amount of the corresponding development milestone payment, which invoice Evommune shall pay within [***] days following receipt of such invoice.

 

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With respect to each development milestone event, the development milestone payments to be made under this Agreement shall be due and payable only once. The achievement of a development milestone event related to a [***] or a [***] of the Product shall trigger the payment of a development milestone event related to a [***] in the event such development milestone event related to a [***] had not been triggered prior to achievement of the development milestone event related to a [***] or a [***]. The achievement of a development milestone event related to a [***] of the Product shall trigger the payment of a development milestone event related to a [***] in the event such development milestone event related to a [***] had not been triggered prior to achievement of the development milestone event related to a [***]. For further clarity, the total maximum development milestones payable under this Section 5.2 shall not exceed US$82,500,000.

 

5.3

Commercial Milestone Payments. As further partial consideration for AprilBio’s grant of the rights and licenses to Evommune hereunder, Evommune shall pay to AprilBio the following one-time non-refundable, non-creditable payments for the first achievement within a single Calendar Year of the following commercial milestones:

 

Commercial Milestone Event

   Milestone Payment
(USD)
 

Aggregate annual Net Sales for all Products exceeds [***]

     [ ***] 

Aggregate annual Net Sales for all Products exceeds [***]

     [ ***] 

Aggregate annual Net Sales for all Products exceeds [***]

     [ ***] 

Aggregate annual Net Sales for all Products exceeds [***]

     [ ***] 

Aggregate annual Net Sales for all Products exceeds [***]

     [ ***] 

Evommune shall promptly (and in any event within [***] days of the end of the Calendar Quarter in which a commercial milestone event occurs) notify AprilBio in writing of the achievement of any such commercial milestone event and AprilBio shall issue Evommune an invoice for the amount of the corresponding commercial milestone payment, which invoice Evommune shall pay within [***] days following receipt of such invoice.

With respect to each commercial milestone event, the commercial milestone payments to be made under this Agreement shall be due and payable only once. The achievement of a higher commercial milestone event shall trigger the payment of a lower commercial milestone event in the event such lower commercial milestone event had not been triggered prior to achievement of the higher commercial milestone event. For clarity, the total maximum commercial milestones payable under this Section 5.3 shall not exceed US$377,500,000.

 

5.4

Compulsory License. In the event that AprilBio or Evommune receives a request for a Compulsory License anywhere in the world, it shall promptly notify the other Party. If any Third Party obtains a Compulsory License in any country in the Territory, then AprilBio or Evommune (whoever has first notice) shall promptly notify the other Party. Thereafter, as of the date that the Third Party obtained such Compulsory License in such country, the royalty rate payable under Section 5.5 to AprilBio for Net Sales in such country will be adjusted to equal any lower royalty rate granted to such Third Party for such country with respect to the sales of such Product therein. The limit on deductions in Section 5.8(d) shall not apply to any adjustment to the royalty rate due to a Compulsory License under this Section 5.4.

 

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5.5

Royalty Payments for Product.

(a) Royalty Rate. As further consideration for AprilBio’s grant of the rights and licenses to Evommune hereunder, Evommune shall, during the Royalty Term, pay to AprilBio a royalty on worldwide aggregate annual Net Sales of a Product for each Calendar Year, on a Product-by-Product basis, at the percentage rates set forth below (subject to Sections 5.5(c) and 5.8 below):

 

Annual Worldwide Net Sales of Product per Calendar Year (in USD)

   Incremental
Royalty Rate

For Net Sales of Product up to and including [***]

   [***]

For that portion of Net Sales of Product that is greater than [***] and less than or equal to [***]

   [***]

For that portion of Net Sales of Product that is greater than [***] and less than or equal to [***]

   [***]

For that portion of Net Sales of Product that is greater than [***]

   [***]

By way of illustration, assume in a Calendar Year, during the Royalty Term, that (i) aggregate annual Net Sales of a Product in USD total [***], and (ii) no adjustments or deductions to payments under this ARTICLE 5 apply. The total royalties due and payable by Evommune to AprilBio for such Net Sales would be [***], calculated as follows:

[***]

(b) Net Sales Subject to Royalty Payments. In no event shall only the manufacture of a Product give rise to a royalty obligation. For clarity, Evommune’s obligation to pay royalties to AprilBio under this ARTICLE 5 is imposed only once with respect to the same unit of Product regardless of the number of Licensed Patents pertaining thereto.

(c) Royalty Payment Calculation. In the event certain Net Sales are subject to the royalty reductions set forth in Section 5.8, Evommune shall calculate the royalty rates as follows: Evommune shall allocate the Net Sales during a particular Calendar Year to the relevant Net Sales band set forth in Section 5.5(a), and shall calculate the proportion of Net Sales within such band that are: (i) not subject to any royalty reduction pursuant to Section 5.8 (to which the full royalty rate in Section 5.5(a) shall apply); and (ii) subject to a royalty reduction pursuant to Section 5.8 (to which the applicable reduction of the royalty rate in Section 5.5(a) shall apply).

 

5.6

Additional Revenue.

(a) If Evommune or its Affiliates (i) grants a Third Party a sublicense in a territory that includes a Major Geography under this Agreement, or (ii) sells to a Third Party all or part of the assets that relate to the Compound or the Product with respect to a territory that includes a Major Geography or engages in any other similar transaction, then, in either case ((i) or (ii)), Evommune shall pay AprilBio the Applicable Percentage of the Additional Revenue from such sublicense, asset sale, or other similar transaction.

(b) For the purposes of this Section 5.6, “Applicable Percentage” means: (a) [***] for the period prior to the [***]; (b) [***] for the period from the [***] until the [***]; and (c) [***] thereafter.

 

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(c) For the avoidance of doubt, if a sublicense, asset sale, or other similar transaction is with respect to a worldwide territory, the consideration received in connection with such transaction shall be deemed to be Additional Revenue. By way of example, if a Sublicensee pays Evommune Additional Revenue in the amount of [***] upon entering into a sublicense agreement for a territory that includes a Major Geography prior to [***], then the Applicable Percentage of such Additional Revenue would be [***], and Evommune would pay AprilBio [***]. By way of further example, if a Sublicensee pays Evommune [***] upon [***], then Evommune would pay AprilBio [***] as follows: (x) [***] for the applicable development milestone payment pursuant to Section 5.2, and (y) [***] as the Applicable Percentage (i.e., [***]) of the Additional Revenue (i.e., [***]). By way of yet a further example, if, prior to [***], a Third Party pays Evommune [***] to acquire all of the assets related to the Compound and the Product, then the Applicable Percentage of such Additional Revenue would be [***], and Evommune would pay AprilBio [***].

 

5.7

PRV Sale. Evommune shall have the right to sell, transfer, or otherwise dispose of each and every priority review voucher (or similar right) (each, a “PRV”) granted to Evommune in connection with the Development of the Product without payment or accounting to AprilBio of any kind except that, in the event that Evommune sells any PRV, the amount of PRV Net Proceeds for such sale, transfer, or other disposition shall be [***].

 

5.8

Reductions, Deductions and Reimbursements.

(a) Lack of Valid Claims. The royalty rates set forth in Section 5.5(a) applicable to the Net Sales of a Product in a country will be reduced by [***] during any period there exists no Valid Claim of a Licensed Patent in such country that Covers such Product in such country.

(b) Third Party License Agreements. Subject to the terms and conditions of this Agreement, if Evommune or any of its Affiliates or Sublicensees enter into a Third Party License Agreement(s), Evommune will be entitled to deduct from any amount payable to AprilBio under Section 5.5, calculated by consideration of the then-applicable royalty rate, an amount equal to not more than [***] of any amounts paid by Evommune, its Affiliates, or Sublicensees pursuant to such Third Party License Agreement(s) in respect of the Current Product which gave rise to the payment obligation under Section 5.5.

(c) Generic Competition. If, on a Product-by-Product and country-by-country basis, (i) a Biosimilar Product with respect to any Product is sold in a country, and (ii) Net Sales of such Product sold in that country during any Calendar Quarter following introduction of such Biosimilar Product have been reduced by at least [***] in that country as compared to the average Net Sales of such Product sold in such country during the [***] full Calendar Quarters immediately prior to the Calendar Quarter in which such Biosimilar Product was first introduced, then the royalty rates for such Product in such country shall be reduced to [***] of the royalty rates set forth in Section 5.5(a) that would otherwise apply in the absence of such adjustment in such country during the remainder of the applicable Royalty Term.

(d) Reduction Floor. Under no circumstances shall the deductions under this Section 5.8 result in the amount payable to AprilBio being reduced by more than [***] compared with the amount otherwise payable under Section 5.5(a). If Evommune is not able to deduct the full amount of the permitted deduction from the amount due to AprilBio due to the [***] minimum amount, Evommune shall be entitled to deduct any undeducted excess amount from subsequent amounts owed to AprilBio under Section 5.5(a) (subject always to AprilBio receiving a minimum of [***] of the amount owed). For the avoidance of doubt, the limit on deductions in this Section 5.8(d) shall not apply to any adjustment to the royalty rate due to a Compulsory License as provided in Section 5.4.

 

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5.9

Timing of Payment. Royalties payable under Section 5.5(a) shall be payable on actual Net Sales and shall accrue at the time the invoice for the sale of Product is delivered. Royalty obligations that have accrued during a particular Calendar Quarter shall be paid, on a Calendar Quarter basis, within [***] days after the end of each Calendar Quarter during which the royalty obligation accrued.

 

5.10

Mode of Payment and Currency; Invoices.

(a) Currency. All payments to AprilBio hereunder shall be made by deposit of USD in the requisite amount to such bank account as AprilBio may from time to time designate by written notice to Evommune. With respect to sales not denominated in USD, Evommune shall convert applicable sales in foreign currency into USD by using the closing exchange rates reported by Thomson Reuters for the last Business Day of each month of the applicable reporting period to the payment due. Based on the resulting sales in USD, the then applicable royalties shall be calculated. The Parties may vary the method of payment set forth herein at any time upon mutual written agreement, and any change shall be consistent with the local Law at the place of payment or remittance.

(b) Valuation of non-Cash Additional Revenue/PRV Consideration. With respect to any non-cash consideration received by Evommune, its Affiliates, or its Sublicensees that is Additional Revenue or is consideration received by Evommune or any of its Affiliates or Sublicensees in connection with the sale, transfer, or other disposition of a PRV, such consideration will be valued at its current fair market value using a method that is mutually agreed upon by the Parties; provided that if such consideration is in the form of publicly traded securities, such securities will be valued based on the volume-weighted average price of such securities for the [***] days after the closing of the applicable transaction. Any dispute between the Parties related to the valuation of any non-cash consideration shall be subject to resolution in accordance with the dispute resolution procedure set forth in ARTICLE 11.

(c) Invoices. AprilBio shall address its invoices to:

Evommune, Inc.

1841 Page Mill Road, Suite 100

Palo Alto, CA 94304

Attn: Accounts Payable

With a copy to:

Name:  [***]

Email:  [***]; APinvoice@evommune.com

Attn:   Accounts Payable

(d) Late Payments. If a Party does not receive payment of any undisputed amount due to it under this Agreement on or before the due date, such payment shall bear interest (compounded monthly) at an annual rate of [***] basis points above the United States effective federal funds rate, as adjusted each Business Day and published by the Federal Reserve Bank of New York through its website (https://apps.newyorkfed.org/markets/autorates/fed%20funds).

 

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5.11

Royalty Reports and Records Retention. Within [***] days after the end of each Calendar Quarter during which Product has been sold, Evommune shall deliver to AprilBio, together with the applicable royalty payment due for such Calendar Quarter, a written report, on a Product-by-Product and a country-by-country basis, of Net Sales subject to royalty payments for such Calendar Quarter. The final report shall also show (a) the calculation of the actual Net Sales subject to royalty payments for such Calendar Quarter, (b) the calculation of the royalty payments due to AprilBio on such Net Sales (including aggregate gross amounts invoiced for the Product in such country during the reporting period and the reductions or offsets applied pursuant to Section 5.8), (c) the amount of Taxes, if any, withheld to comply with applicable Laws, and (d) the exchange rate used in calculating the payments due to AprilBio, which exchange rates shall comply with Section 5.10(a). If no royalties are due, Evommune shall so report. Such report shall be deemed Confidential Information of Evommune. For [***] years (unless otherwise required by applicable Laws) after each sale of Product occurs, Evommune shall, and shall ensure that its Affiliates and Sublicensees, keep complete and accurate records of such sale in sufficient detail to confirm the accuracy of the royalty calculations and commercial milestone payments owed hereunder.

 

5.12

Audits.

(a) Audits Generally. During the Royalty Term and for one (1) Calendar Year thereafter, and not more than once in each Calendar Year, Evommune shall permit, and shall cause its Affiliates or Sublicensees to permit, an independent certified public accounting firm of nationally recognized standing selected by AprilBio, and reasonably acceptable to Evommune or such Affiliate or Sublicensee, to have access to and to review, during normal business hours upon reasonable prior written notice, the applicable records of Evommune and its Affiliates or Sublicensees to verify the accuracy of the royalty reports and payments under this ARTICLE 5. Such review may cover the records for sales made in any Calendar Year ending not more than [***] years prior to the date of such request. The accounting firm shall disclose to AprilBio and Evommune only whether the royalty reports and payments under this ARTICLE 5 are correct or incorrect and the specific details concerning any discrepancies or the information relevant to support the statement as to whether the royalties and commercial milestone payments paid to AprilBio were calculated accurately. No other Confidential Information of Evommune (or additional information that is ordinarily not included in the royalty or cost reports delivered pursuant to this Agreement) disclosed to the accounting firm during the course of the audit shall be provided to AprilBio.

(b) Audit-Based Reconciliation. If such accounting firm concludes that additional amounts were owed during such period, and Evommune agrees with such calculation, Evommune shall pay the additional undisputed amounts within [***] days after the date AprilBio delivers to Evommune such accounting firm’s written report. If such accounting firm concludes that an overpayment was made, such overpayment shall be fully creditable against amounts payable in subsequent payment periods or, at Evommune’s request, shall be promptly reimbursed to Evommune. If Evommune disagrees with such calculation, it may retain its own independent certified public accounting firm of nationally recognized standing and reasonably acceptable to AprilBio, to conduct a review, and if such firm concurs with the other accounting firm, Evommune shall make the required payment within [***] days after the date Evommune receives the report of its accounting firm. If Evommune’s accounting firm does not concur, Evommune and AprilBio shall meet and negotiate in good faith a resolution of the discrepancies between the two (2) firms. AprilBio shall pay for the cost of any audit, unless Evommune has underpaid AprilBio by the lesser of (i) [***] or more, and (ii) [***], in which case Evommune shall pay for the costs of audit.

(c) Audit Confidentiality. Each Party shall treat all information that it receives under this Section 5.12 in accordance with the confidentiality provisions of ARTICLE 7, and shall use reasonable efforts to cause its accounting firm to enter into a reasonable confidentiality agreement with the other Party obligating such firm to retain all such financial information in confidence pursuant to such confidentiality agreement, except to the extent necessary for such Party to enforce its rights under this Agreement.

 

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(d) Audits by Evommune. The terms of this Section 5.12 shall apply mutatis mutandis with respect to Evommune’s right to audit AprilBio’s records related to those Out-of-Pocket Expenses for which AprilBio seeks reimbursement hereunder.

 

5.13

Taxes

(a) General. Notwithstanding anything in this Section 5.13, each Party shall solely bear and pay all Taxes imposed on such Party’s net income or gain (in each case, however denominated) arising, directly or indirectly, from the activities of the Parties under this Agreement. Each Party shall comply with applicable Laws regarding filing and reporting for income tax purposes.

(b) Withholding Tax.

(i) AprilBio shall be responsible for the payment of any and all Taxes levied on account of the royalties and other payments paid to AprilBio by Evommune or its Affiliates or Sublicensees under this Agreement. If Law requires that Taxes be deducted and withheld from royalties or other payments paid under this Agreement, Evommune shall (A) deduct those Taxes and interests and penalties assessed thereon from the payment or from any other payment owed by Evommune hereunder; (B) pay the Taxes to the proper Governmental Body; (C) send evidence of the obligation together with proof of Tax payment to AprilBio within [***] days following such payment; (D) remit the net amount, after deductions or withholding made under this Section 5.13(b); and (E) cooperate with AprilBio in any way reasonably requested by AprilBio, to obtain available reductions, credits, or refunds of such Taxes.

(ii) The Parties agree that payment of the Initial Fee shall not be subject to any withholding tax; provided, that AprilBio shall indemnify and defend Evommune against, and shall hold Evommune harmless from and against, and shall pay and reimburse Evommune for, any and all Taxes and Out-of-Pocket Expenses (including reasonable attorney’s fees) incurred by, or imposed upon, Evommune arising out of any withholding tax finally assessed by any Tax authority with respect to the Initial Fee; and provided, further, that Evommune shall be entitled to offset any amounts otherwise owed or payable to AprilBio under this Agreement by any such finally assessed amounts. Evommune shall notify AprilBio promptly in writing upon the receipt of notice from a Tax authority of any threatened or pending Tax audit, inquiry, investigation, claim, or other proceeding with respect to withholding tax on the Initial Fee. Evommune shall (A) keep AprilBio reasonably informed with respect to any such Tax audit, inquiry, investigation, claim, or other proceeding, (B) consult with AprilBio before taking any significant action in connection with such Tax audit, inquiry, investigation, claim, or other proceeding, (C) give AprilBio an opportunity to review any written responses to the Tax authority prior to submission, (D) take any reasonable comments of AprilBio with respect to any written submissions, and (E) not settle any such Tax audit, inquiry, investigation, claim, or other proceeding without AprilBio’s consent (not to be unreasonably withheld, conditioned, or delayed).

(iii) Tax Action. Notwithstanding anything in this Agreement, if as a result of any assignment or sublicense by Evommune of its rights or obligations under this Agreement, any change in Evommune’s tax residency, any change in the entity that originates the payment, or any failure on the part of Evommune to comply with applicable Laws (other than any failure resulting from reliance on any certification or other information provided by AprilBio with respect to the amount of withholding tax required to be withheld or deducted) with respect to withholding taxes

 

29


(including filing or record retention requirements) (a “Tax Action”) leads to the imposition of withholding tax liability or value added or similar Tax borne by AprilBio that would not have been imposed in the absence of a Tax Action or in an increase in such liability above the liability that would have been imposed in the absence of such Tax Action, then (A) the sum payable by Evommune (in respect of which such deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that AprilBio receives a sum equal to the sum which it would have received had no Tax Action occurred and (B) the sum payable to Evommune that caused a Tax Action (in respect of which such deduction or withholding is required to be made) shall be made to AprilBio after deduction of the amount required to be so deducted or withheld, which deducted or withheld amount shall be remitted in accordance with applicable Law.

(iv) Value Added Tax. It is understood and agreed between the Parties that any payments made by Evommune under this Agreement are inclusive of any value added or similar Tax imposed upon such payment and that AprilBio shall be responsible for the payment of any and all Taxes levied on account of any payments paid to AprilBio by Evommune. Evommune is entitled to receive a proper tax invoice where any value added Tax amount is shown separately.

ARTICLE 6

INVENTIONS AND PATENTS

 

6.1

Ownership of Inventions.

(a) Except as otherwise expressly set forth herein, ownership of Patents (anywhere in the world) that are generated or created by a Party or jointly by the Parties pursuant to this Agreement will be consistent with ownership in the United States as determined by inventorship rules under U.S. law. Each Party shall promptly disclose to the other any Invention submitted to it by its employees, agents, or independent contractors.

(b) Evommune shall own any Invention (other than an AprilBio Invention) developed solely by Evommune (or any of its Affiliates or a Third Party on behalf of Evommune) (“Evommune Inventions”) and the Patents covering or claiming any such Evommune Inventions (“Evommune Patents”).

(c) AprilBio shall own any Invention (i) developed solely by AprilBio (or any of its Affiliates or a Third Party on behalf of AprilBio) or jointly by the Parties (or any of their Affiliates or a Third Party on behalf of either Party) or (ii) that is an improvement on or modification to the Licensed Technology (other than would constitute a Product Licensed Patent) (collectively, “AprilBio Inventions”) and the Patents covering or claiming any such AprilBio Inventions (“AprilBio Patents”). Evommune agrees to assign and hereby does assign all of its right, title, and interest in and to all AprilBio Inventions to AprilBio that are developed jointly by the Parties.

 

6.2

Patent Listing under Public Health Services Act. Each Party shall immediately give written notice to the other Party of any statement of which they become aware filed pursuant to 42 U.S.C. §262(I)(3) (or any amendment or successor statute thereto) claiming that any Licensed Patents covering the Compound or Product, or the manufacture or use of each of the foregoing, are invalid or unenforceable, or that infringement will arise from the manufacture, use, or sale of a product by a Third Party.

 

6.3

Further Assurances. Each Party shall require all of its employees, and use its best efforts to require its contractors and agents, and any Affiliates and Third Parties working on its behalf under this Agreement (and their respective employees, contractors, and agents), to be under an obligation to assign their rights in any Inventions and intellectual property rights resulting therefrom to such Party.

 

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6.4

Patent Prosecution and Maintenance.

(a) Non-Product Licensed Patents.

(i) AprilBio shall have the first right, but not the obligation, to file, prosecute, and maintain Non-Product Licensed Patents in AprilBio’s name, [***]; provided that, [***]. AprilBio, shall (A) keep Evommune informed of the status of the filing and prosecution of Non-Product Licensed Patents or related proceedings (e.g., interferences, oppositions, reexaminations, reissues, revocations, or nullifications) in a timely manner, (B) will take into consideration the advice and recommendations of Evommune, and (C) discuss with Evommune and take into account and consider in good faith any comments received from Evommune to avoid an adverse effect on, or diminished scope of, the prosecution of or claim construction of Product Licensed Patents in any material respect; provided that, with respect to this Section 6.4(a)(i), if [***], then [***].

(ii) AprilBio shall be responsible for obtaining patent term extensions wherever available for Non-Product Licensed Patents. In the event that any election with respect to obtaining patent term extensions is to be made, AprilBio shall have the right to make such elections; provided, however, that AprilBio discuss such election with Evommune prior to making such election in the event that it could adversely affect obtaining patent term extensions for Product Licensed Patents.

(iii) If AprilBio elects not to file or to continue to prosecute or maintain Non-Product Licensed Patent, then it shall notify Evommune in writing at least [***] days before any deadline applicable to the filing, prosecution or maintenance of such Non-Product Licensed Patent, as the case may be, or any other date by which an action must be taken to establish or preserve such Non-Product Licensed Patent in such country or jurisdiction. In such case, Evommune shall have the right to pursue the filing or support the continued prosecution or maintenance of such Non-Product Licensed Patent; provided that [***]; provided further that [***].

(b) Product Licensed Patents.

(i) Evommune shall have the first right, but not the obligation, to file, prosecute, and maintain Product Licensed Patents, in AprilBio’s name. [***] costs and expenses of filing, prosecuting, and maintaining Product Licensed Patents. Evommune shall keep AprilBio informed of the status of the filing and prosecution of Product Licensed Patents and related proceedings (e.g., interferences, oppositions, reexaminations, reissues, revocations, or nullifications) in a timely manner, and will discuss with AprilBio and take into consideration the advice and recommendations of AprilBio to avoid an adverse effect on, or diminished scope of, the prosecution of or claim construction of Non-Product Licensed Patents or other intellectual property rights of AprilBio in any material respect. At Evommune’s reasonable request, AprilBio will provide Evommune with reasonable assistance in prosecuting Product Licensed Patents to the extent possible, [***].

(ii) Evommune shall be responsible, in AprilBio’s name, for obtaining patent term extensions wherever available for Product Licensed Patents for the Compound. AprilBio shall provide Evommune with all relevant information, documentation, and assistance in respect of any patent term extension for a Product Licensed Patent as may reasonably be requested by Evommune, [***]. Any such provision of information, documentation and assistance shall be provided as promptly as practicable and in a manner that will ensure a likelihood that all patent term extensions for Product Licensed Patents are obtained wherever legally permissible, and to the maximum extent available.

 

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(iii) If Evommune elects not to file or to continue to prosecute or maintain a Product Licensed Patent, then it shall notify AprilBio in writing at least [***] days before any deadline applicable to the filing, prosecution, or maintenance of such Product Licensed Patent, as the case may be, or any other date by which an action must be taken to establish or preserve such Product Licensed Patent in such country or jurisdiction. In such case, AprilBio shall have the right (but not the obligation) to pursue the filing or support the continued prosecution or maintenance of such Product Licensed Patent.

(c) Evommune Patents. Evommune shall have the right, but not the obligation, to file, prosecute, and maintain Evommune Patents. Evommune shall bear all costs and expenses of filing, prosecuting, and maintaining Evommune Patents. Evommune shall keep AprilBio reasonably informed of the status of the filing and prosecution of Evommune Patents that Cover the Product (“Evommune Product Patents”) and related proceedings (e.g., interferences, oppositions, reexaminations, reissues, revocations, or nullifications) in a timely manner, and will take into consideration any advice and recommendations of AprilBio. Evommune agrees to meet with AprilBio and take into account and incorporate in good faith any comments received from AprilBio to avoid an adverse effect on, or diminished scope of, the prosecution of or claim construction of Non-Product Licensed Patents or other intellectual property rights of AprilBio in any material respect.

(d) Cooperation to Create Product Licensed Patents. To the extent that a patent application contains written description support for claims that Cover the Compound and/or Product that are composition of matter, method of manufacture, or method of use claims (the “Product Licensed Claims”) and claims that are not Product Licensed Claims (the “Non-Product Licensed Claims”), then the Parties shall discuss and agree to a strategy for filing such patent application and, to the extent not prohibited by applicable Law, use reasonable efforts to file the Product Licensed Claims and the Non-Product Licensed Claims in separate patent applications, for example by filing appropriate divisional(s), or continuations to create Product Licensed Patents for the Product Licensed Claims. When, in certain jurisdictions, it is legally advantageous to file Product Licensed Claims and Non-Product Licensed Claims in the same application (for example, to create a safe harbor from double patenting prohibitions), the Parties will confer to discuss a strategy for such filing and, to the extent advisable taking into account the intellectual property strategy of the Party responsible for prosecution and maintenance of such Patent, such Party will maintain Product Licensed Claims and Non-Product Licensed Claims in the same application. The Party responsible for prosecution and maintenance of such application, as the case may be, agrees to meet with the other Party and take into account and incorporate in good faith any comments received from the other Party to avoid an adverse effect on, or diminished scope of the prosecution of or claim construction of Product Licensed Claims and Non-Product Licensed Claims, as applicable, in any material respect. In furtherance of the foregoing, the Parties agree to cooperate as set forth in Schedule 6.4(d) (the “Prosecution Cooperation Plan”).

 

6.5

Enforcement of Patents

(a) Non-Product Licensed Patents.

(i) Notice. If a Party believes that there has been or will be an infringement, unauthorized use, misappropriation, or ownership claim or threatened infringement or other such activity by a Third Party with respect to any Non-Product Licensed Patent, or if a Third Party claims that any Non-Product Licensed Patent is invalid or unenforceable, such Party shall notify the other Party in writing and provide the other Party with all applicable details.

 

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(ii) Right to Bring an Action. AprilBio shall have the first right, but not the obligation, to attempt to resolve any infringement or claim, including by filing an infringement suit, defending against such claim, or taking other similar action (each, an “Action”), with respect to a Non-Product Licensed Patent and, subject to Section 6.5(a)(iv), to compromise or settle any such Action. AprilBio shall provide Evommune with copies of all pleadings and other documents filed with the court and shall consider reasonable input from Evommune during the course of such Action. Evommune is obligated to join AprilBio in such Action if AprilBio determines that it is necessary to demonstrate “standing to sue.” If (A) AprilBio notifies Evommune that it will not proceed with respect to a particular Action, or otherwise fails to take any material steps to pursue such Action within [***] days after notice is first provided by a Party under Section 6.5(a)(i) (but, with respect to defending against a Third Party Action, no later than [***] days prior to any applicable filing or response deadline), and (B) there are no Product Licensed Patents that can be enforced by Evommune in response to such Action, then, in the case of (A) and (B), subject to Section 6.5(a)(iv), Evommune will have the right, but not the obligation, to initiate and control such Action; provided that in no event will Evommune have a right to enforce any Non-Product Licensed Patents for which a Third Party has been granted enforcement rights.

(iii) Costs of an Action. Subject to the respective indemnity obligations of the Parties set forth in Sections 9.1 and 9.2, the Party that brings an Action under this Section 6.5(a) shall pay all costs associated with such Action, subject to the last sentence of this Section 6.5(a)(iii) and a Party’s obligations under Section 6.5(a)(v). If Evommune enforces a Non-Product Licensed Patent, following conclusion of such enforcement, Evommune may deduct any costs that are not reimbursed from recoveries from such enforcement action from [***] for purposes of [***]. Each Party shall have the right to join an Action relating to a Non-Product Licensed Patent, at its sole cost and expense.

(iv) Settlement; Conduct. Neither Party shall settle or otherwise compromise any Action by admitting that a Non-Product Licensed Patent, or any claim therein, is invalid or unenforceable without the other Party’s prior written consent, which consent will not be unreasonable withheld, conditioned, or delayed, and, (A) in the case of AprilBio, AprilBio may not settle or otherwise compromise an Action in a way that adversely affects or would be reasonably expected to adversely affect Evommune’s rights or benefits under this Agreement, without Evommune’s prior written consent, and (B) in the case of Evommune, Evommune may not settle or otherwise compromise an Action in a way that adversely affects or would be reasonably expected to adversely affect an AprilBio program (including any program of an AprilBio licensee) that utilizes the Licensed Technology.

(v) Cooperation; Reasonable Assistance. The Party enforcing or defending under this Section 6.5(a) will keep the other Party regularly informed of the status and progress of such Action and will reasonably consider the other Party’s comments on any such efforts, including determination of litigation strategy and filing of material papers to the competent court. The Party not enforcing or defending the Non-Product Licensed Patents shall provide reasonable assistance to the Party enforcing or defending, including providing access to relevant documents and other evidence and making its employees reasonably available, subject to the enforcing or defending Party’s reimbursement of any reasonable Out-of-Pocket Expenses incurred on an on-going basis by the Party not enforcing or defending in providing such assistance.

 

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(vi) Distribution of Amounts Recovered. Any amounts recovered by the enforcing or defending Party pursuant to this Section 6.5(a), whether by settlement or judgment, shall be allocated in the following order: (A) to reimburse such enforcing or defending Party for any costs incurred in connection with an applicable Action; (B) to reimburse the Party that is not enforcing or defending for any costs incurred in connection with such Action to the extent not reimbursed by the enforcing or defending Party; and (C) the remaining amount of such recovery, (I) if Evommune is the enforcing or defending Party, shall be [***], and (II) if AprilBio is the enforcing or defending Party, shall be [***].

(b) Product Licensed Patents.

(i) Notice. If a Party believes that there has been or will be an infringement, unauthorized use, misappropriation, or ownership claim or threatened infringement or other such activity by a Third Party with respect to any Product Licensed Patent, or if a Third Party claims that any Product Licensed Patent is invalid or unenforceable, such Party shall notify the other Party in writing and provide the other Party with all applicable details.

(ii) Right to Bring an Action. Evommune shall have the first right, but not the obligation, to attempt to resolve any Action with respect to a Product Licensed Patent and, subject to Section 6.5(b)(iv), to compromise or settle any such Action. Evommune shall provide AprilBio with copies of all pleadings and other documents filed with the court and shall consider reasonable input from AprilBio during the course of such Action. AprilBio is obligated to join Evommune in such Action if Evommune determines that it is necessary to demonstrate “standing to sue.” If Evommune does not intend to prosecute or defend an Action, Evommune shall promptly inform AprilBio. If Evommune notifies AprilBio that it will not proceed with respect to a particular Action, or otherwise fails to take any material steps to pursue such Action within [***] days after notice is first provided by a Party under Section 6.5(b)(i) (but, with respect to defending against a Third Party Action, no later than [***] days prior to any applicable filing or response deadline), then, subject to Section 6.5(b)(iv), AprilBio will have the right, but not the obligation, to initiate and control such Action.

(iii) Costs of an Action. Subject to the respective indemnity obligations of the Parties set forth in Sections 9.1 and 9.2, the Party that brings an Action under this 6.5(b) shall pay all costs associated with such Action, subject to the last sentence of this Section 6.5(b)(iii) and a Party’s obligations under Section 6.5(b)(v). Each Party shall have the right to join an Action relating to a Product Licensed Patent, at its sole cost and expense.

(iv) Settlement; Conduct. Neither Party shall settle or otherwise compromise any Action by admitting that a Product Licensed Patent, or any claim therein, is invalid or unenforceable without the other Party’s prior written consent, which consent will not be unreasonably withheld, conditioned, or delayed. [***]

(v) Cooperation; Reasonable Assistance. The Party enforcing or defending under this Section 6.5(b) will keep the other Party regularly informed of the status and progress of such Action and will reasonably consider the other Party’s comments on any such efforts, including determination of litigation strategy and filing of material papers to the competent court. The Party not enforcing or defending the Product Licensed Patents shall provide reasonable assistance to the Party enforcing or defending, including providing access to relevant documents and other evidence and making its employees reasonably available, subject to the enforcing or defending Party’s reimbursement of any reasonable Out-of-Pocket Expenses incurred on an on-going basis by the Party not enforcing or defending in providing such assistance.

 

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(vi) Distribution of Amounts Recovered. Any amounts recovered by the enforcing or defending Party pursuant to this Section 6.5(b), whether by settlement or judgment, shall be allocated in the following order: (A) to reimburse such enforcing or defending Party for any costs incurred in connection with an applicable Action; (B) to reimburse the Party that is not enforcing or defending for any costs incurred in connection with such Action to the extent not reimbursed by the enforcing or defending Party; and (C) the remaining amount of such recovery (I) if Evommune is the enforcing or defending Party, shall be [***], and (II) if AprilBio is the enforcing or defending Party, shall be [***].

(c) Evommune Patents. Evommune shall have the sole right and authority, but not the obligation, to enforce Evommune Patents against any Third Party infringer; provided that [***]. Evommune shall provide AprilBio with copies of all pleadings and other documents filed with the court and shall consider reasonable input from AprilBio during the course of any Action with respect to an Evommune Product Patent.

 

6.6

Third Party Actions Claiming Infringement.

(a) Notice. Each Party will promptly inform the other Party in writing if such Party receives written notice, or otherwise becomes aware, of alleged infringement, misappropriation, or other violation of a Third Party’s Patent or other intellectual property right based upon such Party’s performance of its obligations or exercise of its rights hereunder (each, a “Third Party Infringement Action”).

(b) Right to Defend. Except as otherwise set forth under this Agreement (including under ARTICLE 9), Evommune shall have the sole right, but not the obligation, to defend a Third Party Infringement Action and to compromise or settle such Third Party Infringement Action.

(c) Consultation. Evommune shall reasonably consult with AprilBio on the defense, and AprilBio will reasonably cooperate with Evommune in the conduct of such defense. AprilBio will be entitled to be represented by independent counsel of its own choice at its own cost and expense.

(d) Costs of an Action. Subject to the respective indemnity obligations of the Parties set forth in ARTICLE 9, Evommune shall pay all costs and expenses associated with such Third Party Infringement Action other than the costs and expenses of AprilBio if AprilBio elects to join such Third Party Action (as provided in Section 6.6(c)).

(e) Settlement. Evommune will not settle or otherwise compromise any such Third Party Infringement Action in a manner that would impose any material obligation or restriction on AprilBio or that adversely affects or would be reasonably expected to adversely affect AprilBio, without AprilBio’s prior written consent.

ARTICLE 7

CONFIDENTIALITY

 

7.1

Confidentiality Obligations. Each Party agrees that, during the Term and for [***] years thereafter, such Party shall, and shall ensure that its Representatives hold in confidence all Confidential Information disclosed to it by the other Party pursuant to this Agreement, unless the receiving Party can show by competent written evidence that such information:

 

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(a) is or becomes generally available to the public other than as a result of disclosure by the receiving Party;

(b) is already known by or in the possession of the receiving Party at the time of disclosure by the disclosing Party;

(c) is independently developed by the receiving Party without use of or reference to the disclosing Party’s Confidential Information; or

(d) is obtained by the receiving Party from a Third Party that has not breached any obligations of confidentiality.

The receiving Party shall not disclose any of the disclosing Party’s Confidential Information, except to Representatives of the receiving Party who need to know the Confidential Information for the purpose of performing the receiving Party’s obligations, or exercising its rights, under this Agreement and who are bound by obligations of non-use and non-disclosure substantially similar to those set forth herein. The receiving Party shall be responsible for any disclosure or use of the disclosing Party’s Confidential Information by such Representatives. The receiving Party shall protect Confidential Information using not less than the same care with which it treats its own confidential information, but at all times shall use at least reasonable care. Each Party shall: (x) implement and maintain appropriate security measures to prevent unauthorized access to, or disclosure of, the other Party’s Confidential Information; (y) promptly notify the other Party of any unauthorized access or disclosure of such other Party’s Confidential Information; and (z) cooperate with such other Party in the investigation and remediation of any such unauthorized access or disclosure.

 

7.2

Use. Notwithstanding Section 7.1, a Party may use the Confidential Information of the other Party for the purpose of performing its obligations, or exercising its rights, under this Agreement, including for purposes of:

(a) prosecuting or defending litigation;

(b) conducting pre-clinical studies or Clinical Trials pursuant to this Agreement;

(c) seeking or maintaining Marketing Approval of the Product as permitted by this Agreement;

(d) filing, prosecuting, maintain, enforcing, or defending Patents as permitted by this Agreement; or

(e) subject to Section 7.4, complying with Law, including securities Law and the rules of any securities exchange or market on which a Party’s securities are listed or traded.

In addition to the foregoing, each Party may, in furtherance of exercising its rights or fulfilling its obligations under this Agreement, disclose Confidential Information of the other Party to its Affiliates and, with respect to Evommune, existing or prospective Sublicensees, provided that each such Affiliate and Sublicensee is bound by written obligations of confidentiality and non-use at least as stringent as set forth herein; provided, further, that such Party shall remain responsible for any violation of such confidentiality and non-use obligations by any Affiliate or Sublicensee who receives Confidential Information of the other Party pursuant hereto.

 

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In addition to the foregoing, AprilBio may disclose the material financial terms of this Agreement to any bona fide potential investor, investment banker, acquirer, merger partner, licensees, sublicensees, or other potential financial or collaborative partner; provided, that in connection with such disclosure, AprilBio shall use all reasonable efforts to inform each disclosee of the confidential nature of such Confidential Information and that in each case the Party receiving such Confidential Information must agree to be bound by similar obligations of confidentiality and non-use at least as equivalent in scope as those set forth in this ARTICLE 7 prior to any such disclosure.

In making any disclosures set forth in this Section 7.2, the disclosing Party shall, where reasonably practicable, give such advance notice to the other Party of such disclosure requirement as is reasonable under the circumstances and will use its reasonable efforts to cooperate with the other Party in order to secure confidential treatment of such Confidential Information required to be disclosed. In addition, in connection with any permitted filing by either Party of this Agreement with any Governmental Body the filing Party shall endeavor to obtain confidential treatment of economic, trade secret information, and such other information as may be requested by the other Party, and shall provide the other Party with the proposed confidential treatment request with reasonable time for such other Party to provide comments, and shall include in such confidential treatment request all reasonable comments of the other Party.

If and whenever any Confidential Information is disclosed in accordance with this Section 7.2, such disclosure shall not cause any such information to cease to be Confidential Information for purposes of this Agreement, except to the extent such disclosure results in a public disclosure of such information (other than by breach of this Agreement).

 

7.3

Required Disclosure. The receiving Party may disclose the Confidential Information of the disclosing Party to the extent required by Law or court order; provided, however, that the receiving Party promptly provides to the disclosing Party prior written notice of such disclosure and provides reasonable assistance in obtaining an order or other remedy protecting such Confidential Information from public disclosure.

 

7.4

Terms of this Agreement. The Parties acknowledge and agree that this Agreement and all of the respective terms of this Agreement shall be treated as Confidential Information of each Party. In addition to the disclosures permitted under Section 7.2, either Party may disclose the terms of this Agreement and other information relating to this Agreement or the transactions contemplated by this Agreement to the extent required, in the reasonable opinion of such Party’s counsel, to comply with the rules and regulations promulgated by the United States Securities and Exchange Commission, the Nasdaq Stock Market, the Korea Stock Exchange, or similar security regulatory authorities or stock market in other countries. If a Party intends to disclose this Agreement or any of its terms or other such information in accordance with this Section 7.4, such Party will, except where impracticable or not legally permitted, give reasonable advance written notice to the other Party of such disclosure and seek confidential treatment of portions of this Agreement or such terms or information, as may be reasonably requested by the other Party in a timely manner.

 

7.5

Publications.

(a) AprilBio shall not publish any information relating to the Compound or Product (subject to Section 7.5(d), including results of the Australian Phase I Clinical Trial) without the prior written consent of Evommune, which consent will not be unreasonably withheld, conditioned, or delayed, unless such information has already been publicly disclosed either prior to the Effective Date or after the Effective Date through no fault of AprilBio or otherwise not in violation of this Agreement.

 

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(b) Evommune and AprilBio each shall have the right to make such publications as it chooses, in its sole discretion, with respect to the Product (in the case of Evommune) and AprilBio’s assets other than related to the Product (in the case of AprilBio), without the approval of the other Party; provided that Evommune shall inform AprilBio in advance of any contemplated publications and shall comply with AprilBio’s request to delay such publications to permit AprilBio to prepare and file any patent applications for any Inventions as contemplated hereunder. AprilBio shall submit to Evommune, for Evommune’s written approval (which approval may be granted or denied in Evommune’s sole discretion), any publication or presentation (including in any seminars, symposia, or otherwise) of information related to the Product for review and approval at least [***] days prior to submission for the proposed date of publication or presentation; provided, further, that AprilBio may publish or present data on the common elements of the Compound and its other assets.

(c) No publication or presentation made by either Party may include any Confidential Information of the other Party without such other Party’s prior written consent.

(d) For clarity, this Section 7.5 shall not apply to public disclosures required by applicable Laws or the rules of the United States Securities and Exchange Commission, the Nasdaq Stock Market, the Korea Stock Exchange, or similar security regulatory authorities or stock market in other countries, as applicable.

 

7.6

Press Releases.

(a) Initial Press Release. Within four (4) Business Days of the Effective Date, the Parties shall issue a joint press release as set forth in Schedule 7.6(a) hereto (the “Initial Press Release”).

(b) Subsequent Press Releases. Subsequent to the Effective Date and the Initial Press Release, except as required to comply with applicable Law or as otherwise permitted in this ARTICLE 7, a Party may issue a subsequent press release announcing the deal and nature of the relationship between the Parties only if both Parties have approved in writing the form of such press release, such approval not to be unreasonably withheld, conditioned, or delayed. If a Party intends to issue such a press release or other public statement as required to comply with applicable Law, such Party will, except where impracticable or not legally permitted, give reasonable advance notice to the other Party of such disclosure. Notwithstanding the foregoing, once information relating to this Agreement has been publicly disclosed as permitted under this Agreement, neither Party shall be required to obtain the other Party’s consent or provide notice of its further public disclosure, provided that such information remains accurate, in line with previous public disclosure, and not misleading in all material respects at the time of such further public disclosure.

ARTICLE 8

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

8.1

Representations and Warranties. Each Party represents and warrants to the other Party that, as of the Effective Date:

(a) such Party is duly organized and validly existing under the Laws of the jurisdiction of its incorporation or organization;

(b) such Party has taken all action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement;

 

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(c) this Agreement is a legal and valid obligation of such Party, binding upon such Party, and enforceable against such Party in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other Laws relating to or affecting creditors’ rights generally and by general equitable principles;

(d) the execution, delivery, and performance of this Agreement by such Party does not conflict with, breach, or create in any Third Party the right to accelerate, terminate, or modify any agreement or instrument to which such Party is a party or by which such Party is bound, and does not violate any Law of any Governmental Body having authority over such Party;

(e) such Party has all right, power, and authority to enter into this Agreement, to perform its obligations under this Agreement;

(f) such Party (and its Affiliates) will not knowingly employ or otherwise use in any capacity the services of any Person that has been debarred or is subject to debarment proceeding under United States law, including under Section 21 USC 335a, that has been excluded from participation in government health care programs under 42 U.S.C. § 1320a-7, or that has been convicted of any crime or engaged in any conduct for which such Person could be excluded from participation in government health care programs under 42 U.S.C. § 1320a-7, or any similar sanction under any other applicable Law or any foreign equivalent thereof, with respect to the Compound or Product;

(g) such Party (and its Affiliates) and any Person acting on their behalf in connection with this Agreement have complied and shall comply in all material respects with all applicable anti-corruption laws, including but not limited to the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, and other laws prohibiting bribery and corruption (collectively, “Anti-Corruption Laws”);

(h) without limiting the foregoing, neither Party nor any of its Affiliates shall directly or indirectly, in connection with the transactions contemplated by this Agreement, make any payments, or offer, promise, authorize the transfer of, or transfer anything of value, to any government official, government employee, official representative of a Governmental Body, political party official or candidate for political office, or to any other Third Party, in a manner that would violate any Anti-Corruption Laws;

(i) such Party is in material compliance and will continue to materially comply with all applicable Laws relating to government health care plans and programs, including but not limited to Laws applicable to health care fraud and abuse, kickbacks, physician self-referral, and false claims; and

(j) no consent by any Third Party or Governmental Body is required with respect to the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

8.2

Additional Representations and Warranties of AprilBio. AprilBio represents and warrants to Evommune that, as of the Effective Date:

(a) no claims have been asserted in writing, or, to AprilBio’s Knowledge, threatened, by any Person, that (i) challenge the validity or ownership of Licensed Technology, and/or (ii) claim that the Compound or Current Product infringes or will infringe on any intellectual property right of any Third Party;

 

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(b) to the Knowledge of AprilBio, there is no unauthorized use, infringement, or misappropriation of any of Licensed Technology by any employee or former employee of AprilBio, or any other Third Party;

(c) the Licensed Patents are subsisting and are not the subject of any litigation procedure, discovery process, interference, reissue, reexamination, opposition, appeal proceedings, or, to the Knowledge of AprilBio, any other legal dispute;

(d) the Licensed Patents set forth on Schedule 1.52 constitute all Patents Controlled by AprilBio as of the Effective Date that are useful or necessary for the Development or Commercialization of the Compound and Current Product;

(e) to AprilBio’s Knowledge, no Third Party has filed, pursued, maintained, or, threatened in writing to file, pursue, or maintain any claim, lawsuit, charge, complaint, or other action alleging that any Licensed Patent is invalid or unenforceable;

(f) to AprilBio’s Knowledge, Evommune’s and its Affiliates’ and Sublicensees’ practice and use of the inventions claimed in the Licensed Patents as permitted herein will not infringe any intellectual property rights of any Third Party;

(g) except as set forth on Schedule 8.2(g), AprilBio has all right, title, and interest in and to the Licensed Technology and the Licensed Technology is free and clear of any liens, charges, encumbrances, or rights of others to possession or use;

(h) except as set forth on Schedule 8.2(h), AprilBio has not previously licensed, assigned, transferred, or otherwise conveyed any right, title, or interest in and to the Licensed Technology to any Third Party, including any rights with respect to the Compound or Current Product;

(i) all Development (including non-clinical studies and Clinical Trials) related to the Compound and Current Product prior to the Effective Date has been conducted in accordance with all Laws in all material respects;

(j) except as set forth in the clinical study report for the Australian Phase I Clinical Trial delivered to Evommune prior to the date hereof, there have been no serious Adverse Events in the Australian Phase I Clinical Trial; and

(k) except for the Compound and the Existing IL-18 Programs, AprilBio and its Affiliates are not involved in the research and/or development of any Competing Product or any other compound or product that does, or is intended to, bind, functionally inhibit, and/or otherwise modulate IL-18 (whether singularly or together with other targets).

 

8.3

Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE COMPOUND, PRODUCT (INCLUDING CURRENT PRODUCT), OR PATENTS THAT ARE LICENSED OR TRANSFERRED TO THE OTHER PARTY UNDER THIS AGREEMENT, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, THAT ANY OF THE DEVELOPMENT OR COMMERCIALIZATION EFFORTS WITH REGARD TO THE COMPOUND OR PRODUCT (INCLUDING CURRENT PRODUCT) WILL BE SUCCESSFUL.

 

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ARTICLE 9

INDEMNIFICATION AND INSURANCE

 

9.1

Indemnification by Evommune. Evommune shall indemnify, defend, and hold AprilBio and its Affiliates and each of their respective employees, officers, directors, and agents (the “AprilBio Indemnitees”) harmless from and against any and all liability, damage, loss, cost, or expense (including reasonable attorneys’ fees) to the extent arising out of Third Party claims or suits (including Third Party Actions) resulting from: (a) Evommune’s negligence or willful misconduct; (b) Evommune’s performance of its obligations under this Agreement; (c) Development or Commercialization of the Compound or Product by or on behalf of Evommune; or (d) breach by Evommune of its representations or warranties set forth in ARTICLE 8; provided, however, that Evommune’s obligations pursuant to this Section 9.1 shall not apply (x) to the extent such claims or suits result from the negligence or willful misconduct of any of the AprilBio Indemnitees, or (y) with respect to claims or suits arising out of breach by AprilBio of its representations or warranties set forth in ARTICLE 8.

 

9.2

Indemnification by AprilBio. AprilBio shall indemnify, defend, and hold Evommune and its Affiliates and each of their respective employees, officers, directors, and agents (“Evommune Indemnitees”) harmless from and against any and all liability, damage, loss, cost, or expense (including reasonable attorney’s fees) to the extent arising out of Third Party claims or suits (including Third Party Actions solely with respect to Section 9.2(c)) resulting from: (a) AprilBio’s negligence or willful misconduct; (b) AprilBio’s performance of its obligations under this Agreement; or (c) breach by AprilBio of its representations, warranties, or covenants set forth in ARTICLE 8; provided, however, that AprilBio’s obligations pursuant to this Section 9.2 shall not apply (x) to the extent that such claims or suits result from the negligence or willful misconduct of any of Evommune Indemnitees or (y) with respect to claims or suits arising out of a breach by Evommune of its representations or warranties set forth in ARTICLE 8.

 

9.3

No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY BREACH HEREOF, EXCEPT WITH RESPECT TO CLAIMS MADE BY THIRD PARTIES FOR WHICH EVOMMUNE HAS INDEMNIFICATION OBLIGATIONS UNDER SECTION 9.1 AND APRILBIO HAS INDEMNIFICATION OBLIGATIONS UNDER SECTION 9.2. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS AGREEMENT SHALL LIMIT EITHER PARTY FROM SEEKING OR OBTAINING ANY REMEDY AVAILABLE UNDER LAW FOR ANY BREACH BY THE OTHER PARTY OF ITS CONFIDENTIALITY AND NON-USE OBLIGATIONS UNDER ARTICLE 7.

 

9.4

Notification of Claims; Conditions to Indemnification Obligations. As a condition to a Party’s right to receive indemnification under this ARTICLE 9, it shall: (a) promptly notify the other Party as soon as it becomes aware of a claim or suit for which indemnification may be sought pursuant hereto, provided that, any failure of the indemnified Party to comply with the provisions of this clause (a) will not relieve the indemnifying Party of any defense or indemnity obligations under this Agreement except to the extent that the indemnifying Party is prejudiced by such failure; (b) cooperate, and cause the individual indemnitees to cooperate, with the indemnifying Party in the defense, settlement, or compromise of such claim or suit; and (c) permit the indemnifying Party to control the defense, settlement, or compromise of such claim or suit, including the right to select defense counsel. In no event, however, may the indemnifying Party compromise or settle any claim or suit in a manner which admits fault or negligence on the part of the indemnified Party or any indemnitee or which adversely affects or would be reasonably expected to adversely affect the indemnified Party or any indemnitee, without the prior written consent of the indemnified Party. The indemnifying Party will not compromise or settle any claim or suit or consent to any judgment in respect thereof that does not include a complete and unconditional release of the indemnified Party. Each Party shall reasonably cooperate with the other Party and its counsel in the course of the defense of any such suit, claim, or demand, such cooperation to include without limitation using reasonable efforts to provide or make available documents, information, and witnesses. The indemnified Party may participate in the defense of any such suit, claim, or demand at its own cost and expense with counsel of its choosing. The indemnifying Party shall have no liability under this ARTICLE 9 with respect to claims or suits settled or compromised without its prior written consent.

 

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9.5

Insurance. During the Term, each Party shall obtain and maintain, at its sole cost and expense, insurance (including any self-insured arrangements) in types and amounts, that are reasonable and customary in such Party’s jurisdiction in the pharmaceutical and biotechnology industry for companies engaged in comparable activities in the Territory. It is understood and agreed that this insurance shall not be construed to limit either Party’s liability with respect to its indemnification obligations hereunder. Each Party will, except to the extent self-insured, provide to the other Party upon request a certificate evidencing the insurance such Party is required to obtain and keep in force under this Section 9.5.

ARTICLE 10

TERM AND TERMINATION

 

10.1

Term and Expiration. The term of this Agreement (the “Term”) shall commence on the Effective Date and, unless earlier terminated as provided in this ARTICLE 10, shall continue in full force and effect, on a country-by-country and Product-by-Product basis until the date on which the Royalty Term in such country with respect to such Product expires, at which time this Agreement shall expire in its entirety with respect to such Product in such country and the terms of Section 10.7(b)(i) shall apply.

 

10.2

Termination of the Agreement for Convenience. At any time during the Term, Evommune may, at its convenience, terminate this Agreement in its entirety or on a Product-by-Product or country-by-country basis upon [***] days’ prior written notice to AprilBio. In the event Evommune wishes to invoke termination pursuant to this Section 10.2, Evommune shall provide AprilBio with written notice thereof and the Executive Officers shall discuss in good faith, for a period of [***] days, any adjustments to the terms of this Agreement or a plan to wind-down, discontinue, and/or terminate activities with respect to the Compound and such Product(s). If the Executive Officers cannot reach resolution within such [***]-day period, Evommune may proceed to terminate this Agreement in accordance with this Section 10.2.

 

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10.3

Termination upon Material Breach.

(a) Material Breach. If a Party breaches any of its material obligations under this Agreement, the Party not in default may give to the breaching Party a written notice specifying the nature of the default, requiring it to cure such breach, and stating its intention to terminate this Agreement if such breach is not cured within [***] days (or within [***] days if such breach relates to the failure of Evommune to pay any amount due to AprilBio hereunder). If such breach is not cured within [***] days (or within [***] days with respect to a breach of payment obligations hereunder) after the receipt of such notice, the Party not in default shall be entitled to terminate this Agreement immediately by written notice to the other Party. For clarity, such material obligations may apply to the performance of either: (i) this Agreement in its entirety, in which case this provision shall apply to the entire Agreement; or (ii) a specific Product or Product(s), in which case this provision shall apply only to such affected Product or Product(s).

(b) AprilBio Cure Period. If AprilBio materially breaches any of its material obligations under this Agreement and (i) such breach by AprilBio is not cured within [***] days of receipt following a notice from Evommune under Section 10.3(a) (the “Cure Period”), and (ii) either (A) AprilBio has agreed that it has materially breached any of its material obligations under this Agreement, or (B) it been finally determined in accordance with ARTICLE 11 that AprilBio has materially breached any of its material obligations under this Agreement, then Evommune may elect not to terminate this Agreement and, instead, during the period commencing at the end of the Cure Period and continuing until the end of the last Royalty Term in all countries, exercise the following remedy, [***]: reduce (x) the future development milestone payments under Section 5.2, (y) the future commercial milestone payments under Section 5.3, and (z) the then-applicable royalty rates under Section 5.5 by [***]. During the time period that the Parties are resolving a dispute as to whether AprilBio materially breached a material obligation under this Agreement until such time that such dispute is finally adjudicated by a court of competent jurisdiction in accordance with ARTICLE 11, Evommune may deposit [***] of any future development milestone payments under Section 5.2, future commercial milestone payments under Section 5.3, and future royalty payments under Section 5.5 into an interesting-bearing escrow account for the benefit of AprilBio held by an escrow agent mutually agreed upon by the Parties for which the balance is released to AprilBio if AprilBio prevails or for which all earned interest is released to AprilBio and the remainder is released to Evommune if Evommune prevails. For clarity, following an election by Evommune under this Section 10.3(b), [***].

(c) Material Breach Dispute. Any dispute regarding an alleged material breach of this Agreement shall be resolved in accordance with ARTICLE 11.

 

10.4

Termination for Patent Challenge. If Evommune or its Affiliates or Sublicensees commence proceedings (whether before a Regulatory Authority or other Governmental Body) anywhere in the world, or assist, directly or indirectly, any Third Party in commencing or participating in proceedings (whether before a Regulatory Authority or other Governmental Body) alleging that any claim in any of the Licensed Patents is invalid, unenforceable, or otherwise not patentable (other than any defensive action by Evommune or any its Affiliates or Sublicensees in response to any action by AprilBio or any of its Affiliates or (sub)licensees) (each such proceeding, a “Patent Challenge”), then AprilBio shall have the right to terminate this Agreement immediately upon notice to Evommune; such termination to be effective immediately. Evommune shall notify AprilBio promptly (and in no case later than [***] days) after commencement of any Patent Challenge.

 

10.5

Termination for Bankruptcy. Each Party shall have the right to terminate this Agreement in its entirety upon written notice as a result of the other Party experiencing a Bankruptcy Event; provided, that such termination shall be effective only if such Bankruptcy Event is not dismissed within [***] days after the institution thereof.

 

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10.6

Termination for Cessation of Active Development. Prior to receiving Marketing Approval for a Product in the United States or European Union, AprilBio shall have the right to terminate this Agreement upon [***] days’ prior written notice to Evommune in the event that AprilBio reasonably determines that there has been a Cessation of Active Development. In the event AprilBio wishes to invoke termination pursuant to this Section 10.6, AprilBio shall provide Evommune with written notice thereof and the Executive Officers shall discuss in good faith, for a period of [***] days, any adjustments to the terms of this Agreement or a plan to wind-down, discontinue, and/or terminate activities with respect to the Compound and such Product(s). If the Executive Officers cannot reach resolution within such [***]-day period, AprilBio may terminate this Agreement pursuant to this Section 10.6.

 

10.7

Effects of Expiration or Termination.

(a) Survival.

(i) Notwithstanding the expiration or termination of this Agreement, the following provisions shall survive: ARTICLE 1, ARTICLE 7 (excluding Section 7.5), ARTICLE 9, ARTICLE 11, and ARTICLE 12 (excluding Section 12.3, but including solely Section 12.3(a)(iii)(B)); and Sections 2.4, 4.4 (to the extent provided in Section 10.7(b)(ii)(6)), 4.5 (solely with respect to Product sold, distributed, or transferred prior to the effective date of expiration or termination), 5.7, 5.9, 5.10, 5.11, 5.12, 5.13, 6.1, 6.4(c), 6.5(c), 8.3, 10.7, and 10.9.

(ii) Expiration or termination of this Agreement shall not relieve the Parties of any liability that accrued hereunder prior to the effective date of such termination. In addition, termination of this Agreement shall not preclude either Party from pursuing all rights and remedies it may have hereunder or at Law or in equity with respect to any breach of this Agreement nor prejudice either Party’s right to obtain performance of any obligation.

(b) Licenses.

(i) As of the effective date of expiration of the Royalty Term with respect to a given Product and country, the license from AprilBio to Evommune under Section 2.1 shall convert to a fully paid, royalty free, irrevocable, perpetual, non-exclusive, and sublicensable license under the Licensed Technology to Develop and Commercialize the Compound and such Product in the Field in such country.

(ii) Upon termination of this Agreement for any reason, the following terms and conditions shall apply with respect to such Product(s) and country(ies) as are the subject of such termination:

(1) all licenses granted to Evommune under Section 2.1 shall terminate;

(2) Evommune shall, upon written request by AprilBio and subject to AprilBio assuming legal responsibility for any Clinical Trials of the Compound and such Product(s) then ongoing, transfer to AprilBio [***], all Regulatory Filings prepared or obtained by or on behalf of Evommune prior to the date of such termination, to the extent related to the Compound and such Product(s) and country(ies) and transferable, and Evommune shall have the right to retain one (1) copy of such transferred Regulatory Filings for record-keeping purposes;

(3) Evommune shall, upon written request of AprilBio [***], assign and cause its Affiliates (as applicable) to assign to AprilBio, effective as of the effective date of such termination, all of Evommune’s (or its Affiliate’s) right, title, and interest in and to all trademarks, trade dress rights, and relevant trademark applications and registrations that are used in connection with the Compound and such Product(s). Each Party shall execute and deliver or shall cause its Affiliates (as applicable) to execute and deliver to the other Party all documents that are necessary to fulfill the obligations set forth in this Section 10.7(b)(ii)(3);

 

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(4) Evommune shall, upon written request of AprilBio [***], return to AprilBio or destroy, at AprilBio’s election, all relevant records and materials in its possession or control containing or comprising the Licensed Know-How or such other Confidential Information of AprilBio; provided, however, that Evommune shall have the right to retain one (1) copy of such Licensed Know-How and such other Confidential Information of AprilBio subject to an ongoing obligation of confidentiality for archival purposes only;

(5) Evommune may, at its sole option and discretion, (i) destroy any and all chemical, biological, or physical materials relating to or comprising the Compound and such Product(s) [***], including clinical supplies of the Compound and such Product(s), that are in Evommune’s possession or control, or (ii) sell such materials (in whole or in part) to AprilBio [***];

(6) to the extent not prohibited by Law, Evommune shall, [***], wind down any ongoing Clinical Trials with respect to the Compound and such Product(s), or at AprilBio’s option upon written request by AprilBio to Evommune, transfer such Clinical Trials to AprilBio [***], in which case Evommune shall transfer to AprilBio the relevant Clinical Trial supplies of the Compound and such Product(s) [***]. Evommune shall continue to comply with its reporting obligations set forth in Section 4.3;

(7) Evommune and its Affiliates and Sublicensees may, only with prior notice to and consent of AprilBio, during the [***] period following such termination, to sell any commercial inventory of the Compound and such Product(s) which remains on hand as of the date of the termination, so long as Evommune pays to AprilBio the commercial milestones and royalties applicable to said subsequent sales in accordance with the terms and conditions set forth in this Agreement. Any commercial inventory remaining following such [***] period shall be offered for sale to AprilBio [***]; and

(8) Evommune shall, and hereby does, grant to AprilBio a [***] (or, [***], in accordance with, and to the extent set forth in this Section 10.7(b)(ii)(8)) license with the right to grant sublicenses, under all rights in any and all Patents and Know-How Controlled by Evommune, to the extent necessary or reasonably useful to Develop and Commercialize the Compound and such Product(s). In the event [***], then (A) in consideration for [***], AprilBio shall pay to Evommune a royalty on net sales of the Compound and such Product(s) in such country(ies) at a rate to be negotiated in good faith by the Parties promptly after notice of termination and in any case prior to AprilBio’s commencement of sales, with such rate based on the stage of Development or Commercialization of the Compound and such Product(s) as of the effective date of termination and relative contribution by AprilBio and Evommune of their respective resources in the Development and Commercialization of the Compound and of such Product(s); (B) [***]. If after negotiating for a period of [***] days, the Parties are unable to agree on such royalty rate, such royalty rate shall be determined by binding arbitration pursuant to Section 11.4; and (C) [***].

(iii) Upon any termination of this Agreement, [***].

 

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10.8

Termination on Bankruptcy or Insolvency.

(a) Bankruptcy Code. All rights and licenses granted under or pursuant to this Agreement by AprilBio are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, to the extent applicable, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.

(b) Continuing Rights. The Parties agree that, in the event AprilBio experiences a Bankruptcy Event, Evommune shall be entitled to a complete duplicate of (or complete access to, as appropriate) any intellectual property and all embodiments of such intellectual property, including any intellectual property and embodiments of such intellectual property relating to the monospecific recombinant Serum Albumin Fab-Associated (SAFA) protein, all as necessary for Evommune to exercise its rights and obligations under this Agreement in a manner consistent with Evommune’s ability to exercise its rights and obligations under this Agreement before such Bankruptcy Event, which, if not already in Evommune’s possession, shall be promptly delivered to Evommune (i) following the occurrence of such Bankruptcy Event, upon written request therefor by Evommune, unless AprilBio elects to continue to perform all of its obligations under this Agreement, or (ii) if not delivered under clause (i), following the rejection of this Agreement by AprilBio and Evommune’s election to retain its rights under the Agreement in accordance with Section 365(n)(1)(B) of the U.S. Bankruptcy Code, upon written request therefor by Evommune.

 

10.9

Other Remedies. Termination of this Agreement for any reason shall not release either Party from any liability or obligation that already has accrued prior to such termination. Termination of this Agreement for any reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice or adversely affect or limit, any rights or remedies that otherwise may be available at Law or in equity.

ARTICLE 11

DISPUTE RESOLUTION

 

11.1

Disputes. The Parties recognize that disputes as to certain matters may from time to time arise during the Term which relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to establish under this ARTICLE 11 procedures to facilitate the resolution of disputes arising under this Agreement (other than any disputes relating to matters which are reserved to the final decision-making authority and/or discretion of one Party or the other pursuant to Section 3.1(d) (each, a “Non-Escalable Dispute”), in which case, such matter shall be determined pursuant to Section 3.1(d) and shall not be part of the dispute resolution procedure set forth in this ARTICLE 11) in an expedient manner by mutual cooperation and without resort to litigation. In the event that the Parties are unable to resolve such dispute through diligent review and deliberation by the Senior Executives within [***] days from the day that one Party had designated the issue as a dispute in written notice to the other Party, then either Party shall have the right to escalate such matter to the Executive Officers as set forth in Section 11.2.

 

11.2

Escalation to Executive Officers. Either Party may, by written notice to the other Party, request that a dispute (other than a Non-Escalable Dispute) that remains unresolved by the Senior Executives for a period of thirty (30) days as set forth in Section 11.1 arising between the Parties in connection with this Agreement, or a dispute relating to material breach, be resolved by the Executive Officers, within [***] days after referral of such dispute to them. If the Executive Officers cannot resolve such dispute within fifteen (15) days after referral of such dispute to them, then, at any time after such [***]-day period, either Party may proceed to enforce any and all of its rights with respect to such dispute.

 

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11.3

Injunctive Relief. No provision herein shall be construed as precluding a Party from bringing an action for injunctive relief or other equitable relief prior to the initiation or completion of the above procedure.

 

11.4

Baseball Arbitration. Notwithstanding the above, if the Parties are unable to agree on any royalty rate pursuant to Section 10.7(b)(ii)(8) within the time period specified therein, either Party may refer such dispute to a panel (the “Panel”) of independent experts with experience in the biopharmaceutical industry who are not current Representatives of either Party or any of their Affiliates, or have not been former Representatives of either Party or any of their Affiliates within the prior [***] years (each, an “Independent Expert”) for resolution. Within [***] days after initiation of arbitration, each Party shall select one (1) Independent Expert and the two (2) Independent Experts so selected shall mutually select a third Independent Expert. In making their dispute resolution determination, the Panel shall not have the authority to modify any term or provision of either Party’s offer and shall select the offer made by one of the Parties’ as is at its decision. A majority consensus decision by any two (2) of the Independent Experts shall be final, conclusive, and binding on the Parties. The Panel shall promptly resolve the dispute but in any case within [***] days following the date the last member is appointed to the Panel. No Party or any Affiliate or Representative of a Party shall meet or discuss any matters with the Panel without the other Party’s presence, either in person or by telephone. Each Party shall submit a written statement to the Panel and the other Party describing in reasonable detail its position with regard to the dispute. The Panel shall have the power to require a Party to provide to the Panel such information as it deems reasonably relevant to the resolution of the dispute, and to require a Party to answer questions that the Panel deems reasonably relevant to the resolution of the dispute. All information (including answers to questions from the Panel) submitted to the Panel must be concurrently delivered to the other Party. Except in the case of fraud or manifest error on the part of such Independent Expert(s), the decision of the Panel shall be binding upon the Parties, and the Parties shall promptly enter into, without modification, the proposal selected by the Panel with respect to such matter. The costs of the Panel and this dispute resolution process shall be borne by the Party whose proposal is not selected.

ARTICLE 12

MISCELLANEOUS PROVISIONS

 

12.1

Relationship of the Parties. Nothing in this Agreement is intended or shall be deemed, for financial, tax, legal, or other purposes, to constitute a partnership, agency, joint venture, or employer-employee relationship between the Parties. For all purposes, and notwithstanding any other provision of this Agreement, AprilBio’s legal relationship under this Agreement to Evommune, and Evommune’s legal relationship under this Agreement to AprilBio, will be that of independent contractor. Moreover, each Party agrees not to construe this Agreement, or any of the transactions contemplated hereby, as a partnership, agency, joint venture, employment, franchise, or fiduciary or similar relationship for any tax purposes, and will file all Tax returns consistent therewith.

 

12.2

Assignment.

(a) Assignment Generally. Except as expressly provided herein, subject always to Section 12.2(d), neither this Agreement nor any interest hereunder shall be assignable, nor any other obligation delegable, by either Party without the prior written consent of the other Party (not to be unreasonably withheld, conditioned, or delayed).

 

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(b) Permitted Assignments. Notwithstanding Section 12.2(a), either Party may assign this Agreement, in whole or in part, to (i) any Affiliate (which will not constitute a sale of assets or other similar transaction for purposes of Section 5.6; provided that such Affiliate remains an Affiliate of the assigning Party) or (ii) subject always to Section 12.2(d), any Third Party acquirer of that portion of its business relating to the subject matter of this Agreement in a sale of assets or other similar transaction, in each case ((i) and (ii)), without the consent of the other Party. The assigning Party shall give written notice to the other Party promptly following any such assignment.

(c) [***]. In any event, both Evommune and any permitted assignee will continue to be responsible for Evommune’s obligations under [***] with respect to [***].

(d) Continuing Obligations. No assignment under this Section 12.2 shall relieve the assigning Party of any of its responsibilities or obligations hereunder and, as a condition of such assignment, the assignee shall agree in writing to be bound by all obligations of the assigning Party hereunder. The Parties acknowledge and agree that Evommune may assign its rights and obligations under this Agreement to its Affiliate; provided however, that Evommune hereby guarantees such Affiliate’s performance of all such obligations, including payment and indemnification obligations. This Agreement shall be binding upon the successors and permitted assigns of the Parties.

(e) Void Assignments. Any assignment not in accordance with this Section 12.2 shall be void.

 

12.3

Change of Control.

(a) In the event of a Change of Control of AprilBio in which the Acquirer is an Evommune Competitor, then as from the date of the closing of such Change of Control:

(i) the JSC shall immediately terminate;

(ii) Evommune’s reporting obligations set forth in Section 3.9 shall permit Evommune to redact (or opt not to include) any of its Confidential Information that would otherwise be required to be included in such reports prior to such Change of Control; and

(iii) AprilBio or its successor entity shall promptly assign, and shall, as applicable, cause its Affiliates to promptly assign to Evommune, to the extent assignable, all right, title, and interest in, to, and under the Product Licensed Patents, including the right to file, prosecute, and maintain such Product Licensed Patents (subject to the Parties’ right in Sections 6.4(b) and 6.5(b) as if such Product Licensed Patents are owned and controlled by AprilBio or its successor or their Affiliates) in all the countries of the world, and provide Evommune with such assistance as Evommune shall reasonably request to effect such assignment; provided, however, that (A) the sublicense in Section 2.3 and all payment obligations set forth in this Agreement will continue to be in full force and effect, including royalty payments as set forth in Section 5.5 with respect to such Product Licensed Patents as if such Product Licensed Patents are owned and controlled by AprilBio or its successor or their Affiliates, and (B) should this Agreement be terminated by Evommune pursuant to Section 10.2 or by AprilBio pursuant to Section 10.3, Evommune shall assign, and shall, as applicable, cause its Affiliates to assign, to AprilBio all right, title, and interest in, to, and under any Product Licensed Patents assigned to Evommune pursuant to this Section 12.3(a)(iii), including the right to file, prosecute, and maintain such Product Licensed Patents in all the countries of the Territory, and provide AprilBio with such assistance as AprilBio shall reasonably request to effect such assignment.

 

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(b) Without limiting the generality of the foregoing Section 12.3(a), and to provide additional assurances to Evommune, (i) promptly following any Change of Control of AprilBio to an Acquirer that is an Evommune Competitor, and/or (ii) prior to initiation of a program by an Acquirer following consummation of a Change of Control to Develop a compound or product that would cause such Acquirer to become an Evommune Competitor, in each case (i) and (ii), AprilBio shall promptly notify Evommune in writing and such Acquirer shall implement an ethical wall between AprilBio and its Affiliates (other than such Acquirer) and such Acquirer with respect to the Licensed Technology that constitutes AprilBio’s Confidential Information until such Acquirer is no longer an Evommune Competitor. Following the implementation of such ethical wall, AprilBio shall promptly certify to Evommune such ethical wall is in place and describe the protections implemented. Such ethical wall shall include the adoption and implementation of customary and reasonable operational processes to keep the Licensed Technology that constitutes AprilBio’s Confidential Information confidential as to the Acquirer, its Affiliates, and their respective successors and assigns.

(c) In addition to any and all other remedies available to Evommune (including with respect to infringement by Acquirer programs existing prior to the consummation of such Change of Control), in the event that the Acquirer (i) does not implement such ethical wall as set forth in Section 12.3(b); and/or (ii) such Acquirer infringes (excluding infringement by Acquirer programs existing prior to the consummation of such Change of Control), makes use of, and/or misappropriates any of the Licensed Technology that constitutes AprilBio’s Confidential Information for which Evommune retains all rights to enforce its exclusive license set forth in Section 2.1 (in all cases, an “Unauthorized Use”), then, (A) AprilBio shall promptly inform Evommune in writing of such failure to implement an ethical wall or Unauthorized Use, (B) such Acquirer shall immediately take all reasonable measures to cause such Unauthorized Use to cease, (C) Patents and Know-How Controlled by the Acquirer arising from an Unauthorized Use (such Patents and Know-How, “Unauthorized IP”) will be deemed to be Controlled by AprilBio for purposes of this Agreement, (D) the restrictions set forth in Section 2.11(a)(ii) shall apply to such Acquirer’s Competing Product(s) that utilizes Unauthorized IP, and (E) the right of first negotiation set forth in Section 2.12 shall apply to such Acquirer’s Competing Product(s) that utilizes Unauthorized IP.

 

12.4

Further Actions. Each Party agrees to execute, acknowledge, and deliver such further instruments and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

12.5

Accounting Procedures. Each Party shall calculate all amounts, and perform other accounting procedures required, under this Agreement and applicable to it in accordance with its Accounting Standards.

 

12.6

Force Majeure. Neither Party shall be liable to the other Party or be deemed to have breached or defaulted under this Agreement for failure or delay in the performance of any of its obligations under this Agreement (other than an obligation to make payments) for the time and to the extent such failure or delay is caused by or results from acts of God, earthquake, riot, civil commotion, terrorism, war, strikes or other labor disputes, fire, flood, failure or delay of transportation, omissions or delays in acting by a Governmental Body, acts of a government or an agency thereof or judicial orders or decrees or restrictions, or any other reason which is beyond the control of the respective Party. For clarity, both Parties agree that the COVID-19 pandemic existing as of the Effective Date and its possible development is not a force majeure event. The Party affected by force majeure shall provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities) and will use commercially reasonable efforts to overcome the difficulties created thereby and to resume performance of its obligations hereunder as soon as practicable.

 

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12.7

No Trademark Rights. No right, express or implied, is granted by this Agreement to a Party to use in any manner the name or any other trade name or trademark of the other Party in connection with the performance of this Agreement or otherwise.

 

12.8

Entire Agreement of the Parties; Amendments. This Agreement and the Exhibits and Schedules hereto, the Confidential Disclosure Agreement dated November 17, 2023, and the Material Transfer Agreement dated April 4, 2024, constitute and contain the entire understanding and agreement of the Parties respecting the subject matter hereof and cancel and supersede any and all prior negotiations, correspondence, understandings, and agreements between the Parties, whether oral or written, regarding such subject matter. No waiver, modification, or amendment of any provision of this Agreement shall be valid or effective unless made in a writing referencing this Agreement and signed by a duly authorized officer of each Party.

 

12.9

Captions. The captions to this Agreement are for convenience only and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement.

 

12.10

Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, excluding application of any conflict of laws principles that would require application of the Law of a jurisdiction outside of the State of New York, and will be subject to the exclusive jurisdiction of the courts of competent jurisdiction located in the State of New York. The Parties hereby irrevocably consent to the exclusive jurisdiction of the state or federal courts of the State of New York and agree to interpose no objection or defense premised in whole or in part on lack of personal jurisdiction, inconvenient forum, or want of venue. Notwithstanding the foregoing, any intellectual property-related dispute under this Agreement may be brought in any court of competent jurisdiction in the country in which the applicable intellectual property right arose.

 

12.11

Notices and Deliveries. Any notice, request, approval, or consent required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently given if delivered in person, transmitted by electronic mail (receipt verified), or by express courier service (signature required) to the Party to which it is directed at its address or e-mail address shown below or such other address or e-mail address as such Party shall have last given by notice to the other Party.

 

If to Evommune, addressed to:
Name:    Evommune, Inc.
Street:    1841 Page Mill Road, Suite 100
City:    Palo Alto, CA 94304
Country:    United States of America
Attn:    Gregory S. Moss, Chief Business & Legal Officer
Email:    Greg.Moss@evommune.com

 

50


With a copy, which shall not constitute notice, to:
Name:    DLA Piper LLP (US)
Street:    650 South Exeter Street
City:    Baltimore, MD 21202
Country:    United States of America
Attn:    Howard S. Schwartz
Email:    Howard.Schwartz@us.dlapiper.com
If to AprilBio, addressed to:
Name:    AprilBio Co., Ltd.
Address:    A-415, Terra Tower 2, 201, Songpa-daero,
   Songpa-gu, Seoul, 05854
Country:    Republic of Korea
Attn:    Hyunsun Park, Chief Operation Officer
Email:    hyunsunpark@aprilbio.com
With a copy, which shall not constitute notice, to:
Name:    Arnold & Porter Kaye Scholer LLP
Street:    200 Clarendon St, 53rd Floor
City:    Boston, Massachusetts 02116
Country:    United States of America
Attn:    Hemmie Chang
E-mail:    Hemmie.Chang@arnoldporter.com

 

12.12

Language. The official language of this Agreement and between the Parties for all correspondence shall be the English language.

 

12.13

Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any other term or condition hereof. All rights, remedies, undertakings, obligations, and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation, or agreement of either Party.

 

12.14

Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Law, but if any provision of this Agreement is held to be prohibited by or invalid under Law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. The Parties shall make a good faith effort to replace the invalid or unenforceable provision with a valid one which in its economic effect is most consistent with the invalid or unenforceable provision.

 

12.15

Interpretation. For purposes of this Agreement, (a) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”; (b) the word “or” is not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto,” and “hereunder” refer to this Agreement as a whole; and (d) words denoting the singular have a comparable meaning when used in the plural, and vice-versa. Whenever this Agreement refers to a number of days without using a term otherwise defined herein, such number refers to calendar days. All references herein to Articles, Sections, Exhibits, and Schedules shall be deemed references to Articles and Sections of, and Exhibit and Schedules to, this Agreement unless the context shall otherwise require.

 

51


12.16

Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, and all of which together will be deemed to be one and the same instrument. A facsimile or a portable document format (PDF) copy of this Agreement, including the signature pages, will be deemed an original.

[SIGNATURE PAGE FOLLOWS]

 

52


IN WITNESS WHEREOF, duly authorized representatives of the Parties have executed this Agreement as of the date first above written.

 

APRILBIO CO., LTD.    EVOMMUNE, INC.
By:   /s/ Sang-hoon Cha    By:    /s/ Luis Peña
 

 

     

 

Printed Name: San-hoon Cha

   Printed Name: Luis Peña

Title: Chief Executive Officer

   Title: President and CEO

[Signature Page to License Agreement]


Exhibit A

POC Development Plan, POC Study Budget, and POC Success Criteria

[***]


Schedule 1.22

Compound Patents

[***]


Schedule 1.30

Development and Manufacturing Contracts

[***]


Schedule 1.52

Licensed Patents

[***]

1.


Schedule 1.58

[***]


Schedule 6.4(d)

Prosecution Cooperation Plan

[***]


Schedule 7.6(a)

Initial Press Release

Evommune Secures Exclusive Rights to Develop and Commercialize a Phase 2-ready IL-18 targeted fusion protein from AprilBio

 

  •  

IL-18 modulation has potential for broad applicability in multiple inflammatory diseases.

 

  •  

Phase 2-ready program complementary to Evommune’s immunology pipeline.

 

  •  

Phase 1 trial demonstrated good safety and tolerability, favorable pharmacokinetics and target engagement.

Palo Alto, Calf., June xx, 2024 – Evommune, Inc., a clinical stage biotechnology company discovering and developing new ways to treat immune-mediated inflammatory diseases, today announced it has entered into a definitive, worldwide license agreement with AprilBio Co., Ltd., (Kosdaq: 397030) a biopharmaceutical company based in South Korea dedicated to developing specialized biologics and antibody drugs, for an IL-18 targeted fusion protein.

Under the terms of the agreement, Evommune receives exclusive, worldwide rights to research, develop and commercialize APB-R3, to now be known as EVO301, a long-acting injectable fusion protein that is designed to neutralize the signal pathway of IL-18 for the regulation of inflammation. Evommune plans to initiate a Phase 2 clinical trial in early 2025.

“We are committed to making a difference for patients suffering from chronic inflammation. Adding this exciting new targeted molecule is another important growth step for Evommune. EVO301 is a product candidate leveraging a novel approach in a mechanism that has demonstrated activity in prior clinical trials. While we continue to execute on our pipeline, including EVO756, our MRGPRX2 antagonist, EVO301 provides the potential to offer a best-in-class therapeutic for patients being underserved by existing treatment options in multiple diseases. We believe the proprietary serum albumin binding motif fused to an IL-18 binding protein may facilitate deep tissue penetration with an extended half-life,” said Luis Pena, Evommune President & CEO.

“As we evaluate partners for our pipeline products, we are thrilled to license the IL-18 fusion protein to Evommune, a company with significant drug development expertise in the areas of chronic inflammatory diseases. Evommune’s ability to broadly develop this product candidate throughout its potentially broad life cycle process was a key driver of our desire to collaborate with them,” commented Dr. Sang-hoon Cha, CEO at AprilBio.

About EVO301

A long-acting injectable therapeutic, EVO-301 is a fusion-protein that is designed to neutralize the signal pathway of IL-18 for the regulation of inflammation. IL-18, a proinflammatory cytokine of the IL-1 family, plays an important role in the T-cell-helper type 1 inflammatory response, primarily by its ability to induce IFN-gamma production in T-cells and natural killer cells.

About AprilBio

AprilBio Co., Ltd. is a biopharmaceutical company in South Korea founded in 2013. The company is specialized in development of specialized biologics and antibody drugs. The company’s platform technologies include a human phage-display Ab library and Anti-Serum Albumin Fab-Associated (SAFA) technology (versatile building block for half-life extension and generation of novel biological therapeutics). AprilBio is focused on rare diseases, oncology, autoimmune and inflammatory diseases.


About Evommune, Inc.

Evommune, Inc., a Palo Alto based biotech company, is creating game-changing science to treat immune-mediated inflammatory diseases by discovering, developing, and delivering therapies that address symptoms and halt progressive disease. For more information, please visit Evommune.com.

Contact:

[***]

[***]

[Insert AprilBio Contact]

[Insert AprilBio Contact]


Schedule 8.2(g)

Rights to Licensed Technology

[***]


Schedule 8.2(h)

Third Party Rights to Licensed Technology

[***]

Exhibit 10.17

OFFICE LEASE

This Office Lease (this “Lease”), dated as of the date set forth in Section 1.1, is made by and between HUDSON PAGE MILL HILL, LLC, a Delaware limited liability company (“Landlord”), and EVOMMUNE, INC., a Delaware corporation (“Tenant”). The following exhibits are incorporated herein and made a part hereof: Exhibit A (Outline of Premises); Exhibit A-1 (Outline of Reserved Parking Spaces); Exhibit B (Work Letter); Exhibit C (Form of Confirmation Letter); Exhibit D (Rules and Regulations); Exhibit E (Judicial Reference); Exhibit F (Additional Provisions); Exhibit F-1 (Location of Monument Signs); Exhibit G (Asbestos Notification) and Exhibit H (Form of Letter of Credit).

1 BASIC LEASE INFORMATION

 

      1.1    Date:       June 29, 2025
   1.2    Premises.
      1.2.1    “Building”:    1891 Page Mill Road, Palo Alto, California, commonly known as Page Mill Hill.
      1.2.2    “Premises”:    The entire 32,016 rentable square feet of the Building, consisting of (i) 20,936 rentable square feet located on the lower and first floors of the Building and commonly known collectively as Suite 100 and (ii) 11,080 rentable square feet located on the second floor of the Building and commonly known as Suite 200, the outlines and locations of which are set forth in Exhibit A. If the Premises include any floor in its entirety, all corridors and restroom facilities located on such floor shall be considered part of the Premises.
      1.2.3    “Property”:    The Building, the parcel(s) of land upon which it is located, and, at Landlord’s discretion, any parking facilities and other improvements serving the Building and the parcel(s) of land upon which such parking facilities and other improvements are located.
      1.2.4    “Project”:    The Property or, at Landlord’s discretion, any project containing the Property and any other land, buildings or other improvements.
   1.3    Term      
      1.3.1    Term:    The term of this Lease (the “Term”) shall begin on the Commencement Date and expire on the Expiration Date (or any earlier date on which this Lease is terminated as provided herein).
      1.3.2    “Commencement Date”:    The earlier of (i) the first date on which Tenant conducts business in the Premises, or (ii) the date on which the Tenant Improvement Work (defined in Exhibit B) is Substantially Complete (defined in Exhibit B), which is anticipated to be January 1, 2026.
            However, Tenant may enter the Premises before the Commencement Date, solely for the purpose of installing telecommunications and data cabling, equipment, furnishings and other personal property in the Premises. Other than the obligation to pay Monthly Rent, all of Tenant’s obligations hereunder shall apply during such period of early entry. Notwithstanding the foregoing, Landlord may limit, suspend or terminate Tenant’s rights to enter the Premises early pursuant to this paragraph if Landlord reasonably determines that such entry is endangering individuals working in the Premises or is delaying completion of the Tenant Improvement Work (defined below).

 

1


         1.3.3    “Expiration Date”:    The last day of the 63rd full calendar month beginning on the Commencement Date; provided, however, that if the Commencement Date is not the first day of a month, then the Expiration Date shall be the last day of the 63rd full calendar month beginning immediately after the Commencement Date.
   1.4    “Base Rent”:   

 

Period During

Term

  

Monthly Base

Rent Per

Rentable Square

Foot (rounded to

the nearest 100th

of a dollar)

    

Annual Base

Rent Per

Rentable Square

Foot (rounded to

the nearest 100th

of a dollar)

    

Monthly
Installment

of Base Rent

 

Commencement Date through last day of 12th full calendar month of Term

   $ 3.70      $ 44.40      $ 118,459.20  

13th through 24th full calendar months of Term

   $ 3.81      $ 45.73      $ 122,012.98  

25th through 36th full calendar months of Term

   $ 3.93      $ 47.10      $ 125,673.37  

37th through 48th full calendar months of Term

   $ 4.04      $ 48.52      $ 129,443.57  

49th through 60th full calendar months of Term

   $ 4.16      $ 49.97      $ 133,326.87  

61st full calendar month of Term through Expiration Date

   $ 4.29      $ 51.47      $ 137,326.68  

 

   Notwithstanding the foregoing, Base Rent shall be abated, in the following amounts with respect to the following periods of time: (a) the amount of $118,459.20 with respect to the 1st full calendar month of the Term, and (b) the amount of $137,326.68 with respect to the 63rd full calendar month of the Term.
1.5    Intentionally Omitted.

 

2


     1.6    “Tenant’s Share”:   

17.3318% (based upon a total of 184,724 rentable square feet in the Building).

 

Notwithstanding any contrary provision hereof, for purposes of the definition of Tenant’s Share, the second sentence of Section 2.1.1, and Sections 2.2 and 4, “Building” means, collectively, the Related Buildings (defined below), and “Property” means, collectively, the Related Buildings, the parcel(s) of land upon which the Related Buildings are located and, at Landlord’s discretion, the parking facilities and other improvements, if any, serving the Related Buildings and the parcels of land upon which such parking facilities and improvements are located. As used herein, “Related Buildings” means, collectively, the 5 buildings located at 1801, 1841, 1881, 1891 and 1899 Page Mill Road, Palo Alto, California; provided, however, that, at Landlord’s option from time to time, any such building, other than the building(s) in which the Premises are located, may be removed from the Related Buildings (whether as a result of a sale or demolition of such building or otherwise) and any building owned by Landlord may be added to the Related Buildings (whether as a result of a purchase or development of such building or otherwise), in which event, effective as of the date of such removal or addition, Tenant’s Share shall be recalculated accordingly.

  1.7    “Permitted Use”:    General office use consistent with a first-class office building.
        Notwithstanding any contrary provision hereof: (a) the Permitted Use shall exclude the Competing Use (defined below); and (b) Tenant shall neither use, nor permit (pursuant to a sublease or otherwise) any other party to use, any portion of the Premises for the Competing Use. As used herein, “Competing Use” means a shared executive suites office center.
  1.8.    “Security Deposit”:    $ 0.00, as more particularly described in Section 21.
     Prepaid Base Rent:    $ 118,459.20, as more particularly described in Section 3.
     Prepaid Additional Rent:    $ 71,715.84, as more particularly described in Section 3.
  1.9    Parking:    93 unreserved parking spaces, at the rate of $0.00 per space per month.
        6 reserved parking spaces in the Parking Facility as more particularly set forth on Exhibit A-1, at the rate of $0.00 per space per month.
  1.10    Address of Tenant:    Before the Commencement Date:
        Evommune, Inc.
        1841 Page Mill Road, Suite 150
        Palo Alto, California
        Attn: Luis Pena
        From and after the Commencement Date:
        At the Premises. Attn: Luis Pena
        with a copy to:
        Crowell & Moring LLP
        515 South Flower Street, 41st Floor
        Los Angeles, California 90071
        Attention: Scott J. Moore, Esq.

 

3


     1.11    Address of Landlord:    Hudson Page Mill Hill, LLC
        c/o Hudson Pacific Properties
        333 Twin Dolphin Drive, Suite 100
        Redwood City, California 94065
        Attn: Building manager
        with copies to:
        Hudson Page Mill Hill, LLC
        c/o Hudson Pacific Properties
        333 Twin Dolphin Drive, Suite 100
        Redwood City, California 94065
        Attn: Managing Counsel
        and
        Hudson Page Mill Hill, LLC
        c/o Hudson Pacific Properties
        11601 Wilshire Boulevard, Suite 900
        Los Angeles, California 90025
        Attn: Lease Administration
  1.12    Broker(s):    Cushman & Wakefield (“Tenant’s Broker”), representing Tenant, and Newmark (“Landlord’s Broker”), representing Landlord.
  1.13    Building HVAC Hours and Holidays:    “Building HVAC Hours” means 8:00 a.m. to 6:00 p.m., Monday through Friday, excluding the day of observation of New Year’s Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and, at Landlord’s discretion, any other locally or nationally recognized holiday that is observed by other Comparable Buildings (defined in Section 25.10) (collectively, “Holidays”).
  1.14    “Tenant Improvements”:    Defined in Exhibit B, if any.
  1.15    “Guarantor”:    None.

2 PREMISES AND COMMON AREAS.

 

  2.1

The Premises.

2.1.1 Subject to the terms hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. Landlord and Tenant acknowledge that the rentable square footage of the Premises is as set forth in Section 1.2.2 and the rentable square footage of the Building is as set forth in Section 1.6. At any time Landlord may deliver to Tenant a notice substantially in the form of Exhibit C, as a confirmation of the information set forth therein. Tenant shall execute and return (or, by notice to Landlord, reasonably object to) such notice within 10 business days after receiving it, and if Tenant fails to do so, Tenant shall be deemed to have executed and returned it without exception.

2.1.2 Except as expressly provided herein, the Premises are accepted by Tenant in their configuration and condition existing on the date hereof (or in such other configuration and condition as any existing tenant of the Premises may cause to exist in accordance with its lease), without any obligation of Landlord to perform or pay for any alterations to the Premises, and without any representation or warranty regarding the configuration or condition of the Premises, the Building or the Project or their suitability for Tenant’s business.

2.2 Common Areas. Tenant may use, in common with Landlord and other parties and subject to the Rules and Regulations (defined in Exhibit D), any portions of the Property that are designated from time to time by Landlord for such use (the “Common Areas”).

3 RENT. Tenant shall pay all Base Rent and Additional Rent (defined below) (collectively, “Rent”) to Landlord or Landlord’s agent, without prior notice or demand or any setoff or deduction, at the place Landlord may designate from time to time, in money of the United States of America that, at the time of payment, is legal tender for the payment of all obligations. As used herein, “Additional Rent” means all amounts, other than Base Rent, that Tenant is required to pay Landlord hereunder. Monthly payments of Base Rent and monthly payments of Additional Rent for Expenses (defined in Section 4.2.2) and Taxes

 

4


(defined in Section 4.2.3) (collectively, “Monthly Rent”) shall be paid in advance on or before the first day of each calendar month during the Term; provided, however, that the installment of Base Rent for the first full calendar month for which Base Rent is payable hereunder and the installment of Additional Rent for Expenses and Taxes for the first full calendar month for which such Additional Rent is payable hereunder shall be paid upon the Commencement Date. Except as otherwise provided herein, all other items of Additional Rent shall be paid within 30 days after Landlord’s request for payment. Rent for any partial calendar month shall be prorated based on the actual number of days in such month. Without limiting Landlord’s other rights or remedies, (a) if any installment of Rent is not received by Landlord or its designee within five (5) business days after its due date, Tenant shall pay Landlord a late charge equal to 5% of the overdue amount (provided, however, that such late charge shall not apply to any such delinquency unless either (i) such delinquency is not cured within five (5) business days after notice from Landlord, or (ii) Tenant previously received notice from Landlord of a delinquency that occurred earlier in the same calendar year); and (b) any Rent that is not paid within 10 days after its due date shall bear interest, from its due date until paid, at the lesser of 18% per annum or the highest rate permitted by Law (defined in Section 5). Tenant’s covenant to pay Rent is independent of every other covenant herein.

4 EXPENSES AND TAXES.

4.1 General Terms. In addition to Base Rent, Tenant shall pay, in accordance with Section 4.4, for each Expense Year (defined in Section 4.2.1), an amount equal to the sum of (a) Tenant’s Share of Expenses for such Expense Year, plus (b) Tenant’s Share of Taxes for such Expense Year. Tenant’s Share of Expenses and Tenant’s Share of Taxes for any partial Expense Year shall be prorated based on the number of days in such Expense Year.

4.2 Definitions. As used herein, the following terms have the following meanings:

4.2.1 “Expense Year” means each calendar year in which any portion of the Term occurs.

4.2.2 “Expenses” means all expenses, costs and amounts that Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Property. Landlord shall act in a reasonable manner in incurring Expenses. Expenses shall include (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining and renovating the utility, telephone, mechanical, sanitary, storm- drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections, the cost of contesting any Laws that may affect Expenses, and the costs of complying with any governmentally-mandated transportation- management or similar program; (iii) the cost of all insurance premiums and deductibles (provided, however, that earthquake insurance deductibles shall not exceed 5.0% of the total insurable value of the Project per occurrence (and any such earthquake insurance deductible shall be amortized by Landlord over 10 years) and any other insurance deductibles shall not exceed $100,000.00 per occurrence); (iv) the cost of landscaping and relamping; (v) the cost of parking-area operation, repair, restoration, and maintenance; (vi) a management fee in the amount (which fee may be imputed if Landlord has internalized management or otherwise acts as its own property manager and which fee is hereby acknowledged to be reasonable) of 3% of gross annual receipts from the Property (excluding the management fee), together with other fees and costs, including consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Property; (vii) the fair rental value of any management office space; (viii) wages, salaries and other compensation, expenses and benefits, including taxes levied thereon, of all persons engaged in the operation, maintenance and security of the Property, and costs of training, uniforms, and employee enrichment for such persons; (ix) the costs of operation, repair, maintenance and replacement of all systems and equipment (and components thereof) of the Property; (x) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in Common Areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xi) rental or acquisition costs of supplies, tools, equipment, materials and personal property used in the maintenance, operation and repair of the Property; (xii) the cost of capital improvements or any other items that are (A) intended to reduce current or future Expenses or enhance the safety or security of the Property or its occupants, (B) replacements or modifications of the nonstructural portions of the Base Building (defined in Section 5) or Common Areas that are required to keep the Base Building or Common Areas in good condition, or (C) required under any Law (except to the extent that such Law was in effect and required the installation of such capital improvements or other items before the date hereof); (xiii) intentionally omitted; and (xiv) payments under any existing or future reciprocal easement agreement, transportation management agreement, cost-sharing agreement or other covenant, condition, restriction or similar instrument affecting the Property.

Notwithstanding the foregoing, Expenses shall not include: (a) capital expenditures not described in clauses (xi) or (xii) above (in addition, to the extent that any capital expenditure is included in Expenses pursuant to this Section 4.2.2., it shall be amortized (including actual or imputed interest on the amortized cost) over the lesser of (i) the useful life of the item purchased through such capital expenditure, as reasonably determined by Landlord, or (ii) the period of time that Landlord reasonably estimates will be required for any Expense savings resulting from such capital expenditure to equal such

 

5


capital expenditure; provided, however, that any capital expenditure that is included in Expenses solely on the grounds that it is intended to reduce current or future Expenses shall be so amortized over the period of time described in the preceding clause (ii)); (b) depreciation; (c) principal payments of mortgage or other non-operating debts of Landlord; (d) costs of repairs to the extent Landlord is reimbursed by insurance or condemnation proceeds; (e) costs of leasing space in the Building, including brokerage commissions, lease concessions, rental abatements and construction allowances granted to specific tenants; (f) costs of selling, financing or refinancing the Building; (g) fines, penalties or interest resulting from late payment of Taxes or Expenses; (h) organizational expenses of creating or operating the entity that constitutes Landlord; (i) damages paid to Tenant hereunder or to other tenants of the Building under their respective leases; (j) amounts (other than management fees) paid to Landlord’s affiliates for services, but only to the extent such amounts exceed the prices charged for such services by parties having similar skill and experience; (k) fines or penalties resulting from any violations of Law, negligence or willful misconduct of Landlord or its employees, agents or contractors; (l) advertising and promotional expenses; (m) Landlord’s charitable and political contributions; (n) ground lease rental; (o) attorney’s fees and other expenses incurred in connection with negotiations or disputes with tenants or other occupants of the Building; (p) costs of services or benefits made available to other tenants of the Building but not to Tenant; (q) costs of purchasing or leasing major sculptures, paintings or other artwork (as opposed to decorations purchased or leased by Landlord for display in the Common Areas of the Building); (r) any expense for which Landlord has received actual reimbursement from a third party (other than from a tenant of the Building pursuant to its lease); (s) costs of curing defects in design or original construction of the Property; (t) costs that Landlord is entitled to recover under a warranty, except to the extent it would not be fiscally prudent to pursue legal action to recover such costs;(u) expenses (other than Parking Expenses (defined below)) of operating any commercial concession at the Project; (v) Parking Expenses (defined below), except to the extent Parking Expenses exceed parking revenues on an annual basis (as used herein, “Parking Expenses” means costs of operating, maintaining and repairing the Parking Facility, including costs of parking equipment, tickets, supplies, signs, cleaning, resurfacing, restriping, parking-garage management fees, and the wages, salaries, employee benefits and taxes for individuals working exclusively in the Parking Facility; provided, however, that Parking Expenses shall exclude (i) capital expenses, and (ii) costs of electricity, janitorial service, elevator maintenance and insurance); (w) reserves; (x) bad debt expenses; (y) costs of cleaning up Hazardous Materials, except for routine cleanup performed as part of the ordinary operation and maintenance of the Property (as used herein, “Hazardous Materials” means any material now or hereafter defined or regulated by any Law or governmental authority as radioactive, toxic, hazardous, or waste, or a chemical known to the state of California to cause cancer or reproductive toxicity, including (1) petroleum and any of its constituents or byproducts, (2) radioactive materials, (3) asbestos in any form or condition, and (4) materials regulated by any of the following, as amended from time to time, and any rules promulgated thereunder: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. §§2601, et seq.; the Clean Water Act, 33 U.S.C. §§1251 et seq; the Clean Air Act, 42 U.S.C. §§7401 et seq.;The California Health and Safety Code; The California Water Code; The California Labor Code; The California Public Resources Code; and The California Fish and Game Code.); or (z) wages, salaries, fees or fringe benefits (“Labor Costs”) paid to executive personnel or officers or partners of Landlord (provided, however, that if such individuals provide services directly related to the operation, maintenance or ownership of the Property that, if provided directly by a general manager or property manager or his or her general support staff, would normally be chargeable as an operating expense of a comparable office building, then the Labor Costs of such individuals may be included in Expenses to the extent of the percentage of their time that is spent providing such services to the Property).

If, during any portion of any Expense Year, the Building is not 100% occupied (or a service provided by Landlord to Tenant is not provided by Landlord to a tenant that provides such service itself, or any tenant of the Building is entitled to free rent, rent abatement or the like), Expenses for such Expense Year shall be determined as if the Building had been 100% occupied (and all services provided by Landlord to Tenant had been provided by Landlord to all tenants, and no tenant of the Building had been entitled to free rent, rent abatement or the like) during such portion of such Expense Year.

4.2.3 “Taxes” means all federal, state, county or local governmental or municipal taxes, fees, charges, assessments, levies, licenses or other impositions, whether general, special, ordinary or extraordinary, that are paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing or operation of the Property. Taxes shall include (a) real estate taxes; (b) general and special assessments; (c) transit taxes; (d) leasehold taxes; (e) personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems, appurtenances, furniture and other personal property used in connection with the Property; (f) any tax on the rent, right to rent or other receipts from any portion of the Property or as against the business of leasing any portion of the Property; (g) any assessment, tax, fee, levy or charge imposed by any governmental agency, or by any non-governmental entity pursuant to any private cost-sharing agreement, in order to fund the provision or enhancement of any fire-protection, street-, sidewalk- or road-maintenance, refuse-removal or other service that is (or, before the enactment of Proposition 13, was) normally provided by governmental agencies to property owners or occupants without charge (other than through real property taxes); and (h) payments in lieu of taxes under any tax increment financing agreement, abatement agreement, agreement to construct improvements, or other

 

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agreement with any governmental body or agency or taxing authority. Any reasonable and actual costs and expenses (including reasonable attorneys’ and consultants’ fees) incurred in attempting to protest, reduce or minimize Taxes shall be included in Taxes for the year in which they are incurred. Notwithstanding any contrary provision hereof, Taxes shall be determined without regard to any “green building” credit and shall exclude (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, transfer taxes, estate taxes, federal and state income taxes, and other taxes to the extent (x) applicable to Landlord’s general or net income (as opposed to rents or receipts attributable to operations at the Property), or (y) measured solely by the square footage, rent, fees, services, tenant allowances or similar amounts, rights or obligations described or provided in or under any particular lease, license or similar agreement or transaction at the Building; (ii) any Expenses, and (iii) any items required to be paid or reimbursed by Tenant under Section 4.5.

4.3 Allocation. Landlord, in its reasonable discretion, may equitably allocate Expenses among office, retail or other portions or occupants of the Property. If Landlord incurs Expenses or Taxes for the Property together with another property, Landlord, in its reasonable discretion, shall equitably allocate such shared amounts between the Property and such other property.

4.4 Calculation and Payment of Expenses and Taxes.

4.4.1 Statement of Actual Expenses and Taxes; Payment by Tenant. Landlord shall give to Tenant, after the end of each Expense Year, a statement (the “Statement”) setting forth the actual Expenses and Taxes for such Expense Year. If the amount paid by Tenant for such Expense Year pursuant to Section 4.4.2 is less or more than the sum of Tenant’s Share of the actual Expenses plus Tenant’s Share of the actual Taxes (as such amounts are set forth in such Statement), Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the Rent then or next due hereunder; provided, however, that if this Lease has expired or terminated and Tenant has vacated the Premises, Tenant shall pay Landlord the amount of such underpayment, or Landlord shall pay Tenant the amount of such overpayment (less any Rent due), within 30 days after delivery of such Statement. Any failure of Landlord to timely deliver the Statement for any Expense Year shall not diminish either party’s rights under this Section 4.

4.4.2 Statement of Estimated Expenses and Taxes. Landlord shall give to Tenant, for each Expense Year, a statement (the “Estimate Statement”) setting forth Landlord’s reasonable estimates of the Expenses (the “Estimated Expenses”) and Taxes (the “Estimated Taxes”) for such Expense Year. Upon receiving an Estimate Statement, Tenant shall pay, with its next installment of Base Rent coming due at least 30 days after such receipt, an amount equal to the excess of (a) the amount obtained by multiplying (i) the sum of Tenant’s Share of the Estimated Expenses plus Tenant’s Share of the Estimated Taxes (as such amounts are set forth in such Estimate Statement), by (ii) a fraction, the numerator of which is the number of months that have elapsed in the applicable Expense Year (including the month of such payment) and the denominator of which is 12, over (b) any amount previously paid by Tenant for such Expense Year pursuant to this Section 4.4.2. Until Landlord delivers a new Estimate Statement (which Landlord may do at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the sum of Tenant’s Share of the Estimated Expenses plus Tenant’s Share of the Estimated Taxes, as such amounts are set forth in the previous Estimate Statement. Any failure of Landlord to timely deliver any Estimate Statement shall not diminish Landlord’s rights to receive payments and revise any previous Estimate Statement under this Section 4.

4.4.3 Retroactive Adjustment of Taxes. Notwithstanding any contrary provision hereof, if, after Landlord’s delivery of any Statement, an increase or decrease in Taxes occurs for the applicable Expense Year (whether by reason of reassessment, error, or otherwise), Taxes for such Expense Year shall be retroactively adjusted. If, as a result of such adjustment, it is determined that Tenant has under- or overpaid Tenant’s Share of such Taxes, Tenant shall pay Landlord the amount of such underpayment, or receive a credit in the amount of such overpayment, with or against the Rent then or next due hereunder; provided, however, that if this Lease has expired or terminated and Tenant has vacated the Premises, Tenant shall pay Landlord the amount of such underpayment, or Landlord shall pay Tenant the amount of such overpayment (less any Rent due), within 30 days after such adjustment is made.

4.5 Charges for Which Tenant Is Directly Responsible. Notwithstanding any contrary provision hereof, Tenant, promptly upon demand, shall pay (or if paid by Landlord, reimburse Landlord for) each of the following to the extent levied against Landlord or Landlord’s property: (a) any tax based upon or measured by (i) the cost or value of Tenant’s trade fixtures, equipment, furniture or other personal property, or (ii) the cost or value of the Leasehold Improvements (defined in Section 7.1) to the extent such cost or value exceeds that of a Building-standard build-out, as determined by Landlord; (b) any rent tax, sales tax, service tax, transfer tax, value added tax, use tax, business tax, gross income tax, gross receipts tax, or other tax, assessment, fee, levy or charge measured solely by the square footage, Rent, services, tenant allowances or similar amounts, rights or obligations described or provided in or under this Lease; (c) any tax assessed upon the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of any portion of the Property; and (d) any tax assessed on this transaction or on any document to which Tenant is a party that creates an interest or estate in the Premises.

 

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4.6 Books and Records. Within 90 days after receiving any Statement (the “Review Notice Period”), Tenant may give Landlord notice (“Review Notice”) stating that Tenant elects to review Landlord’s calculation of the Expenses and/or Taxes for the Expense Year to which such Statement applies and identifying with reasonable specificity the records of Landlord reasonably relating to such matters that Tenant desires to review. Within a reasonable time after receiving a timely Review Notice (and, at Landlord’s option, an executed confidentiality agreement as described below), Landlord shall deliver to Tenant, or make available for inspection at a location reasonably designated by Landlord, copies of such records. Within 90 days after such records are made available to Tenant (the “Objection Period”), Tenant may deliver to Landlord notice (an “Objection Notice”) stating with reasonable specificity any objections to the Statement, in which event Landlord and Tenant shall work together in good faith to resolve Tenant’s objections. Tenant may not deliver more than one Review Notice or more than one Objection Notice with respect to any Statement. If Tenant fails to give Landlord a Review Notice before the expiration of the Review Notice Period or fails to give Landlord an Objection Notice before the expiration of the Objection Period, Tenant shall be deemed to have approved the Statement. If Tenant retains an agent to review Landlord’s records, the agent must be with a CPA firm licensed to do business in the State of California with experience reviewing books and records kept for Comparable Buildings and its fees shall not be contingent, in whole or in part, upon the outcome of the review. Tenant shall be responsible for all costs of such review; provided, however, that if Landlord and Tenant determine that the sum of Expenses and Taxes for the Expense Year in question was overstated by more than 5%, Landlord, within 30 days after receiving paid invoices therefor from Tenant, shall reimburse Tenant for the reasonable amounts paid by Tenant to third parties in connection with such review (not to exceed $5,000.00). The records and any related information obtained from Landlord shall be treated as confidential, and as applicable only to the Premises, by Tenant, its auditors, consultants, and any other parties reviewing the same on behalf of Tenant (collectively, “Tenant’s Auditors”). Before making any records available for review, Landlord may require Tenant and Tenant’s Auditors to execute a reasonable confidentiality agreement, in which event Tenant shall cause the same to be executed and delivered to Landlord within 30 days after receiving it from Landlord, and if Tenant fails to do so, the Objection Period shall be reduced by one day for each day by which such execution and delivery follows the expiration of such 30-day period. Notwithstanding any contrary provision hereof, Tenant may not examine Landlord’s records or dispute any Statement if any Rent remains unpaid past its due date. If, for any Expense Year, Landlord and Tenant determine that the sum of Tenant’s Share of the actual Expenses plus Tenant’s Share of the actual Taxes is less or more than the amount reported, Tenant shall receive a credit in the amount of its overpayment, or pay Landlord the amount of its underpayment, against or with the Rent next due hereunder; provided, however, that if this Lease has expired or terminated and Tenant has vacated the Premises, Landlord shall pay Tenant the amount of its overpayment (less any Rent due), or Tenant shall pay Landlord the amount of its underpayment, within 30 days after such determination.

5 USE; COMPLIANCE WITH LAWS.

5.1 Tenant shall not (a) use the Premises for any purpose other than the Permitted Use, or (b) do anything in or about the Premises that violates any of the Rules and Regulations, damages the reputation of the Project, interferes with, injures or annoys other occupants of the Project, or constitutes a nuisance. Tenant, at its expense, shall comply with all Laws relating to (i) the operation of its business at the Project, (ii) the use, occupancy and, other than with respect to elements of the Base Building, the condition and configuration of the Premises, or (iii) any Supplemental Systems (defined below) serving the Premises, whether located inside or outside of the Premises. If, in order to comply with any such Law, Tenant must obtain or deliver any permit, certificate or other document evidencing such compliance, Tenant shall provide a copy of such document to Landlord promptly after obtaining or delivering it. If a change to any Common Area or the Base Building becomes required under Law (or if any such requirement is enforced) as a result of any Tenant-Requested Improvement (defined below) that is not of a type customarily required for general office use, any trade fixture that is not of a type customarily required for general office use or because any use of the Premises that is not general office use, then Tenant, upon demand, shall (x) at Landlord’s option, either make such change at Tenant’s cost or pay Landlord the cost of making such change, and (y) pay Landlord a coordination fee equal to 5% of the cost of such change. As used herein, “Law” means any existing or future law, ordinance, regulation or requirement of any governmental authority having jurisdiction over the Project or the parties. As used herein, “Supplemental System” means any Unit (defined in Section 25.5), supplemental fire-suppression system, kitchen (including any hot water heater, dishwasher, garbage disposal, insta-hot dispenser, or plumbing), shower or similar facility, or any other system that would not customarily be considered part of the base building of a first-class multi-tenant office building. As used herein, “Base Building System” means any mechanical (including HVAC), electrical, plumbing or fire/life-safety system serving the Building, other than a Supplemental System. As used herein, “Base Building” means the structural portions of the Building, together with the Base Building Systems. As used herein, “Tenant-Requested Improvement” means any Leasehold Improvements (defined in Section 7.1 below) installed by or for the benefit of Tenant, whether pursuant to this Lease or pursuant to any prior lease or other agreement to which Tenant was a party.

 

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5.2 Landlord, at its expense (subject to Section 4), shall cause the Base Building and the Common Areas to comply with all Laws (including the Americans with Disabilities Act (“ADA”)) to the extent that (a) such compliance is necessary for Tenant to use the Premises for general office use in a normal and customary manner and for Tenant’s employees and visitors to have reasonably safe access to and from the Premises, or (b) Landlord’s failure to cause such compliance would impose liability upon Tenant under Law; provided, however, that Landlord shall not be required to cause or pay for such compliance to the extent that (x) Tenant is required to cause or pay for such compliance under Section 5.1 or 7.3 or any other provision hereof, or (y) non-compliance arises under any provision of the ADA other than Title III thereof. Notwithstanding the foregoing, Landlord may contest any alleged violation in good faith, including by applying for and obtaining a waiver or deferment of compliance, asserting any defense allowed by Law, and appealing any order or judgment to the extent permitted by Law; provided, however, that (i) no cost or liability shall be imposed upon Tenant as a result of such contest, and (ii) after exhausting any rights to contest or appeal, Landlord shall perform any work necessary to comply with any final order or judgment.

6 SERVICES.

6.1 Standard Services. Landlord shall provide the following services on all days (unless otherwise stated below): (a) subject to limitations imposed by Law, customary heating, ventilation and air conditioning (“HVAC”) in season during Building HVAC Hours, stubbed to the Premises; (b) electricity supplied by the applicable public utility, stubbed to the Premises; (c) water supplied by the applicable public utility (i) for use in lavatories and any drinking facilities located in Common Areas within the Building, and (ii) stubbed to the Building core for use in any plumbing fixtures located in the Premises; (d) janitorial services to the Premises, except on weekends and Holidays; (e) elevator service (subject to scheduling by Landlord, for any freight service); and (f) access to the Building for Tenant and its employees, 24 hours per day/7 days per week, subject to the terms hereof and such access control or monitoring systems as Landlord may reasonably impose, including sign-in procedures and/or presentation of identification cards.

6.2 Above-Standard Use. Landlord shall provide HVAC service outside Building HVAC Hours if Tenant gives Landlord such prior notice and pays Landlord such hourly cost per zone as Landlord may require; provided, however, Tenant shall be entitled to 12 hours per month of free HVAC service during non-Building HVAC Hours. The parties acknowledge that, as of the date hereof, Landlord’s charge for HVAC service outside Building HVAC Hours is $64.00 per hour per zone, subject to change from time to time. Tenant shall not, without Landlord’s prior consent, use equipment that may affect the temperature maintained by the air conditioning system or consume above-Building-standard amounts of any water furnished for the Premises by Landlord pursuant to Section 6.1. If Landlord reasonably determines, based on objective data, that Tenant’s consumption of electricity or water exceeds the rate that Landlord reasonably determines, based on objective data, is standard for the Building, and if Landlord provides Tenant with reasonable documentation of such determinations, Tenant shall pay Landlord, upon billing, the actual out-of-pocket cost of such excess consumption, including any costs of installing, operating and maintaining any equipment that is installed in order to supply or measure such excess electricity or water. The connected electrical load of Tenant’s incidental-use equipment shall not exceed the Building-standard electrical design load, and Tenant’s electrical usage shall not exceed the capacity of the feeders to the Project or the risers or wiring installation.

6.3 Interruption. Subject to Section 11, any failure to furnish, delay in furnishing, or diminution in the quality or quantity of any service resulting from any application of Law, failure of equipment, performance of maintenance, repairs, improvements or alterations, utility interruption, or event of Force Majeure (defined in Section 25.2) (each, a “Service Interruption”) shall not render Landlord liable to Tenant, constitute a constructive eviction, or excuse Tenant from any obligation hereunder. Notwithstanding the foregoing, if all or a material portion of the Premises is made untenantable or inaccessible for more than three (3) consecutive business days after notice from Tenant to Landlord by a Service Interruption that (a) does not result from a Casualty (defined in Section 11), a Taking (defined in Section 13) or an Act of Tenant (defined in Section 10.1), and (b) can be corrected through Landlord’s reasonable efforts, then, as Tenant’s sole remedy, Monthly Rent shall abate for the period beginning on the day immediately following such 3-business-day period and ending on the day such Service Interruption ends, but only in proportion to the percentage of the rentable square footage of the Premises made untenantable or inaccessible and not occupied by Tenant.

7 REPAIRS AND ALTERATIONS.

7.1 Repairs. Subject to Section 11, Tenant, at its expense, shall perform all maintenance and repairs (including replacements) to the Premises, and keep the Premises in as good condition and repair as existed when Tenant took possession and as thereafter improved, except for reasonable wear and tear, damage due to a Casualty (defined below), or a Taking (defined below) and repairs that are Landlord’s express responsibility hereunder. Tenant’s maintenance and repair obligations shall include (a) all leasehold improvements in the Premises, including any Tenant Improvements, any Alterations (defined in Section 7.2), and any leasehold improvements installed pursuant to any prior lease (the “Leasehold Improvements”), but excluding the Base Building; (b) any Supplemental Systems serving the Premises, whether located inside or outside of the Premises; and (c) all Lines (defined in Section 23) and trade

 

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fixtures. Notwithstanding the foregoing, if a Default (defined in Section 19.1) or an emergency exists, Landlord may, at its option, perform such maintenance and repairs on Tenant’s behalf, in which case Tenant shall pay Landlord, upon demand, the cost of such work plus a coordination fee equal to 5% of such cost. Landlord shall perform all maintenance and repairs to (i) the roof and exterior walls and windows of the Building, (ii) the Base Building, and (iii) the Common Areas.

7.2 Alterations. Tenant may not make any improvement, alteration, addition or change to the Premises or to any mechanical, plumbing or HVAC facility or other system serving the Premises (an “Alteration”) without Landlord’s prior consent, which consent shall be requested by Tenant not less than 30 days before commencement of work and shall not be unreasonably withheld by Landlord. Notwithstanding the foregoing, provided that Landlord receives 10 business days’ prior notice, Landlord’s prior consent shall not be required for any Alteration that (i) is reasonably estimated (together with any other Alterations performed without Landlord’s consent pursuant to this sentence during the 12- month period ending on the date of such notice) to cost less than $100,000.00; (ii) is not visible from outside the Premises; (iii) does not affect any system or structural component of the Building; and (iv) does not require work to be performed inside the walls or above the ceiling of the Premises. For any Alteration, (a) Tenant, before beginning work, shall deliver to Landlord, and obtain Landlord’s approval of, plans and specifications; (b) Landlord, in its discretion, may require Tenant to obtain security for performance satisfactory to Landlord; (c) Tenant shall deliver to Landlord “as built” drawings (in CAD format, if requested by Landlord), completion affidavits, full and final lien waivers, and all governmental approvals; and (d) Tenant shall pay Landlord upon demand (i) Landlord’s reasonable out-of-pocket expenses incurred in reviewing the work, and (ii) a coordination fee equal to 5% of the cost of the work; provided, however, that this clause (d) shall not apply to any Tenant Improvements.

7.3 Tenant Work. Before beginning any Alteration or any work affecting Lines (collectively, “Tenant Work”), Tenant shall deliver to Landlord, and obtain Landlord’s approval of (which approval shall not be unreasonably withheld, conditioned or delayed), (a) names of contractors, subcontractors, mechanics, laborers and materialmen; (b) evidence of contractors’ and subcontractors’ insurance in amounts and coverages as Landlord may reasonably require; and (c) any required governmental permits. Tenant shall perform all Tenant Work (i) in a good and workmanlike manner using materials of a quality reasonably approved by Landlord; (ii) in compliance with any approved plans and specifications, all Laws, the National Electric Code, and Landlord’s construction rules and regulations; and (iii) in a manner that does not impair the Base Building. If, as a result of any Tenant Work, Landlord becomes required under Law to perform any inspection, give any notice, or cause such Tenant Work to be performed in any particular manner, Tenant shall comply with such requirement and promptly provide Landlord with reasonable documentation of such compliance. Landlord’s approval of Tenant’s plans and specifications shall not relieve Tenant from any obligation under this Section 7.3. In performing any Tenant Work, Tenant shall not use contractors, services, labor, materials or equipment that, in Landlord’s reasonable judgment, would disturb labor harmony with any workforce or trades engaged in performing other work or services at the Project.

8 LANDLORD’S PROPERTY. All Leasehold Improvements shall become Landlord’s property upon installation and without compensation to Tenant. Notwithstanding the foregoing, if any Tenant- Requested Improvements (other than any Unit, which shall be governed by Section 25.5) are not, in Landlord’s reasonable judgment, Building-standard, then before the expiration or earlier termination hereof, Tenant shall, at Tenant’s expense, and except as otherwise notified by Landlord, remove such Tenant-Requested Improvements, repair any resulting damage to the Premises or Building, and restore the affected portion of the Premises to its configuration and condition existing before the installation of such Tenant-Requested Improvements. If Tenant fails to timely perform any work required under the preceding sentence, Landlord may perform such work at Tenant’s expense. When Landlord approves any Tenant Improvements or Alterations (or, in the case of any Tenant Improvements or Alterations not requiring Landlord’s approval hereunder, within 10 business days after Tenant’s request), Landlord shall identify any such Tenant Improvements or Alterations that, in Landlord’s judgment, are not Building- standard and therefore subject to removal by Tenant at the expiration or earlier termination of this Lease pursuant to the terms of this Section 8 (and if Landlord fails to do so, such Tenant Improvements or Alterations shall be deemed Building-standard).

9 LIENS. Tenant shall keep the Project free from any lien arising out of any work performed, material furnished or obligation incurred by or on behalf of Tenant. Tenant shall remove any such lien within 10 business days after notice from Landlord, and if Tenant fails to do so, Landlord, without limiting its remedies, may pay the amount necessary to cause such removal, whether or not such lien is valid. The amount so paid, together with reasonable attorneys’ fees and expenses, shall be reimbursed by Tenant upon demand.

10 INDEMNIFICATION; INSURANCE.

10.1 Waiver and Indemnification. Tenant waives all claims against Landlord, its Security Holders (defined in Section 17), Landlord’s managing agent(s), their (direct or indirect) owners, and the beneficiaries, trustees, officers, directors, employees and agents of each of the foregoing (including Landlord, the “Landlord Parties”) for (i) any damage to person or property (or resulting from the loss of

 

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use thereof), except to the extent such damage is caused by any negligence, willful misconduct or breach of this Lease of or by any Landlord Party, or (ii) any failure to prevent or control any criminal or otherwise wrongful conduct by any third party or to apprehend any third party who has engaged in such conduct. Tenant shall indemnify, defend, protect, and hold the Landlord Parties harmless from any obligation, loss, claim, action, liability, penalty, damage, cost or expense (including reasonable attorneys’ and consultants’ fees and expenses) (each, a “Claim”) that is imposed or asserted by any third party and arises from (a) any cause in, on or about the Premises, or (b) any negligence, willful misconduct or breach of this Lease of or by Tenant, any party claiming by, through or under Tenant, their (direct or indirect) owners, or any of their respective beneficiaries, trustees, officers, directors, employees, agents, contractors, licensees or invitees (each, an “Act of Tenant”), except to the extent such Claim arises from any negligence, willful misconduct or breach of this Lease of or by any Landlord Party. Landlord shall indemnify, defend, protect, and hold Tenant, its (direct or indirect) owners, and their respective beneficiaries, trustees, officers, directors, employees and agents (including Tenant, the “Tenant Parties”) harmless from any Claim that is imposed or asserted by any third party and arises from any negligence, willful misconduct or breach of this Lease of or by any Landlord Party, except to the extent such Claim arises from any negligence, willful misconduct or breach of this Lease of or by any Tenant Party.

10.2 Tenant’s Insurance . Tenant shall maintain the following coverages in the following amounts:

10.2.1 Commercial General Liability Insurance, written on an occurrence basis, with a combined single limit for bodily injury and property damages of not less than Five Million Dollars ($5,000,000) per occurrence and Six Million Dollars ($6,000,000), in the annual aggregate, which shall apply separately to each location of Tenant, including products liability coverage if applicable, blanket contractual coverage including written contracts, and personal and bodily injury coverage, covering the insuring provisions of this Lease and the performance of Tenant of the indemnity and exemption of Landlord from liability agreements set forth in this Lease.

10.2.2 Property Insurance covering (i) all improvements in the Premises (“Tenant-Insured Improvements”) and (ii) all office furniture, trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant’s property in the Premises installed by, for, or at the expense of Tenant. Such insurance shall be written on a special cause of loss or all risk form for physical loss or damage, for the full replacement cost value (subject to deductible amounts not exceeding $10,000.00) new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance, and shall include coverage for damage or other loss caused by fire or other peril, including vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion (and providing business interruption, loss of income and extra expense insurance covering any failure or interruption of Tenant’s business equipment (including, without limitation, telecommunications equipment) and covering all other perils, failures or interruptions sufficient to cover a period of interruption of not less than twelve (12) months).

10.2.3 Workers’ Compensation statutory limits and Employers’ Liability limits of $1,000,000.

10.3 Form of Policies. The minimum limits of insurance required to be carried by Tenant shall not limit Tenant’s liability. Such insurance shall be issued by an insurance company that has an A.M. Best rating of not less than A-VIII. Tenant’s Commercial General Liability Insurance shall (a) name the Landlord Parties and any other party designated by Landlord (“Additional Insured Parties”) as additional insureds; and (b) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and non-contributing with Tenant’s insurance. Landlord shall be designated as a loss payee with respect to Tenant’s Property Insurance on any Tenant-Insured Improvements. Tenant shall deliver to Landlord, on or before the Commencement Date and at least 10 days before the expiration dates thereof, certificates from Tenant’s insurance company on the forms currently designated “ACORD 25” (Certificate of Liability Insurance) and “ACORD 28” (Evidence of Commercial Property Insurance) or the equivalent. Attached to the ACORD 25 (or equivalent) there shall be an endorsement (or an excerpt from the policy) naming the Additional Insured Parties as additional insureds, and attached to the ACORD 28 (or equivalent) there shall be an endorsement (or an excerpt from the policy) designating Landlord as a loss payee with respect to Tenant’s Property Insurance on any Tenant-Insured Improvements, and each such endorsement (or policy excerpt) shall be binding on Tenant’s insurance company. Tenant agrees that if Tenant does not take out and maintain such insurance or furnish Landlord with certificates of coverage in a timely manner, Landlord may (but shall not be required to) procure said insurance on Tenant’s behalf and charge Tenant the cost thereof, which amount shall be payable by Tenant upon demand with interest (at the rate that is at the lesser of 18% per annum or the highest rate permitted by Law) from the date such sums are expended. Tenant shall have the right to provide such insurance coverage pursuant to primary, excess and or blanket/umbrella policies obtained by Tenant, provided such policies expressly afford coverage to the Premises and to Tenant as required by this Lease.

 

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10.4 Subrogation. Notwithstanding any provision in this Lease to the contrary (but subject to the provisions set forth in Section 11 below as well as the provisions set forth in Sections 4 and 8 of Exhibit D hereto) each party waives, and shall cause its insurance carrier to waive, any right of recovery against the other party, any of its (direct or indirect) owners, or any of their respective beneficiaries, trustees, officers, directors, employees or agents for any loss of or damage to property which loss or damage is (or, if the insurance required hereunder had been carried, would have been) covered by the waiving party’s property insurance. For purposes of this Section 10.4 only, (a) any deductible with respect to a party’s insurance shall be deemed covered by, and recoverable by such party under, valid and collectable policies of insurance, and (b) any contractor retained by Landlord to install, maintain or monitor a fire or security alarm for the Building shall be deemed an agent of Landlord.

10.5 Additional Insurance Obligations. Tenant shall maintain such increased amounts of the insurance required to be carried by Tenant under this Section 10, and such other types and amounts of insurance covering the Premises and Tenant’s operations therein, as may be reasonably requested (not more than once in any 36-month period) by Landlord, but not in excess of the amounts and types of insurance then being required by landlords of Comparable Buildings. Tenant agrees that it will not, at any time, during the Term, carry any stock of goods or do anything in or about the Premises that will in any way tend to increase Landlord’s insurance rates upon the Project. Tenant agrees to pay Landlord forthwith upon demand the amount of any increase in Landlord’s premiums for insurance that may be carried during the Term of this Lease, or the amount of insurance to be carried by Landlord on the Project resulting from the foregoing, or from Tenant doing any act in or about the Premises that does so increase the insurance rates, whether or not Landlord shall have consented to such act on the part of Tenant. Tenant shall, at its own expense, comply with the requirements of Landlord’s insurance providers applicable to the Premises including, without limitation, the installation of fire extinguishers or an automatic dry chemical extinguishing system.

10.6 Landlord’s Insurance. Landlord shall maintain the following insurance, together with such other insurance coverage as Landlord, in its reasonable judgment, may elect to maintain, the premiums of which shall be included in Expenses: (a) Commercial General Liability insurance applicable to the Property, Building and Common Areas providing, on an occurrence basis, combined primary and excess/umbrella limits of at least $3,000,000 each occurrence and $4,000,000 annual aggregate; (b) Special Cause of Loss or All Risk Insurance on the Building at replacement cost value as reasonably estimated by Landlord; (c) Worker’s Compensation insurance to the extent required by Law; and (d) Employers Liability Coverage to the extent required by Law.

11 CASUALTY DAMAGE. With reasonable promptness after discovering any damage to the Premises (other than trade fixtures), or to any Common Area or portion of the Base Building necessary for access to or tenantability of the Premises, resulting from any fire or other casualty (a “Casualty”), Landlord shall notify Tenant of Landlord’s reasonable estimate of the time required to substantially complete repair of such damage (the “Landlord Repairs”). If, according to such estimate, the Landlord Repairs cannot be substantially completed within 270 days after the date of Casualty, either party may terminate this Lease upon 60 days’ notice to the other party delivered within 10 days after Landlord’s delivery of such estimate. Within 90 days after discovering any damage to the Project resulting from any Casualty, Landlord may, whether or not the Premises are affected, terminate this Lease by notifying Tenant if (i) any Security Holder terminates any ground lease or requires that any insurance proceeds be used to pay any mortgage debt; (ii) any damage to Landlord’s property is not fully covered by Landlord’s insurance policies plus any applicable deductibles (other than deductibles with respect to earthquake damage); (iii) Landlord decides to rebuild the Building or Common Areas so that it or they will be substantially different structurally or architecturally; (iv) the damage occurs during the last 12 months of the Term; or (v) any owner, other than Landlord, of any damaged portion of the Project does not intend to repair such damage. Tenant shall have the right to terminate this Lease if: (a) there is less than one (1) year of the Term remaining on the date of the Casualty; (b) the Casualty was not caused by the negligence or willful misconduct of Tenant or its agents, employees or contractors; and (c) Tenant provides Landlord with written notice of its intent to terminate within 30 days after the date of Tenant’s receipt of the estimate of the time required to substantially complete the Landlord Repairs. If this Lease is not terminated pursuant to this Section 11, Landlord shall promptly and diligently perform the Landlord Repairs, subject to reasonable delays for insurance adjustment and other events of Force Majeure. The Landlord Repairs shall restore the Premises (other than trade fixtures) and any Common Area or portion of the Base Building necessary for access to or tenantability of the Premises to substantially the same condition that existed when the Casualty occurred, except for (a) any modifications required by Law or any Security Holder, and (b) any modifications to the Common Areas that are deemed desirable by Landlord, are consistent with the character of the Project, and do not materially impair access to or tenantability of the Premises. Notwithstanding Section 10.4, Tenant shall assign to Landlord (or its designee) all insurance proceeds payable to Tenant under Tenant’s insurance required under Section 10.2 with respect to any Tenant-Insured Improvements, and if the estimated or actual cost of restoring any Tenant-Insured Improvements exceeds the insurance proceeds received by Landlord from Tenant’s insurance carrier, Tenant shall pay such excess (the “Excess”) to Landlord within 30 days after Landlord’s demand; provided, however, that if (a) the Casualty was not caused by the negligence or willful misconduct of any Tenant Party, and (b) the amount of such insurance proceeds (or, if greater, the amount of insurance proceeds Tenant would have been entitled to receive if it had maintained the property insurance required under Section 10.2), together with any self-insured retention or deductible, is

 

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less than the amount, if any, by which the estimated or actual cost of restoring any Tenant-Insured Improvements exceeds $100,000.00 (such shortfall being referred herein to as the “Shortfall”), then (x) Tenant may terminate this Lease by providing Landlord with 15 business days’ prior notice (which notice shall include reasonable documentation of the Shortfall) within 15 days after receiving such demand (the “Tenant Notice Period”); provided further, however, that Landlord, by notifying Tenant within 10 business days after receiving such notice and documentation, may cancel such termination, in which event Tenant’s obligation to pay the Excess shall not exceed $100,000.00; and (y) if this Lease is not terminated pursuant to the preceding clause (x) and Landlord delays performance of the Landlord Repairs until the earliest of (i) the date, if any, on which Tenant notifies Landlord that Tenant waives its right to so terminate this Lease, (ii) the expiration of the Tenant Notice Period without Tenant giving Landlord notice of such termination, or (iii) if Tenant gives such notice before the expiration of the Tenant Notice Period, the date on which Landlord notifies Tenant that Landlord cancels such termination, then, for purposes of determining the period of any abatement of Monthly Rent pursuant to this Section 11, the Landlord Repairs shall be deemed to have been completed on the date on which Landlord reasonably estimates such completion would have occurred in the absence of such delay. No Casualty and no restoration performed as required hereunder shall render Landlord liable to Tenant, constitute a constructive eviction, or excuse Tenant from any obligation hereunder; provided, however, that if the Premises (other than trade fixtures) or any Common Area or portion of the Base Building necessary for access to or tenantability of the Premises is damaged by a Casualty, then, during any time that, as a result of such damage, any portion of the Premises is inaccessible or untenantable and is not occupied by Tenant, Monthly Rent shall be abated in proportion to the rentable square footage of such portion of the Premises.

12 NONWAIVER. No provision hereof shall be deemed waived by either party unless it is waived by such party expressly and in writing, and no waiver of any breach of any provision hereof shall be deemed a waiver of any subsequent breach of such provision or any other provision hereof. Landlord’s acceptance of Rent shall not be deemed a waiver of any preceding breach of any provision hereof, other than Tenant’s failure to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of such acceptance. No acceptance of payment of an amount less than the Rent due hereunder shall be deemed a waiver of Landlord’s right to receive the full amount of Rent due, whether or not any endorsement or statement accompanying such payment purports to effect an accord and satisfaction. No receipt of monies by Landlord from Tenant after the giving of any notice, the commencement of any suit, the issuance of any final judgment, or the termination hereof shall affect such notice, suit or judgment, or reinstate or extend the Term or Tenant’s right of possession hereunder.

13 CONDEMNATION. If any part of the Premises, Building or Project is taken for any public or quasi-public use by power of eminent domain or by private purchase in lieu thereof (a “Taking”) for more than 180 consecutive days, Landlord may terminate this Lease. If more than 25% of the rentable square footage of the Premises, or any Common Area or portion of the Base Building necessary for access to or tenantability of the Premises, is Taken for more than 180 consecutive days, Tenant may terminate this Lease. Any such termination shall be effective as of the date possession must be surrendered to the authority, and the terminating party shall provide termination notice to the other party within 45 days after receiving written notice of such surrender date. Except as provided above in this Section 13, neither party may terminate this Lease as a result of a Taking. Tenant shall not assert, and hereby assigns to Landlord, any claim it may have for compensation because of any Taking; provided, however, that Tenant may file a separate claim for any Taking of Tenant’s personal property or any trade fixtures that Tenant is entitled to remove upon the expiration hereof, and for moving expenses, so long as such claim does not diminish the award available to Landlord or any Security Holder and is payable separately to Tenant. If this Lease is terminated pursuant to this Section 13, all Rent shall be apportioned as of the date of such termination. If a Taking occurs and this Lease is not so terminated, Monthly Rent shall be abated for the period of such Taking in proportion to the percentage of the rentable square footage of the Premises, if any, that is subject to, or rendered inaccessible or untenantable by, such Taking and not occupied by Tenant.

14 ASSIGNMENT AND SUBLETTING.

14.1 Transfers. Tenant shall not, without Landlord’s prior consent, assign, mortgage, pledge, hypothecate, encumber, permit any lien to attach to, or otherwise transfer this Lease or any interest hereunder, permit any assignment or other transfer hereof or any interest hereunder by operation of law, enter into any sublease or license agreement, otherwise permit the occupancy or use of any part of the Premises by any persons other than Tenant and its employees and contractors, or permit a Change of Control (defined in Section 14.6) to occur (each, a “Transfer”). If Tenant desires Landlord’s consent to any Transfer, Tenant shall provide Landlord with (i) notice of the terms of the proposed Transfer, including its proposed effective date (the “Contemplated Effective Date”), a description of the portion of the Premises to be transferred (the “Contemplated Transfer Space”), a calculation of the Transfer Premium (defined in Section 14.3), and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, and (ii) current financial statements of the proposed transferee (or, in the case of a Change of Control, of the proposed new controlling party(ies)) certified by an officer or owner thereof and any other information reasonably required by Landlord in order to evaluate the proposed Transfer (collectively, the “Transfer Notice”). Within 15 business days after receiving the Transfer Notice, Landlord shall notify Tenant of (a) its consent to the proposed Transfer, (b) its refusal to

 

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consent to the proposed Transfer, or (c) its exercise of its rights under Section 14.4. Any Transfer made without Landlord’s prior consent shall, at Landlord’s option, be void and shall, at Landlord’s option, constitute a Default. Concurrently with Tenant’s delivery of the Transfer Notice, Tenant shall pay Landlord a fee of $1,500.00 for Landlord’s review of any proposed Transfer, whether or not Landlord consents to it.

14.2 Landl ord’ s Consent. Subject to Section 14.4, Landlord shall not unreasonably withhold its consent to any proposed Transfer. Without limiting other reasonable grounds for withholding consent, it shall be deemed reasonable for Landlord to withhold its consent to a proposed Transfer if:

14.2.1 The proposed transferee is not a party of reasonable financial strength in light of the responsibilities to be undertaken in connection with the Transfer on the date the Transfer Notice is received; or

14.2.2 The proposed transferee has a character or reputation or is engaged in a business that is not consistent with the quality of the Building or the Project; or

14.2.3 The proposed transferee is a governmental entity or a nonprofit organization; or

14.2.4 Intentionally Omitted; or

14.2.5 The proposed transferee or any of its Affiliates, on the date the Transfer Notice is received, leases or occupies (or, at any time during the 3-month period ending on the date the Transfer Notice is received, has negotiated with Landlord to lease) space in the Project; or

14.2.6 The use to be made of the Contemplated Transfer Space is a use which would be prohibited by any other portion of this Lease or a use which conflicts with any applicable so-called “exclusive” then in favor of another tenant of the Building or Project.

Notwithstanding any contrary provision hereof, (a) if Landlord consents to any Transfer pursuant to this Section 14.2 but Tenant does not enter into such Transfer within six (6) months thereafter, such consent shall no longer apply and such Transfer shall not be permitted unless Tenant again obtains Landlord’s consent thereto pursuant and subject to the terms of this Section 14; and (b) if Landlord withholds its consent in breach of this Section 14.2, Tenant’s sole remedies shall be contract damages (subject to Section 20) or specific performance, and Tenant waives all other remedies, including any right to terminate this Lease.

14.3 Transfer Premium. If Landlord consents to a Transfer (other than a Change of Control), Tenant shall pay Landlord an amount equal to 50% of any Transfer Premium (defined below). As used herein, “Transfer Premium” means (a) in the case of an assignment, any consideration (including payment for Leasehold Improvements) paid by the assignee for such assignment, less any reasonable and customary expenses directly incurred by Tenant on account of such assignment, including brokerage fees, legal fees, and Landlord’s review fee, and (b) in the case of a sublease, license or other occupancy agreement, for each month of the term of such agreement, the amount by which all rent and other consideration paid by the transferee to Tenant pursuant to such agreement (less all reasonable and customary expenses directly incurred by Tenant on account of such agreement, including brokerage fees, legal fees, construction costs and Landlord’s review fee exceeds the Monthly Rent payable by Tenant hereunder with respect to the Contemplated Transfer Space. Payment of Landlord’s share of the Transfer Premium shall be made (x) in the case of an assignment, within 30 days after Tenant receives the consideration described above, and (y) in the case of a sublease, license or other occupancy agreement, for each month of the term of such agreement, within 30 days after Tenant receives the rent and other consideration described above.

14.4 Landl ord’ s Ri ght to Recapture. Notwithstanding any contrary provision hereof, except in the case of a Permitted Transfer (defined in Section 14.8), a Change of Control, or a sublease (including any expansion rights) of less than 50% of the rentable square footage of the then existing Premises for a term (including any extension options) of less than 50% of the balance of the Term remaining on the Contemplated Effective Date (excluding any unexercised extension options), Landlord, by notifying Tenant within 15 business days after receiving the Transfer Notice, may terminate this Lease with respect to the Contemplated Transfer Space as of the Contemplated Effective Date. If the Contemplated Transfer Space is less than the entire Premises, then Base Rent, Tenant’s Share, and the number of parking spaces to which Tenant is entitled under Section 1.9 shall be deemed adjusted on the basis of the percentage of the rentable square footage of the portion of the Premises retained by Tenant. Upon request of either party, the parties shall execute a written agreement prepared by Landlord memorializing such termination.

14.5 Effect of Consent. If Landlord consents to a Transfer, (i) such consent shall not be deemed a consent to any further Transfer, (ii) Tenant shall deliver to Landlord, promptly after execution, an executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iii) Tenant shall deliver to Landlord, upon Landlord’s request, a complete statement, certified by an independent CPA or Tenant’s chief financial officer, setting forth in detail the computation of any Transfer Premium. In the case of an assignment, the assignee shall assume in writing, for Landlord’s

 

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benefit, all of Tenant’s obligations hereunder. No Transfer, with or without Landlord’s consent, shall relieve Tenant or any guarantor hereof from any liability hereunder. Notwithstanding any contrary provision hereof, Tenant, with or without Landlord’s consent, shall not enter into, or permit any party claiming by, through or under Tenant to enter into, any sublease, license or other occupancy agreement that provides for payment based in whole or in part on the net income or profit of the subtenant, licensee or other occupant thereunder.

14.6 Change of Control. As used herein, “Change of Control” means (a) if Tenant is a closely held professional service firm, the withdrawal or change (whether voluntary, involuntary or by operation of law) of more than 50% of its equity owners within a 12-month period; and (b) in all other cases, any transaction(s) resulting in the acquisition of a Controlling Interest (defined below) in Tenant by one or more parties that neither owned, nor are Affiliates (defined below) of one or more parties that owned, a Controlling Interest in Tenant immediately before such transaction(s). As used herein, “Controlling Interest” means control over an entity, other than control arising from the ownership of voting securities listed on a recognized securities exchange. As used herein, “control” means the direct or indirect power to direct the ordinary management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise. As used herein, “Affiliate” means, with respect to any party, a person or entity that controls, is under common control with, or is controlled by such party.

14.7 Effect of Default. If Tenant is in Default, Landlord is irrevocably authorized, as Tenant’s agent and attorney-in-fact, to direct any transferee under any sublease, license or other occupancy agreement to make all payments under such agreement directly to Landlord (which Landlord shall apply towards Tenant’s obligations hereunder) until such Default is cured. Such transferee shall rely upon any representation by Landlord that Tenant is in Default, whether or not confirmed by Tenant.

14.8 Permitted Transfers. Notwithstanding any contrary provision hereof, if Tenant is not in Default, Tenant may, without Landlord’s consent pursuant to Section 14.1, permit a Change of Control to occur, sublease any portion of the Premises to an Affiliate of Tenant or assign this Lease to (a) an Affiliate of Tenant (other than pursuant to a merger or consolidation), (b) a successor to Tenant by merger or consolidation, or (c) a successor to Tenant by purchase of all or substantially all of Tenant’s assets (a “Permitted Transfer”), provided that (i) at least 10 business days before the Transfer (provided that if such pre-Transfer notice and delivery are prohibited by a confidentiality agreement or by Law, then within 10 business days after the Transfer), Tenant notifies Landlord of the Transfer and delivers to Landlord any documents or information reasonably requested by Landlord relating thereto, including reasonable documentation that the Transfer satisfies the requirements of this Section 14.8; (ii) in the case of a sublease, the subtenant executes and delivers to Landlord, at least 10 business days before taking occupancy, an agreement which (A) requires the subtenant to assume all of Tenant’s release, waiver, indemnity and insurance obligations hereunder with respect to the Contemplated Transfer Space and to be bound by each provision hereof that limits the liability of any Landlord Party, and (B) provides that if either a Landlord Party or the subtenant institutes a suit against the other for violation of or to enforce such agreement, or in connection with any matter relating to the sublease or the subtenant’s occupancy of the Contemplated Transfer Space, the prevailing party shall be entitled to all of its costs and expenses, including reasonable attorneys’ fees; (iii) in the case of an assignment pursuant to clause (a) or (c) above, the assignee executes and delivers to Landlord, at least 10 business days before the assignment (provided that if such pre-assignment execution and delivery are prohibited by a confidentiality agreement or by Law, then within 10 business days after the assignment), a commercially reasonable instrument pursuant to which the assignee assumes, for Landlord’s benefit, all of Tenant’s obligations hereunder; (iv) in the case of an assignment pursuant to clause (b) above, (A) the successor entity has a net worth (as determined in accordance with GAAP, but excluding intellectual property and any other intangible assets (“Net Worth”)) immediately after the Transfer that is not less than Tenant’s Net Worth immediately before the Transfer, and (B) if Tenant is a closely held professional service firm, at least 50% of its equity owners existing 12 months before the Transfer are also equity owners of the successor entity; (v) except in the case of a Change of Control, the transferee is qualified to conduct business in the State of California; (vi) in the case of a Change of Control, (A) Tenant is not a closely held professional service firm and (B) Tenant’s Net Worth immediately after the Change of Control is not less than its Net Worth immediately before the Change of Control; and (vii) the Transfer is made for a good faith operating business purpose and not in order to evade the requirements of this Section 14.

15 SURRENDER. Upon the expiration or earlier termination hereof, and subject to Sections 8 and 11 and this Section 15, Tenant shall surrender possession of the Premises to Landlord in as good condition and repair as existed when Tenant took possession and as thereafter improved, except for reasonable wear and tear, damage due to a Casualty, or a Taking and repairs that are Landlord’s express responsibility hereunder. Before such expiration or termination, Tenant, without expense to Landlord, shall (a) remove from the Premises all debris and rubbish and all furniture, equipment, trade fixtures, Lines, free-standing cabinet work, movable partitions and other articles of personal property that are owned or placed in the Premises by Tenant or any party claiming by, through or under Tenant (except for any Lines not required to be removed under Section 23), and (b) repair all damage to the Premises and Building resulting from such removal. If Tenant fails to timely perform such removal and repair, Landlord may do so at Tenant’s expense (including storage costs). If Tenant fails to remove such property from the Premises, or from storage, within 30 days after notice from Landlord, any part of such property shall be deemed, at Landlord’s option, either (x) conveyed to Landlord without compensation, or (y) abandoned.

 

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16 HOLDOVER. If Tenant fails to surrender the Premises upon the expiration or earlier termination hereof, Tenant’s tenancy shall be subject to the terms and conditions hereof; provided, however, that such tenancy shall be a tenancy at sufferance only, for the entire Premises, and Tenant shall pay Monthly Rent (on a per-month basis without reduction for any partial month) at a rate equal to 150% of the Monthly Rent applicable during the last calendar month of the Term. Nothing in this Section 16 shall limit Landlord’s rights or remedies or be deemed a consent to any holdover. If Landlord is unable to deliver possession of the Premises to, or perform improvements for, a new tenant as a result of Tenant’s holdover, Tenant shall be liable for all resulting damages, including lost profits, incurred by Landlord, but only to the extent that such damages result from the occurrence or continuation of such holdover more than 30 days after notice from Landlord that Landlord has entered into, or will enter into, a lease with such new tenant.

17 SUBORDINATION; ESTOPPEL CERTIFICATES; FINANCIALS. This Lease shall be subject and subordinate to all existing and future ground or underlying leases, mortgages, trust deeds and other encumbrances against the Building or Project, all renewals, extensions, modifications, consolidations and replacements thereof (each, a “Security Agreement”), and all advances made upon the security of such mortgages or trust deeds, unless in each case the holder of such Security Agreement (each, a “Security Holder”) requires in writing that this Lease be superior thereto. Upon any termination or foreclosure (or any delivery of a deed in lieu of foreclosure) of any Security Agreement, Tenant, upon request, shall attorn, without deduction or set-off, to the Security Holder or purchaser or any successor thereto and shall recognize such party as the lessor hereunder provided that such party agrees not to disturb Tenant’s occupancy so long as Tenant timely pays the Rent and otherwise performs its obligations hereunder. Within 10 business days after Landlord’s request, Tenant shall execute such further instruments as Landlord may reasonably deem necessary to evidence the subordination or superiority of this Lease to any Security Agreement. Tenant waives any right it may have under Law to terminate or otherwise adversely affect this Lease or Tenant’s obligations hereunder upon a foreclosure. Landlord represents and warrants to Tenant that, as of the date hereof, there are no mortgages or deeds of trust secured by Landlord’s ground lease interest in the Building and/or by Landlord’s ground lease interest in the Project. Notwithstanding the foregoing, Tenant’s agreement to subordinate this Lease to a future mortgage or future deed of trust secured by Landlord’s interest in the Project shall not be effective unless Landlord has provided Tenant with a commercially reasonable non-disturbance agreement from the security holder. Within 10 business days after Landlord’s request, Tenant shall execute and deliver to Landlord a commercially reasonable estoppel certificate in favor of such parties as Landlord may reasonably designate, including current and prospective Security Holders and prospective purchasers. Within 10 days after Tenant’s receipt of Landlord’s written request (but no more than once each calendar year), Tenant shall provide Landlord with its current financial statement and its financial statements for the prior three (3) calendar or fiscal years (if Tenant’s fiscal year is other than a calendar year). Any such statements shall be prepared in accordance with generally accepted accounting principles and, if the normal practice of Tenant, shall be audited by an independent certified public accountant.

18 ENTRY BY LANDLORD. At all reasonable times and upon 24 hours’ prior notice to Tenant, (provided that no such notice shall be required in cases of an emergency), Landlord may enter the Premises to (i) inspect the Premises; (ii) show the Premises to prospective purchasers, current or prospective Security Holders or insurers, or, during the last nine (9) months of the Term (or while an uncured Default exists), prospective tenants; (iii) post notices of non-responsibility; or (iv) perform maintenance, repairs or alterations. At any time and without notice to Tenant, Landlord may enter the Premises to perform required services. If reasonably necessary, Landlord may temporarily close any portion of the Premises to perform maintenance, repairs or alterations. In an emergency, Landlord may use any means it deems proper to open doors to and in the Premises. No entry into or closure of any portion of the Premises pursuant to this Section 18 shall render Landlord liable to Tenant, constitute a constructive eviction, or excuse Tenant from any obligation hereunder.

19 DEFAULTS; REMEDIES.

19.1 Events of Default. The occurrence of any of the following shall constitute a “Default”:

19.1.1 Any failure by Tenant to pay any Rent (or deliver any Security Deposit, Letter of Credit, or similar credit enhancement required hereunder) when due unless such failure is cured within five (5) business days after notice; or

19.1.2 Except where a specific time period is otherwise set forth for Tenant’s cure herein (in which event Tenant’s failure to cure within such time period shall be a Default), and except as otherwise provided in this Section 19.1, any breach by Tenant of any other provision hereof where such breach continues for 30 days after notice from Landlord; provided that if such breach cannot reasonably be cured within such 30-day period, Tenant shall not be in Default as a result of such breach if Tenant diligently commences such cure within such period, thereafter diligently pursues such cure, and completes such cure within 60 days after Landlord’s notice; or

 

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19.1.3 Abandonment of the Premises by Tenant; or

19.1.4 Any breach by Tenant of Section 17 or 18 where such breach continues for more than two (2) business days after notice from Landlord; or

19.1.5 Tenant becomes in breach of Section 25.3(c) or (d).

If Tenant, by repeating substantially the same act or omission, breaches a particular provision hereof (other than a provision requiring payment of Rent), and Landlord notifies Tenant of such breach, on three (3) separate occasions during any 12-month period, and if such breaches are collectively material, then Tenant’s subsequent breach of such provision by commission of substantially the same act or omission shall be, at Landlord’s option, an incurable Default. The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by Law, and Landlord shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding.

19.2 Remedies Upon Default. Upon any Default, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (which shall be cumulative and nonexclusive), the option to pursue any one or more of the following remedies (which shall be cumulative and nonexclusive) without any additional notice or demand:

19.2.1 Landlord may terminate this Lease, in which event Landlord may recover from Tenant the following:

(a) The worth at the time of award of the unpaid Rent which had been earned at the time of such termination; plus

(b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided; plus

(d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations hereunder or which in the ordinary course of things would be likely to result therefrom, including brokerage commissions, advertising expenses, expenses of remodeling any portion of the Premises for a new tenant (whether for the same or a different use), and any special concessions made to obtain a new tenant; plus

(e) At Landlord’s option, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by Law.

As used in Sections 19.2.1(a) and (b), the “worth at the time of award” shall be computed by allowing interest at the rate specified in Section 3(b) above. As used in Section 19.2.1(c), the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%.

19.2.2 Landlord shall have the remedy described in California Civil Code § 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover Rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies hereunder, including the right to recover all Rent as it becomes due.

19.2.3 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2.1 and 19.2.2, or any Law or other provision hereof), without prior demand or notice except as required by Law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof. The parties intend that this Lease and Tenant’s obligations hereunder are binding on Tenant and (unless otherwise explicitly set forth in this Lease) will not be reduced or otherwise excused by any future events or circumstances, whether foreseeable or unforeseeable, even if such circumstances substantially affect Tenant’s business, profitability or ability to operate in the Premises (unless such inability to operate is due to a default by Landlord pursuant to Section 19.4 below, in which case Section 19.4 shall control) and Tenant waives the right to claim equitable relief from its obligations hereunder.

19.3 Efforts to Relet. Unless Landlord provides Tenant with express notice to the contrary, no re-entry, repair, maintenance, change, alteration, addition, reletting, appointment of a receiver or other action or omission by Landlord shall (a) be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or to accept a surrender of the Premises, or (b) operate to release

 

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Tenant from any of its obligations hereunder. Tenant waives, for Tenant and for all those claiming by, through or under Tenant, California Civil Code § 3275, California Code of Civil Procedure §§ 1174(c) and 1179, and any existing or future rights to redeem or reinstate, by order or judgment of any court or by any legal process or writ, this Lease or Tenant’s right of occupancy of the Premises after any termination hereof.

19.4 Landlord Default. Landlord shall not be in default hereunder unless it fails to begin within 30 days after notice from Tenant, or fails to pursue with reasonable diligence thereafter, the cure of any breach by Landlord of its obligations hereunder. Before exercising any remedies for a default by Landlord, Tenant shall give notice and a reasonable time to cure to any Security Holder of which Tenant has been notified.

20 LANDLORD EXCULPATION. Notwithstanding any contrary provision hereof, (a) the liability of the Landlord Parties to Tenant shall be limited to an amount equal to the Landlord’s interest in the Building; (b) Tenant shall look solely to Landlord’s interest in the Building for the recovery of any judgment or award against any Landlord Party; (c) no Landlord Party shall have any liability for any judgment or deficiency, and Tenant waives and releases such liability on behalf of itself and all parties claiming by, through or under Tenant; and (d) no Landlord Party shall be liable for any injury or damage to, or interference with, Tenant’s business, including loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, or for any form of special or consequential damage. For purposes of this Section 20, “Landlord’s interest in the Building” shall include rents paid by tenants, insurance proceeds, condemnation proceeds, and proceeds from the sale of the Building (collectively, “Owner Proceeds”); provided, however, that nothing in this sentence shall diminish any right Tenant may have under Law, as a creditor of Landlord, to initiate or participate in an action to recover Owner Proceeds from a third party on the grounds that such third party obtained such Owner Proceeds when Landlord was, or could reasonably be expected to become, insolvent or in a transfer that was preferential or fraudulent as to Landlord’s creditors.

21 SECURITY DEPOSIT. Concurrently with its execution and delivery hereof, Tenant shall deposit with Landlord the Security Deposit, if any, as security for Tenant’s performance of its obligations hereunder. If Tenant breaches any provision hereof, Landlord may, at its option, without limiting its remedies and without notice to Tenant, apply all or part of the Security Deposit to cure such breach and compensate Landlord for any loss or damage caused by such breach, including any damage for which recovery may be made under California Civil Code § 1951.2. If Landlord so applies any portion of the Security Deposit, Tenant, within five (5) business days after demand therefor, shall restore the Security Deposit to its original amount. The Security Deposit is not an advance payment of Rent or measure of damages. Any unapplied portion of the Security Deposit shall be returned to Tenant within 30 days after the latest to occur of (a) the expiration of the Term, or (b) Tenant’s surrender of the Premises as required hereunder; provided, however, that if Landlord estimates in good faith that Tenant may be required to make a payment to Landlord under Section 4.4.1 (and/or to otherwise cure any breach by Tenant of any provision hereof), Landlord may retain such unapplied portion of the Security Deposit, to the extent of the estimated amount of such payment (and/or cure, as applicable), until the date occurring 60 days after determination of the final Rent due from Tenant. Landlord shall not be required to keep the Security Deposit separate from its other accounts.

22 RELOCATION. Intentionally Omitted.

23 COMMUNICATIONS AND COMPUTER LINES. All Lines installed pursuant to this Lease shall be (a) installed in accordance with Section 7; and (b) clearly marked with adhesive plastic labels (or plastic tags attached to such Lines with wire) to show Tenant’s name, suite number, and the purpose of such Lines (i) every six (6) feet outside the Premises (including the electrical room risers and any Common Areas), and (ii) at their termination points. Landlord may designate specific contractors for work relating to vertical Lines. Sufficient spare cables and space for additional cables shall be maintained for other occupants, as reasonably determined by Landlord. Unless otherwise notified by Landlord, Tenant, at its expense and before the expiration or earlier termination hereof, shall remove all Lines and repair any resulting damage. As used herein, “Lines” means all communications or computer wires and cables serving the Premises which either (a) were installed by or at the direction of the Tenant or (b) existed prior to the date of this Lease, but which are used by Tenant.

24 PARKING. Tenant may park in the Building’s parking facilities (the “Parking Facility”), in common with other tenants of the Building, upon the following terms and conditions. Tenant shall not use more than the number of unreserved and/or reserved parking spaces set forth in Section 1.9. Tenant shall pay Landlord any fees, taxes or other charges imposed by any governmental or quasi-governmental agency in connection with the Parking Facility, to the extent such amounts are allocated to Tenant by Landlord based on the number and type of parking spaces Tenant is entitled to use. Tenant shall comply with all rules and regulations established by Landlord from time to time for the orderly operation and use of the Parking Facility, including any sticker or other identification system and the prohibition of vehicle repair and maintenance activities in the Parking Facility. Landlord may, in its discretion, allocate and assign parking passes among Tenant and the other tenants in the Building. Tenant’s use of the Parking Facility shall be at Tenant’s sole risk, and Landlord shall have no liability for any personal injury or

 

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damage to or theft of any vehicles or other property occurring in the Parking Facility or otherwise in connection with any use of the Parking Facility by Tenant or its employees or invitees. Landlord may alter the size, configuration, design, layout or any other aspect of the Parking Facility, and, in connection therewith, temporarily deny or restrict access to the Parking Facility, in each case without abatement of Rent or liability to Tenant. Landlord may delegate its responsibilities hereunder to a parking operator, in which case (i) such parking operator shall have all the rights of control reserved herein by Landlord, (ii) Tenant shall enter into a parking agreement with such parking operator, (iii) Tenant shall pay such parking operator, rather than Landlord, any charge established hereunder for the parking spaces, and (iv) Landlord shall have no liability for claims arising through acts or omissions of such parking operator except to the extent caused by Landlord’s negligence or willful misconduct. Tenant’s parking rights under this Section 24 are solely for the benefit of Tenant’s employees and invitees and such rights may not be transferred without Landlord’s prior consent, except pursuant to a Transfer permitted under Section 14.

 

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MISCELLANEOUS.

25.1 Notices. No notice, demand, statement, designation, request, consent, approval, election or other communication given hereunder (“Notice”) shall be binding upon either party unless (a) it is in writing; (b) it is (i) sent by certified or registered mail, postage prepaid, return receipt requested, (ii) delivered by a nationally recognized courier service, or (iii) delivered personally; and (c) it is sent or delivered to the address set forth in Section 1.10 or 1.11, as applicable, or to such other place (other than a P.O. box) as the recipient may from time to time designate in a Notice to the other party. Any Notice shall be deemed received on the earlier of the date of actual delivery or the date on which delivery is refused, or, if Tenant is the recipient and has vacated its notice address without providing a new notice address, three (3) days after the date the Notice is deposited in the U.S. mail or with a courier service as described above. No provision of this Lease requiring a particular Notice to be in writing shall limit the generality of clause (a) of the first sentence of this Section 25.1.

25.2 Force Majeure. If either party is prevented from performing any obligation hereunder by any strike, act of God, fire, war, terrorist act, shortage of labor or materials, governmental action (including, without limitation, governmentally required evacuations), epidemic, pandemic, public health emergency, civil commotion or other cause beyond such party’s reasonable control (“Force Majeure”), such obligation shall be excused during (and any time period for the performance of such obligation shall be extended by) the period of such prevention; provided, however, that this Section 25.2 shall not (a) permit Tenant to hold over in the Premises after the expiration or earlier termination hereof, or (b) excuse (or extend any time period for the performance of) (i) any obligation to remit money or deliver credit enhancement, (ii) any obligation under Section 10 or 25.3, or (iii) any of Tenant’s obligations whose breach would interfere with another occupant’s use, occupancy or enjoyment of its premises or the Project or result in any liability on the part of any Landlord Party.

25.3 Representations and Covenants. Tenant represents, warrants and covenants that (a) Tenant is, and at all times during the Term will remain, duly organized, validly existing and in good standing under the Laws of the state of its formation and qualified to do business in the state of California; (b) neither Tenant’s execution of nor its performance under this Lease will cause Tenant to be in violation of any agreement or Law; (c) Tenant (and any guarantor hereof) has not, and at no time during the Term will have, (i) made a general assignment for the benefit of creditors, (ii) filed a voluntary petition in bankruptcy, (iii) suffered (A) the filing by creditors of an involuntary petition in bankruptcy that is not dismissed within 30 days, (B) the appointment of a receiver to take possession of all or substantially all of its assets, or (C) the attachment or other judicial seizure of all or substantially all of its assets, (iv) admitted in writing its inability to pay its debts as they come due, or (v) made an offer of settlement, extension or composition to its creditors generally; and (d) no party that (other than through the passive ownership of interests traded on a recognized securities exchange) constitutes, owns, controls, or is owned or controlled by Tenant, any guarantor hereof or any subtenant of Tenant is, or at any time during the Term will be, (i) in violation of any Laws relating to terrorism or money laundering, or (ii) among the parties identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists or on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/tllsdn.pdf or any replacement website or other replacement official publication of such list.

25.4 Signs. Landlord shall include Tenant’s name in any tenant directory located in the lobby on the first floor of the Building. If any part of the Premises is located on a multi-tenant floor, Landlord shall provide identifying suite signage for Tenant comparable to that provided by Landlord on similar floors in the Building. Such identifying suite signage shall be provided at Landlord’s expense; provided, however, that any changes to such signage made after its initial installation shall be at Tenant’s expense. Tenant may not install (a) any signs outside the Premises, or (b) without Landlord’s prior consent in its sole and absolute discretion, any signs, window coverings, blinds or similar items that are visible from outside the Premises.

 

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25.5 Supplemental HVAC. If the Premises are served by any supplemental HVAC unit (a “Unit”), then (a) Tenant shall pay the costs of all electricity consumed in the Unit’s operation, together with the cost of installing a meter to measure such consumption; (b) Tenant, at its expense, shall (i) operate and maintain the Unit in compliance with all applicable Laws and such reasonable rules and procedures as Landlord may impose; (ii) keep the Unit in as good working order and condition as existed upon installation (or, if later, when Tenant took possession of the Premises), subject to normal wear and tear and damage resulting from Casualty; (iii) maintain in effect, with a contractor reasonably approved by Landlord, a contract for the maintenance and repair of the Unit, which contract shall require the contractor, at least once every three (3) months, to inspect the Unit and provide to Tenant a report of any defective conditions, together with any recommendations for maintenance, repair or parts-replacement; (iv) follow all reasonable recommendations of such contractor; and (v) promptly provide to Landlord a copy of such contract and each report issued thereunder; (c) the Unit shall become Landlord’s property upon installation and without compensation to Tenant; provided, however, that upon Landlord’s request at the expiration or earlier termination hereof, Tenant, at its expense, shall remove any Unit installed by or for the benefit of Tenant pursuant to this Lease and repair any resulting damage (and if Tenant fails to timely perform such work, Landlord may do so at Tenant’s expense); (d) the Unit shall be deemed (i) a Leasehold Improvement (except for purposes of Section 8), and (ii) for purposes of Section 11, part of the Premises; (e) if the Unit exists on the date of mutual execution and delivery hereof, Tenant accepts the Unit in its “as is” condition, without representation or warranty as to quality, condition, fitness for use or any other matter; (f) if the Unit connects to the Building’s condenser water loop (if any), then Tenant shall pay to Landlord, as Additional Rent, Landlord’s standard one-time fee for such connection and Landlord’s standard monthly per-ton usage fee; and (g) if any portion of the Unit is located on the roof, then (i) Tenant’s access to the roof shall be subject to such reasonable rules and procedures as Landlord may impose; (ii) Tenant shall maintain the affected portion of the roof in a clean and orderly condition and shall not interfere with use of the roof by Landlord or any other tenants or licensees; and (iii) Landlord may relocate the Unit and/or temporarily interrupt its operation, without liability to Tenant, as reasonably necessary to maintain and repair the roof or otherwise operate the Building. The parties acknowledge and agree that no Unit serves the Premises as of the date of this Lease.

25.6 At t orneys ’ Fees . In any action or proceeding between the parties, including any appellate or alternative dispute resolution proceeding, the prevailing party may recover from the other party all of its costs and expenses in connection therewith, including reasonable attorneys’ fees and costs. Tenant shall pay all reasonable attorneys’ fees and other fees and costs that Landlord incurs in interpreting or enforcing this Lease or otherwise protecting its rights hereunder (a) where Tenant has failed to pay Rent when due, or (b) in any bankruptcy case, assignment for the benefit of creditors, or other insolvency, liquidation or reorganization proceeding involving Tenant or this Lease.

25.7 Brokers. Tenant represents to Landlord that it has dealt only with Tenant’s Broker as its broker in connection with this Lease. Tenant shall indemnify, defend, and hold Landlord harmless from all claims of any brokers, other than Tenant’s Broker, claiming to have represented Tenant in connection with this Lease. Landlord shall indemnify, defend and hold Tenant harmless from all claims of any brokers, including Landlord’s Broker, claiming to have represented Landlord in connection with this Lease.

25.8 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed and enforced in accordance with the Laws of the State of California. THE PARTIES WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE OR ANY EMERGENCY OR STATUTORY REMEDY.

25.9 Waiver of Statutory Provisions. Each party waives California Civil Code §§ 1932(2), 1933(4) and 1945. Tenant waives (a) any rights under (i) California Civil Code §§ 1932(1), 1941, 1942, 1950.7 (except subsection (b) thereof) or any similar or replacement section or Law, or (ii) California Code of Civil Procedure §§ 1263.260 or 1265.130 or any similar or replacement section or Law; and (b) any right to terminate this Lease under California Civil Code § 1995.310(b) or any similar or replacement section or Law. Tenant further expressly waives California Civil Code Section 1479, and agrees that Landlord shall have the right to designate which portion of Tenant’s obligations under this Lease are satisfied by a partial payment or to allocate any payment by Tenant to outstanding obligations of Tenant in any order it desires (i.e., Landlord may allocate payments to the earliest amounts outstanding or the most recent, at its discretion).

25.10 Interpretation. As used herein, the capitalized term “Section” refers to a section hereof unless otherwise specifically provided herein. As used in this Lease, the terms “herein,” “hereof,” “hereto” and “hereunder” refer to this Lease and the term “include” and its derivatives are not limiting. Any reference herein to “any part” or “any portion” of the Premises, the Property or any other property shall be construed to refer to all or any part of such property. As used herein in connection with insurance, the term “deductible” includes self-insured retention. Wherever this Lease prohibits either party from engaging in any particular conduct, this Lease shall be deemed also to require such party to cause each of its employees and agents (and, in the case of Tenant, each of its licensees, invitees and subtenants, and any other party claiming by, through or under Tenant) to refrain from engaging in such conduct. Wherever this Lease requires Landlord to provide a customary service or to act in a reasonable manner (whether in incurring an expense, establishing a rule or regulation, providing an approval or

 

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consent, or performing any other act), this Lease shall be deemed also to provide that whether such service is customary or such conduct is reasonable shall be determined by reference to the practices of owners of buildings (“Comparable Buildings”) that (i) are comparable to the Building in size, age, class, quality and location, and (ii) at Landlord’s option, have been, or are being prepared to be, certified under the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system or a similar rating system. Tenant waives the benefit of any rule that a written agreement shall be construed against the drafting party.

25.11 Entire Agreement. This Lease sets forth the entire agreement between the parties relating to the subject matter hereof and supersedes any previous agreements (none of which shall be used to interpret this Lease). Tenant acknowledges that in entering into this Lease it has not relied upon any representation, warranty or statement, whether oral or written, not expressly set forth herein. This Lease can be modified only by a written agreement signed by both parties.

25.12 Other. Landlord, at its option, may cure any Default, without waiving any right or remedy or releasing Tenant from any obligation, in which event Tenant shall pay Landlord, upon demand, the cost of such cure. If any provision hereof is void or unenforceable, no other provision shall be affected. Submission of this instrument for examination or signature by Tenant does not constitute an option or offer to lease, and this instrument is not binding until it has been executed and delivered by both parties. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination thereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies. If Tenant is comprised of two or more parties, their obligations shall be joint and several. Time is of the essence with respect to the performance of every provision hereof in which time of performance is a factor. So long as Tenant performs its obligations hereunder, Tenant shall have peaceful and quiet possession of the Premises against any party claiming by, through or under Landlord, subject to the terms hereof. Landlord may transfer its interest herein, in which event (a) to the extent the transferee assumes in writing Landlord’s obligations arising hereunder after the date of such transfer (including the return of any Security Deposit), Landlord shall be released from, and Tenant shall look solely to the transferee for the performance of, such obligations; and (b) Tenant shall attorn to the transferee. If Tenant (or any party claiming by, through or under Tenant) pays directly to the provider for any energy consumed at the Property, Tenant, promptly upon request, shall deliver to Landlord (or, at Landlord’s option, execute and deliver to Landlord an instrument enabling Landlord to obtain from such provider) any data about such consumption that Landlord, in its reasonable judgment, is required for benchmarking purposes or to disclose to a prospective buyer, tenant or mortgage lender under any applicable Law. Landlord reserves all rights not expressly granted to Tenant hereunder, including the right to make alterations to the Project. No rights to any view or to light or air over any property are granted to Tenant hereunder. The expiration or earlier termination hereof shall not relieve either party of any obligation that accrued before, or continues to accrue after, such expiration or termination. Each party hereto, and their respective successors and assigns shall be authorized to rely upon the signatures of all of the parties hereto which are delivered by facsimile, PDF or DocuSign (or the like) as constituting a duly authorized, irrevocable, actual, current delivery hereof with original ink signatures of each person and entity. This Lease may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

25.13 Fitness Center. Subject to the provisions of this Section 25.13, so long as Tenant’s employees execute Landlord’s standard waiver of liability form and pay the applicable one time or monthly fee, if any, then Tenant’s employees (the “Fitness Center Users”) shall be entitled to use the fitness center (the “Fitness Center”) in the building located at 1841 Page Mill Road, Palo Alto, California. The use of the Fitness Center shall be subject to the reasonable rules and regulations (including rules regarding hours of use) established from time to time by Landlord for the Fitness Center. Landlord and Tenant acknowledge that the use of the Fitness Center by the Fitness Center Users shall be at their own risk and that the terms and provisions of Section 10.1 of this Lease shall apply to Tenant and the Fitness Center User’s use of the Fitness Center. The costs of operating, maintaining and repairing the Fitness Center may be included as part of Expenses. Tenant acknowledges that the provisions of this Section shall not be deemed to be a representation by Landlord that Landlord shall continuously maintain the Fitness Center (or any other fitness facility) throughout the Term of this Lease, and Landlord shall have the right, at Landlord’s sole discretion, to expand, contract, eliminate or otherwise modify the Fitness Center. In addition, in the event Landlord no longer owns the building located at 1841 Page Mill Road, Palo Alto, California, the rights of Tenant and the users of the Fitness Center to use the Fitness Center may, at Landlord’s option, be terminated. No expansion, contraction, elimination or modification of the Fitness Center, and no termination of Tenant’s or the Fitness Center Users’ rights to the Fitness Center shall entitle Tenant to an abatement or reduction in Rent, or constitute a constructive eviction, or result in an event of default by Landlord under this Lease.

25.14 Shower Facility. Subject to the provisions of this Section 25.14, so long as Tenant’s employees execute Landlord’s standard waiver of liability form, Tenant employees (the “Shower Users”) shall be entitled to use the shower facility (the “Shower Facility”) in the Fitness Center. The use of the Shower Facility shall be subject to the reasonable rules and regulations (including rules regarding hours of use) established from time to time by Landlord for the Shower Facility. Landlord and Tenant

 

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acknowledge that the use of the Shower Facility by the Shower Users shall be at their own risk and that the terms and provisions of Section 10.1 of this Lease shall apply to Tenant and the Shower User’s use of the Shower Facility. The costs of operating, maintaining and repairing the Shower Facility shall be included as part of Expenses. Tenant acknowledges that the provisions of this Section shall not be deemed to be a representation by Landlord that Landlord shall continuously maintain the Shower Facility throughout the Term, and Landlord shall have the right, at Landlord’s sole discretion, to expand, contract, eliminate or otherwise modify the Shower Facility. No expansion, contraction, elimination or modification of the Shower Facility, and no termination of Tenant’s or the Shower User’s rights to the Shower Facility shall entitle Tenant to an abatement or reduction in Rent, constitute a constructive eviction, or result in an event of default by Landlord under this Lease.

[SIGNATURES ARE ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.

 

LANDLORD:
HUDSON PAGE MILL HILL, LLC, a
Delaware limited liability company
By:  

Hudson Pacific Properties, L.P.,

a Maryland limited partnership,

its sole member

 

By: Hudson Pacific Properties, Inc., a Maryland corporation, its general partner

  By:  

/s/ Mark Lammas

  Name:   Mark Lammas
  Title:   President
TENANT:
EVOMMUNE, INC., a Delaware corporation
By:  

/s/ Luis Pena

Name:   Luis Pena
Title:   President and CEO

 

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Exhibit 21.1

EVOMMUNE, INC.

SUBSIDIARIES

1. Evommune Research, LLC, a company organized under the laws of Delaware

2. Evommune Biologics, LLC, a company organized under the laws of Delaware

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated May 14, 2025, relating to the consolidated financial statements of Evommune, Inc. (the Company), which is contained in that Prospectus. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ BDO USA, P.C.

New York, New York

October 9, 2025

Exhibit 99.1

CONSENT TO BE NAMED AS A DIRECTOR NOMINEE

Evommune, Inc., a Delaware corporation (the “Company”), is filing a Registration Statement on Form S-1 (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with a public offering (the “Public Offering”) of its common stock. In connection with the Public Offering, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement, and any amendments and supplements thereto. I also consent to the filing of this consent as an exhibit to the Registration Statement and any amendments and supplements thereto.

 

/s/ Arthur Kirsch
Name: Arthur Kirsch
Date: October 8, 2025