Edgewise Therapeutics, Inc 10-Q for FY2026 Q2
Edgewise Therapeutics, Inc. (EWTX)
About this 10-Q
Edgewise Therapeutics, Inc filed this 10-Q on August 6, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $57.33M
- compared with a net loss of $36.12M a year earlier
- Diluted EPS
- -$0.53
- compared with -$0.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
EXCHANGE ACT OF 1934
For the quarterly period ended
or
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
| | | | | |
☒ | Accelerated filer | ☐ | | | |
| | | | | |
Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 31, 2026, there were
TABLE OF CONTENTS
| | | | Page |
|---|---|---|---|---|
| | | | |
| | | ||
| | | | |
| | 6 | ||
| | | | |
| | | 6 | |
| | | | |
| | | 7 | |
| | | | |
| | | 8 | |
| | | | |
| | | 9 | |
| | | | |
| | | 10 | |
| | | | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 18 | |
| | | | |
| | 29 | ||
| | | | |
| | 29 | ||
| | | | |
| | 30 | ||
| | | | |
| | 30 | ||
| | | | |
| | 30 | ||
| | | | |
| | 101 | ||
| | | | |
| | 102 | ||
| | | | |
| | 102 | ||
| | | | |
| | 102 | ||
| | | | |
| | 102 | ||
| | | | |
| | | | |
| | | 104 |
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business, strategy, development plans, planned preclinical studies and clinical trials, future results of clinical trials, expected research and development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “likely,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
| ● | the safety and efficacy, and the ability of our preclinical studies and clinical trials to demonstrate the safety and efficacy, of our product candidates, and other positive results; |
| ● | our ability to utilize our proprietary drug discovery platform to develop a pipeline of product candidates to address cardiovascular and cardiometabolic diseases; |
| ● | the timing, progress and results of preclinical studies and clinical trials for EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the studies or trials will become available, potential registrational studies or cohorts and our research and development programs; |
| ● | the timing, scope and likelihood of domestic and foreign regulatory filings and approvals, including timing of final U.S. Food & Drug Administration (FDA) approval of or Investigational New Drugs of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any other future product candidates; |
| ● | our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical studies; |
| ● | our manufacturing, commercialization, operations and marketing capabilities, relationships with other businesses and other business strategies, systems and relationships; |
| ● | our commercialization plans, including the launch, uptake, and market acceptance of any approved products; |
| ● | our ability to become a commercial-ready biopharmaceutical company; |
| ● | the size of the markets and the potential market opportunity for our product candidates, if approved; |
| ● | the pricing, reimbursement, and coverage of our product candidates, if approved; |
| ● | the need to hire additional personnel and our ability to attract and retain such personnel; |
| ● | our expectations regarding the approval and potential use of our product candidates in combination with other drugs; |
| ● | our competitive position and the success of competing product candidates and therapies that are or may become available; |
3
| ● | the ability of our programs to offer opportunities for us to expand into other serious cardiovascular diseases; |
| ● | our estimates of the number of patients that we will enroll in our clinical trials; |
| ● | our estimates relating to the timing of completing enrollment for our clinical trials; |
| ● | the beneficial characteristics, and the potential safety, efficacy and therapeutic effects, of our product candidates; |
| ● | our ability to obtain and maintain regulatory approval of our product candidates, and the timing or likelihood of regulatory filings and approvals, including our expectations to seek special designations for our product candidates; |
| ● | our plans relating to the further development of our product candidates, including additional indications we may pursue; |
| ● | existing regulations and regulatory developments in the United States, Europe and other jurisdictions; |
| ● | our expectations regarding the impact of public health pandemics on our business; |
| ● | our expectations regarding the impact of changes in the U.S. government administration and policy positions; |
| ● | our expectations regarding the impact of instability in the U.S. banking and financial services sector and other macroeconomic trends; |
| ● | our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights; |
| ● | our continued reliance on third parties to conduct additional preclinical studies and planned clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials; |
| ● | our relationships with patient advocacy groups, key opinion leaders, regulators, the research community and payors; |
| ● | our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates; |
| ● | the pricing and reimbursement of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates we may develop, if approved; |
| ● | the rate and degree of market acceptance and clinical utility of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates we may develop; |
| ● | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing which may be impacted by many factors including inflation; |
4
| ● | our financial performance; |
| ● | the period over which we estimate our existing cash, cash equivalents and marketable securities will be sufficient to fund our future operating expenses and capital expenditure requirements; |
| ● | statements regarding any potential milestone payments related to the Sevasemten Sale; |
| ● | the potential use of proceeds from the Sevasemten Sale and our offerings; |
| ● | statements regarding the amount of cash tax obligations from the Sevasemten Sale; |
| ● | our beliefs regarding our future operations, growth strategy and prospects as a smaller, less diversified company following the Sevasemten Sale, and our expectations regarding transition services and other post-closing obligations related to the Sevasemten Sale; and |
| ● | the impact of laws and regulations. |
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.
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 Quarterly Report 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 unduly rely upon these statements.
5
PART I —FINANCIAL INFORMATION
Item 1. Financial Statements
EDGEWISE THERAPEUTICS, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
| | As of | | As of | ||
| | June 30, | | December 31, | ||
| | 2026 | | 2025 | ||
Assets | | (unaudited) | | | ||
Current assets |
| | | | | |
Cash and cash equivalents | | $ | | | $ | |
Marketable securities, available for sale | |
| | |
| |
Prepaid expenses and other assets | |
| | |
| |
Current assets held for sale | | | | | | — |
Total current assets | |
| | |
| |
| | | | | | |
Property and equipment, net | |
| | |
| |
Operating lease right-of-use asset | | | | | | |
| | | | | | |
Total assets | | $ | | | $ | |
| | | | | | |
Liabilities and stockholders' equity | |
| | |
| |
| | | | | | |
Current liabilities | |
| | |
| |
Accounts payable | | $ | | | $ | |
Accrued compensation | |
| | |
| |
Accrued other expenses | |
| | |
| |
Operating lease liability, current portion | | | | | | |
Current liabilities held for sale | | | | | | — |
Total current liabilities | |
| | |
| |
Operating lease liability, net of current portion | | | | | | |
| | | | | | |
Total liabilities | |
| | |
| |
| | | | | | |
Commitments and contingencies (see note 5) | |
| | |
| |
| | | | | | |
Stockholders' equity: | |
| | |
| |
Preferred stock, $ | | | | | ||
Common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Accumulated other comprehensive income (loss) | | | ( | | | |
Accumulated deficit | |
| ( | |
| ( |
Total stockholders' equity | |
| | |
| |
| | | | | | |
Total liabilities and stockholders' equity | | $ | | | $ | |
The accompanying notes are an integral part of these condensed financial statements.
6
EDGEWISE THERAPEUTICS, INC.
Condensed Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
| | | | | | | | | | | | |
Operating expenses |
| | | | | | | | |
| | |
Research and development | | $ | | | $ | | | $ | | | $ | |
General and administrative | |
| | |
| | |
| | |
| |
Total operating expenses | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Loss from operations | |
| ( | |
| ( | |
| ( | |
| ( |
| | | | | | | | | | | | |
Other income | |
| | |
| | |
| | |
| |
Interest income | |
| | |
| | | | | |
| |
Total other income | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Net loss | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | |
Other comprehensive income (loss): | | | | | | | | | | | | |
Unrealized loss on available-for-sale securities, net | | | ( | | | ( | | | ( | | | ( |
Total comprehensive loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | |
Net loss per share, basic and diluted | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
Weighted-average shares outstanding, basic and diluted | |
| | |
| | |
| | |
| |
The accompanying notes are an integral part of these condensed financial statements.
7
EDGEWISE THERAPEUTICS, INC.
Condensed Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
| | | | | | | | | | Accumulated | | | | | | | |
| | Common Stock | | Additional | | Other Comprehensive | | Accumulated | | | | ||||||
| | Shares | | Amount | | Paid-In Capital | | Income (Loss) | | Deficit | | Total | |||||
Balance as of December 31, 2024 |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
Exercise of stock options |
| | |
| — | |
| | | | — | |
| — | |
| |
Stock-based compensation |
| — | |
| — | |
| | | | — | |
| — | |
| |
Other comprehensive loss | | — | |
| — | |
| — | | | ( | |
| — | |
| ( |
Net loss | | — | |
| — | |
| — | | | — | |
| ( | |
| ( |
Balance as of March 31, 2025 |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
Issuance of common stock, net of offering costs | | | | | | | | | | | — | | | — | | | |
Exercise of stock options and vesting of restricted stock units | | | | | — | | | | | | — | | | — | | | |
Purchase of common stock under Employee Stock Purchase Plan | | | | | — | | | | | | — | | | — | | | |
Stock-based compensation | | — | | | — | | | | | | — | | | — | | | |
Other comprehensive loss | | — | | | — | | | — | | | ( | | | — | | | ( |
Net loss | | — | | | — | | | — | | | — | | | ( | | | ( |
Balance as of June 30, 2025 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | | | | | | |
| | Common Stock | | Additional | | Other Comprehensive | | Accumulated | | | | ||||||
| | Shares | | Amount | | Paid-In Capital | | Income (Loss) | | Deficit | | Total | |||||
Balance as of December 31, 2025 | | | | $ | | | $ | | | $ | | | $ | ( | | $ | |
Exercise of stock options and vesting of restricted stock units |
| | |
| — | |
| | | | — | |
| — | |
| |
Stock-based compensation |
| — | |
| — | |
| | | | — | |
| — | |
| |
Other comprehensive loss |
| — | |
| — | |
| — | | | ( | |
| — | |
| ( |
Net loss |
| — | |
| — | |
| — | | | — | |
| ( | |
| ( |
Balance as of March 31, 2026 |
| | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
Exercise of stock options and vesting of restricted stock units | | | | | — | | | | | | — | | | — | |
| |
Purchase of common stock under Employee Stock Purchase Plan | | | | | — | | | | | | — | | | — | |
| |
Stock-based compensation | | — | | | — | | | | | | — | | | — | |
| |
Other comprehensive loss | | — | | | — | | | — | | | ( | | | — | | | ( |
Net loss | | — | | | — | | | — | | | — | | | ( | |
| ( |
Balance as of June 30, 2026 | | | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
The accompanying notes are an integral part of these condensed financial statements.
8
EDGEWISE THERAPEUTICS, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
| | Six months ended June 30, | ||||
| | 2026 | | 2025 | ||
Cash flows from operating activities |
| | | | | |
Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | |
| |
Depreciation | | | | |
| |
Stock-based compensation | |
| | |
| |
Accretion of discount on marketable securities, net | | | ( | | | ( |
Amortization of right-of-use asset | | | | | | |
Changes in assets and liabilities: | |
| | |
| |
Prepaid expenses and other assets | |
| | |
| ( |
Accounts payable | |
| | |
| |
Accrued compensation | |
| ( | |
| ( |
Accrued other expenses and other liabilities | |
| | |
| ( |
Lease liability | |
| ( | | | ( |
Net cash used in operating activities | |
| ( | | | ( |
| | | | | | |
Cash flows from investing activities | |
| | | | |
Purchases of marketable securities | |
| ( | |
| ( |
Sales of marketable securities | | | | | | |
Maturities of marketable securities | | | | | | |
Purchases of property and equipment | |
| ( | |
| ( |
Net cash provided by (used in) investing activities | |
| | |
| ( |
| | | | | | |
Cash flows from financing activities | |
| | |
| |
Proceeds from issuance of common stock, net of offering costs | | | — | | | |
Exercise of stock options | |
| | |
| |
Payment of deferred offering costs | | | — | | | — |
Proceeds from Employee Stock Purchase Plan | | | | | | |
Net cash provided by financing activities | |
| | |
| |
| | | | | | |
Net change in cash and cash equivalents | |
| | |
| |
Cash and cash equivalents at beginning of period | |
| | |
| |
Cash and cash equivalents at end of period | | $ | | | $ | |
Supplemental disclosures of non-cash investing and financing activities: | |
| | |
| |
Property and equipment purchases included in accounts payable | | $ | | | $ | |
The accompanying notes are an integral part of these condensed financial statements.
9
EDGEWISE THERAPEUTICS, INC.
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1 DESCRIPTION OF BUSINESS
Organization and Description of Business
Edgewise Therapeutics, Inc. (the Company) is a late-stage clinical biopharmaceutical company focused on advancing therapies for people living with for serious cardiovascular diseases. The Company’s pipeline includes EDG-7500, a novel, oral, selective, cardiac sarcomere modulator, in development for the treatment of hypertrophic cardiomyopathy (HCM), including both obstructive HCM (oHCM) and nonobstructive HCM (nHCM). The Company is also advancing EDG-15400, an oral next-generation cardiac sarcomere modulator in clinical development for the treatment of heart failure with preserved ejection fraction (HFpEF). In addition, the Company is leveraging its precision medicine platform to advance additional research programs focused on genetically defined cardiovascular and cardiometabolic diseases.
On May 31, 2026, the Company entered into an Asset Purchase Agreement (Sevasemten Purchase Agreement) with Servier Pharmaceuticals LLC and Les Laboratoires Servier (Servier) for the sale of the sevasemten muscular dystrophy program, including certain related assets, intellectual property, know-how, select employees, contracts, regulatory filings and clinical data, and assumed certain related liabilities (Sevasemten Sale). As a result, the related disposal group was classified as held for sale as of June 30, 2026, and the Sevasemten Sale closed on July 10, 2026. Following completion of the Sevasemten Sale, the Company is focused on advancing its cardiovascular pipeline and related research and development activities.
Risks and Uncertainties
The board of directors of the Company discusses with management macroeconomic and geopolitical developments, including inflation, instability in the banking and financial services sector, tightening of the credit markets, the impact of changes in the U.S. government administration and policy positions, international conflicts, public health pandemics, cybersecurity, sanctions, and changes in tariffs so that the Company can be prepared to react to new developments as they arise. The board of directors and the management of the Company are carefully monitoring these developments and the resulting economic impact on its financial condition and results of operations.
Liquidity and Capital Resources
The Company has an accumulated deficit of $
On May 10, 2024, the Company filed an automatic shelf registration statement on Form S-3ASR that allows the Company to undertake various equity and debt offerings. Additionally, on May 10, 2024, the Company filed a prospectus supplement to the shelf registration statement and entered into a sales agreement with Leerink Partners LLC (Leerink Sales Agreement) under which the Company may offer and sell shares of common stock, having aggregate sales proceeds of up to $
On April 3, 2025, the Company closed an underwritten registered direct offering of
As a subsequent event, on July 10, 2026, the Company completed the Sevasemten Sale receiving $
10
Becker muscular dystrophy in the amount of (i) $
The Company’s ability to secure capital is dependent upon success in developing its technology and product candidates. The Company cannot provide assurance that additional capital will be available on acceptable terms, if at all. The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s stockholders. Should additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may be unable to realize value from the Company’s assets or discharge liabilities in the normal course of business, which may, among other alternatives, cause the Company to delay, substantially reduce, or discontinue operational activities to conserve cash balances, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. The Company believes that the $
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed financial statements and related notes to the condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2026. There have been no material changes to the summary of significant accounting policies as disclosed in that filing.
These interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and include all adjustments consisting of normal recurring adjustments that management believes are necessary for a fair presentation of the periods presented and are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.
Marketable Securities, Available for Sale
All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies its investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. In accordance with the Company’s investment policy, management invests in money market funds, corporate debt securities, commercial paper, asset-backed securities and government
11
securities. The Company has not experienced any realized losses on its deposits of cash, cash equivalents, and marketable securities since inception.
The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
| | As of June 30, 2026 | ||||||||||||
| | Fair Value | | Amortized | | Unrealized | | Unrealized | | Fair Market | ||||
| | Hierarchy | | Cost Basis | | Gains | | Losses | | Value | ||||
Cash equivalents: |
| |
| | |
| | |
| | |
| | |
Money market funds |
| Level 1 | | $ | | | $ | — | | $ | — | | $ | |
Marketable securities, available for sale: |
| | |
| | |
| | |
| | |
| |
Asset-backed securities |
| Level 2 | |
| | | | | | | ( | |
| |
Corporate debt securities |
| Level 2 | |
| | | | | | | ( | |
| |
Commercial paper |
| Level 2 | |
| | | | | | | ( | |
| |
U.S. government treasury and agency securities | | Level 2 | |
| | | | | | | ( | |
| |
Total |
| | | $ | | | $ | | | $ | ( | | $ | |
| | As of December 31, 2025 | ||||||||||||
| | Fair Value | | Amortized | | Unrealized | | Unrealized | | Fair Market | ||||
| | Hierarchy | | Cost Basis | | Gains | | Losses | | Value | ||||
Cash equivalents: |
| |
| | |
| | |
| | |
| | |
Money market funds |
| Level 1 | | $ | | | $ | — | | $ | — | | $ | |
Marketable securities, available for sale: |
| | |
| | |
| | |
| | |
| |
Asset-backed securities |
| Level 2 | |
| | |
| | |
| — | |
| |
Corporate debt securities |
| Level 2 | |
| | |
| | |
| ( | |
| |
Commercial paper | | Level 2 | | | | | | | | | — | | | |
U.S. government treasury and agency securities | | Level 2 | | | | | | | | | — | | | |
Total |
| | | $ | | | $ | | | $ | ( | | $ | |
The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. Investments in asset-backed securities, corporate debt securities, commercial paper and U.S. government treasury and agency securities, and supranational and sovereign government securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of asset-backed securities, corporate debt securities, commercial paper, and U.S. government treasury and agency securities were derived based on input of market prices from multiple sources at each reporting period. With regard to commercial paper, all of the securities had high credit ratings and one year or less to maturity; therefore, fair value was derived from accretion of purchase price to face value over the term of maturity or quoted market prices for similar instruments if available. There were
The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, the Company has assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on marketable securities at June 30, 2026 were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.
12
Accounting Standards Not Yet Adopted
In November 2024, the FASB issued Accounting Standards Update (ASU) 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU is expected to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). This ASU is effective beginning with the Company’s 2027 fiscal year annual reporting period and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This ASU is expected to improve the navigability of the required interim disclosures, clarify when that guidance is applicable, and provide additional guidance on what disclosures should be included in interim reporting periods. It also adds a principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. This ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its interim financial statements.
NOTE 3 PREFERRED STOCK AND COMMON STOCK
The Company is authorized to issue two classes of stock designated as common stock and preferred stock. As of June 30, 2026, the total number of shares authorized was
Common stockholders are entitled to dividends if and when declared by the board of directors of the Company and after any convertible preferred share dividends are fully paid. The holder of each share of common stock is entitled to
NOTE 4 STOCK-BASED COMPENSATION AWARDS
Equity Incentive Plans
In March 2021, the Company’s board of directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (2021 Plan), which became effective in March 2021 in connection with the IPO. Upon adoption of the 2021 Plan, the Company restricted the grant of future equity awards under its 2017 Equity Incentive Plan, as amended and restated (2017 Plan).
The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units (RSUs), stock appreciation rights, performance units, and performance shares to its employees, directors, and consultants and its subsidiary corporations’ employees and consultants.
The vesting of stock options is stated in each individual grant agreement, which is generally
13
Inducement Equity Incentive Plan
Effective August 10, 2024, the Company’s board of directors adopted the Company’s 2024 Inducement Equity Incentive Plan (Inducement Plan) and, subject to the adjustment provisions of the Inducement Plan, reserved
The Inducement Plan was adopted without stockholder approval pursuant to the applicable The Nasdaq Stock Market LLC’s (Nasdaq) Listing Rules. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards, and its terms are substantially similar to the 2021 Plan, including with respect to treatment of equity awards in the event of a “merger” or “change in control” as defined under the Inducement Plan, but with such other terms and conditions intended to comply with the Nasdaq inducement award exception or to comply with the Nasdaq acquisition and merger exception.
In accordance with the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by the Nasdaq Listing Rules, in connection with a merger or acquisition. The vesting of stock options is stated in each individual grant agreement, which is generally
Founder Stock Options
On September 19, 2017, the Company granted one of its founders the option to purchase
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (2021 ESPP) enables eligible employees of the Company to purchase shares of common stock at a discount. A total of
The 2021 ESPP provides for
14
Total stock-based compensation expense related to all equity plans was allocated as follows (in thousands):
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Research and development | | $ | |
| $ | |
| $ | |
| $ | |
General and administrative | |
| | |
| | |
| | |
| |
Total stock-based compensation expense | | $ | | | $ | | | $ | | | $ | |
NOTE 5 COMMITMENTS AND CONTINGENCIES
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three and six months ended June 30, 2026 and no material legal proceedings are currently pending or threatened.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising from breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of June 30, 2026.
NOTE 6 NET LOSS PER SHARE
Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, common stock options and unvested restricted stock units are considered to be potentially dilutive securities. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.
The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share data):
| | Three months ended June 30, | | Six Months Ended June 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Numerator | | | | | | | | | | | | |
Net loss | | $ | ( | | $ | ( | | $ | ( |
| $ | ( |
Denominator | |
| | |
| | |
| | |
| |
Weighted-average shares outstanding used in computing net loss per share, basic and diluted | | | | | | | | | | | | |
Net loss per share, basic and diluted | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
15
The following weighted average 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 anti-dilutive:
| | Three months ended June 30, | | Six Months Ended June 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Options to purchase common stock | | | | | | | | | | | | |
Unvested restricted stock units | | | | | | | | | | | | |
Total | | | | | | | | | | | | |
NOTE 7 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following amounts (in thousands):
| | As of June 30, | | As of December 31, | ||
| | 2026 | | 2025 | ||
Leasehold improvements | | $ | | | $ | |
Laboratory equipment | | | | | | |
Computers and software | | | | | | |
Furniture and fixtures | | | | | | |
Construction in process | | | — | | | |
Property and equipment, at cost | | | | | | |
Less: accumulated depreciation | | | ( | | | ( |
Property and equipment, net | | $ | | | $ | |
Depreciation expense was $
NOTE 8 ACCRUED OTHER EXPENSES
Accrued other expenses consisted of the following amounts (in thousands):
| | As of June 30, | | As of December 31, | ||
| | 2026 | | 2025 | ||
Accrued research and development costs | | $ | | | $ | |
Accrued other | | | | | | |
Total accrued other expenses | | $ | | | $ | |
16
NOTE 9 SEGMENT REPORTING
There have been no changes in the Company’s assessment of the basis of
| | Three months ended June 30, | | Six Months Ended June 30, | ||||||||
| | 2026 | | 2025 | | 2026 | | 2025 | ||||
Operating expenses: | | | | | | | | | |
| | |
Contracted research expense | | $ | | | $ | | | $ | | | $ | |
Personnel expense | | | | | | | | | | | | |
Stock-based compensation expense | | | | | | | | | | | | |
Other segment expense(a) | | | | | | | | | | | | |
Depreciation | | | | | | | | | | | | |
Segment net loss | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | |
Reconciliation of net loss | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | |
Net Loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
a
NOTE 10 ASSETS AND LIABILITIES HELD FOR SALE
On May 31, 2026, the Company entered into the Sevasemten Purchase Agreement with Servier, to sell the assets and transfer the liabilities comprising its sevasemten program (the Disposal Group) for (i) closing consideration of $
The assets and liabilities of the Disposal Group met the criteria for classification as held for sale under ASC 360-10-45-9 effective May 31, 2026, and have been presented as Current assets held for sale and Current liabilities held for sale in the accompanying unaudited condensed balance sheet as of June 30, 2026. The comparative condensed balance sheet as of December 31, 2025 has not been reclassified. The Disposal Group has been measured at the lower of its carrying amount or fair value less costs to sell. Because the estimated fair value less costs to sell of the Disposal Group exceeds its carrying amount,
The Disposal Group is reported within the Company's single operating and reportable segment. For the three and six months ended June 30, 2026, the Disposal Group's pretax loss, recorded within operating expenses, was $
17
| | As of June 30, | |
| | 2026 | |
Assets held for sale: | | | |
Prepaid expenses and other assets | | $ | |
Total assets held for sale | | $ | |
| | | |
Liabilities held for sale: | | | |
Accounts payable | | $ | |
Accrued other expenses | | | |
Total liabilities held for sale | | $ | |
The Company did not present the disposal group as discontinued operations because the disposition did not meet the applicable discontinued-operations criteria. The sevasemten intellectual property, know-how, regulatory filings, clinical data and related contracts were internally generated and, as a result, related costs were expensed as incurred and no intangible asset was included in the disposal group.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations of Edgewise Therapeutics, Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report), and the audited financial statements and the related notes thereto included in our Annual Report on Form 10-K (Annual Report), filed with the Securities and Exchange Commission, on February 26, 2026. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.
As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”
Overview
Since our inception in 2017, we have applied our deep expertise in muscle biology and small molecule drug discovery to build a proprietary precision medicine platform. This foundation has generated multiple clinical and preclinical programs across skeletal and cardiac muscle, including sevasemten for muscular dystrophies and our cardiovascular portfolio of novel, oral cardiac sarcomere modulators. In May 2026, we entered into an Asset Purchase Agreement under which Servier Pharmaceuticals LLC and Les Laboratoires Servier (Servier) acquired sevasemten and our muscular dystrophy program for $1,550 million in upfront cash consideration and up to $1,100 million in additional regulatory and commercial milestone payments, for aggregate potential consideration of up to $2,650 million (Sevasemten Sale). On July 10, 2026, the Sevasemten Sale was completed.
Following this transaction, Edgewise is positioned as a cardiovascular-focused late-stage clinical biopharmaceutical company advancing therapies for people living with serious cardiovascular diseases. Our lead cardiovascular program, EDG-7500, is a novel, oral, selective cardiac sarcomere modulator currently being studied in a multipart Phase 2 trial in patients with obstructive and nonobstructive hypertrophic cardiomyopathy, with a Phase 3 program targeted to initiate in the fourth quarter of 2026. EDG-15400, our second cardiovascular product candidate, is currently in a Phase 1 trial in healthy adults, with a future disease target of heart failure with preserved ejection fraction, and we expect to initiate a Phase 2 trial in the second half of 2026. We are also continuing to advance preclinical discovery efforts, including additional cardiovascular and cardiometabolic targets, as we pursue our mission of changing the lives of patients and families affected by serious cardiovascular diseases.
18
We have incurred significant losses since the commencement of our operations. Our net losses were $57.3 million and $106.3 million for the three and six months ended June 30, 2026, respectively, and $36.1 million and $76.9 million for the three and six months ended June 30, 2025, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.
As of June 30, 2026, we had an accumulated deficit of $652.7 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and public offerings of our common stock. From inception to our initial public offering, private placements provided gross proceeds of $160.7 million, and, as of June 30, 2026, we generated net proceeds from our initial public offering, follow-on public offering, issuance of our common stock under an “at the market offering” program (the ATM Program), and the January 2024 and April 2025 underwritten registered direct offerings of $793.7 million. We believe that our existing cash and cash equivalents and marketable securities of $460.7 million, together with the $1,550 million in upfront cash proceeds from the Sevasemten Sale received on July 10, 2026, will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.
Macroeconomic and Geopolitical Developments
We are monitoring macroeconomic and geopolitical developments, such as inflation, instability in the banking and financial services sector, tightening of the credit markets, changes in the U.S. government administration and policy positions, international conflicts, public health pandemics, cybersecurity, sanctions, and changes in tariffs, and evaluating potential impacts on our operations, clinical development timelines, supply chain continuity and capital markets access. The extent, severity, and duration of the impacts of these events and conditions on our business, operations and research and development timelines and plans cannot be predicted and will depend on numerous factors. For more information regarding the risks related to macroeconomic and geopolitical developments, see the section titled “Risk Factors” found elsewhere in this Quarterly Report.
Components of Our Results of Operations
Operating expenses
Operating expenses primarily consist of research and development activities and general and administrative functions that support our clinical programs and corporate infrastructure.
Research and development expenses
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We record research and development expenses when these are incurred. Such expenses include:
| ● | employee and external consultant-related expenses including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions; |
| ● | external expenses incurred in connection with the clinical development of our product candidates including under agreements with third parties, such as consultants and contract research organizations (CROs); |
| ● | the cost of external manufacturing drug products for use in our preclinical studies and ongoing and planned clinical trials including under agreements with third parties such as consultants and CDMOs; |
| ● | expenses incurred in connection with the preclinical development of our product candidates including external, or outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties; |
19
| ● | laboratory supplies; |
| ● | facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities; and |
| ● | expenses related to compliance with regulatory requirements. |
The majority of these expenses have been incurred to advance our lead product candidate EDG-7500, as well as sevasemten, our previous product candidate sold to Servier in July 2026. We expect that significant additional spending will be required to progress EDG-7500, EDG-15400, and other potential discoveries through later-stage clinical development phases and potentially registrational activities. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.
We track our direct research and development expenses on a program-by-program basis once a lead compound has been selected and clinical trials have been initiated. These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery and preclinical activities, process development, manufacturing and clinical development activities. These expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. Our direct research and development expenses by program also include costs of laboratory supplies that can be directly attributed to a specific program as well as any fees incurred under license agreements. We do not allocate employee-related costs, including stock-based compensation, or facility expenses, including rent, depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities and to manage our preclinical development, manufacturing and clinical development activities.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. In June 2026, we announced positive topline data for our multipart Phase 2 trial with EDG-7500 for people with HCM (CIRRUS-HCM) and are planning to initiate a Phase 3 trial for EDG-7500 in the fourth quarter of 2026 and we have completed dosing in the Phase 1 trial with EDG-15400 of healthy adults with the future disease target of HFpEF and are planning to initiate a Phase 2 trial for EDG-15400 in the second half of 2026. As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-7500, EDG-15400, and candidates from our EDG-003 cardiometabolic discovery program through clinical trials and additional product candidates; continue to develop our proprietary drug discovery platform; continue to discover and develop additional product candidates; and hire additional personnel.
The successful development of our product candidates is highly uncertain, and we do not believe it is possible at this time to accurately project the nature, timing and extent of expenses necessary to complete the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. 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:
| ● | the timing and progress of preclinical and clinical development activities; |
| ● | the number and scope of preclinical and clinical programs we decide to pursue; |
| ● | our ability to maintain our current research and development programs and to establish new ones; |
| ● | establishing an appropriate safety profile with IND-enabling studies; |
| ● | successful patient enrollment in, and the initiation and completion of, clinical trials; |
20
| ● | the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; |
| ● | the receipt of regulatory approvals from applicable regulatory authorities; |
| ● | the timing, receipt and terms of any marketing approvals from applicable regulatory authorities; |
| ● | our ability to establish new licensing or collaboration arrangements; |
| ● | the performance of our future collaborators, if any; |
| ● | establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; |
| ● | development and timely delivery of sufficient supplies of our drug product that can be used in our planned clinical trials and for commercial launch upon approval; |
| ● | obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights; |
| ● | launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; and |
| ● | maintaining a continued acceptable safety profile of the product candidates following approval.. |
Any changes in the outcome of any of these factors could significantly impact the costs and timing associated with the development of our product candidates. We may also adjust program prioritization or resource allocation based on emerging clinical data, regulatory feedback or capital availability.
General and administrative expenses
General and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expense for personnel in executive, finance, accounting, legal and administrative functions. General and administrative expenses also include facilities and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We continue to expand our administrative infrastructure to support the growth of our clinical programs and public company operations.
We anticipate that our general and administrative expenses will increase in the future as we scale our organization to support clinical advancement, regulatory readiness, and future commercial planning activities.
Interest income
Interest income primarily consists of interest income generated from our cash, cash equivalents and marketable securities.
Interest income may fluctuate in future periods based on cash deployment and prevailing market conditions.
21
Results of Operations
Comparison of the three months ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:
| | Three months ended June 30, | | | | ||||
| | 2026 | | 2025 | | Change | |||
| | (in thousands) | |||||||
Operating expenses: | | | | | | | | | |
Research and development | | $ | 47,548 | | $ | 33,558 | | $ | 13,990 |
General and administrative | |
| 14,395 | |
| 9,052 | |
| 5,343 |
Total operating expenses | |
| 61,943 | |
| 42,610 | |
| 19,333 |
Loss from operations | |
| | |
| | |
| |
Interest income | |
| 4,616 | |
| 6,495 | |
| (1,879) |
Net loss | | $ | 57,327 | | $ | 36,115 | | $ | 21,212 |
Research and development expenses
The following table summarizes our research and development expenses:
| | Three months ended June 30, | | | | ||||
| | 2026 | | 2025 | | Change | |||
| | (in thousands) | |||||||
External research and development expenses: | | | | | | | | | |
Sevasemten clinical program | | $ | 13,211 | | $ | 13,018 | | $ | 193 |
EDG-7500 clinical program | | | 8,058 | | | 3,099 | | | 4,959 |
EDG-15400 clinical program | | | 3,388 | | | — | | | 3,388 |
Discovery and preclinical | |
| 2,334 | |
| 2,612 | |
| (278) |
Internal costs, including personnel related | |
| 20,557 | |
| 14,829 | |
| 5,728 |
Total research and development expenses | | $ | 47,548 | | $ | 33,558 | | $ | 13,990 |
Research and development expenses were $47.5 million and $33.6 million for the three months ended June 30, 2026 and 2025, respectively. The increase was primarily due to higher EDG-7500, EDG-15400 and internal personnel-related costs, partially offset by lower discovery and preclinical expenses, and was attributed to the following:
| ● | an increase in EDG-7500 clinical program expenses of $5.0 million primarily related to an increase of $0.4 million from completion of patient activity for Part D of our multipart Phase 2 CIRRUS-HCM trial, for which Part B and Part C were fully enrolled and Part D was enrolling in the comparable period in 2025, an increase of $2.0 million from pharmacokinetic studies, and a $2.6 million increase in other development costs primarily driven by nonclinical costs and manufacturing costs to support future trials; |
| ● | an increase in EDG-15400 clinical program expenses of $3.4 million which are now shown separately in the above table due to advancing into a Phase 1 trial in the third quarter of 2025. These expenses include clinical trial and nonclinical costs, as well as manufacturing costs to support current and future trials; and |
| ● | an increase in internal costs of $5.7 million, primarily related to personnel-related costs, including stock-based compensation, resulting from increased employee headcount to support the growth of our research and development programs; and |
| ● | an increase of $0.2 million in sevasemten clinical program expenses, which was primarily related to a $1.2 million increase in clinical program expenses in the MESA trial related to increased clinical activity due to patient rollover from the GRAND CANYON trial and $0.8 million increase in the GRAND CANYON trial, partially offset by $1.8 million in decreased activity across all other sevasemten trials; |
22
partially offset by:
| ● | a decrease in discovery and preclinical expenses of $0.3 million, which was primarily driven by a decrease in EDG-15400 related costs, now shown separately, which were a significant portion of discovery, preclinical, and nonclinical expenses in the comparable period in 2025. |
General and administrative expenses
General and administrative expenses increased to $14.4 million for the three months ended June 30, 2026 compared to $9.1 million for the three months ended June 30, 2025. The increase of $5.3 million was primarily attributable to $1.7 million in increased personnel-related costs, including stock-based compensation, associated with organizational growth, $1.4 million in increased costs associated with commercial readiness activities for sevasemten, as well as $2.3 million in increased professional and consulting costs, transaction costs related to the Sevasemten Sale, and other administrative costs supporting public company operations and clinical development activities.
Interest income
Interest income was $4.6 million for the three months ended June 30, 2026 compared to $6.5 million for the three months ended June 30, 2025. Interest income reflects returns generated from the investment of our cash, cash equivalents and marketable securities in accordance with our investment policies and may fluctuate in future periods based on prevailing market conditions and the timing of cash deployment.
Comparison of the six months ended June 30, 2026 and 2025
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025:
| | Six months ended June 30, | | | | ||||
| | 2026 | | 2025 | | Change | |||
| | (in thousands) | |||||||
Operating expenses: | | | | | | | | | |
Research and development | | $ | 90,199 | | $ | 70,315 | | $ | 19,884 |
General and administrative | |
| 25,859 | |
| 18,254 | |
| 7,605 |
Total operating expenses | |
| 116,058 | |
| 88,569 | |
| 27,489 |
| |
| | |
| | |
| |
Interest income | |
| 9,718 | |
| 11,656 | |
| (1,938) |
Net loss | | $ | 106,340 | | $ | 76,913 | | $ | 29,427 |
Research and development expenses
The following table summarizes our research and development expenses:
| | Six months ended June 30, | | | | ||||
| | 2026 | | 2025 | | Change | |||
| | (in thousands) | |||||||
External research and development expenses: | | | | | | | | | |
Sevasemten clinical program | | $ | 26,309 | | $ | 27,058 | | $ | (749) |
EDG-7500 clinical program | | | 13,880 | | | 7,290 | | | 6,590 |
EDG-15400 clinical program | | | 6,509 | | | — | | | 6,509 |
Discovery and preclinical | |
| 4,409 | |
| 5,455 | |
| (1,046) |
Internal costs, including personnel related | |
| 39,092 | |
| 30,512 | |
| 8,580 |
Total research and development expenses | | $ | 90,199 | | $ | 70,315 | | $ | 19,884 |
23
Research and development expenses were $90.2 million and $70.3 million for the six months ended June 30, 2026 and 2025, respectively. The increase was primarily due to higher EDG-7500, EDG-15400 and internal personnel-related costs, partially offset by lower discovery and preclinical expenses, and was attributed to the following:
| ● | an increase in EDG-7500 clinical program expenses of $6.6 million primarily related to an increase of $1.6 million from completion of patient activity for Part D of our multipart Phase 2 CIRRUS-HCM trial, for which Part B and Part C were completed enrollment and Part D was enrolling in the comparable period in 2025, a $2.3 million increase in other development costs primarily driven by nonclinical costs and manufacturing costs to support future trials, and an increase of $2.7 million from pharmacokinetic studies; |
| ● | an increase in EDG-15400 clinical program expenses of $6.5 million which are now shown separately in the above table due to advancing into a Phase 1 trial in the third quarter of 2025. These expenses include clinical trial and nonclinical costs, as well as manufacturing costs to support current and future trials; and |
| ● | an increase in internal costs of $8.6 million, primarily related to personnel-related costs, including stock-based compensation, resulting from increased employee headcount to support the growth of our research and development programs; |
partially offset by:
| ● | a decrease of $0.7 million in sevasemten clinical program expenses, which was primarily related to a $1.9 million decrease in spend related to a pharmacokinetic study which was completed in 2025, a $0.6 million decrease in clinical program expenses in CANYON and GRAND CANYON compared to the same period in 2025 due to patient rollover to the MESA trial. This was offset by a $1.6 million increase in clinical program expenses in the MESA trial related to increased clinical activity due to continued patient rollover from the GRAND CANYON trial; and |
| ● | a decrease in discovery and preclinical expenses of $1.0 million, which was primarily driven by a decrease in EDG-15400 related costs, now shown separately, which were a significant portion of discovery, preclinical, and nonclinical expenses in the comparable period in 2025. |
Following completion of the Sevasemten Sale on July 10, 2026, we do not expect direct external clinical program costs associated with sevasemten to continue, except for retained obligations and transition-services activities performed under the Transition Services Agreement.
General and administrative expenses
General and administrative expenses increased to $25.9 million for the six months ended June 30, 2026 compared to $18.3 million for the six months ended June 30, 2025. The increase of $7.6 million was primarily attributable to $3.0 million in increased personnel-related costs, including stock-based compensation, associated with organizational growth, $2.1 million in increased costs associated with commercial readiness activities for sevasemten, as well as $2.5 million in increased professional and consulting costs, transaction costs related to the Sevasemten Sale, and other administrative costs supporting public company operations and clinical development activities.
Interest income
Interest income was $9.7 million for the six months ended June 30, 2026 compared to $11.7 million for the six months ended June 30, 2025. Interest income reflects returns generated from the investment of our cash, cash equivalents and marketable securities in accordance with our investment policies and may fluctuate in future periods based on prevailing market conditions and the timing of cash deployment.
Liquidity and Capital Resources
Sources of liquidity
Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. To date, we have financed our operations primarily through private placements of
24
convertible preferred stock and public offerings of our common stock. From inception to our initial public offering, private placements provided gross proceeds of $160.7 million, and, as of June 30, 2026, we generated net proceeds from our initial public offering, follow-on public offering, issuance of our common stock under the ATM Program, and the January 2024 and April 2025 underwritten registered direct offerings of $793.7 million. Additionally, pursuant to the Sevasemten Purchase Agreement, we completed the sale of sevasemten and our muscular dystrophy program to Servier on July 10, 2026 and received upfront cash consideration of $1,550 million. As of June 30, 2026, we had cash, cash equivalents and marketable securities in the amount of $460.7 million.
Cash flows
The following table summarizes our sources and uses of cash for each of the periods presented:
| | Six months ended June 30, | ||||
| | 2026 | | 2025 | ||
| | (in thousands) | ||||
Net cash used in operating activities | | $ | (85,012) | | $ | (70,448) |
Net cash provided by (used in) investing activities | |
| 80,923 | |
| (118,268) |
Net cash provided by financing activities | |
| 15,260 | |
| 190,454 |
Net increase in cash and cash equivalents | | $ | 11,171 | | $ | 1,738 |
Operating activities
Cash used in operating activities during the six months ended June 30, 2026 was $85.0 million primarily driven by our net loss for the period of $106.3 million, and was also impacted by changes in operating assets and liabilities, which decreased net working capital by $3.9 million. Cash used in operating activities was reduced by non-cash charges of $17.4 million relating to stock-based compensation expense of $18.1 million, depreciation of $1.1 million, and amortization of right-of-use asset of $0.1 million, offset by accretion of discounts, net on marketable securities of $1.8 million.
Cash used in operating activities during the six months ended June 30, 2025 was $70.4 million primarily driven by our net loss for the period of $76.9 million, and was also impacted by changes in operating assets and liabilities, which increased net working capital by $7.3 million. Cash used in operating activities was reduced by non-cash charges of $13.8 million relating to stock-based compensation expense of $16.8 million, accretion of discounts, net on marketable securities of $4.1 million, depreciation of $1.0 million, and amortization of right-of-use asset of $0.1 million.
Investing activities
Cash provided by investing activities during the six months ended June 30, 2026 amounted to $80.9 million, due to $217.7 million in maturities of marketable securities and $26.8 million in sales of marketable securities, which were partially offset by $163.2 million in purchases of marketable securities and $0.3 million for purchases of equipment.
Cash used in investing activities during the six months ended June 30, 2025 amounted to $118.3 million, due to $385.9 million in purchases of marketable securities and $0.1 million for purchases of equipment, which was partially offset by $229.1 million in maturities of marketable securities and $38.7 million in sales of marketable securities.
Financing activities
Cash provided by financing activities during the six months ended June 30, 2026 was $15.3 million due to cash proceeds of $14.5 million from the issuance of common stock upon exercise of stock options and $0.8 million in proceeds from the Company’s 2021 Employee Stock Purchase Plan (2021 ESPP).
Cash provided by financing activities during the six months ended June 30, 2025 was $190.5 million, due to cash proceeds of $200.0 million from the April 2025 underwritten registered direct offering, $2.5 million in proceeds from the
25
issuance of common stock upon exercise of stock options, $0.6 million in proceeds from the Company’s 2021 Employee Stock Purchase Plan (2021 ESPP), which was partially offset by $12.6 million for the payment of underwriting discounts and commissions and offering costs.
Impact of the Sevasemten Sale
On July 10, 2026, we completed the Sevasemten Sale and received $1,550 million in upfront cash proceeds. As a result, our available liquidity increased materially after June 30, 2026. In the quarter ending September 30, 2026, we expect to recognize a gain on the sale within other income, subject to final closing-date carrying values of the assets transferred and liabilities assumed, transaction costs, and the related income tax effects. We also expect our future operating expenses to be affected by the elimination of direct sevasemten program costs that will not continue following the sale, partially offset by costs and reimbursements associated with the Transition Services Agreement. Any contingent milestone payments will be recognized only if and when the applicable recognition criteria are met.
Funding requirements
We may continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. On May 10, 2024, we filed an automatic shelf registration statement on Form S-3ASR that allows us to undertake various equity and debt offerings and entered into the Leerink Sales Agreement under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $175.0 million from time to time, through the Leerink ATM.
On May 31, 2026, the Company entered into the Sevasemten Purchase Agreement, pursuant to which Servier acquired sevasemten and certain other related assets collectively constituting the Company’s muscular dystrophy program and assumed certain related liabilities for aggregate potential consideration of up to $2,650 million. On July 10, 2026, the Company completed the Sevasemten Sale receiving $1,550 million in upfront cash proceeds and is eligible to receive up to $1,100 million in potential future milestone payments, including (a) a potential milestone payment upon achieving U.S. marketing approval for sevasemten for Becker muscular dystrophy in the amount of (i) $200 million, in cash, payable in the event of an approved labelling including specified adult and adolescent populations or (ii) $100 million in cash, payable in the event of an approved labelling including only specified adult populations (if (i) has not previously been achieved); (b) a potential milestone payment of $600 million in cash, payable upon the achievement of U.S. marketing approval for sevasemten for Duchenne muscular dystrophy; and (c) a potential milestone payment of $300 million in cash, payable upon the achievement of annual U.S. net sales of sevasemten products exceeding $550 million.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. In addition, we expect to continue to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we:
| ● | advance our product candidates through preclinical and clinical development; |
| ● | seek regulatory approvals for any product candidates that successfully complete clinical trials; |
| ● | continue to invest in our proprietary drug discovery platform; |
| ● | seek to discover and develop additional product candidates; |
| ● | establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly; |
26
| ● | hire additional clinical, quality control, scientific and other personnel; |
| ● | expand our operational, financial and management systems and increase personnel including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; |
| ● | maintain, expand, protect and enforce our intellectual property portfolio; and |
| ● | acquire or in-license other product candidates and technologies. |
We do not currently have any long-term material capital requirements other than what will be required to fund operations for the foreseeable future and the amounts disclosed on the contractual obligations and commitments section below. In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:
| ● | the scope, progress, results and costs of researching and developing our product candidates including: |
| o | conducting preclinical studies and clinical trials; |
| o | the costs, timing and outcome of regulatory review of our product candidates; |
| o | the number and characteristics of other product candidates that we pursue; |
| o | the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
| o | the costs of manufacturing products of consistent quality and obtaining sufficient inventory to support commercial launch; |
| o | the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; |
| o | the cost and timing of hiring new employees to support our continued growth; |
| ● | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
| ● | the effect of competing products that may limit market penetration of our products; |
| ● | the ability to establish and maintain collaborations on favorable terms, if at all; |
| ● | the extent to which we acquire or in-license other product candidates and technologies; |
| ● | the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any; |
27
| ● | our need to implement additional internal systems and infrastructure, including financial and reporting systems; |
| ● | the compliance and administrative costs associated with being a public company; |
| ● | the effects of inflation on our business operations; and |
| ● | the extent to which we acquire or invest in businesses, products, or technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We may also be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
The issuance of additional equity securities may cause our stockholders to experience dilution. Future equity or debt financings may contain terms that are not favorable to us or our stockholders including debt instruments imposing covenants that restrict our operations and limit our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions.
Operating and Capital Expenditure Requirements and Contractual Obligations
We expect that our existing cash and cash equivalents and marketable securities, will be sufficient to enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.
Our short-term material cash requirements as of June 30, 2026 are to fund our operations, which consist primarily of research and development expenses related to our programs, and to a lesser extent, general and administrative expenses. We have entered into contracts in the normal course of business with CROs, CDMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.
Our long-term cash requirements as of June 30, 2026 includes our lease obligations. In January 2022, we entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado which includes escalating rent payments and an 8.2 year term, plus our share of operating expenses. In February 2023, the lease was modified to occupy an additional 9,624 square feet of office space, with aggregate payments of approximately $1.5 million over the initial 7.3 year term, plus our share of operating expenses. As of June 30, 2026, our total operating lease liability balance is $3.6 million, of which $1.0 million is a current liability.
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States and requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, costs, expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on a periodic basis. Our actual results may differ from these estimates.
28
Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2026 and the notes to the financial statements appearing elsewhere in this Quarterly Report. During the three and six months ended June 30, 2026, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K filed on February 26, 2026.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to market risk related to changes in interest rates. As of June 30, 2026 and December 31, 2025, we had cash, cash equivalents and marketable securities of $460.7 million and $530.1 million, respectively, primarily invested in U.S. Treasury securities, U.S. government agency securities, corporate debt securities, asset-backed securities, commercial paper, and money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term available-for-sale marketable securities. Our available-for-sale marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. However, there can be no assurance that changes in interest rates will not have a material adverse impact on us in the future.
Foreign Currency Exchange Risk
We are exposed to market risk related to changes in foreign currency exchange rates. We contract with vendors that are located outside the United States, and certain invoices are denominated in foreign currencies. We are subject to fluctuations in foreign currency exchange rates in connection with these arrangements. To date, we have not experienced any material effects from foreign currency fluctuations. A hypothetical 10% change in foreign currency exchange rates would not have had a material effect on our results of operations during the periods presented.
Item 4. Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 30, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2026 were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three and six months ended June 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
29
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any material legal proceedings. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially affect our financial condition or results of operations.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report and in our other public filings in evaluating our business. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our common stock.
Risk Factors Summary
Investing in shares of our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as fully described below. The principal factors and uncertainties that make investing in shares of our common stock risky include, among others:
Risks Related to Our Financial Position, Need for Additional Capital and Limited Operating History
| ● | We have a limited operating history and while we are moving toward becoming a commercial-ready biopharmaceutical company, some of our product candidates are early in development and we have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and likelihood of success and future viability. |
| ● | We have not generated any revenue to date, have incurred significant net losses since our inception, and expect to continue to incur significant net losses for the foreseeable future. |
| ● | Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve several objectives relating to the discovery, development and commercialization of our product candidates, if approved. |
| ● | We may require substantial additional capital to finance our operations, which may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts. |
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
| ● | We are substantially dependent on the success of our lead product candidate EDG-7500. If we are unable to complete further development of, obtain approval for and commercialize EDG-7500 for one or more indications in a timely manner, our business will be harmed. |
| ● | In addition to EDG-7500, our prospects depend in part upon developing and commercializing EDG-15400 and product candidates from our EDG-003 cardiometabolic discovery program and discovering, developing and commercializing product candidates in future programs, which may fail or suffer delays that adversely affect their commercial viability. |
30
| ● | Clinical drug development involves a lengthy and expensive process with an uncertain outcome. The clinical trials of our product candidates may not demonstrate safety and efficacy to the satisfaction of the FDA, European Medicines Agency (EMA) or other comparable foreign regulatory authorities or otherwise produce positive results and the results of preclinical studies and early clinical trials may not be predictive of future results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. |
| ● | Our product candidates may cause serious adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could prevent regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences. |
| ● | The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA or other comparable foreign regulatory authorities. |
| ● | If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented. |
| ● | We have limited resources and are currently focusing the majority of our efforts on developing EDG-7500 for particular indications. As a result, we may fail to capitalize on other indications or product candidates that may ultimately have proven to be more profitable. |
| ● | We face significant competition and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the products we develop, our commercial opportunities will be negatively impacted. |
| ● | Interim, topline and preliminary data from our clinical trials that we announce or publish may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final data. |
| ● | We may not be successful in our efforts to develop a proprietary drug discovery platform to build a pipeline of product candidates. |
| ● | The manufacture of drugs is complex, and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented. |
| ● | Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay. |
| ● | Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success. |
Risks Related to Regulatory Approval and Other Legal Compliance Matters
| ● | The regulatory approval processes of the FDA, EMA and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval of our product candidates, we will be unable to generate product revenue and our business will be substantially harmed. |
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
| ● | Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees. |
Risks Related to Our Intellectual Property
| ● | Our success depends on our ability to protect our intellectual property and our proprietary technologies. |
31
Risks Related to Our Dependence on Third Parties
| ● | We rely, and expect to continue to rely, on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research and studies, which may harm our business. |
| ● | We contract with third parties for the production of EDG-7500 and EDG-15400 for our ongoing clinical trials and the production of product candidates from our EDG-003 cardiometabolic discovery program for our ongoing preclinical studies, and expect to continue to do so for additional clinical trials, preclinical studies and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quality and quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. |
| ● | Our reliance on third parties may require 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. |
Risks Related to Our Future Operations Following the Sevasemten Sale
| ● | There is no guarantee that we will receive the milestone payments under the Sevasemten Purchase Agreement (as defined below). |
| ● | We have discretion in the use of the proceeds from the Sevasemten Sale (as defined below) and our choices about the use of proceeds may be ineffective. |
| ● | We may face new challenges as a smaller, less diversified company. |
| ● | We may experience operational burdens, disputes or costs in connection with transition services and other post-closing obligations under the Sevasemten Sale. |
Risks Related to Our Financial Position, Need for Additional Capital and Limited Operating History
We have a limited operating history and while we are moving toward becoming a commercial-ready biopharmaceutical company, some of our product candidates are early in development and we have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and likelihood of success and future viability.
We are a late-stage clinical biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. We are developing precision medicines for cardiovascular diseases which is an unproven and highly uncertain undertaking and involves a substantial degree of risk. We commenced operations in 2017, and while we are moving toward becoming a commercial-ready biopharmaceutical company, we have no products approved for commercial sale and have not generated any revenue. In April 2024, we began enrolling a multipart Phase 2 clinical trial with our product candidate EDG-7500 for people with hypertrophic cardiomyopathy (HCM), and in September 2025, we initiated a Phase 1 trial of healthy adults with our product candidate EDG-15400 with future disease target of heart failure with preserved ejection fraction (HFpEF). We have not yet initiated clinical trials for any other product candidate, including product candidates from our EDG-003 cardiometabolic discovery program. Since our inception in 2017, we have devoted substantially all of our focus and financial resources to discovering, identifying and developing potential product candidates, including advancing our development programs, conducting preclinical studies of our product candidates and initiating clinical trials, organizing and staffing our company, business planning, raising capital and securing related intellectual property rights.
We have not yet demonstrated our ability to obtain marketing approvals, manufacture a commercial-scale product or arrange for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. As a result, it may be more difficult for investors to accurately predict our likelihood of success and viability than it could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields. As we continue moving toward commercialization, we will need to transition from a company with
32
a research and development focus to a company capable of supporting commercial activities. We have not yet demonstrated an ability to successfully overcome such risks and difficulties, or to make such a transition. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
We have not generated any revenue to date, have incurred significant net losses since our inception, and expect to continue to incur significant net losses for the foreseeable future.
We have incurred significant net losses since our inception, have not generated any revenue to date and have financed our operations principally through private placements of our convertible preferred stock and public offerings of our common stock. Our net loss was $57.3 million and $106.3 million for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, we had an accumulated deficit of $652.7 million. We are advancing EDG-7500 and EDG-15400 in clinical development. Our other programs, including EDG-003, are in preclinical discovery and research stages. As a result, we expect that it will be a couple of years, if ever, before we receive approval to commercialize a product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our approved product candidates, we expect that we will continue to incur substantial research and development and other expenses in order to discover, develop and market additional potential products.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. For example, we anticipate that our general and administrative expenses will increase in the future as we scale our organization to support clinical advancement, regulatory readiness, and future commercial planning activities. The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance, particularly since we expect our expenses to increase if and when our product candidates progress through clinical development as product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital, our ability to fund the development of our product candidates and our ability to achieve and maintain profitability and the performance of our stock.
On July 10, 2026, we completed the sale of our sevasemten muscular dystrophy program to Servier and received $1,550 million in upfront cash consideration. While the transaction significantly strengthened our capital position, we expect to continue to incur substantial operating losses as we advance EDG-7500, EDG-15400 and our other cardiovascular programs. Our future capital requirements will depend on numerous factors, including clinical development timelines, regulatory requirements, manufacturing activities, commercialization strategies and potential business development opportunities. In addition, future milestone payments under the Servier transaction are contingent upon the achievement of specified development, regulatory and commercial milestones and may never be received.
Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve several objectives relating to the discovery, development and commercialization of our product candidates, if approved.
Our business depends entirely on the successful discovery, development, regulatory approval and commercialization of product candidates. We have no products approved for commercial sale and do not anticipate generating any revenue from product sales for the next couple of years, if ever. Our ability to generate revenue and achieve profitability depends significantly on our ability, or any future collaborator’s ability, to achieve several objectives, including:
| ● | successful and timely completion of preclinical and clinical development of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and our other future product candidates and programs; |
33
| ● | establishing and maintaining relationships with CROs and clinical sites for the clinical development of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any other future product candidates and programs; |
| ● | the initiation and successful patient enrollment and completion of additional clinical trials on a timely basis; |
| ● | acceptable frequency and severity of adverse events in the clinical trials; |
| ● | the efficacy and safety profiles that are satisfactory to the FDA or any comparable foreign regulatory authority for marketing approval; |
| ● | timely receipt of marketing approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development; |
| ● | complying with any required post-marketing approval commitments to applicable regulatory authorities; |
| ● | developing an efficient and scalable manufacturing process for our product candidates; |
| ● | establishing and maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for our product candidates, if approved; |
| ● | successful commercial launch following any marketing approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators; |
| ● | a continued acceptable safety profile following any marketing approval of our product candidates; |
| ● | commercial acceptance of our product candidates by patients, the medical community and third-party payors; |
| ● | timely receipt of reimbursement from applicable authorities for any product candidates for which we successfully receive regulatory approval; |
| ● | satisfying any required post-marketing approval commitments to applicable regulatory authorities; |
| ● | identifying, assessing and developing new product candidates; |
| ● | obtaining, maintaining and expanding patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally; |
| ● | protecting our rights in our intellectual property portfolio; |
| ● | defending against third-party infringement claims, if any; |
| ● | entering into, on favorable terms, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates; |
| ● | obtaining coverage and adequate reimbursement by third-party payors for our products and patients’ willingness to pay in the absence of such coverage and adequate reimbursement; |
34
| ● | obtaining additional funding to develop and potentially manufacture and commercialize our product candidates; |
| ● | addressing any competing therapies and technological and market developments; |
| ● | managing costs, including any unforeseen costs, that we may incur as a result of nonclinical study or clinical trial delays due to public health pandemics or emergencies, inflation or other causes; and |
| ● | attracting, hiring and retaining qualified personnel, including clinical, scientific, management and administrative personnel. |
We may never be successful in achieving our objectives and, even if we do, 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 on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to maintain or further our research and development efforts, raise additional necessary capital, grow our business and continue our operations.
We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or commercializing our product candidates on a timely or profitable basis, if at all. Changes in the manufacturing process or facilities will require further comparability analysis and approval by the FDA before implementation, which could delay our clinical trials and product candidate development, and could require additional clinical trials, including bridging studies, to demonstrate consistent and continued safety and efficacy.
We may require substantial additional capital to finance our operations, which may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
As of June 30, 2026, we had $460.7 million in cash, cash equivalents and marketable securities. We also received $1,550 million in upfront cash consideration and can potentially receive up to $1,100 million in additional milestone payments in connection with the Sevasemten Sale. We expect our current cash, cash equivalents and marketable securities will be sufficient to fund our current operating plan for at least the next 12 months. The upfront proceeds from the Sevasemten Sale, combined with existing cash, cash equivalents and marketable securities, significantly strengthen our capital position and are expected to support advancement of EDG-7500 and our cardiovascular pipeline; however, our operating plans may change and we may seek or require additional capital. On May 10, 2024, we filed an automatic shelf registration statement on Form S-3ASR that allows us to undertake various equity and debt offerings. We additionally filed a prospectus supplement to the shelf registration statement and entered into a sales agreement with Leerink Partners LLC (Leerink Sales Agreement) on May 10, 2024, under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $175.0 million from time to time, through an “at the market offering” program (Leerink ATM). Pursuant to the automatic shelf registration statement, on April 3, 2025, we closed an underwritten registered direct offering of 9,935,419 shares of our common stock for net proceeds of $187.1 million after deducting underwriting discounts and commissions and offering expenses. We have not yet offered or sold any shares of common stock related to the Leerink ATM.
Our estimate as to how long we expect our existing cash, cash equivalents and marketable securities to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed
35
substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials of, and seek marketing approval for, EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program, as well as develop our proprietary drug discovery platform. Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with sales, marketing, manufacturing and distribution activities. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or other regulatory agencies to perform clinical trials or preclinical studies in addition to those that we currently anticipate. Other unanticipated costs may also arise. Because the design and outcome of our planned and anticipated preclinical studies and clinical trials are highly uncertain, we cannot reasonably estimate the actual amount of resources and funding that will be necessary to successfully complete the development and commercialization of any product candidate we develop. We are not permitted to market or promote EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program or any other product candidate before we receive marketing approval from the FDA. We also expect to incur costs associated with operating as a public company. Our cash, cash equivalents and marketable securities may not be sufficient for us to complete development and commercialization of all current or future product candidates under all scenarios. Accordingly, we may need to obtain additional funding in order to continue our operations.
Our future capital requirements will depend on many factors, including, but not limited to:
| ● | the scope, progress, results and costs of researching and developing our product candidates including conducting preclinical studies and clinical trials; |
| ● | the costs, timing and outcome of regulatory review of our product candidates; |
| ● | the number and characteristics of other product candidates that we pursue; |
| ● | the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
| ● | the costs of manufacturing products of consistent quality and obtaining sufficient inventory to support commercial launch; |
| ● | the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; |
| ● | the cost and timing of hiring new employees to support our continued growth; |
| ● | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
| ● | the effect of competing products that may limit market penetration of our products; |
| ● | the ability to establish and maintain collaborations on favorable terms, if at all; |
| ● | the extent to which we acquire or in-license other product candidates and technologies; |
| ● | the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any; |
| ● | our need to implement additional internal systems and infrastructure, including financial and reporting systems; |
| ● | the compliance and administrative costs associated with being a public company; and |
36
| ● | the extent to which we acquire or invest in businesses, products, or technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.
We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. In the event that we would need to obtain additional funding, our ability to raise or access capital may be affected by macroeconomic events and disruptions to the U.S. banking and financial sectors and adequate financing may not be available to us on acceptable terms, or at all. Failures of banks and other financial institutions, such as Silicon Valley Bank in March 2023, or issues in the broader U.S. financial system may impact the broader capital markets, and in turn, may impact our ability to access those markets. Further, a tightening of credit markets and lending standards could it make more difficult for us to raise capital through either debt or equity offerings on commercially reasonable terms or at all.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments, declaring dividends or encumbering our assets to secure future indebtedness. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan.
If we raise additional funds through upfront payments or milestone payments pursuant to strategic collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Until such time, if ever, as we can generate substantial revenues, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. Further, attempting to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop our product candidates.
Failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes to offset current and future taxable income may be limited.
The Sevasemten Sale may generate substantial taxable income. Although we have net operating loss carryforwards and other tax attributes, our ability to use those attributes may be limited under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) (as further described below) and similar state rules. As a result, the Sevasemten Sale may result in material cash tax obligations, and the amount of any such obligations may differ from our estimates as the transaction accounting and related tax provision are finalized.
37
Our net operating loss (NOL) carryforwards may be unavailable to offset future taxable income because of restrictions under U.S. tax law. Our federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but for taxable years beginning after December 31, 2020, the deductibility of federal NOLs generated in tax years beginning after December 31, 2017 is limited to 80% of our current year taxable income. Our state NOLs may be subject to similar or different limitations. As of December 31, 2025, we had available federal NOL carryforwards of approximately $319.7 million, of which $318.5 million do not expire, and state NOL carryforwards of approximately $333.3 million, of which $32.7 million do not expire.
In addition, under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a cumulative change in the corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change taxable income may be limited. Similar rules may apply under state tax laws. We may have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control. We have not conducted any studies to determine annual limitations, if any, that could result from such changes in the ownership of our stock. Our ability to utilize our NOLs and certain other tax attributes could be limited by an “ownership change” as described above and consequently, we may not be able to utilize a material portion of our NOLs and certain other tax attributes, which could have a material adverse effect on our cash flows and results of operations.
Changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial conditions.
We are subject to tax laws, regulations, and policies of several taxing jurisdictions. Changes in tax laws, as well as other factors, could cause us to experience fluctuations in our tax obligations and effective tax rates and otherwise adversely affect our tax positions and/or our tax liabilities. Further, many countries, and organizations such as the Organization for Economic Cooperation and Development (the OECD) have proposed implementing changes to existing tax laws, including a proposed 15% global minimum tax (Pillar Two) that has been implemented by several countries in 2024 and is being considered for implementation by other jurisdictions. On January 5, 2026, the OECD announced a “side-by-side” elective safe harbor that exempts U.S.-parented multinational entities from some of the Pillar Two rules (including the 15% global minimum tax) for fiscal years beginning on or after January 1, 2026. Any of these developments or changes in U.S. federal or state or non-U.S. tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others.
Market conditions and changing circumstances, some of which may be beyond our control, could impair our ability to access our existing cash, cash equivalents and investments and to timely pay key vendors and others. For example, on March 10, 2023, Silicon Valley Bank (SVB), where we maintain certain operating accounts, was placed into receivership with the Federal Deposit Insurance Corporation (FDIC), which resulted in all funds held at SVB being temporarily inaccessible by SVB’s customers. If other banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC. In addition, in such circumstances we might not be able to timely pay key vendors and others. We regularly maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit. Any delay in our ability to access our cash, cash equivalents and investments (or the loss of some
38
or all of such funds) or to timely pay key vendors and others could have a material adverse effect on our operations and cause us to need to seek additional capital sooner than planned.
Our operations and financial results could be adversely impacted by public health pandemics, such as COVID-19 and other related outbreaks in the United States and the rest of the world.
Disruptions caused by the COVID-19 pandemic impacted our productivity, resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial.
To the extent we may experience any disruptions directly or indirectly through our contractors or partners as a result of any ongoing pandemic, outbreaks or other public health emergencies or disruptions that could severely impact our business and clinical trials, including:
| ● | further delays or difficulties in enrolling and retaining patients in our clinical trials or those conducted by third parties and further incurrence of additional costs as a result of preclinical study and clinical trial delays and adjustments; |
| ● | challenges related to ongoing and increased operational expenses related to pandemics or public health emergencies or disruptions; |
| ● | delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff; |
| ● | delays, difficulties or increased costs to comply with public health related protocols at our leased facilities and clinical sites; |
| ● | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of clinical trials; |
| ● | interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others; |
| ● | delays in receiving approval from local regulatory authorities to initiate our planned clinical trials; |
| ● | delays in preclinical and clinical sites receiving the supplies and materials needed to conduct our clinical trials; |
| ● | interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug products used in our clinical trials; |
| ● | changes in regulations as part of a response to public health emergencies or disruptions which may require us to change the ways in which our clinical trials are conducted, or to discontinue the clinical trials altogether, or which may result in unexpected costs; |
| ● | delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel; |
| ● | refusal of the FDA to accept data from clinical trials in affected geographies outside the United States; and |
| ● | increased competition for contract research organizations (CROs), suppliers and vendors. |
39
Additionally, certain third parties with whom we engage, including our collaborators, contract organizations, third-party manufacturers, suppliers, clinical trial sites, regulators and other third parties with whom we conduct business may adjust their operations in light of public health emergencies. If these third parties experience shutdowns or continued business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. Changing our third-party manufacturer could result in delays in our manufacturing supply chain which could delay or otherwise impact our development of our product candidates and result in increased costs related to our product candidates. Additionally, certain preclinical studies for our discovery research programs are conducted by CROs, which could be discontinued or delayed as a result of public health emergencies. We could also experience delays if our suppliers are delayed in delivering raw materials to our third-party manufacturers. For example, our clinical trial sites could experience delays in collecting, receiving, and analyzing data from patients enrolled in our clinical trials due to limited staff at such sites, limitation or suspension of on-site visits by patients, or patients’ reluctance to visit the clinical trial sites during a public health emergency. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from public health emergencies on the costs and timing associated with the conduct of our clinical trial and other related business activities.
In the event of a public health emergency, we could be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from such diseases. To the extent public health emergencies or outbreaks adversely affect our business, financial condition and operating results, it may also have the effect of heightening many of the risks described in this “Risk Factors” section.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We are substantially dependent on the success of our lead product candidate EDG-7500. If we are unable to complete further development of, obtain approval for and commercialize EDG-7500 for one or more indications in a timely manner, our business will be harmed.
Our future success is dependent on our ability to timely and successfully complete clinical trials, obtain marketing approval for and successfully commercialize our lead product candidate EDG-7500. We are investing the majority of our efforts and financial resources in the research and development of EDG-7500. EDG-7500 is in advanced clinical trials in patients with HCM.
EDG-7500 will require additional clinical development, expansion of manufacturing capabilities, marketing approval from government regulators, substantial investment and significant marketing efforts before we can generate any revenues from product sales. We are not permitted to market or promote EDG-7500, EDG-15400, or any other product candidate before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals. While we announced topline results for our multipart Phase 2 CIRRUS-HCM trial of EDG-7500, from Part A, the single-dose arm in patients with obstructive HCM (oHCM) and Part B, Part C, and Part D in patients with oHCM and nonobstructive HCM (nHCM), the FDA may disagree with our interpretation of the data and may require additional clinical testing before we can seek regulatory approval and begin commercialization, if at all.
The success of EDG-7500 will depend on several factors, including the following:
| ● | the successful and timely completion of our ongoing nonclinical studies and clinical trials of EDG-7500; |
| ● | the initiation and successful patient enrollment and completion of additional clinical trials of EDG-7500 on a timely basis; |
| ● | maintaining and establishing relationships with CROs and clinical sites for the clinical development of EDG-7500; |
| ● | the frequency and severity of adverse events in clinical trials; |
40
| ● | demonstrating efficacy, safety and tolerability profiles that are satisfactory to the FDA, EMA or any comparable foreign regulatory authority for marketing approval; |
| ● | the timely receipt of marketing approvals for EDG-7500 from applicable regulatory authorities; |
| ● | the extent of any required post-marketing approval commitments to applicable regulatory authorities; |
| ● | the maintenance of existing or the establishment of new supply arrangements with third-party drug product suppliers and manufacturers for clinical development and, if approved, commercialization of EDG-7500; |
| ● | obtaining and maintaining patent protection, trade secret protection and regulatory exclusivity, both in the United States and internationally; |
| ● | protecting our rights in our intellectual property portfolio; |
| ● | our ability to expand EDG-7500 into multiple indications; |
| ● | the successful launch of commercial sales following any marketing approval; |
| ● | a continued acceptable safety profile following any marketing approval; |
| ● | the actual market-size, ability to identify patients and the demographics of patients eligible for our product candidates, which may be different than expected; |
| ● | commercial acceptance by patients, the medical community and third-party payors, particularly since the product candidates we develop may be novel; |
| ● | our ability to compete or combine with other therapies; and |
| ● | addressing any delays, necessary adjustments and additional costs in nonclinical study and clinical trials resulting from factors related to public health pandemics. |
We do not have complete control over many of these factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator. If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize EDG-7500, which would materially harm our business. If we do not receive marketing approvals for EDG-7500, we may not be able to continue our operations.
In addition to EDG-7500, our prospects depend in part upon developing and commercializing EDG-15400 and product candidates from our EDG-003 cardiometabolic discovery program and discovering, developing and commercializing product candidates in future programs, which may fail or suffer delays that adversely affect their commercial viability.
Our future operating results are dependent on our ability to successfully develop, obtain regulatory approval for and commercialize EDG-15400 with future disease target of HFpEF, product candidates from our EDG-003 research program currently focused on cardiometabolic indications, and our lead product candidate EDG-7500. However, research and development related to new product candidates is inherently risky. A product candidate can unexpectedly fail at any stage of preclinical and/or clinical development. The historical failure rate for product candidates is high due to risks relating to safety, efficacy, clinical execution, changing standards of medical care and other unpredictable variables. The results from preclinical testing or early clinical trials of a product candidate may not be predictive of the results that will be obtained in later stage clinical trials of the product candidate.
The success of other product candidates we may develop will depend on many factors, including the following:
41
| ● | generating sufficient data to support the initiation or continuation of clinical trials; |
| ● | obtaining regulatory permission to initiate clinical trials; |
| ● | contracting with the necessary parties to conduct clinical trials; |
| ● | successful enrollment of patients in, and the completion of, clinical trials on a timely basis; |
| ● | the timely manufacture of sufficient quantities of a product candidate for use in clinical trials; |
| ● | adverse events in clinical trials; and |
| ● | addressing any delays in our research programs resulting from factors related to public health pandemics. |
Even if we successfully discover and advance any other product candidates into clinical development, their success will be subject to all of the clinical, regulatory and commercial risks described elsewhere in this “Risk Factors” section. Accordingly, we cannot assure you that we will ever be able to discover, develop, obtain regulatory approval of, commercialize, or generate significant revenue from any product candidates.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome. The clinical trials of our product candidates may not demonstrate safety and efficacy to the satisfaction of the FDA, EMA or other comparable foreign regulatory authorities or otherwise produce positive results and the results of preclinical studies and early clinical trials may not be predictive of future results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Although we have announced positive results from our preclinical studies and clinical trials, our product candidates’ risk of failure is high and it is impossible to predict when or if EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program or any other product candidate that we develop will prove effective or safe in humans or will receive marketing approval. Before obtaining marketing approval from the FDA, EMA or other comparable foreign regulatory authorities for the sale of our product candidates, we must complete preclinical development and extensive clinical trials to demonstrate with substantial evidence the safety and efficacy of such product candidates.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and its ultimate outcome is uncertain. We cannot guarantee that any of our clinical trials will be conducted as planned or completed on schedule, or at all. Clinical trials can fail at any stage of testing and failure may result from a multitude of factors, including, among other things, flaws in study design, dose selection issues, placebo effects, patient enrollment criteria and failure to demonstrate favorable safety or efficacy traits. The outcome of preclinical studies and early-stage clinical trials may not be predictive of the success of later clinical trials. In addition, our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies or having successfully advanced through initial clinical trials. We may also discover that the half-life of our product candidates renders them unsuitable for the therapeutic applications we have chosen. As a result, we cannot assure you that any clinical trials that we conduct will demonstrate consistent or adequate efficacy and safety to support marketing approval.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs. Furthermore, the failure of any of our product candidates to demonstrate safety and efficacy in any clinical trial could negatively impact the perception of our other product candidates and/or cause the FDA or other regulatory authorities to require additional testing before approving any of our product candidates.
42
We have experienced delays in completing our clinical trials and may experience additional delays in initiating or completing additional clinical trials. We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent receipt of marketing approval or our ability to commercialize our product candidates, including:
| ● | receipt of feedback from regulatory authorities that requires us to modify the design of our clinical trials; |
| ● | clinical trial observations or results that require us to modify the design of our clinical trials; |
| ● | negative or inconclusive clinical trial results that may require us to conduct additional clinical trials or abandon certain drug development programs; |
| ● | obtaining approval from one or more institutional review boards (IRB); |
| ● | the number of patients required for clinical trials being larger than anticipated, enrollment in these clinical trials being slower than anticipated or participants dropping out of these clinical trials at a higher rate than anticipated; |
| ● | any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
| ● | the suspension or termination of our clinical trials for various reasons, including non-compliance with regulatory requirements or a finding that our product candidates have undesirable side effects or other unexpected characteristics or risks; |
| ● | changes to clinical trial protocol; |
| ● | clinical sites deviating from trial protocol or dropping out of a trial; |
| ● | the cost of clinical trials of our product candidates being greater than anticipated; |
| ● | the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates being insufficient or inadequate; |
| ● | subjects experiencing severe or unexpected drug-related adverse effects; |
| ● | selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data; |
| ● | a facility manufacturing our product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of cGMPs, regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process; |
| ● | any changes to our manufacturing process that may be necessary or desired; |
| ● | third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices (GCP) or other regulatory requirements; |
| ● | third-party contractors not performing data collection or analysis in a timely or accurate manner; |
43
| ● | interruptions resulting from geo-political actions, including war, such as war and instability in the U.S., Iran, Israel and Lebanon and other regional or geo-political conflicts given that the Company conducts trials internationally, including in Israel and certain countries in Europe and Australasia; |
| ● | third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; and |
| ● | regulators revising the requirements for approving our product candidates. |
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing in a timely manner, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may incur unplanned costs, be delayed in seeking and obtaining marketing approval, if we receive such approval at all, receive more limited or restrictive marketing approval, be subject to additional post-marketing testing requirements or have the drug removed from the market after obtaining marketing approval.
Moreover, in the future, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.
If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, our product development costs will also increase if we experience delays in preclinical studies or clinical trials or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also determine to change the design or protocol of one or more of our clinical trials, which could result in increased costs and expenses and/or delays. Any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.
In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.
Our product candidates may cause serious adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could prevent regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
We are developing novel biologically active small molecules for cardiovascular diseases. As a result, there is uncertainty as to the safety profile of product candidates we may develop. If our product candidates are associated with undesirable side effects or have unexpected characteristics in preclinical studies or clinical trials when used
44
alone or in combination with other approved products or investigational new drugs we may need to interrupt, delay or abandon their development or limit 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. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may harm our business, financial condition and prospects significantly.
Patients in our ongoing and planned clinical trials may in the future suffer other adverse events or other side effects not observed in our preclinical studies or previous clinical trials. For example, in Part B and Part C of the Phase 2 CIRRUS-HCM trial of EDG-7500 in participants with HCM, the most frequently reported adverse events were dizziness, upper respiratory tract infection and atrial fibrillation (AF), nearly all of which were considered mild to moderate in severity. If EDG-7500 or other product candidates are investigated in pediatric populations, safety monitoring and related concerns may be particularly scrutinized by regulatory agencies. In addition, if EDG-7500 or any of our product candidates are studied in combination with other therapies, it may exacerbate adverse events associated with the therapy. Patients treated with our product candidates may also be undergoing other therapies which can cause side effects or adverse events that are unrelated to our product candidate but may still impact the success of our clinical trials. The inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using or due to the gravity of such patients’ illnesses, which could occur either during the course of our clinical trials or after participating in such clinical trials.
If further serious adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, EMA, other comparable regulatory authorities or an IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition and prospects. Further, if any of our product candidates obtains marketing approval, toxicities associated with such product candidates previously not seen during clinical testing may also develop after such approval and lead to a requirement to conduct additional clinical safety trials, additional contraindications, warnings and precautions being added to the drug label, significant restrictions on the use of the product or the withdrawal of the product from the market. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on preclinical studies or early stage clinical trials.
The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA, EMA or other comparable foreign regulatory authorities.
We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in preclinical studies and early-stage clinical trials does not mean that future clinical trials will be successful. 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. Although we have announced positive results from our preclinical studies and clinical trials, we do not know whether EDG-7500 or EDG-15400 will perform in current or future clinical trials as they have performed in preclinical studies or earlier clinical trials, nor do we know whether any product candidate in our EDG-003 cardiometabolic discovery program will perform in current or future preclinical studies or future clinical trials as it has in prior preclinical studies. Product candidates in clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA, EMA and other comparable foreign regulatory authorities despite having progressed
45
through preclinical studies. Regulatory authorities may also limit the scope of later-stage trials until we have demonstrated satisfactory safety, which could delay regulatory approval, limit the size of the patient population to which we may market our product candidates, or prevent regulatory approval.
In some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, differences in and adherence to the dose and dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. Patients treated with our product candidates may also be undergoing other therapies and may be using other approved products or investigational new drugs, which can cause side effects or adverse events that are unrelated to our product candidates. As a result, assessments of efficacy can vary widely for a particular patient, and from patient to patient and site to site within a clinical trial. This subjectivity can increase the uncertainty of, and adversely impact, our clinical trial outcomes.
We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain approval to market any of our product candidates.
If we experience delays or difficulties in the enrollment and/or maintenance of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials to such trial’s conclusion as required by the FDA, EMA or other comparable foreign regulatory authorities. Patient enrollment is a significant factor in the timing of clinical trials. Our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.
For EDG-7500 trials, we completed the Phase 1 trial in healthy subjects and our multipart Phase 2 trial (CIRRUS-HCM) in patients with oHCM and nHCM. However, we may experience difficulty with enrollment of patients in a Phase 3 trial of EDG-7500 and Phase 2 trial of EDG-15400.
We are developing product candidates for serious cardiovascular diseases and we may encounter difficulties in identifying and enrolling subjects with a stage of disease appropriate for our planned clinical trials and monitoring such subjects adequately during and after treatment. We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible subjects to participate in the clinical trials required by the FDA or comparable foreign regulatory authorities. In addition, the process of finding and diagnosing subjects may prove costly. Further, the treating physicians in our clinical trials may also use their medical discretion in advising patients enrolled in our clinical trials to withdraw from our studies to try alternative therapies.
We expect patient enrollment to be affected because our competitors have ongoing clinical trials for programs that are under development for the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials could instead enroll in clinical trials of our competitors’ programs. Patient enrollment for our current or any future clinical trials has been and could in the future be affected by factors such as:
| ● | size and nature of the patient population; |
| ● | perceived risks and benefits of novel, unproven approaches; |
| ● | severity of the disease under investigation; |
| ● | availability and efficacy of approved drugs for the disease under investigation; |
| ● | patient eligibility criteria for the trial in question as defined in the protocol; |
| ● | perceived risks and benefits of the product candidate under study; |
46
| ● | clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new products that may be approved or other product candidates being investigated for the indications we are investigating; |
| ● | patient referral practices of physicians; |
| ● | the ability to monitor patients adequately during and after treatment; |
| ● | the activities of key opinion leaders (KOLs) and patient advocacy groups; |
| ● | proximity and availability of clinical trial sites for prospective patients; and |
| ● | the risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they may have an advanced disease, will not survive the full terms of the clinical trials. |
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates and jeopardize our ability to obtain marketing approval for the sale of our product candidates. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining participation in our clinical trials through the treatment and any follow-up periods.
We have limited resources and are currently focusing the majority of our efforts on developing EDG-7500 for particular indications. As a result, we may fail to capitalize on other indications or product candidates that may ultimately have proven to be more profitable.
Although the Sevasemten Sale significantly increased our cash resources, we must still prioritize the use of capital, personnel and management attention, and we are currently focusing the majority of our efforts on developing EDG-7500. As a result, because we have limited resources, we may forgo or delay the pursuit of opportunities for other indications or with other product candidates that may have greater commercial potential, including EDG-15400 or product candidates from our EDG-003 cardiometabolic discovery program. In addition, while we currently have multiple compounds in our programs, we are focusing our efforts on select product candidates from each of these programs to develop as lead product candidates in each program. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future research and development activities for EDG-7500, EDG-15400, and our EDG-003 cardiometabolic discovery program may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target markets for EDG-7500, EDG-15400, or the product candidates we are currently researching, such as those from our EDG-003 cardiometabolic discovery program, we may relinquish valuable rights to our product candidates or programs through collaboration, licensing or other strategic arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate or program.
We face significant competition and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the products we develop, our commercial opportunities will be negatively impacted.
The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary and novel products and product candidates. Our competitors have developed, are developing or may develop products, product candidates and processes competitive with our product candidates. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may attempt to develop product candidates.
47
We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, emerging and start-up companies, universities and other research institutions. We also compete with other organizations to recruit management, scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business plan. We will also face competition in establishing clinical trial sites, enrolling subjects for clinical trials and in identifying and in-licensing new product candidates.
With EDG-7500, we expect to face competition from existing products and products in development. Current first-line pharmaceutical treatment for patients with oHCM and nHCM consists of non-vasodilating beta blockers and non-dihydropyridine calcium channel blockers. Commonly prescribed beta-blockers are atenolol, propranolol, and metoprolol. Verapamil and diltiazem are calcium channel blockers used in the treatment of symptomatic oHCM and nHCM. For oHCM patients who remain symptomatic, a sodium channel blocker with negative ionotropic drug properties, typically disopyramide (Norpace marketed by Pfizer or a generic form) and/or a cardiac myosin inhibitor (CMI) (Camzyos marketed by Bristol-Myers Squibb (BMS) or Myqorzo marketed by Cytokinetics), may also be added.
In the field of emerging treatments for HCM, competitors include BMS, Cytokinetics and Braveheart, each of which has advanced or is advancing a CMI for the treatment of symptomatic NYHA Class II-III oHCM and nHCM. BMS received approval for oHCM and commercialized Camzyos (mavacamten) in the US in 2022 and is now approved and marketed in Europe and countries across five continents. In late 2025 and early 2026, Cytokinetics received approval of Myqorzo (aficamten) in the US, Europe and certain Asian countries, also for the treatment of oHCM. BMS reported negative results from its Phase 3 nHCM trial of mavacamten in early 2025 but plans to initiate another Phase 3 nHCM trial in the second half of 2026. In 2026, Cytokinetics announced positive results from its Phase 3 trial of aficamten in nHCM. Cytokinetics and BMS are also developing their respective CMIs in pediatric oHCM patients; BMS announced a target review date under the Prescription Drug User Fee Act (PDUFA) of September 30, 2026 for the FDA-accepted sNDA for Camzyos in adolescents with oHCM. Braveheart Bio announced results from its Phase 2 oHCM and nHCM of HRS/BHB-1893 in March 2026 and plans to initiate global Phase 3 studies in oHCM and nHCM in the second half of 2026 and 2027, respectively.
Other active non-CMI programs include: Lexicon’s sotagliflozin, which completed enrollment of the Phase 3 trial in symptomatic oHCM and nHCM in July 2026; Imbria’s ninerafaxstat, currently in Phase 2b trial for symptomatic nHCM; HAYA’s HTX-001, currently in Phase 1a/b for nHCM; Tenaya’s TN-201, a Phase 1b/2 gene therapy for MYBPC3-associated HCM. We are aware of several preclinical HCM programs including: JN-210, a microRNA activating gene therapy approach being developed by Jaan Biotherapeutics; CDR348T and CDR641L, both are non-coding RNA-based therapies being developed by Cardior Pharmaceuticals (acquired by Novo Nordisk in May 2024); Lexeo’s LX2022 a TNNI3 gene therapy program; DINA-003, a gene therapy approach developed by DiNAQOR for which we have limited knowledge of its development plans..
Many of these current and potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources and commercial expertise than we do. Large pharmaceutical and biotechnology companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing biotechnology products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical and biotechnology companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product candidates that we develop obsolete. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies, as well as in acquiring technologies complementary to, or necessary for, our programs. As a result of all of these factors, our competitors may succeed in obtaining approval from the FDA, EMA or other comparable foreign regulatory authorities or in discovering, developing and commercializing products in our field before we do.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects, are more convenient, have a broader label, are marketed more effectively, are more widely reimbursed or are less expensive than any products that we may
48
develop. Our competitors also may obtain marketing approval from the FDA, EMA or other comparable foreign regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if the product candidates we develop achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced competitiveness. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our products we may develop, if approved, could be adversely affected.
Interim, topline and preliminary data from our clinical trials that we announce or publish may change as more patient data becomes available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials. In EDG-7500, on September 19, 2024, we announced positive topline data from the Phase 1 trial of EDG-7500 in healthy subjects and the Part A single-dose arm of the Phase 2 multipart CIRRUS-HCM trial in patients with oHCM, on April 2, 2025, we announced positive topline results from Part B and Part C of the Phase 2 multipart CIRRUS-HCM trial in patients with oHCM and nHCM, and on June 16, 2026, we announced positive topline results from Part D of the Phase 2 multipart CIRRUS-HCM trial in patients with oHCM and nHCM. These interim updates are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline 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, topline data should be viewed with caution until the final data are available. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common stock.
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 impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If the preliminary or topline data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program or any other product candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.
We may not be successful in our efforts to develop a proprietary drug discovery platform to build a pipeline of product candidates.
A key element of our strategy is to leverage our proprietary drug discovery platform and our ability to design small molecules to expand our pipeline of product candidates. We are leveraging our proprietary drug discovery platform and capabilities to create precision medicines for cardiovascular and cardiometabolic diseases with high levels of unmet need. In order to do so, we must continue to invest in our proprietary drug discovery platform and development capabilities. Although our research and development efforts to date have resulted in a pipeline of
49
product candidates, these product candidates may not be safe and effective. In addition, although we expect that our proprietary drug discovery platform will allow us to develop a diverse pipeline of product candidates across cardiovascular and cardiometabolic indications, we may not prove to be successful at doing so. Furthermore, we may also find that the uses of our proprietary drug discovery platform are limited because alternative uses of our therapeutics prove not to be safe or effective. Even if we are successful in building our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval or achieve market acceptance. Further, because our product candidates and development programs are based on our proprietary drug discovery platform, adverse developments with respect to one of our programs may have a significant adverse impact on the actual or perceived likelihood of success and value of our other programs.
In addition, the biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies. Our future success will depend in part on our ability to maintain a competitive position with our approach. If we fail to stay at the forefront of technological change in utilizing our proprietary drug discovery platform to create and develop product candidates, we may be unable to compete effectively. Our competitors may render our approach obsolete or limit the commercial value of our product candidates, by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach and proprietary technologies. By contrast, adverse developments with respect to other companies that attempt to use a similar approach to our approach may adversely impact the actual or perceived value of our proprietary drug discovery platform and potential of our product candidates. If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.
The manufacture of drugs is complex, and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.
Manufacturing drugs, especially in large quantities, is complex and may require the use of innovative technologies. Each lot of an approved drug product must undergo thorough testing for identity, strength, quality, purity and potency. Manufacturing drugs requires facilities specifically designed for and validated for this purpose, as well as sophisticated quality assurance and quality control procedures. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures or product recalls. When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable quality and efficacy of the products before and after such changes. If our third-party manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization as a result of these challenges, or otherwise, 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.
Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.
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. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other 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.
50
Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:
| ● | the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments; |
| ● | the timing of market introduction of the product candidate as well as competitive products; |
| ● | the clinical indications for which a product candidate is approved; |
| ● | restrictions on the use of product candidates in the labeling approved by regulatory authorities, such as boxed warnings or contraindications in labeling, or a risk evaluation and mitigation strategy, if any, which may not be required of alternative treatments and competitor products; |
| ● | the potential and perceived advantages of our product candidates over alternative treatments; |
| ● | the cost of treatment in relation to alternative treatments; |
| ● | the availability of an approved product candidate for use as a combination therapy; |
| ● | relative convenience and ease of administration; |
| ● | the willingness of the target patient population or their caregivers to try new therapies and of physicians to prescribe these therapies; |
| ● | the availability of coverage and adequate reimbursement by third-party payors, including government authorities; |
| ● | patients’ willingness to pay for these therapies in the absence of such coverage and adequate reimbursement; |
| ● | the effectiveness of sales and marketing efforts; |
| ● | support from KOLs and patient advocacy groups; |
| ● | unfavorable publicity relating to our product candidates; and |
| ● | the approval of other new therapies for the same indications. |
If any of our product candidates are approved but do not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate or derive sufficient revenue from that product candidate and our financial results could be negatively impacted.
We may not be successful in augmenting our product pipeline through acquisitions and in-licenses.
We intend to evaluate select external opportunities to strategically expand our pipeline. While we plan to leverage our leadership team’s prior business development experience as we evaluate potential in-licensing and acquisition opportunities to expand our portfolio, we may not be able to identify suitable licensing or acquisition opportunities, and even if we do, we may not be able to successfully secure such licensing and acquisition opportunities. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property
51
rights that we may consider attractive or necessary. These 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 license or acquire additional product candidates to expand our portfolio, our pipeline, competitive position, business, financial condition, results of operations, and prospects may be materially harmed.
Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations.
The availability and extent of coverage and adequate reimbursement by third-party payors including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. The initial targets in our pipeline are indications with small patient populations. For product candidates that are designed to treat smaller patient populations to be commercially viable, the reimbursement for such product candidates must be higher, on a relative basis, to account for the lack of volume. Accordingly, we will need to implement a coverage and reimbursement strategy for any approved product candidate that accounts for the smaller potential market size.
Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of such product candidates will be covered and reimbursed by third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, for example, principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency within the HHS. CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private third-party payors often follow CMS’s decisions regarding coverage and reimbursement to a substantial degree. However, one third-party payor’s determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate or at the same level of reimbursement. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our products to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates. There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost effectiveness of our products. Nonetheless, our product candidates may not be considered medically necessary or cost effective. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.
Outside the United States, the commercialization of therapeutics is 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
52
and usage of therapeutics such as our product candidates. In many countries, particularly the countries of the European Union (EU), medical product prices are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after a product receives marketing approval. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In general, product prices under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for 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 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.
If we are unable to establish or sustain coverage and adequate reimbursement for any product candidates from third-party payors, the adoption of those products and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Our business entails a significant risk of product liability and if we are unable to obtain sufficient insurance coverage, such inability could have an adverse effect on our business and financial condition. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to marketing any of our product candidates, if approved. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have an adverse effect on our business and financial condition. Also, our insurance policies may 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. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
We may be sued if any of our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing, or sale post-approval. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties. Claims could also be asserted under state consumer protection laws. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit testing and commercialization of our products. Even successful defense of a claim would require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims may result in:
| ● | delays in the development of our product candidates; |
| ● | FDA, EMA or other regulatory authority investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs; |
| ● | decreased or interrupted demand for our products; |
| ● | injury to our reputation; |
53
| ● | withdrawal of clinical trial participants and inability to continue clinical trials; |
| ● | initiation of investigations by regulators; |
| ● | costs to defend the related litigation; |
| ● | a diversion of management’s time and our resources; |
| ● | substantial monetary awards to trial participants or patients; |
| ● | product recalls, withdrawals or labeling, marketing, or promotional restrictions; |
| ● | loss of revenue; |
| ● | exhaustion of any available insurance and our capital resources; and |
| ● | the inability to commercialize any products. |
Risks Related to Regulatory Approval and Other Legal Compliance Matters
The regulatory approval processes of the FDA, EMA and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval of our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.
Our product candidates are and will continue to be subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process must be successfully completed in the United States and in many foreign jurisdictions before a new drug can be approved for marketing. Obtaining approval by the FDA, EMA and other comparable foreign regulatory authorities is costly, unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other data. Even if we eventually complete clinical testing and receive approval for our product candidates, the FDA, EMA and other comparable foreign regulatory authorities may approve our product candidates for a more limited indication or a narrower patient population than we originally requested or may impose other prescribing limitations or warnings that limit the product’s commercial potential. We have not submitted for, or obtained, regulatory approval for any product candidate, and it is possible that none of our product candidates will ever obtain regulatory approval. Further, development of our product candidates and/or regulatory approval may be delayed for reasons beyond our control. We cannot provide any assurance that any product candidate we may develop will progress through required clinical testing and obtain the regulatory approvals necessary for us to begin selling them.
We have not conducted, managed or completed large-scale or pivotal clinical trials nor managed the regulatory approval process with the FDA or any other regulatory authority. Applications for our product candidates could fail to receive regulatory approval for many reasons, including the following:
| ● | the FDA, EMA or other comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials; |
54
| ● | the FDA, EMA or other comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, are only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; |
| ● | the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; |
| ● | the FDA, EMA or other comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; |
| ● | we may be unable to demonstrate to the FDA, EMA or other comparable foreign regulatory authorities that our product candidate’s risk-benefit ratio for its proposed indication is acceptable; |
| ● | the FDA, EMA or other comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and |
| ● | the approval policies or regulations of the FDA, EMA or other comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval. |
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects. Any delay or failure in seeking or obtaining required approvals would have a material and adverse effect on our ability to generate revenue from any particular product candidates we are developing and for which we are seeking approval. Furthermore, any regulatory approval to market a drug may be subject to significant limitations on the approved uses or indications for which we may market, promote and advertise the drug or the labeling or other restrictions. In addition, the FDA has the authority to require a Risk Evaluation and Mitigation Strategy (REMS) plan as part of approving an NDA, or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug. These requirements or restrictions might include limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may significantly limit the size of the market for the drug and affect reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process varies among countries, and generally includes all of the risks associated with FDA and EMA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval.
Further, under the new leadership at the HHS under the current administration, agency reorganization, mass layoffs due to the reduction in force initiative and other measures implemented by the Department of Government Efficiency may impact the normal operations of the FDA as well as other federal agencies. FDA may lack adequate staff and resources to meet current review, approval, and inspection schedules, which could delay our anticipated timelines. In January 2025, an executive order entitled “Unleashing Prosperity Through Deregulation”, was issued which calls for at least 10 existing regulations to be repealed whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation. Recent developments at the FDA include implementation of Elsa, a generative AI tool, across all centers at the agency, announcement of a plan to phase out animal testing for monoclonal antibodies and certain other drugs, and the announcement of a new Commissioner’s National Priority Voucher program to companies supporting certain U.S. national health priorities and interests. FDA has also increased its scrutiny of foreign drug manufacturing facilities and other contractors based in China, especially with respect to the transfer of biological materials, genetic data, and other sensitive data of American patients to parties located in China. FDA’s
“real-time” release of newly issued Complete Response Letters associated with withdrawn or abandoned applications, if applicable to any of our product candidates, can materially impact our competitive advantage and intellectual property.
55
It is unclear how our industry and our clinical programs will be impacted by policies and regulations implemented under the current administration and FDA commissioner, or other executive orders. There is significant uncertainty in the industry and how federal agencies like the FDA will change in the coming years under the current administration.
To the extent the agency reorganization and other agency changes lead to disruptions in FDA’s operations, our correspondence and regulatory review processes with the FDA may be materially delayed.
The FDA, EMA and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.
Our ongoing clinical trials are being undertaken in the United States. We may choose to conduct additional clinical trials internationally. The acceptance of study data by the FDA, EMA or other comparable foreign regulatory authority from clinical trials conducted outside of their respective jurisdictions may be subject to certain conditions. In cases where data from United States clinical trials are intended to serve as the basis for marketing approval in the foreign countries outside the United States, the standards for clinical trials and approval may be different. There can be no assurance that any United States or foreign regulatory authority would accept data from trials conducted outside of its applicable jurisdiction. If the FDA, EMA 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 or clearance for commercialization in the applicable jurisdiction.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction. For example, even if the FDA or EMA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion and reimbursement of the product candidate in those countries. Complying with new requirements and changes in other foreign regulations that apply to clinical trials and drug development activities can delay our clinical trials and regulatory approval timelines in the EU and other foreign jurisdictions. For example, the Clinical Trials Regulation EU No. 536/2014 entered into application on January 31, 2022 and is intended to simplify the current rules for clinical trial authorization and standards of performance in EU. Any trials approved under the Clinical Trials Directive that continue running will need to comply with the Clinical Trials Regulation. Complying with such new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in a material adverse effect on our business.
However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory 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. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining foreign regulatory approvals and 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 potential product candidates will be harmed.
Even if our product candidates receive regulatory approval, they will be subject to significant post-marketing regulatory requirements and oversight.
Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and on-going surveillance to monitor the safety and efficacy of the product candidate, may contain significant limitations related to use restrictions for specified age groups, warnings,
56
precautions or contraindications, and may include burdensome post-approval study or risk management requirements and regulatory inspection. For example, the FDA may require a REMS in order to approve our product candidates, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or foreign regulatory authorities approve our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. 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 conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. In addition, failure to comply with FDA, EMA and other comparable foreign regulatory requirements may subject our company to administrative or judicially imposed sanctions, including:
| ● | delays in or the rejection of product approvals; |
| ● | restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials; |
| ● | restrictions on the products, manufacturers or manufacturing process; |
| ● | warning or untitled letters; |
| ● | civil and criminal penalties; |
| ● | injunctions; |
| ● | suspension or withdrawal of regulatory approvals; |
| ● | product seizures, detentions or import bans; |
| ● | voluntary or mandatory product recalls and publicity requirements; |
| ● | total or partial suspension of production; and |
| ● | imposition of restrictions on operations, including costly new manufacturing requirements. |
The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates, if approved, and generate revenue. Furthermore, non-compliance by us or any future collaborator with regulatory requirements, including safety monitoring and with requirements related to the development of products for the pediatric population can also result in significant financial penalties.
Further, the FDA’s or other ex-U.S. regulators’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. In June 2024, the U.S. Supreme Court overruled the Chevron doctrine, which gives deference to regulatory agencies’ statutory interpretations in litigation against federal government agencies, such as the FDA, where the law is ambiguous. This landmark Supreme Court decision may invite more companies and other stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, including FDA’s statutory interpretations of market exclusivities and the “substantial evidence” requirements for drug approvals, which could undermine the FDA's authority, lead to uncertainties in the industry, and disrupt the FDA's normal operations, any of which could delay the FDA’s review of our regulatory submissions. Further, changes in the leadership of the FDA and other federal agencies under the current administration may lead to new policies and changes in the regulations that can increase our compliance costs or delay our clinical development and timelines. We cannot predict the full impact of this decision, future judicial challenges
57
brought against the FDA, or the nature or extent of government regulation that may arise from future legislation or administrative action. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
In the future, to the extent we pursue an orphan disease, we may not be able to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for our product candidates and, even if we do, that exclusivity may not prevent the FDA, EMA or other comparable foreign regulatory authorities, from approving competing products.
Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. However, there can be no assurances that we will be able to obtain orphan designations for our product candidates.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity in the United States provides that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances. The applicable exclusivity period is 10 years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
Even if we are successful in obtaining orphan drug designation, we may not be able to obtain or maintain orphan drug exclusivity for that product candidate. We may not be the first to obtain marketing approval of any product candidate for which we have obtained orphan drug designation for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to ensure that we will be able to manufacture sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even after obtaining orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care or the manufacturer of the product with orphan exclusivity is unable to maintain sufficient product quantity. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the product candidate any advantage in the regulatory review or approval process or entitles the product candidate to priority review. In January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst, FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. The Consolidated Appropriations Act of 2026, signed into law in February 2026, codified this longstanding FDA interpretation of the Orphan Drug Act, allowing the FDA to approve multiple versions of the same orphan drug for different subindications and subpopulations.
58
Where appropriate, we plan to secure approval from the FDA or comparable foreign regulatory authorities through the use of accelerated registration pathways. If we are unable to obtain such approval, we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw accelerated approval.
Where possible, we plan to pursue accelerated development strategies in areas of high unmet need. We may seek an accelerated approval pathway for our one or more of our product candidates. Under the accelerated approval provisions in the Federal Food, Drug, and Cosmetic Act, and the FDA’s implementing regulations, the FDA may grant accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, the FDA may withdraw its approval of the drug. The Food and Drug Omnibus Reform Act reformed the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
Prior to seeking such accelerated approval, we will seek feedback from the FDA and will otherwise evaluate our ability to seek and receive such accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit an NDA for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we decide to submit an application for accelerated approval or under another expedited regulatory designation (e.g., breakthrough therapy designation), there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other comparable foreign regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidate would result in a longer time period to commercialization of such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
We may face difficulties from changes to current regulations and future legislation.
Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory 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 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 lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.
59
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the U.S. administration may impact our business and industry, which could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how current and future legislation, executive actions, and litigation, including the executive orders referenced below, will be implemented, and the extent to which they will impact our business, our clinical development, and the FDA’s and other agencies’ ability to exercise their regulatory authority, including FDA’s pre-approval inspection and timely review of any regulatory filings or applications we submit to the FDA. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course or constraints on our business operations, including operations of our contractors, our business may be negatively impacted.
For example, in March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and continues to significantly impact the U.S. pharmaceutical industry. Since its enactment, there have been judicial and congressional challenges to certain aspects of the ACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how future litigation or healthcare measures promulgated by the government will impact our business, financial condition and results of operations. Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in a material adverse effect on our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which will remain in effect through 2032, unless additional congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our drugs, if approved, and accordingly, our financial operations.
Moreover, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the American Rescue Plan Act of 2021 eliminated the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for single-source biologics) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. For 2026, CMS selected 10 high-cost Medicare Part D drugs in 2023 and the negotiated maximum fair price for each drug has been announced. CMS has selected 15 additional Medicare Part D drugs for negotiated maximum fair pricing in 2027. For 2028, up to an additional 15 drugs, which may be covered under either Medicare Part B or Part D, will be selected, and for 2029 and subsequent years, up to 20 additional Part B or Part D drugs will be selected. Various industry stakeholders have initiated lawsuits against the federal
60
government asserting that the price negotiation provisions of the Inflation Reduction Act are unconstitutional. In June 2026, the CMS issued a proposed rule that would codify policies established in guidance documents for the Medicare Drug Price Negotiation Program for initial price applicability year 2029 and beyond. CMS plans to release guidance to implement policies related to the effectuation of the MFP for the Medicare Drug Price Negotiation Program for 2028, consistent with the Inflation Reduction Act.
Further, the current administration has issued executive orders focused on decreasing prescription drug prices, including directing the Secretary of Health and Human Services to establish a mechanism through which American patients can buy drugs directly from manufacturers who sell at a most-favored-nation price and directing the U.S. Trade Representative and Secretary of Commerce to take action to ensure foreign countries are not engaged in practices that purposefully and unfairly undercut market prices and drive price hikes in the United States. In November 2025, CMS announced a voluntary initiative called the GENEROUS Model (GENErating cost Reductions fOr U.S. Medicaid Model) to introduce the option of most-favored-nation pricing to the Medicaid program, whereby a drug manufacturer may voluntarily offer supplemental rebates to participating state Medicaid programs for a manufacturer’s covered outpatient drugs. Government agreements with pharmaceutical companies and other measures that use most-favored-nation pricing targets for prescription drugs, including the use of international pricing reference to set drug prices in the United States, or that increase generic and biosimilar drug entry sooner than expected can have a material adverse effect on our industry, ability to set adequate pricing for new drugs to recover R&D costs, ability to attract potential investors and potential buyers in the future. Additionally, the OBBB Act includes provisions that will impact the United States healthcare system in various ways, including by cuts to Medicaid and introducing new participant work and eligibility requirements for Medicaid coverage, which are expected to significantly change the administration and applicability of Medicaid coverage. The OBBB Act also expanded the orphan drug exemptions under the Medicare Price Negotiation Program, including an amendment to exclude orphan designated drugs for one or more rare diseases or conditions, instead of only one disease/condition, with the initial price applicability year 2028 and after, from Medicare price negotiations, and providing that the time for measuring a former orphan drug’s eligibility for Medicare price negotiations will be calculated from the first day after the date of FDA approval for a non-orphan disease or condition, or an approval for which the drug does not have orphan drug designation. The expansion of the exemptions for orphan designated drugs from the Medicare Drug Price Negotiation Program is expected to provide greater incentives for the development of drugs for orphan diseases and conditions which could potentially increase our competition. We cannot predict the full impact of the OBBB Act, executive orders, and new laws focused on reducing prescription drug prices or increasing domestic drug manufacturing capacity, or other measures that may be implemented by the current administration related to drug pricing, drug supply chain and manufacturing in the United States. The impact of ongoing and future judicial challenges as well as future legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the current administration on us and the pharmaceutical industry as a whole is unclear. The implementation of cost containment measures, including the prescription drug provisions under the Inflation Reduction Act, as well as other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.
At the state level, legislatures have 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. A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products. For example, the FDA has authorized the state of Florida to develop Section 804 Importation Programs to import certain prescription drugs from Canada for a limited period of time to help reduce drug costs, provided that Florida’s Agency for Health Care Administration meets the requirements set forth by the FDA. Other states may follow Florida. We are unable to predict the future course of federal or state healthcare measures in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. These and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.
61
We expect that the ACA, OBBB Act, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicaid, 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 product candidates.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. We cannot be sure whether additional legislative changes will be enacted, or 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. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
The regulatory framework for privacy and personal information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. The U.S. federal and various state, local and foreign government bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding, the collection, distribution, use, disclosure, storage, security and other processing of personal information.
Additionally, the collection and use of health data and other personal data is governed in the European Economic Area (EEA), which includes the EU and certain other European nations, by the General Data Protection Regulation (GDPR). The GDPR extends the geographical scope of EU data protection law to entities and operations outside of the EEA under certain conditions and imposes substantial obligations upon companies and new rights for individuals, and by certain EU member state-level legislation. Failure to comply with the GDPR may result in fines up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. The GDPR has increased our responsibility and liability in relation to applicable personal data that we or our CROs and other contractors and service providers may process, and we may be required to put in place additional measures in an effort to comply with the GDPR and with other laws and regulations in the EEA, including those of EU member states, relating to privacy and data protection. These efforts may require substantial efforts and incurring significant costs. If our efforts to comply with the GDPR or other applicable EU laws and regulations are not successful, or are perceived to be unsuccessful, it could adversely affect our business in the EEA and elsewhere. Further, in July 2020, the Court of Justice of the European Union (CJEU) issued a decision invalidating the EU-U.S. Privacy Shield, which had enabled the transfer of personal data from the EU to the U.S. for participating companies, and questioning the continued validity of the European Commission’s standard contractual clauses (SCCs). EU regulators have since issued additional guidance regarding considerations and requirements that must be considered and undertaken when using the SCCs. EU regulators also released updated standard contractual clauses that are required to be implemented. The CJEU’s decision and other regulatory guidance or developments otherwise may impose additional obligations with respect to the transfer of personal data from the EEA, United Kingdom (UK) and Switzerland to the U.S., and we may be required to engage in additional contractual negotiations relating to the new SCCs or otherwise, each of which could restrict our activities in those jurisdictions, limit our ability to provide our products and services in those jurisdictions, or increase our costs and obligations and impose limitations upon our ability to efficiently transfer personal data from the EEA, UK and Switzerland to the U.S.
Further, the UK has implemented legislation similar to the GDPR, referred to as the UK GDPR, which provides for fines of up to the greater of £17.5 million or 4% of global turnover. On June 28, 2021, the European Commission issued an adequacy decision in respect of the UK’s data protection framework, allowing personal data transfers from EU member states to the UK to continue without requiring additional contractual or other measures. This decision was renewed in December 2025 to extend until December 2031, but is subject to renewal and may be revisited by the European Commission at any time. The United Kingdom has modified its data protection framework in the UK Data (Use and Access) Act 2025 (DUAA), which was enacted on June 19, 2025. In the medium and longer terms, the relationship between the UK and EU in relation to aspects of data protection law
62
remains unclear, which exposes us to further compliance risk. The UK also has issued its own standard contractual clauses that are required to be implemented. We may incur liabilities, expenses, costs, and other operational losses relating to the GDPR, the UK GDPR, and other laws and regulations in the EEA and UK relating to privacy and data protection, including those of applicable EU member states in connection with any measures we take to comply with them.
In the United States, a broad variety of data protection laws and regulations may apply to our activities such as state data breach notification laws, state personal data privacy laws (for example, the California Consumer Privacy Act of 2018 (CCPA)), state health information privacy laws, and federal and state consumer protection laws. A range of enforcement agencies exist at both the state and federal levels that can enforce these laws and regulations. For example, the CCPA requires covered businesses that process personal information of California residents to disclose their data collection, use and sharing practices. Further, the CCPA provides California residents with certain data privacy rights (including the ability to opt out of certain disclosures of personal data), imposes operational requirements for covered businesses, provides for civil penalties for violations as well as a private right of action for data breaches and statutory damages (that is expected to increase data breach class action litigation and result in significant exposure to costly legal judgments and settlements). Aspects of the CCPA and its interpretation and enforcement remain uncertain. In addition, the CCPA was expanded on January 1, 2023, when the California Privacy Rights Act of 2020 (CPRA) became operative. The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal information, establishes restrictions on the retention of personal information, expand the types of data breaches subject to the CCPA’s private right of action, provides for increased penalties for CPRA violations concerning California residents under the age of 16, and establishes a California Privacy Protection Agency to implement and enforce the legislation. Although there are limited exemptions for clinical trial data under the CCPA, the CCPA and other similar laws could impact our business activities, depending on their interpretation. Additionally, numerous other state legislatures have enacted or are currently contemplating, and may pass, their own data privacy and security laws, with potentially greater penalties and more rigorous compliance requirements relevant to our business. Many of these laws are comprehensive privacy statutes that impose obligations similar to the CCPA. For example, Colorado enacted a Colorado Privacy Act (CPA) in June 2021 that went into effect on July 1, 2023, with enforcement commencing on the same date. The Colorado Attorney General released its rules implementing the CPA on March 15, 2023, and since has amended these rules on multiple occasions. Connecticut, Utah and Virginia have also enacted legislation similar to the CCPA and the CPA that took effect in 2023; Florida, Montana, Oregon and Texas have enacted similar legislation that took effect in 2024; Delaware, Iowa, Maryland, Minnesota, New Hampshire, New Jersey, Nebraska and Tennessee have enacted similar legislation that took effect in 2025; Indiana, Kentucky and Rhode Island have enacted similar legislation that has taken effect in 2026; Alabama and Oklahoma have enacted similar legislation that will take effect in 2027; and Vermont has enacted similar legislation that takes effect in 2028. The U.S. government also has instituted rules, effective April 8, 2025, that prohibit or restrict transactions involving certain types and amounts of sensitive data between U.S. persons and foreign persons associated with specific countries of concern, including China. Among other things, these rules require U.S. businesses to seek assurances from certain foreign parties with which they share sensitive data (under certain types of agreements) that those parties will not further share that data with parties in countries of concern. Further, other states have enacted laws that cover certain aspects of the collection, use, disclosure, and/or other processing of health information, such as Washington’s My Health, My Data Act, which, among other things, provides for a private right of action.
Additionally, state and foreign laws may apply generally to the privacy and security of information we maintain, and may differ from each other in significant ways, thus complicating compliance efforts and potentially requiring us to undertake additional measures to comply with them. With the GDPR, CCPA, CPRA, CPA and other laws, regulations and other obligations relating to privacy and data protection imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other obligations, we may face challenges in addressing their requirements and in making necessary changes to our policies and practices, and may incur significant costs and expenses in an effort to do so. Additionally, if third parties we work with, such as vendors or service providers, violate applicable laws or regulations or our policies, such violations may also put our or our customers’ data at risk and could in turn have an adverse effect on our business. Any failure or perceived failure by us or our service providers to comply with our applicable policies or notices relating to privacy or data protection, our contractual or other obligations to third parties, or any of our
63
other legal obligations relating to privacy or data protection, may result in governmental investigations or enforcement actions, litigation, claims and other proceedings, harm our reputation, and could result in significant liability.
Inadequate funding for and other disruptions at the FDA, the SEC and other government agencies, including government shutdowns, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government shutdown, lapse in U.S. government appropriations, staff departures, 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 agency have fluctuated in recent years as a result. Government shutdown, departures and other changes in the agency personnel at the FDA can materially impact the continuity of our correspondence with the FDA, delay our clinical trials, and the timing for submitting our applications for FDA approval. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those 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, including delays or disruptions due to government shutdown, lapse in U.S. government appropriations, changes in agency personnel, public health emergencies, travel restrictions, staffing shortages, may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. If any prolonged government shutdown or disruption occurs, including due to any public health emergencies, travel restrictions, or staffing shortages, it could significantly impact the ability of the FDA and other regulatory authorities to timely review and process our regulatory submissions and provide feedback on our clinical development plans, which could have a material adverse effect on our business and our anticipated timelines. Further, future government shutdowns or disruptions to normal operations could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Our relationships with healthcare professionals, clinical investigators, CROs and third-party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws, which could expose us to significant losses, including, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings.
Healthcare providers and third-party payors 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, clinical investigators, CROs, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, as well as market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations may include the following:
| ● | the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid; |
| ● | the federal false claims laws, including the civil False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, and civil monetary penalties laws, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the |
64
| federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
| ● | the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; |
| ● | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their implementing regulations, also imposes obligations, including mandatory contractual terms, on covered entities, which are health plans, healthcare clearinghouses, and certain health care providers, as those terms are defined by HIPAA, and their respective business associates and their subcontractors, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; |
| ● | the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS information regarding payments and other transfers of value made to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as nurse practitioners and physician assistants, among others), and teaching hospitals as well as information regarding ownership and investment interests held by physicians; and |
| ● | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance regulations promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing; state and local laws that require the registration of pharmaceutical sales and medical representatives; state laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare and data privacy laws and regulations will involve substantial ongoing costs and may require us to undertake or implement additional policies or measures. We may face claims and proceedings by private parties, and claims, investigations and other proceedings by governmental authorities, relating to allegations that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations, and it is possible that courts or governmental authorities may conclude that we have not complied with them, or that we may find it necessary or appropriate to settle any such claims or other proceedings. In connection with any such claims, proceedings, or settlements, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
65
Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, suppliers and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs, suppliers and vendors may engage in misconduct or other improper activities. Misconduct by these parties could include failures to comply with FDA regulations, provide accurate information to the FDA, comply with federal and state health care fraud and abuse laws and regulations, accurately report financial information or data or disclose unauthorized activities to us. In particular, research, sales, marketing and business arrangements in the health care industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct but it is not always possible to identify and deter misconduct by these parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with 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 have a significant impact on our business, including the imposition of significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations.
If we 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 our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. 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 resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
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 maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of hazardous and flammable materials, including chemicals and biological materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
66
Our business activities may be subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws of other countries in which we operate, as well as other trade laws, including U.S. and certain foreign export and import controls, trade sanctions, and foreign investment and data export laws and regulations. Compliance with these legal requirements could limit our ability to compete in foreign markets and subject us to liability if we violate them.
Our business activities are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. These laws generally prohibit companies and their employees, agents, representatives, business partners, and third-party intermediaries from, directly or indirectly, offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to recipients in the public or private sector in order to influence official action or otherwise obtain or retain business. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals are owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA.
We sometimes leverage third parties to assist with the conduct of our business abroad. We, our employees, agents, representatives, business partners and our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly authorize such activities. We cannot assure you that all of our employees, agents, representatives, business partners and third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase.
These laws also require that we make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls and compliance procedures designed to prevent violations of anti-corruption laws. There is no certainty that all of our employees, agents, representatives, business partners and third-party intermediaries, or those of our affiliates, will comply with applicable laws and regulations, for which we may be ultimately held responsible.
Violations of these laws and regulations could result in whistleblower complaints, fines, severe civil or criminal sanctions, settlements, prosecution, enforcement actions, damages, adverse media coverage, investigations, loss of export privileges, disgorgement, and other remedial measures and prohibitions on the conduct of our business including our ability to offer our products in one or more countries. Responding to any investigation or action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. As a general matter, investigations, enforcement actions and sanctions could damage our reputation, our brand, our international activities, our ability to attract and retain employees and our business, prospects, operating results and financial condition.
In addition, our products may be subject to U.S. and foreign export and import controls, trade sanctions, and foreign investment and data export 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 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. We also may be subject to review under U.S. or other national-security or foreign-investment laws and regulations when foreign persons invest in us or when we engage in certain cross-border transactions. Such review may delay or prevent proposed investments or transactions, impose material conditions or require divestiture, and failure to comply with or to obtain required clearance could have a material adverse effect on our business, financial condition and results of operations.
67
Further, national security concerns or changing geopolitical tensions could spur new regulations that limit our ability to transfer certain types of data abroad. For example, the Department of Justice issued a final rule which took effect in April 2025 that places limitations, and in some cases prohibitions, on certain transfers of sensitive personal data to business partners located in China and other designated countries, or with other specified links to China and other designated countries. These rules also may broadly require us to extract promises from other third-party service providers that they will not transfer data we share with them onward to parties linked to countries of concern.
If we fail to comply with these trade laws and regulations, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new trade 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, including the impact of the changes in the U.S. government administration and policy positions, could result in decreased use of our products by existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to sell our products would likely adversely affect our business.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.
To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel, and we face significant competition for experienced personnel. We are highly dependent on the principal members of our management and scientific and medical staff, particularly Alan Russell, our Co-Founder and Chief Scientific Officer. Additionally, wage inflation may interfere with our ability to hire or retain personnel. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental to us if we cannot recruit suitable replacements in a timely manner. We do not maintain “key person” insurance for any of our executives or other employees. We could in the future have difficulty attracting and retaining experienced personnel and may be required to expend significant financial resources in our employee recruitment and retention efforts.
Many of the other biotechnology companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide higher compensation, more diverse opportunities and better prospects for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover, develop and commercialize our product candidates will be limited and the potential for successfully growing our business will be harmed.
Additionally, we rely on our scientific founders and other scientific and clinical advisors and consultants to assist us in formulating our research, development and clinical strategies. These advisors and consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, these advisors and consultants typically will not enter into non-compete agreements with us. If a conflict of interest arises between their work for us and their work for another entity, we may lose their services. Furthermore, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours. In particular, if we are unable to maintain consulting relationships with our scientific founders or if they provide services to our competitors, our development and commercialization efforts will be impaired and our business will be significantly harmed.
68
If we are unable to establish sales or marketing capabilities or enter into agreements with third parties to sell or market our product candidates, we may not be able to successfully sell or market our product candidates that obtain regulatory approval.
We currently do not have and have never had a marketing or sales team. In order to commercialize any product candidates, if approved, we must build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services for each of the territories in which we may have approval to sell or market our product candidates. We may not be successful in accomplishing these required tasks.
Establishing an internal sales or marketing team with technical expertise and supporting distribution capabilities to commercialize our product candidates will be expensive and time-consuming and will require significant attention of our executive officers to manage. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could adversely impact the commercialization of any of our product candidates that we obtain approval to market, if we do not have arrangements in place with third parties to provide such services on our behalf. Alternatively, if we choose to collaborate, either globally or on a territory-by-territory basis, 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, we will be required to negotiate and enter into arrangements with such third parties relating to the proposed collaboration and such arrangements may prove to be less profitable than commercializing the product on our own. If we are unable to enter into such arrangements when needed, on acceptable terms, or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval, or any such commercialization may experience delays or limitations. If we are unable to successfully commercialize our approved product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will suffer, and we may incur significant additional losses.
In order to successfully implement our plans and strategies, we will need to grow the size of our organization, and we may experience difficulties in managing this growth.
The Sevasemten Sale resulted in the separation or transfer of certain employees and may require us to reallocate responsibilities among remaining personnel while continuing to recruit and retain employees needed to advance our cardiovascular pipeline. Following the sale of sevasemten, we had 127 full-time employees. Of these employees, 94 are engaged in research or product development and clinical activities. In order to successfully implement our development and commercialization plans and strategies, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:
| ● | identifying, recruiting, integrating, maintaining and motivating additional employees; |
| ● | managing our internal development efforts effectively, including the clinical, FDA, EMA and other comparable foreign regulatory agencies’ review process for EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any other product candidates, while complying with any contractual obligations to contractors and other third parties we may have; and |
| ● | improving our operational, financial and management controls, reporting systems and procedures. |
Our future financial performance and our ability to successfully develop and, if approved, commercialize EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including key aspects of our
69
research and development, clinical development and manufacturing. We cannot assure you that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by third-party service providers is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any other product candidates or otherwise advance our business. We cannot assure you that we will be able to manage our existing third-party service providers or find other competent outside contractors and consultants on economically reasonable terms, or at all.
If we are not able to effectively expand our organization by hiring new employees and/or engaging additional third-party service providers, we may not be able to successfully implement the tasks necessary to further develop and commercialize EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and other product candidates and, accordingly, may not achieve our research, development and commercialization goals.
Our computer systems, or those of any of our CROs, manufacturers, other contractors, consultants, service providers, or potential future collaborators, may fail or suffer security or data privacy breaches or incidents or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations.
We, and our CROs, like other companies operating in today’s environment, are increasingly dependent on information systems, services and infrastructure, and information systems, services, and infrastructure owned, operated or maintained by third parties, to operate our business. In the ordinary course of our business, we collect, create, generate, process, transmit and store large amounts of sensitive information, including personal information, proprietary information such as trade secrets, and other sensitive data. It is critical that we do so in a manner designed to maintain the confidentiality, integrity and availability of our information systems and the information contained therein. We have incurred costs to establish a cybersecurity risk management program, including through the implementation of security measures in an effort to protect systems that store our information. However, despite the implementation of those security measures and the implementation of our cybersecurity risk management program, given the size and complexity and the increasing amounts of information maintained on our information technology systems, and those of our third-party CROs, other contractors (including sites performing our clinical trials), service providers, suppliers, and consultants, these systems are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, technical errors, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches and incidents from inadvertent or intentional actions by our employees, contractors, consultants, service providers, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including supply chain cyber-attacks or the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise the confidentiality, integrity, or availability of our information systems or the information contained therein, or otherwise availability or lead to the loss, destruction, alteration, prevention of access to, disclosure, or dissemination of, or damage or unauthorized access to, our data (including trade secrets or other confidential information, intellectual property, proprietary business information, and personal information) or data that is processed or maintained on our behalf, or other assets, which could result in financial, legal, business and reputational harm to us. We, our CROs, and other vendors that we work with have experienced cybersecurity incidents in the past (including one of our vendors in 2026 and CROs of ours in 2025, 2023, and 2019) and we cannot eliminate the risk that we, our CROs, and other vendors will experience them in the future.
While we regularly monitor the security of our systems, attackers have become very sophisticated in the way they conceal access to systems, and we may not be aware that we have been attacked. We have received phishing attacks, and companies have, in general, experienced an increase in phishing and social engineering attacks from third parties, and cybersecurity researchers have warned of heightened risks of cyberattacks in connection with Russia’s war with Ukraine, and war and instability in the Middle East. In addition, our adoption of remote working arrangements may result in increased privacy, security, and operational concerns arising from the increased
70
electronic transfer and other online activity. For example, employees, consultants, or contractors working remotely through home or other networks or on personal owned devices may be less secure than employees, consultants, or contractors working in company offices, which may subject us to increased security risks, including cybersecurity-related events, and expose us to risks of data or loss and associated disruptions to our operations.
Any disruption or security incident, technical outage or other event that leads to unauthorized access, use, destruction, or disclosure of our applications, any other data processed or maintained on our behalf or other assets, or for it to be believed or reported that any of these occurred, could disrupt our business, harm our reputation, contribute to delays in the development and commercialization of our product candidates, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of data, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
We also face indirect technology, cybersecurity, and operational risks relating to CROs, consultants, suppliers, and other third parties with whom we do business or upon whom we rely, or whose technology on which we rely, to facilitate or enable our business activities. We cannot assure you that our data protection efforts and our investment in information technology, or the efforts or investments of CROs, consultants or other third parties, will prevent significant breakdowns in systems or will prevent, or have prevented, other cyber incidents that could disrupt our programs and operations and the development of our product candidates or result in loss, destruction, unavailability, alteration or dissemination of, or damage or unauthorized access to, our systems and data and other data processed or maintained on our behalf or other assets, any of which could have a material adverse effect upon our reputation, business, operations or financial condition. Any such event that leads to loss, damage, or unauthorized access to, or use, alteration, or disclosure, dissemination, or other processing of, personal information, including personal information regarding our clinical trial subjects or employees, or the perception that any such event has occurred, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, cause us to incur costs, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.
Advances in artificial intelligence (AI) and other technologies may increase our cybersecurity risks. The already-increasing sophistication and expertise among hackers may be magnified through the malicious use of AI technologies that have the potential to dramatically increase the speed and impact of cyberattacks. We, and our third-party CROs, other contractors (including sites performing our clinical trials), service providers, suppliers, and consultants also continue to incorporate artificial intelligence (AI) technologies into our solutions and otherwise in our business, and that may result in security incidents, magnify the impact of such incidents, or otherwise increase cybersecurity risks. Generative AI tools, particularly those that employ large language models (LLMs), used by us or our third-party CROs, contractors or service providers can also pose significant risks of data leakage, which could lead to loss, disclosure, dissemination, or other unauthorized processing of our data (including trade secrets or other confidential information, intellectual property, proprietary business information, and personal information), data that is maintained or otherwise processed on our behalf, or other assets, which could result in financial, legal, business and reputational harm to us. To mitigate such risks, we generally seek to limit authorized use of AI tools in our business to internal LLMs.
Notifications and follow-up actions related to a security breach or incident could impact our reputation and cause us to incur significant costs, including legal expenses and remediation costs. For example, the loss, corruption or (temporary or permanent) unavailability of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the impacted data. We expect to incur significant costs in an effort to detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or incident. We also rely on third parties to manufacture our product candidates, and for other purposes, and similar events relating to their infrastructure and systems could also have a material adverse effect on our business.
71
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption in or, failure or security breach or incident of or impacting our systems or third-party systems where information important to our business operations or commercial development is stored. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
The use of AI technology can give rise to intellectual property risks, including uncertainty regarding ownership of AI-generated inventions, compromises to proprietary IP, inaccuracy, bias, data privacy and cybersecurity issues, data provenance disputes, and infringement or misappropriation claims. The legal landscape for AI-generated inventions remains uncertain, and development of the law in the U.S. and abroad could impact our ability to enforce proprietary rights or protect against infringing uses. 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. For example, on February 13, 2024, the USPTO issued AI Inventorship guidance entitled “Inventorship Guidance for AI-assisted Inventions” which indicated that the three-part test articulated in Pannu v. Iolab Corp. 155 F.3d 1344 (Fed. Cir. 1998) was relevant to the inventorship analysis of AI-assisted inventions. However, the USPTO rescinded the February 13, 2024, guidance and issued a new guidance document entitled “Revised Inventorship Guidance for AI-Assisted Inventions” on November 28, 2025, wherein it is stated that the Pannu factors only apply when determining whether multiple natural persons qualify as joint inventors. The determination of inventorship with respect to AI-assisted inventions is thus highly uncertain and subject to change based on USPTO guidance and law.
AI may have errors or inadequacies that are not easily detectable. If the data used to train AI or the content AI applications assist in producing are deficient, inaccurate, or biased, our business may be adversely affected. We expect increasing government regulation of AI use (including the EU’s AI Act which entered into force on August 1, 2024), which may significantly increase compliance costs. This legislation imposes significant obligations on providers and deployers of AI systems. The legal landscape for AI-related intellectual property remains uncertain, and development of the law could impact our ability to enforce proprietary rights.
The rapid evolution of AI may, to the extent we decide to integrate such technologies with our products and services, require the application of significant resources to design, develop, test and maintain such products and services to help ensure that any such AI is implemented in accordance with applicable law and regulation and in a socially responsible manner and to minimize any real or perceived unintended harmful impacts. We also may need to expend further resources to adjust our business practices, as these laws and regulations evolve, especially where requirements across jurisdictions are inconsistent. Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could materially and adversely affect our business, financial condition, results of operations, and prospects.
Our vendors may in turn incorporate AI tools into their own offerings, and the providers of these AI tools may not meet existing or rapidly evolving regulatory or industry standards, including with respect to privacy and data security. Further, bad actors around the world use increasingly sophisticated methods, including the use of Gen AI, to engage in illegal activities involving the theft and misuse of personal information, financial and other confidential information and intellectual property. Any of these effects could damage our reputation, result in the loss of valuable property and information, cause us to breach applicable laws and regulations, and adversely impact our business
Our operations are vulnerable to interruption by fire, earthquakes, power loss, telecommunications failure, terrorist activity, pandemics and other events beyond our control, which could harm our business.
Our facilities and many of our personnel are located in Boulder, Colorado. We have not undertaken a systematic analysis of the potential consequences to our business and financial results from a major flood, blizzard, fire, earthquake, power loss, terrorist activity, pandemics or other disasters and do not have a recovery plan for such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us could harm our business.
72
Also, our CDMOs’ and suppliers’ facilities are located in multiple locations where other natural disasters or similar events which could severely disrupt our operations, could expose us to liability and could have a material adverse effect on our business. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our business may become subject to economic, political, regulatory and other risks associated with international operations directly or indirectly. A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.
Our business is subject to risks associated with business operations we conduct internationally, as well as indirect impacts from our relationships with collaborators, partners, or contractors who conduct business internationally. For example, we plan to initiate a Phase 3 trial for EDG-7500 in the fourth quarter of 2026 in the U.S. and in certain countries in Europe, Latin America, Australasia, and Asia. We may seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:
| ● | differing regulatory requirements and reimbursement regimes in foreign countries, including changes in existing regulatory requirements and implementation of new regulatory requirements or policies that impact our clinical development and business operations in foreign countries; |
| ● | foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials or our interpretation of data from preclinical studies or clinical trials; |
| ● | approval policies or regulations of foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval; |
| ● | unexpected changes in tariffs, trade barriers, any retaliatory actions in respect thereto, price and exchange controls and other regulatory requirements; |
| ● | economic weakness, including inflation, change in political condition, including as a result of changes in the U.S. government administration and policy positions, or political instability in particular foreign economies and markets; |
| ● | compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; |
| ● | foreign taxes, including withholding of payroll taxes; |
| ● | foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; |
| ● | difficulties staffing and managing foreign operations; |
| ● | workforce uncertainty in countries where labor unrest is more common than in the United States; |
| ● | potential liability under the FCPA or comparable foreign regulations; |
| ● | challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; |
| ● | impact of public health pandemics on our ability to produce our product candidates and conduct clinical trials in foreign countries; |
73
| ● | production or supply shortages or other disruptions resulting from any events affecting raw material supply or manufacturing capabilities abroad, including, but not limited to, impacts due to the ongoing Ukraine-Russia war, addition of certain suppliers or companies to the restricted parties lists including the U.S. Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons or U.S. Department of Commerce’s Denied Persons List, Entity List, and Unverified List or other export restrictions under the Export Administration Regulations, implementation of other export controls, restrictions or sanctions, including the impact of changes in the U.S. government administration and policy positions, that can impact the supply chain, our business, or business operations of our suppliers, contractors or partners; and |
| ● | business interruptions resulting from geo-political actions, including war, such as the ongoing war in Ukraine and war and instability in the U.S., Iran, Israel, and Lebanon, other regional or geo-political conflicts, and terrorism. |
In particular, there is currently significant uncertainty about the future relationship between the United States and various other countries, including China, with respect to trade policies, treaties, tariffs, taxes, any retaliatory actions in respect thereto, and other limitations on cross-border operations. The U.S. government has and continues to make significant additional changes in U.S. trade policy and may continue to take future actions, including the impact of changes in the U.S. government administration and policy positions, that could negatively impact U.S. trade and our business. For example, legislation in Congress known as the BIOSECURE Act was enacted in December 2025 as part of the 2026 National Defense Authorization Act, and places limitations on certain interactions with certain Chinese and other biotechnology firms that may pose a threat to United States national security; additional proposals have been raised regarding possible executive actions to further limit those Chinese service providers’ ability to engage in business in the United States. In addition, between February 2025 and February 2026, the U.S. administration imposed additional tariffs of 10% - 145% on many products imported from China citing authorities provided for in the International Emergency Economic Powers Act (IEEPA). These additional U.S. tariffs implemented under IEEPA were rescinded on February 24, 2026, following a Supreme Court decision invalidating the use of IEEPA to authorize these tariffs, but the U.S. government subsequently implemented a “temporary import surcharge” of 10% on many of the same imports between February 24, 2026 and July 24, 2026, under authorities provided for in Section 122 of the Trade Act of 1974. Upon expiration of the Section 122 temporary import surcharge on July 24, 2026, the U.S. government implemented tariffs of up to 10% or 12.5% on imported commodities from 60 U.S. trading partners, with certain items (including certain chemicals used for pharmaceutical applications) excepted, under authorities provided under Section 301 of the Trade Act of 1974, following a determination by the U.S. Trade Representative that these trading partners insufficiently enforce forced labor laws. In response to these and other actual and threatened tariff actions, certain U.S. trading partners have from time to time imposed and/or threatened retaliatory tariffs or other trade controls. These or other tariffs, actual or proposed legislation, or similar laws and regulations in the future, including changes to implemented bilateral trade deals between the U.S. and China, could adversely impact our current or future third-party arrangements with certain companies, including those in China or Chinese-owned U.S. companies, which could delay or impact our clinical trials and consequently delay or obstruct successful commercialization of our product candidates. We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions or what actions may be taken by the other countries in retaliation. If we are unable to obtain or use services from existing service providers or become unable to export or sell our products to any of our customers or service providers, our business, liquidity, financial condition, and/or results of operations would be materially and adversely affected.
These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.
Inflation in the global economy could negatively impact our business and results of operations.
General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. General inflation, including rising prices for our trial drug supply, CROs, CDMOs and rising salaries negatively impact our business by increasing our operating expenses. To the extent general inflation results
74
in rising interest rates and has other adverse effects on the market, it may continue to adversely affect our business, financial condition and results of operations.
Risks Related to Our Intellectual Property
Our success depends on our ability to protect our intellectual property and our proprietary technologies.
Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our product candidates, proprietary technologies and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We generally seek to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates, proprietary technologies and their uses that are important to our business. We also seek to protect our proprietary position by acquiring or in-licensing relevant issued patents or pending applications from third parties.
Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology. There can be no assurance that our patent applications or the patent applications of any licensor will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties.
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. The degree of future protection for our and any licensor’s proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. These uncertainties and/or limitations in our ability to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operations.
We cannot be certain that the claims in our U.S. pending patent applications, corresponding international patent applications and patent applications in certain foreign territories, or that of any licensor, will be considered patentable by the United States Patent and Trademark Office (USPTO), courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that issued claims will not be found invalid or unenforceable if challenged.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our potential future collaborators will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
| ● | the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction; |
| ● | patent applications may not result in any patents being issued; |
| ● | patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage; |
| ● | our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or eliminate our ability to make, use and sell our potential product candidates; |
75
| ● | 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 policy regarding worldwide health concerns; and |
| ● | countries other than the United States may have patent laws 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 patent prosecution process is also expensive and time-consuming, and we and any licensor may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous. It is also possible that we or any licensor will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
Recent reforms and changes at government agencies of the United States and those of non-U.S. jurisdictions could increase the delays, uncertainties and costs surrounding the prosecution of our patent applications, and the maintenance, enforcement, or defense of our issued patents. For example, the ability of the USPTO and other applicable patent authorities to properly administer their functions is highly dependent on the levels of funding available to the agency, their ability to attract and retain personnel, and fill key leadership appointments, among various factors. Termination of employees or delays in replacing or hiring for positions could significantly impact the ability of the USPTO and other applicable patent authorities to fulfill their functions and could greatly impact our ability to timely and adequately prosecute or maintain our patent applications, and our ability to timely and adequately maintain, enforce, or defend our issued patents.
In addition, 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, outside scientific collaborators, CROs, third-party manufacturers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.
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, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours for an extended duration, if at all.
Following completion of the Sevasemten Sale, our intellectual property portfolio is increasingly concentrated in assets supporting our cardiovascular programs, including EDG-7500 and EDG-15400. Any adverse development affecting the scope, validity, enforceability or commercial value of our intellectual property covering these programs could have a more significant impact on our business than prior to the transaction.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.
The ability of biotech companies to protect their intellectual property through patents is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications and those of any licensor may not result in patents being issued which protect our product candidates or which effectively prevent others from commercializing competitive product candidates.
Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we own or in-license currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive
76
advantage. Any patents that we own or in-license may be challenged or circumvented by third parties or may be narrowed or invalidated as a result of challenges by third parties. Consequently, we do not know whether our product candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents or the patents of any licensors by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and prospects.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents or the patents of any licensor may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant review (PGR) and inter partes review (IPR), or other similar proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our patent rights, allow third parties to commercialize our product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, our patents or the patents of any licensor may become subject to post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our priority of invention or other features of patentability with respect to our patents and patent applications and those of any licensor. Such challenges may result in loss of patent rights, loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our product candidates. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. In addition, if the breadth or strength of protection provided by our patents and patent applications or the patents and patent applications of any licensor is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
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 or permit us to maintain our competitive advantage. For example:
| ● | others may be able to develop products that are similar to our product candidates but that are not covered by the claims of the patents that we own or license; |
| ● | we or any licensor or collaborators might not have been the first to make the inventions covered by the patent applications that we own or license; |
| ● | we or any licensor or collaborators might not have been the first to file patent applications covering certain of our inventions; |
| ● | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; |
| ● | it is possible that the pending patent applications we own or license will not lead to issued patents; |
| ● | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
| ● | we may not develop additional proprietary technologies that are patentable; |
| ● | the patents of others may have an adverse effect on our business; and |
77
| ● | we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third-party may subsequently file a patent covering such intellectual property. |
Should any of these events occur, it could significantly harm our business, results of operations and prospects.
Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.
Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Other entities may have or may obtain patents or proprietary rights that could limit our ability to make, use, sell, offer for sale or import our product candidates and products that may be approved in the future, or impair our competitive position. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biopharmaceutical industry, including patent infringement lawsuits, oppositions, reexaminations, IPR proceedings and PGR proceedings before the USPTO and/or corresponding foreign patent offices. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which we are developing product candidates. There are third-party patents or patent applications that may have claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
There are numerous U.S. and foreign issued patents and pending patent applications owned by third-parties in the fields in which we are developing our product candidates. Because patent applications are maintained as confidential for a certain period of time, until the relevant application is published, we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates, and we cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. There is also no assurance that there is not prior art of which we are aware, but which we do not believe is relevant to our business, which may, nonetheless, ultimately be found to limit our ability to make, use, sell, offer for sale or import our products that may be approved in the future, or impair our competitive position. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
| ● | result in costly litigation that may cause negative publicity; |
| ● | divert the time and attention of our technical personnel and management; |
| ● | cause development delays; |
| ● | prevent us from commercializing any of our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law; |
| ● | require us to develop non-infringing technology, which may not be possible on a cost-effective basis; |
| ● | subject us to significant liability to third parties; or |
| ● | require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors gaining access to the same technology. |
78
Although no third-party has asserted a claim of patent infringement against us as of the date of this periodic report, others may hold proprietary rights that could prevent our product candidates from being marketed. While we believe that this patent and pending patent applications will be difficult to enforce and that we would have valid defenses to these claims of patent infringement, we cannot be certain that we would prevail in any dispute and we cannot be certain how an adverse determination would affect our business.
It is possible that a third party may assert a claim of patent infringement directed at any of our product candidates. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to our products, treatment indications, or processes could subject us to significant liability for damages, including treble damages if we were determined to willfully infringe, and require us to obtain a license to manufacture or market 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. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. Moreover, even if we or our future strategic partners were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. In addition, we cannot be certain that we could redesign our product candidates, treatment indications, or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent us from developing and commercializing our product candidates, which could harm our business, financial condition and operating results. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity and could prohibit us from marketing or otherwise commercializing our product candidates and technology.
Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.
We may in the future pursue invalidity proceedings with respect to third-party patents. The outcome following legal assertions of invalidity is unpredictable. In addition, we may be subject to claims of patent infringement during those proceedings, and delays caused by the federal agencies may increase the time period that we are subject to such claims. For example, administrative changes, including reduced personnel and budgets experienced by the Patent and Trial Appeal Board, could further delay our ability to timely challenge any such patents. Even if resolved in our favor, these legal proceedings may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and 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. Such proceedings could be expensive, substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such proceedings adequately. Some of these third parties may be able to sustain the costs of such proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent proceedings could compromise our ability to compete in the marketplace. If we do not prevail in the patent proceedings the third parties may assert a claim of patent infringement directed at our product candidates.
We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.
Many pharmaceutical companies, biotechnology companies, and academic institutions may have patents and patent applications potentially relevant to our business. We may find it necessary or prudent to obtain licenses to such patents from such third-party intellectual property holders, for example, in order to avoid infringing these third-party patents. We may also require licenses from third parties for certain technologies for use with future
79
product candidates. 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.
We may be involved in lawsuits to protect or enforce our patents or any licensor’s patents, which could be expensive, time consuming and unsuccessful. Further, our issued patents or any licensor’s patents could be found invalid or unenforceable if challenged in court.
Competitors may infringe our intellectual property rights. To prevent infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in a patent infringement proceeding, a court may decide that a patent we own or in-license is invalid, is unenforceable and/or is not infringed. If we or any of our potential future collaborators were to initiate legal proceedings against a third-party to enforce a patent directed at one of our product candidates, the defendant could counterclaim that our patent or the patent of any licensor is invalid and/or unenforceable in whole or in part. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of sufficient written description, non-enablement, or obviousness-type double patenting. Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution.
Third parties may also raise similar invalidity claims before the USPTO or patent offices abroad, even outside the context of litigation. Such mechanisms include re-examination, PGR, IPR, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). The outcome following legal assertions of invalidity and/or unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, any licensor, and the patent examiners are unaware during prosecution. There is also no assurance that there is not prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim in our patents and patent applications or the patents and patent applications of any licensor, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. If a third-party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our technology or proprietary drug discovery platform, or any product candidates that we may develop. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations and prospects.
In addition, if the breadth or strength of protection provided by our patents and patent applications or the patents and patent applications of any licensor is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and 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. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.
80
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other legal proceedings relating to our intellectual property rights, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or other proceedings.
In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that could prevent us from marketing our own patented product and practicing our own patented technology.
In Europe, as of June 1, 2023, European applications and patents may be subjected to the jurisdiction of the Unified Patent Court (UPC). Also, European applications now have the option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the UPC. This may be a significant change in European patent practice. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. As a single court system can invalidate a European patent, we, where applicable may opt out of the UPC, and as such, each European patent would need to be challenged in each individual country.
Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common shares to decline.
During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing products, programs or intellectual property could be diminished. Accordingly, the market price of shares of our common stock may decline. Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business.
Derivation proceedings may be necessary to determine priority of inventions, and an unfavorable outcome may require us to cease using the related technology or to attempt to license rights from the prevailing party.
Derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of any licensor. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with such proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development or manufacturing partnerships that would help us bring our product candidates to market.
Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involve a high degree of technological and legal complexity. Therefore, obtaining and enforcing pharmaceutical patents is costly, time consuming and inherently uncertain. Changes in either the patent laws or in the interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property and may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. In addition, Congress or other foreign legislative bodies may pass patent reform legislation that is unfavorable to us.
For example, 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
81
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, once obtained. Depending on decisions by the U.S. Congress, the U.S. federal courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patent and the patents we might obtain or license in the future.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We may also be subject to claims that former employees or other third parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Any such outcome could have a material adverse effect on our business, results of operations, and prospects. Even if we are successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products. 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, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we do not obtain patent term extension for our product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, one or more of our U.S. patents or those of any licensor may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments). The Hatch- Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. A maximum of one patent may be extended per FDA approved product as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended. Patent term extension may also be available in certain foreign countries upon regulatory approval of our product candidates. However, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case. Additionally, administrative changes at the USPTO or other applicable patent authorities, such as reduced hiring and/or funding, may result in delays in issuance of a patent or in accrual of patent term extension, thereby reducing the amount of patent term extension that could otherwise be received. Administrative changes (e.g., at the FDA or USPTO) may also lead to delays in review and analysis of regulatory submissions or requests for patent term extension, which could result in a patent term extension not being timely granted (e.g., before the expiration of the patent) and there may be no patent eligible for extension.
82
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates, and our patents, the patents of any licensors, or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or any future licensors’ patents or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents or the patents of any licensors at risk of being invalidated or interpreted narrowly and our patent applications or the patent applications of any licensor at risk of not issuing and could provoke third parties to assert claims 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. 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.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Geo-political actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications or those of any current or future licensors and the maintenance, enforcement or defense of our issued patents or those of any current or future licensors. For example, the United States and foreign government actions related to Russia’s invasion of Ukraine, which could be subject to change as a result of the change in the U.S. presidential administration, may limit or prevent filing, prosecution and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of our patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on our business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees that have citizenship or nationality in, are registered in, or have predominately primary place of business or profit-making activities in the United States and other countries that Russia has deemed unfriendly without consent or compensation. Consequently, we would not be able to prevent third parties from practicing our inventions in Russia or from selling or importing products made using our inventions in and into Russia. Accordingly, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
In Europe, as of June 1, 2023, European applications and patents may be subjected to the jurisdiction of the Unified Patent Court (UPC). Also, European applications now have the option, upon grant of a patent, of becoming a Unitary Patent which is subject to the jurisdiction of the UPC. This may be a significant change in European patent practice. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. As a
83
single court system can invalidate a European patent, we, where applicable may opt out of the UPC, and as such, each European patent would need to be challenged in each individual country.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by regulations and governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to the USPTO and various foreign patent offices at various points over the lifetime of our patents and/or applications and those of any licensors. We have systems in place to remind us to pay these fees, and we rely on our outside patent annuity service to pay these fees when due. Additionally, the USPTO and various foreign patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the particular jurisdiction. However, 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. If such an event were to occur, it could have a material adverse effect on our business.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
We intend to use registered or unregistered trademarks or trade names to brand and market ourselves and our products. Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our financial condition or results of operations.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition, we rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information to maintain our competitive position. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, we cannot provide any assurances that all such agreements have been duly executed, and 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 illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced, and our competitive position would be harmed. If we do not apply for patent protection prior to such publication or if we cannot otherwise maintain the confidentiality of our proprietary
84
technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.
We may be subject to claims that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets.
We have entered into and may enter in the future into non-disclosure and confidentiality agreements to protect the proprietary positions of third parties, such as outside scientific collaborators, CROs, third-party manufacturers, consultants, advisors, potential partners, lessees of shared multi-company property and other third parties. We may become subject to litigation where a third-party asserts that we or our employees inadvertently or otherwise breached the agreements and used or disclosed trade secrets or other information proprietary to the third parties. Defense of such matters, regardless of their merit, could involve substantial litigation expense and be a substantial diversion of employee resources from our business. We cannot predict whether we would prevail in any such actions. Moreover, intellectual property litigation, regardless of its outcome, may cause negative publicity and could prohibit us from marketing or otherwise commercializing our product candidates and technology. Failure to defend against any such claim could subject us to significant liability for monetary damages or prevent or delay our developmental and commercialization efforts, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team and other employees.
Parties making claims against us may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. 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. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, operating results, financial condition and prospects.
We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.
As is common in the pharmaceutical industry, in addition to our employees, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants, and many of our employees, were previously employed at, or may have previously provided or may be currently providing consulting services to, other pharmaceutical companies including our competitors or potential competitors. We may become subject to claims that we, our employees or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. 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, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team and other employees.
Our rights to develop and commercialize our technology and product candidates may be subject, in part, to the terms and conditions of licenses granted to us by others.
We may enter into license agreements in the future to advance our research or allow commercialization of product candidates. These and other 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 technology and products 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 any licensors fail to prosecute, maintain, enforce, and defend such
85
patents, 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 products that are subject of such licensed rights could be adversely affected.
Any licensor may have relied on third-party consultants or collaborators or on funds from third parties such that any licensor are not the sole and exclusive owners of the patents we in-licensed. If other third parties have ownership rights to our 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.
It is possible that we may be unable to obtain additional 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 and/or other forms of compensation to third parties, which could be significant.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with any licensors, we could lose license rights that are important to our business.
Disputes may arise between us and future licensors or potential licensors regarding intellectual property subject to a license agreement, including:
| ● | the scope of rights granted under the license agreement and other interpretation-related issues; |
| ● | 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; |
| ● | 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; |
| ● | the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by any 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 have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates,
86
which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
In spite of our best efforts, any licensor or potential licensors might conclude that we have 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 would 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.
The patent protection and patent prosecution for some of our product candidates may be dependent on third parties.
While we normally 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 relating to our product candidates are controlled by any licensors or collaboration partners. If any 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, any licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.
Intellectual property discovered through government funded programs may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S. manufacturers.
We have in-licensed patent applications that were generated through the use of U.S. government funding or grants, and may acquire or license in the future intellectual property rights that have been generated through the use of U.S. government funding or grants. Pursuant to the Bayh-Dole Act of 1980, the U.S. government has certain rights in inventions developed with government funding. These U.S. government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right, under certain limited circumstances, to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third-party if it determines that: (1) adequate steps have not been taken to commercialize the invention; (2) government action is necessary to meet public health or safety needs; or (3) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”). If the U.S. government exercised its march-in rights in our future intellectual property rights that are generated through the use of U.S. government funding or grants, we could be forced to license or sublicense intellectual property developed by us or that we license on terms unfavorable to us, and there can be no assurance that we would receive compensation from the U.S. government for the exercise of such rights. The U.S. government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources. In addition, the U.S. government requires that any products embodying any of these inventions or produced through the use of any of these inventions be manufactured substantially in the United States. This preference for U.S. industry may be waived by the federal agency that provided the funding if the owner or assignee of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. industry may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property.
87
Risks Related to Our Dependence on Third Parties
We rely, and expect to continue to rely, on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research and studies, which may harm our business.
We do not have the ability to independently conduct our clinical trials. We currently rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators, to conduct our current and planned clinical trials of EDG-7500 and EDG-15400 and we expect to continue to rely upon third parties to conduct additional clinical trials for EDG-7500, EDG-15400, and other product candidates. Third parties have a significant role in the conduct of our clinical trials and the subsequent collection and analysis of data. These third parties are not our employees, and except for remedies available to us under our agreements with such third parties, we have limited ability to control the amount or timing of resources that any such third-party will devote to our clinical trials. The third parties we rely on for these services may also have relationships with other entities, some of which may be our competitors. Some of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements with a third-party, it would delay our drug development activities.
Our reliance on these third parties for such drug development activities will reduce our control over these activities but will not relieve us of our regulatory responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with GCP standards, regulations for conducting, recording and reporting the results of clinical trials to assure that data and reported results are reliable and accurate and that the rights, integrity and confidentiality of trial participants are protected. The EMA also requires us to comply with similar standards. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials substantially comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under current cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the marketing approval process.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.
We also expect to rely on third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We contract with third parties for the production of EDG-7500 and EDG-15400 for our ongoing clinical trials and the production of product candidates from our EDG-003 cardiometabolic discovery program for our ongoing preclinical studies, and expect to continue to do so for additional clinical trials, preclinical studies and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quality and quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently have the infrastructure or internal capability to manufacture supplies of our product candidates for use in development and commercialization. We rely, and expect to continue to rely, on third-party manufacturers for the production of our product candidates for preclinical studies and clinical trials under the
88
guidance of members of our organization. We will be relying on a single third-party manufacturer and we currently have no alternative manufacturer in place. Changing our third-party manufacturer could result in delays in our manufacturing supply chain which could delay or otherwise impact our development of EDG-7500, EDG-15400, and product candidates from our EDG-003 cardiometabolic discovery program and result in increased costs related to EDG-7500, EDG-15400, and product candidates from our EDG-003 cardiometabolic discovery program. We do not have long-term supply agreements, and we purchase our required drug product on a purchase order basis, which means that aside from any binding purchase orders we have from time to time, our supplier could cease supplying to us or change the terms on which it is willing to continue supplying to us at any time. If we were to experience an unexpected loss of supply of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program or any other product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials and preclinical studies.
We expect to continue to rely on third-party manufacturers for the commercial supply of any of our product candidates for which we obtain marketing approval. We may be unable to maintain or establish required agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| ● | the failure of the third-party to manufacture our product candidates according to our schedule and specifications, or at all, including if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them; |
| ● | the termination or nonrenewal of arrangements or agreements by our third-party contractors at a time that is costly or inconvenient for us; |
| ● | the breach by the third-party contractors of our agreements with them; |
| ● | the failure of third-party contractors to comply with applicable regulatory requirements, including cGMPs; |
| ● | the failure of the third-party to manufacture our product candidates according to our specifications; |
| ● | the mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; |
| ● | clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and |
| ● | the misappropriation of our proprietary information, including our trade secrets and know-how. |
We do not have complete control over all aspects of the manufacturing process of our CDMOs and are dependent on these CDMOs for compliance with cGMP regulations for manufacturing both active pharmaceutical ingredients (API) and finished drug products. We are in the process of developing our supply chain for each of our product candidates and negotiating commercial manufacturing agreements with our CDMOs that will be periodically reviewed, renewed, and/or replaced as our product candidates advance, under which our CDMOs will generally provide us with necessary quantities of API and drug product on a project-by-project basis based on our development needs. As we advance our product candidates through development, we will consider our lack of redundant supply for the API and drug product for each of our product candidates to protect against any potential supply disruptions. However, we may be unsuccessful in putting in place such agreements or protecting against potential supply disruptions.
89
Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the United States. If our current or future CDMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA or others, they will not be able to secure and/or maintain marketing approval for their manufacturing facilities. In addition, we do not have control over the ability of our CDMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA, EMA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we will need to find alternative manufacturing facilities, and those new facilities would need to be inspected and approved by FDA, EMA or comparable regulatory authority prior to commencing manufacturing, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates or drugs and harm our business and results of operations.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
Our reliance on third parties may require 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.
Because we currently rely on third parties in the course of our business, we may share our proprietary technology and confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements, and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees 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. 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 intentionally or 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 and despite our efforts to protect our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
From time to time, we evaluate various acquisition opportunities and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
| ● | increased operating expenses and cash requirements; |
| ● | the assumption of additional indebtedness or contingent liabilities; |
| ● | the issuance of our equity securities; |
| ● | assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; |
| ● | the diversion of our management’s attention from our existing programs and initiatives in pursuing such a strategic merger or acquisition; |
90
| ● | retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; |
| ● | risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and marketing approvals; and |
| ● | our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. |
In addition, if we undertake acquisitions or pursue partnerships in the future, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
If we decide to establish collaborations, but are not able to establish those collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans.
Our drug development programs and the potential commercialization of our product candidates may require substantial additional cash to fund expenses. We may seek to selectively form collaborations to expand our capabilities, potentially accelerate research and development activities and provide for commercialization activities by third parties. In addition, we intend to explore strategic partnering and collaboration opportunities to out-license rights to our research programs and drug candidates for indications in which we are unlikely to pursue development and commercialization. In parallel, we will also evaluate select external opportunities to strategically expand our portfolio. Any of these relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business.
We would face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA, EMA or comparable foreign regulatory authorities, 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 drugs, the existence of uncertainty with respect to our ownership of intellectual property and industry and market conditions generally. The potential collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate. Further, we may not be successful in our efforts to establish a collaboration or other alternative arrangements for product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view them as having the requisite potential to demonstrate safety and efficacy.
In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Even if we are successful in entering into a collaboration, the terms and conditions of that collaboration may restrict us from entering into future agreements on certain terms with potential collaborators.
If and when we seek to enter into collaborations, 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 a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or 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
91
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 our product candidates or bring them to market and generate product revenue.
We may enter into collaborations with third parties for the development and commercialization of product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
If we enter into any collaboration arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements. Collaborations involving our product candidates would pose numerous risks to us, including the following:
| ● | collaborators have significant discretion in determining the efforts and resources that they will apply to, and the manner in which they perform their obligations under, these collaborations and may not perform their obligations as expected; |
| ● | collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a business combination or sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates 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 product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; |
| ● | a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products; |
| ● | we may grant exclusive rights to our collaborators that would prevent us from collaborating with others; |
| ● | collaborators may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings; |
| ● | disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; |
| ● | collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; |
| ● | collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all; |
92
| ● | collaborators may not provide us with timely and accurate information regarding development progress and activities under the collaboration or may limit our ability to share such information, which could adversely impact our ability to report progress to our investors and otherwise plan our own development of our product candidates; |
| ● | collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and |
| ● | a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings. |
We also collaborate with a network of experts who advise and support our development efforts. In the future, such experts may not collaborate with us which could affect our ability to develop our product candidates and proprietary drug discovery platform as such experts potentially provide us with access to ideas to address the needs of serious cardiovascular diseases.
Risks Related to Our Future Operations Following the Sevasemten Sale
There is no guarantee that we will receive the milestone payments under the Sevasemten Purchase Agreement.
On July 10, 2026, Servier Pharmaceuticals LLC and Les Laboratoires Servier (Servier) acquired sevasemten and certain other related assets collectively constituting our muscular dystrophy program and assumed certain related liabilities for aggregate potential consideration of up to $2,650 million (Sevasemten Sale), pursuant to an Asset Purchase Agreement between us and Servier dated May 31, 2026 (Sevasemten Purchase Agreement). The up to $2,650 million of aggregate potential consideration consists of $1,550 million in cash, already paid at closing, and up to $1,100 million in potential future milestone payments that are subject to certain conditions, risks and uncertainties, including (a) a potential milestone payment upon achieving U.S. marketing approval for sevasemten for Becker muscular dystrophy in the amount of (i) $200 million, in cash, payable in the event of an approved labelling including specified adult and adolescent populations or (ii) $100 million in cash, payable in the event of an approved labelling including only specified adult populations (if (i) has not previously been achieved); (b) a potential milestone payment of $600 million in cash, payable upon the achievement of U.S. marketing approval for sevasemten for Duchenne muscular dystrophy; and (c) a potential milestone payment of $300 million in cash, payable upon the achievement of annual U.S. net sales of sevasemten products exceeding $550 million. U.S. marketing approval for sevasemten for Becker muscular dystrophy or Duchenne muscular dystrophy and sales of sevasemten products in the U.S. are subject to various risks and uncertainties, and there is no guarantee that we will receive any of the milestone payments. If we do not receive any of the milestone payments, our business, financial condition, results of operations and prospects may be adversely affected.
We have discretion in the use of the proceeds from the Sevasemten Sale and our choices about the use of proceeds may be ineffective.
We plan to use the proceeds that we received at the closing of the Sevasemten Sale and may receive as milestone payments for working capital and general corporate purposes, in connection with our continued business, which is focused on our cardiovascular pipeline. We expect to use the upfront proceeds received at closing, together with our existing cash, cash equivalents and marketable securities, for working capital and general corporate purposes, including advancing EDG-7500, EDG-15400 and our EDG-003 cardiometabolic discovery program, satisfying transaction-related tax and other obligations. We will have broad discretion in the application of the proceeds from the Sevasemten Sale and our planned use of proceeds described above may not improve or enhance our business, financial condition, results of operations or prospects. An ineffective use of proceeds may have a material adverse effect on business, financial condition, results of operations and prospects.
93
We may face new challenges as a smaller, less diversified company.
The Sevasemten Sale resulted in us being a smaller, less diversified company with a more limited business concentrated on our cardiovascular pipeline. Following the closing, we no longer own or control the sevasemten muscular dystrophy program and are more dependent on the success of EDG-7500, EDG-15400 and our earlier-stage cardiovascular and cardiometabolic programs. As a result, we may be more susceptible to changing market conditions, including fluctuations and risks particular to the markets for patients with HCM or HFpEF, than a more diversified company, which could adversely affect our business, financial condition, results of operations and prospects. In addition, the diversification of our costs and cash flows has diminished following the transaction, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility, and our ability to fund capital expenditures and investments or satisfy other financial commitments may be diminished.
We may experience operational burdens, disputes or costs in connection with transition services and other post-closing obligations under the Sevasemten Sale.
In connection with the Sevasemten Sale, we entered into a transition services arrangement under which we agreed to provide specified transitional services to Servier for a period following closing. Providing these services may require management attention, personnel time, third-party support and operating resources that could otherwise be devoted to our cardiovascular pipeline. If the transition services take longer, cost more, or are more complex than expected, or if disputes arise regarding the scope, performance, reimbursement or transfer of services or contracts, our business, results of operations and prospects could be adversely affected.
Risks Related to the Securities Markets and Ownership of Our Common Stock
An active, liquid and orderly trading market may not continue to be developed or sustained for our common stock and as a result it may be difficult for you to sell your shares of our common stock.
An active trading market for our shares may not be sustained. The lack of an active market may also reduce the fair market value of your shares. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic collaborations or acquire companies, technologies or other assets by using our shares of common stock as consideration.
The price of our stock has been and may continue to be volatile, and you could lose all or part of your investment.
The trading price of our common stock has been and may continue to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. The stock market in general, and pharmaceutical and biotechnology 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. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this periodic report, these factors include:
| ● | the timing and results of preclinical studies and clinical trials of our product candidates, those conducted by third parties or those of our competitors; |
| ● | the success of competitive products or announcements by potential competitors of their product development efforts; |
| ● | regulatory actions with respect to our products or our competitors’ products; |
| ● | actual or anticipated changes in our growth rate relative to our competitors; |
94
| ● | regulatory or legal developments in the United States and other countries; |
| ● | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
| ● | the recruitment or departure of key personnel; |
| ● | announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments; |
| ● | actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; |
| ● | fluctuations in the valuation of companies perceived by investors to be comparable to us; |
| ● | market conditions in the pharmaceutical and biotechnology sector; |
| ● | changes in the structure of healthcare payment systems; |
| ● | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
| ● | announcement or expectation of additional financing efforts; |
| ● | sales of our common stock by us, our insiders or our other stockholders; |
| ● | the impact of any natural disasters or public health emergencies; and |
| ● | general economic, political, industry and market conditions including the impact of changes in the U.S. government administration and policy positions, any U.S. federal government shutdown, and the impact of any increase in inflation. |
The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and adverse impact on the market price of our common stock.
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.
Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. From time to time, we may enter into license or collaboration agreements or strategic partnerships with other companies that include development funding and significant upfront and milestone payments and/or royalties, which may become an important source of our revenue. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next.
In addition, we measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award as determined by our board of directors, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly.
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following:
95
| ● | the timing and cost of, and level of investment in, research and development activities relating to our current product candidates and any future product candidates and research-stage programs, which will change from time to time; |
| ● | our ability to enroll patients in clinical trials and the timing of enrollment; |
| ● | the cost of manufacturing our current product candidates and any future product candidates, which may vary depending on FDA, EMA or other comparable foreign regulatory authority guidelines and requirements, the quantity of production and the terms of our agreements with manufacturers; |
| ● | expenditures that we will or may incur to acquire or develop additional product candidates and technologies or other assets; |
| ● | the timing and outcomes of clinical trials or preclinical studies (as applicable) for EDG-7500, EDG-15400, and our EDG-003 cardiometabolic discovery program and any of our other product candidates, or competing product candidates; |
| ● | the need to conduct unanticipated clinical trials or trials that are larger or more complex than anticipated; |
| ● | competition from existing and potential future products that compete with EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any of our other product candidates or programs, and changes in the competitive landscape of our industry, including consolidation among our competitors or partners; |
| ● | any delays in regulatory review or approval of EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program or any of our other product candidates; |
| ● | the level of demand for EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any of our other product candidates, if approved, which may fluctuate significantly and be difficult to predict; |
| ● | the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future products that compete with our product candidates; |
| ● | our ability to commercialize EDG-7500, EDG-15400, product candidates from our EDG-003 cardiometabolic discovery program and any of our other product candidates, if approved, inside and outside of the United States, either independently or working with third parties; |
| ● | our ability to establish and maintain collaborations, licensing or other arrangements; |
| ● | our ability to adequately support future growth; |
| ● | potential unforeseen business disruptions that increase our costs or expenses; |
| ● | future accounting pronouncements or changes in our accounting policies; |
| ● | the changing and volatile global economic and political environment; and |
| ● | increased impact from public health pandemics on the costs and timing associated with the conduct of our clinical trial and other related business activities. |
96
The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.
Our affiliated principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
As of June 30, 2026, our executive officers, directors, affiliated holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 21.6% of our outstanding common stock. These stockholders, acting together, may be able to control matters requiring stockholder approval. For example, they may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transactions. This concentration of ownership control may delay, discourage or prevent a change of control, including unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders, entrench our management and board of directors or delay or prevent a merger, consolidation, takeover or other business combination involving us that other stockholders may desire. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. On May 10, 2024, we filed an automatic shelf registration statement on Form S-3ASR that allows us to undertake various equity and debt offerings and entered into the Leerink Sales Agreement under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $175.0 million from time to time, through the Leerink ATM. Pursuant to the automatic shelf registration statement, on April 3, 2025, we closed an underwritten registered direct offering of 9,935,419 shares of our common stock at an offering price of $20.13 per share.
Moreover, certain holders of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Registration of these shares, under the Securities Act of 1933, as amended (Securities Act), would result in the shares becoming freely tradeable in the public market, subject to the restrictions of Rule 144 in the case of our affiliates. In addition, shares registered under Form S-8 to register shares of our common stock reserved for issuance under our equity compensation plans become available for sale in the public market subject to the satisfaction of applicable vesting arrangements and the exercise of such options and, in the case of our affiliates, the restrictions of Rule 144. If any of these shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amount of our common stock in the public market, the market price of our common stock could decline significantly.
If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that securities or industry analysts publish about us, our business or our market. We currently have research coverage from a limited number of securities or industry analysts. If no or few new securities or industry analysts commence coverage of us, the stock price may be negatively impacted. If any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if
97
our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We incur significantly increased costs and devote substantial management time as a result of operating as a public company. Additionally, if we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
As a public company, we 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, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and the Nasdaq Stock Market LLC (Nasdaq). Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have substantially increased our legal and financial compliance costs and makes some activities more time-consuming and costly, which has increased our operating expenses. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance and we have been required to incur substantial costs to maintain sufficient coverage, particularly in light of recent cost increases related to coverage. We cannot accurately 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.
In addition, we are required to incur additional costs and obligations in order to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act. We are required to make a formal assessment of the effectiveness of our internal control over financial reporting. Additionally, we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404, we execute a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively, and implement a continuous reporting and improvement process for internal control over financial reporting.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act.
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.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, 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.
98
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 assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and 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 facts that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. 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 be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years and we may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns.
We do not intend to pay dividends on our common stock in the foreseeable future, so any returns will be limited to the value of our common stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to any appreciation in the value of their stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws contains provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. These provisions, among other things:
| ● | establish a classified board of directors so that not all members of our board are elected at one time; |
| ● | permit only the board of directors to establish the number of directors and fill vacancies on the board; |
| ● | provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; |
| ● | authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); |
99
| ● | eliminate the ability of our stockholders to call special meetings of stockholders; |
| ● | prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; |
| ● | prohibit cumulative voting; |
| ● | authorize our board of directors to amend the bylaws; |
| ● | establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and |
| ● | require a super-majority vote of stockholders to amend or repeal specified provisions of our amended and restated certificate of incorporation and amended and restated bylaws. |
In addition, Section 203 of the General Corporation Law of the State of Delaware (DGCL), prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business 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 preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another State court in Delaware or the federal district court for the District of Delaware) is the exclusive forum for the following (except for any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than such court or for which such court does not have subject matter jurisdiction):
| ● | any derivative action or proceeding brought on our behalf; |
| ● | any action asserting a claim of breach of fiduciary duty; |
| ● | any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; and |
| ● | any action asserting a claim against us that is governed by the internal-affairs doctrine. |
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
100
Our amended and restated bylaws further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find either exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Recent Repurchases of Equity Securities
None.
Use of Proceeds from Follow-On Offering
On September 16, 2022, we completed a follow-on offering pursuant to a shelf registration statement on Form S-3 (File No. 333-264083) with the SEC that became effective on May 5, 2022, and issued 13,372,093 shares of our common stock at a price to the public of $10.32 per share, including 1,744,186 shares of common stock issued in connection with the full exercise by the underwriters of their options to purchase additional shares of common stock. The aggregate gross proceeds from the follow-on offering were $138.0 million. After deducting underwriting discounts and commissions of $8.3 million and offering costs of $0.5 million, the net proceeds from the follow-on offering were approximately $129.2 million.
There has been no material change in the use of proceeds from our follow-on offering as described in our final prospectus filed with the SEC on September 14, 2022 pursuant to Rule 424(b)(5). We invested the funds received in interest-bearing investment-grade securities.
Use of Proceeds from the ATM Program
On June 16, 2023, we entered into a Sales Agreement with BofA Securities, Inc. under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $125,000,000 from time to time, through an “at the market” program (ATM Program), pursuant to a shelf registration statement on Form S-3 (File No. 333-264083) with the SEC that became effective on May 5, 2022. On January 19, 2024, we filed a prospectus supplement to suspend the ATM Program. Through the suspension of the ATM Program, we sold 7,560,068 shares of common stock at a weighted average price of $7.93 per share. The gross proceeds were $59.9 million, and the net proceeds were $59.4 million after deducting underwriting discounts and commissions of $0.2 million and offering expenses of $0.3 million.
There has been no material change in the planned use of proceeds from the ATM Program as described in our final prospectus filed with the SEC on June 16, 2023 pursuant to Rule 424(b)(5). We invested the funds received in interest-bearing investment-grade securities.
101
Use of Proceeds from the 2024 Underwritten Registered Direct Offering
On January 23, 2024, we closed an underwritten registered direct offering pursuant to a shelf registration statement on Form S-3 (File No. 333-264083) with the SEC that became effective on May 5, 2022 and Form S-3 MEF (File No. 333-276595) that became effective on January 19, 2024, of 21,818,182 shares of common stock at a public offering price of $11.00 per share (January 2024 Offering). The aggregate gross proceeds from the January 2024 Offering were $240.0 million, and the net proceeds were $231.9 million after deducting underwriting discounts and commissions of $7.5 million and offering expenses of $0.6 million.
There has been no material change in the planned use of proceeds from our January 2024 Offering as described in our final prospectus filed with the SEC on January 19, 2024 pursuant to Rule 424(b)(5). We invested the funds received in interest-bearing investment-grade securities.
Use of Proceeds from the 2025 Underwritten Registered Direct Offering
On April 3, 2025, we closed an underwritten registered direct offering pursuant to an automatic shelf registration statement on Form S-3ASR (File No. 333-279299) with the SEC that became effective on May 10, 2024, of 9,935,419 shares of common stock at a public offering price of $20.13 per share (April 2025 Offering). The aggregate gross proceeds from the April 2025 Offering were $200.0 million, and the net proceeds were $187.1 million, after deducting underwriting discounts and commissions of $12.0 million and offering expenses of $0.9 million.
There has been no material change in the planned use of proceeds from our April 2025 Offering as described in our final prospectus filed with the SEC on April 2, 2025 pursuant to Rule 424(b)(5). We invested the funds received in interest-bearing investment-grade securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Director and Officer Trading Arrangements
No directors or “officers,” as defined in Rule 16a-1(f) of the Exchange Act,
Item 6. Exhibits
See Exhibit Index.
102
EXHIBIT INDEX
| | | | Incorporated by Reference | ||||||
Exhibit Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
2.1# | | | Filed herewith | | | | | | | |
| | | | | | | | | | |
31.1 | | | Filed herewith | | | | | | | |
| | | | | | | | | | |
31.2 | | | Filed herewith | | | | | | | |
| | | | | | | | | | |
32.1† | | | Furnished herewith | | | | | | | |
| | | | | | | | | | |
32.2† | | | Furnished herewith | | | | | | | |
| | | | | | | | | | |
101.INS | | Inline XBRL Instance Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | Filed herewith | | | | | | |
| | | | | | | | | | |
104 | | The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101 | | Filed herewith | | | | | | |
# Certain confidential information contained in this exhibit has been omitted because it is both (i) not material; and (ii) the type that the registrant customarily and actually treats as private or confidential.
†The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
103
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
Date: August 6, 2026
| EDGEWISE THERAPEUTICS, INC. | |
| | |
| By: | /s/ Kevin Koch |
| Name: | Kevin Koch |
| Title: | President, Chief Executive Officer and Director |
| | (Principal Executive Officer) |
| | |
| By: | /s/ Michael Nofi |
| Name: | Michael Nofi |
| Title: | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
104
Exhibit 2.1
CERTAIN INFORMATION IN THIS DOCUMENT, MARKED BY [***], HAS BEEN EXCLUDED FROM THIS EXHIBIT PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
ASSET PURCHASE AGREEMENT
by and among
Edgewise Therapeutics, Inc.
Servier Pharmaceuticals LLC
and
Les Laboratoires Servier
Dated as of May 31, 2026
TABLE OF CONTENTS
| | Page |
ARTICLE 1 DEFINITIONS | 4 | |
1.1 | Defined Terms | 4 |
1.2 | Construction | 20 |
| | |
ARTICLE 2 PURCHASE AND SALE; LIABILITIES | 21 | |
2.1 | Purchase and Sale | 21 |
2.2 | Consents to Certain Assignments; Shared Contracts | 23 |
2.3 | Liabilities | 24 |
2.4 | Consideration | 24 |
2.5 | Closing | 25 |
2.6 | Withholding | 26 |
| | |
ARTICLE 3 REPRESENTATIONS AND WARRANTIES | 26 | |
3.1 | Representations and Warranties of Seller | 26 |
3.2 | Representations and Warranties of Each Buyer | 41 |
3.3 | Exclusivity of Representations | 43 |
| | |
ARTICLE 4 PRE-CLOSING COVENANTS | 44 | |
4.1 | Access and Information | 44 |
4.2 | Ordinary Course of Business. | 44 |
4.3 | Efforts; Regulatory and Other Authorizations; Notices and Consents. | 46 |
4.4 | Notices | 48 |
| | |
ARTICLE 5 ADDITIONAL COVENANTS | 48 | |
5.1 | Publicity | 48 |
5.2 | Confidentiality | 49 |
5.3 | No-Shop | 50 |
5.4 | Noncompetition | 50 |
5.5 | Post-Closing Access and Information | 51 |
5.6 | Wrong Pockets | 52 |
5.7 | Certain Tax Matters | 52 |
5.8 | Insurance | 54 |
5.9 | Services from Seller | 54 |
5.10 | Delivery of Data Site Copy | 55 |
5.11 | Litigation Support. | 55 |
5.12 | Completion of Ongoing Activities | 55 |
5.13 | [***]. | 56 |
5.14 | Additional Financial Information | 56 |
5.15 | Transition Services Agreement | 56 |
5.16 | Representations and Warranties Insurance | 56 |
| | |
ARTICLE 6 EMPLOYEES | 56 | |
6.1 | Offers of Employment | 56 |
6.2 | Terms of Employment | 57 |
6.3 | Cooperation | 59 |
1
6.4 | No Third Party Beneficiaries | 59 |
| | |
ARTICLE 7 CONDITIONS PRECEDENT | 60 | |
7.1 | Conditions to Obligations of the Buyers and Seller | 60 |
7.2 | Conditions to Obligations of the Buyers | 60 |
7.3 | Conditions to Obligations of Seller | 60 |
7.4 | Frustration of Closing Conditions | 61 |
| | |
ARTICLE 8 TERMINATION | 61 | |
8.1 | Termination | 61 |
8.2 | Procedure and Effect of Termination | 62 |
| | |
ARTICLE 9 INDEMNIFICATION | 62 | |
9.1 | Survival; Indemnification | 62 |
| | |
ARTICLE 10 MISCELLANEOUS | 68 | |
10.1 | Dispute Resolution | 68 |
10.2 | Notices | 69 |
10.3 | No Benefit to Third Parties | 71 |
10.4 | Waiver | 71 |
10.5 | Expenses | 71 |
10.6 | Assignment | 71 |
10.7 | Amendment | 71 |
10.8 | Severability | 71 |
10.9 | Equitable Relief | 71 |
10.10 | Bulk Sales Statutes | 72 |
10.11 | Fulfillment of Obligations | 72 |
10.12 | Counterparts | 72 |
10.13 | Entire Agreement | 72 |
10.14 | Disclosure Schedules | 72 |
10.15 | Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege; Communications with Internal Counsel | 72 |
10.16 | Performance by LLC and LLS | 73 |
2
EXHIBITS
[***]
SCHEDULES
[***]
3
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”) is made and executed as of May 31, 2026, by and among Edgewise Therapeutics, Inc., a Delaware corporation (“Seller”), Servier Pharmaceuticals LLC, a Delaware limited liability company (“LLC”) and Les Laboratoires Servier, a Société par Actions Simplifiée (“LLS”). Seller, LLC and LLS are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Seller is engaged in the Development and Manufacture of the Products;
WHEREAS, Seller owns all of the Purchased Assets;
WHEREAS, the Parties desire that, at the Closing, Seller shall sell and assign to the Buyers, and the Buyers shall purchase and assume from Seller, the Purchased Assets and the Assumed Liabilities, upon the terms and conditions hereinafter set forth; and
WHEREAS, at the Closing, Seller and the Buyers intend to enter into, or cause certain of their respective Affiliates to enter into, the Ancillary Agreements.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from this Agreement and of the representations, warranties, conditions, agreements and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1Defined Terms. As used herein, the following terms shall have the following meanings:
“Acquiring Entity” means (a) a Third Party that acquires all or at least a majority of the outstanding voting equity securities of Seller (whether in one transaction or a series of related transactions), or to which Seller transfers all or substantially all of its assets, (b) a Third Party that acquires greater than 25% of the outstanding voting equity securities of Seller and either (x) has the right to designate at least one member to Seller’s board of directors, or (y) otherwise has the power, directly or indirectly, to exercise managerial authority over the business and affairs of Seller, or (c) any Affiliate of the Third Party described in clause (a) and (b), other than Seller or any Affiliates of Seller prior to the date of the transaction pursuant to which such Third Party became an Acquiring Entity.
“Adverse Event” means, with respect to either Product, any untoward medical occurrence in a patient or clinical investigation subject administered such Product and which is not necessarily required to have a causal relationship with the administration of such Product. An Adverse Event can therefore be any unfavorable and unintended sign (including, for example, an abnormal laboratory finding), symptom, or disease temporally associated with the use of the Product, whether or not considered causally related to the Product. Adverse Event, with respect to the Product, includes any serious and unexpected suspected adverse reactions and serious adverse events as those terms are defined in 21 CFR 312.32.
“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first Person. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by”
4
and “under common control with,” mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). An Acquiring Entity of Seller shall not be an Affiliate of Seller or its Affiliates, and the entities set forth on Section 1.1(a) of the Disclosure Schedules shall not be an Affiliate of Seller.
“Ancillary Agreements” means the Bill of Sale, the Domain Name Assignment Agreement, the Patent Assignment Agreement, the Trademark Assignment Agreement, the ROW Intellectual Property Assignment Agreement, the U.S. Intellectual Property Assignment Agreement, the Escrow Agreement and the Transition Services Agreement.
“Antitrust Law” means the Sherman Antitrust Act of 1890, the Clayton Act of 1914, the Hart-Scott Rodino Antitrust Improvements Act of 1976, the Federal Trade Commission Act of 1914, and all other United States or non-United States (including state, national, or supranational) antitrust, competition or other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
“Authorization” means any Consent, Order, license, permit, approval and other similar authorization of or from any Governmental Authority, together with any renewals, extensions, or modifications thereof and additions thereto.
“Backup Compound” means that certain compound known as of the date hereof as “5440,” the chemical structure of which is described in Schedule 1.1(a), including any prodrugs, salts, free acid form, free base form, hydrates, crystalline hydrates, polymorphs, solvates, active metabolites, enantiomers, diastereomers, racemates, tautomers, stereoisomers, complexes, co-crystals, or other non-covalent modification of 5440.
“Bill of Sale” means the Bill of Sale and Assignment and Assumption Agreement to be entered at Closing, substantially in the form attached as Exhibit A.
“BMD” means Becker Muscular Dystrophy, including any patient population or subpopulation in Becker Muscular Dystrophy.
“Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in Boulder, Colorado or Paris, France are obligated by Law to remain closed.
“Buyer Material Adverse Effect” means any event, fact, condition, occurrence, change or effect that prevents or materially impedes or materially delays the consummation by any Buyer and its Affiliates of the Transactions prior to the End Date.
“Buyers” means, collectively, LLS, LLC and any other Affiliate of LLS or LLC designated in writing by LLC or LLS to purchase and acquire any Purchased Assets or assume, pay, perform or discharge when due any Assumed Liabilities, in each case subject to the assignment provisions of Section 10.6.
“cGMP” means all applicable then-current good Manufacturing practice standards, practices and procedures promulgated or endorsed by the applicable Regulatory Authority, as may be updated from time-to-time, including those as set forth in FDA regulations in 21 C.F.R. Parts 210 and 211
5
and all other applicable FDA rules, regulations, and orders, and the requirements with respect to current good Manufacturing practices prescribed by the European Community under provisions of “The Rules Governing Medicinal Products in the European Community, Volume 4, Good Manufacturing Practices, Annex 13, Manufacture of Investigational Medicinal Products, December 2010” (or such other foreign equivalent regulatory standards in any other country or jurisdiction).
“Clinical Trial” means a clinical investigation or trial and any such other tests and studies in human subjects in which a pharmaceutical product is administered or dispensed to, or used involving, one or more human subjects, as required by applicable Law, recommended by Governmental Authorities, or are otherwise necessary, to obtain or maintain regulatory approvals for a product, including a clinical investigation or trial that meets the definition of a “clinical investigation” as set forth in 21 CFR 312.3.
“Closing Consideration” means $1,550,000,000.
“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, the Public Health Service Act, codified as 42 USC §§ 300bb-1 through 300bb-8, and any similar state or federal continuation of coverage Laws.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Commercialization” means with respect to any product, any and all activities directed to: the marketing, advertising, promotion, distribution, import, export, offering for sale, and sale of such product, product samples, pre-launch activities to prepare a market for potential sales, modeling and pharmaco-economic studies, epidemiological studies, expanded access programs and associated registries and activities required to fulfill ongoing regulatory obligations, government affairs, and public policy activities, patient advocacy engagement, and the preparation and submission of regulatory documentation and interacting with Regulatory Authorities regarding any of the foregoing activities, and pricing and reimbursement activities, including seeking and maintaining any required pricing and reimbursement approval. When used as a verb, “Commercialize” means to engage in Commercialization activities. For clarity, “Commercialization” will not include any Development or Manufacturing activities.
“Competing Proposal” means any proposal or offer from any Person (other than the Buyers or their respective Affiliates) relating to any direct or indirect transaction (whether in a single transaction or a series of related transactions) involving or providing for the sale, transfer, exchange or other disposition or any material portion of the assets of the Program, including any Purchased Assets.
“Consent” means a consent, approval or authorization.
“Contract” means any contract, agreement, license, sublicense, instrument, assignment, purchase order, notes, leases, deeds, mortgages, indentures or other legally binding commitment or arrangement, whether written or oral.
“Control” (and, with correlative meanings, the terms “Controlled” and “Controlled by”) means, with respect to any regulatory documentation, Product Records, Intellectual Property Rights or any other relevant property (whether tangible or intangible), the possession of the right, whether directly or indirectly, and whether by ownership, license, sublicense, contract or otherwise, to assign or grant a license, sublicense or other right to or under such regulatory documentation, Product Records, Intellectual Property Rights or such other relevant tangible or intangible property as provided for herein or in any of the Ancillary Agreements without violating the terms of any Contract that exists as of the Closing Date with any Third Party, infringing the Patent Rights of, or misappropriating the proprietary or trade secret information of, any Third Party and without violating applicable Laws.
6
“Copyrights” means all works of authorship, copyrights, and other copyrightable works (including all technical data compilations, website content, advertising collateral, and promotional materials), whether published or unpublished and whether or not registered, all copyright registrations and applications therefor and all extensions, restorations, reversions and renewals thereof and all rights in any copyrightable works and other copyrightable works, together with all translations, adaptations, derivations, and combinations thereof, and all moral rights and all other rights associated therewith.
“Covered Insurance Matters” means any Liabilities relating to or arising out of or in connection with the Program or the Product with respect to any fact, matter, circumstance or other occurrence prior to the Closing for which coverage is available under any Specified Policy.
“Data Requirements” means: (i) all applicable Laws and industry self-regulatory programs to which Seller is legally or contractually bound, (ii) any of Seller’s contractual requirements, and (iii) any of Seller’s published policies and notices, in each case with respect to clauses (i), (ii), and (iii), relating to the privacy, security, collection, usage, storage, retention, transfer, disclosure, disposal or processing of Personal Data by or on behalf of Seller in connection with the Program, the Purchased Assets, or the Assumed Liabilities.
“Data Site” means the Project Earth virtual data site administered by Datasite for Seller in connection with the Transactions.
“Development” means all activities relating to research and other non-clinical and clinical drug development activities, including toxicology, carcinogenicity, pharmacology, assay development and other non-clinical efforts, statistical analysis, formulation development, delivery system development, translational medicine activities, companion diagnostics development, the performance of Clinical Trials or other activities (including interacting with Regulatory Authorities) in furtherance of obtaining approval of products by any Regulatory Authority. When used as a verb, “Develop” means to engage in Development activities. For clarity, “Development” will not include any Manufacturing activities.
“Disclosure Schedules” means, collectively, the disclosure schedules, dated as of the date hereof, delivered by Seller to the Buyers.
“DMD” means Duchenne Muscular Dystrophy, including any patient population or subpopulation in Duchenne Muscular Dystrophy.
“Domain Name Assignment Agreement” means the Domain Name Assignment Agreement to be entered into at Closing, substantially in the form attached as Exhibit B.
“Employee Benefit Plan” means any compensation or benefits plan, program, policy, agreement, arrangement or understanding, whether or not written and whether or not an “employee benefit plan” within the meaning of Section 3(3) of ERISA, including each employment, consulting, independent contractor, retirement, pension, profit sharing, deferred compensation, medical, dental, vision, disability, life, severance, change-in-control, retention, vacation, paid time off or other leave, incentive, bonus, commission, fringe benefit, equity, equity-based compensation, and stock purchase, or other compensatory or benefit plan, program, policy, agreement, arrangement or understanding, sponsored, maintained, contributed to or required to be contributed to by Seller or any of its ERISA Affiliates, or with respect to which Seller or any of its ERISA Affiliates has any current or contingent Liability for the benefit of any Program Employee or in which any Program Employee is eligible to participate.
“Encumbrance” means any charge, community property interest, mortgage, lien (statutory or other), license, pledge, security interest, easement, right of first refusal or any other encumbrance.
7
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
“Escrow Agent” means Citibank, N.A.
“Escrow Agreement” means the escrow agreement to be entered into on the Closing Date among the Buyers, Seller and the Escrow Agent in substantially the form attached hereto as Exhibit C.
“Escrow Amount” means the General Indemnity Escrow Amount plus the Special Indemnity Amount.
“Excluded Assets” means any and all (a) real property and tangible personal property of Seller; (b) Excluded Intellectual Property; (c) Manufacturing-related assets of Seller (other than to the extent included in the Purchased Contracts, Purchased Intellectual Property, Purchased Regulatory Documentation or Purchased Product Records); (d) refunds, claims for refunds or rights to receive refunds of any and all Taxes that constitute Excluded Liabilities; (e) insurance policies or practices and insurance Contracts of Seller (including any captive insurance policies, self-insurance, surety bonds or corporate insurance policies or practices), together with any claim, action or other right Seller may have for insurance coverage under any past or present policies or practices and insurance Contracts; (f) cash, cash equivalents, investments and securities and bank or other deposit or securities accounts; (g) intercompany accounts receivable; (h) rights to causes of action, judgments, claims, counterclaims, rights of recovery and demands related to any Excluded Liabilities or Excluded Assets; (i) shares of capital stock and other equity interests, and all stock record books and ledgers, of Seller; (j) certificates of incorporation, by-laws, corporate minutes, corporate resolutions and other similar corporate documents and records of Seller; (k) accounts receivable, notes receivable and other indebtedness due and owed by any Third Party to Seller outstanding on the Closing Date; (l) information technology systems and software of Seller and all related license maintenance and service Contracts; (m) Excluded Communications; (n) rights of Seller under this Agreement, the Ancillary Agreements and any other agreements, certificates and instruments otherwise delivered in connection with this Agreement relating to the sale of the Program (or any portion thereof) or the Products; (o) Employee Benefit Plans; (p) any Excluded Contracts; and (q) any other assets, property, rights and interests of Seller, other than (i) those included in the Purchased Assets, or (ii) those assets being assigned pursuant to the Transition Services Agreement
“Excluded Communications” means any and all (a) books, documents, records, files and other items prepared in connection with or relating to the negotiation and consummation of the Transactions, or any other products or programs of Seller other than the Program or Products, including all (i) bids received from Third Parties and analyses relating to the Program or the Products and (ii) strategic, financial or Tax analyses relating to the divestiture of the Purchased Assets, the Assumed Liabilities, the Products and the Program; (b) attorney work product, attorney-client communications and other items protected by established legal privilege; (c) all human resources and personnel records and any other employee books and records, in each case, to the extent not related to the Program, the Transferred Employees or the Purchased Assets; (d) financial and accounting records to the extent not exclusively related to the Products or the Program or that form part of the general ledger of Seller; (e) work papers of Seller’s auditors; (f) Tax Returns, Tax records, related workpapers and other similar Tax information related to Taxes paid or payable by Seller that are not exclusively related to the Purchased Assets or the Program; and (g) items to the extent applicable Law prohibits their transfer.
8
“Excluded Contracts” means any Contract to which Seller is a party other than a Purchased Contract or the Shared Contracts to be assigned to the Buyers in accordance with Section 2.1.1 and Section 2.2.1, including those Contracts set forth on Schedule 1.1(b).
“Excluded Intellectual Property” means all Intellectual Property Rights owned or Controlled by or licensed to Seller other than (a) the Purchased Intellectual Property and (b) the rights to Intellectual Property Rights exclusively related to the Program or a Product granted to Seller under the Purchased Contracts or the Shared Contracts to be assigned to the Buyers in accordance with Section 2.2.1.
“Excluded Employee Liabilities” means any and all Liabilities, relating to or resulting from (a) any Employee Benefit Plan, except for Liabilities expressly assumed by the Buyers pursuant to Article 6 with respect to Transferred Employees for periods following the Closing, (b) the employment or engagement, or termination of employment or engagement, of any current or former employee, individual independent contractor, consultant, director or other service provider of Seller or its Affiliates who is not a Transferred Employee, (c) the employment or engagement of any Program Employee or other service provider for any period prior to the Closing, including wages, bonuses, commissions, accrued or unused vacation or paid time off, payroll Taxes, severance, retention, change-in-control, equity or equity-based compensation, and any claims arising under applicable employment or employee benefits Laws for any period prior to the Closing, and (d) any employee-related obligation triggered by or arising in connection with the execution of this Agreement or the consummation of the Transactions, including any transaction, retention, change-in-control, severance, parachute, gross-up or similar payments or benefits.
“Excluded Liabilities” means without duplication, the following Liabilities: (a) all Excluded Employee Liabilities, (b) any Liabilities arising out of or relating to any indebtedness of Seller, (c) any Liabilities under any Purchased Contract or Shared Contract that arise out of or relate to (i) any breach of, or failure to comply with any covenant or obligation in any such Contract by Seller or (ii) any event that occurred which, with or without notice, lapse of time or both, would or does constitute any breach or failure, in each case to the extent such Liability is based upon any act, event circumstance, omission or condition which occurred prior to the Closing, (d) arising out of or relating to Seller’s violation of, or failure to comply with, applicable Law prior to the Closing, (e) all Liabilities to the extent arising out of or related to the Excluded Assets (other than performance obligations under Section 5.6 or any Liabilities for which the Buyers or any of their Affiliates expressly has responsibility pursuant to this Agreement or any Ancillary Agreement, subject to terms, conditions and limitations set forth herein or therein), (f) all Liabilities for Taxes of Seller or its Affiliates, (g) all Liabilities for any Taxes in respect of the Program or the Purchased Assets arising on or prior to the Closing Date determined in accordance with Section 5.7.1, (h) all Liabilities for Transfer Taxes for which Seller is responsible pursuant to Section 5.7.2, (i) all criminal Liabilities and obligations and all civil penalties of Seller arising from criminal Litigation or breaches by Seller of criminal Laws, (j) all fees and expenses of brokers, finders, outside counsel, financial advisors, accountants, consultants and other professional advisors incurred by Seller specifically in connection with the negotiation, execution and performance of this Agreement and the other Ancillary Agreements and the transactions contemplated hereby and thereby and any other similar processes which occurred with any other Person; and (k) any Covered Insurance Matters.
“Exploit” (and, with correlative meanings, the terms “Exploitation” and “Exploiting”) means to Develop, Manufacture or Commercialize the Products.
“FD&C Act” means the United States Federal Food, Drug, and Cosmetic Act, and all regulations promulgated thereunder.
“FDA” means the United States Food and Drug Administration, or any successor thereto.
9
“Fraud” means, with respect to any Party, an actual and intentional fraud with respect to the making of representations and warranties contained in Section 3.1 or Section 3.2, as applicable; provided, that such actual and intentional fraud of such Party shall be deemed to exist only if (a) as applicable, (i) a Buyer had actual knowledge (as opposed to imputed or constructive knowledge) the representations and warranties made by a Buyer were breached when made or (ii) to Seller’s Knowledge, the representations and warranties made by Seller were actually breached when made, (b) such representations and warranties were made with the intent to induce another Party to rely thereon and take action or inaction, (c) such reliance and subsequent action or inaction by such other Party was justifiable and (d) such action or inaction resulted in Losses to such other Party. “Fraud” shall include only common law liability for fraud with respect to the making of the representations and warranties contained in Section 3.1 or Section 3.2, as applicable, and shall exclude constructive or equitable fraud, promissory fraud and unfair dealing.
“Fundamental Representations” means those representations and warranties of Seller and the Buyers, as applicable, contained in Section 3.1.1 (Corporate Status), Section 3.1.2 (Authority), Section 3.1.5 (Title to and Sufficiency of Assets), Section 3.1.10(d) (Title to Intellectual Property); Section 3.1.17 (No Broker), Section 3.2.1 (Corporate Status), Section 3.2.2 (Authority) and Section 3.2.9 (No Broker).
“GAAP” means United States generally accepted accounting principles.
“General Indemnity Escrow Amount” means an amount equal to $3,875,000, which amount is to be deposited by the Buyers with the Escrow Agent in accordance with the terms of this Agreement and held and released pursuant to the terms and subject to the conditions set forth in this Agreement and the Escrow Agreement.
“Governmental Authority” means any supranational, international, national, commonwealth, provincial, territorial, county, municipal, district, federal, state or local body or entity exercising executive, legislative, judicial, regulatory, or administrative governmental functions, including any court (or any arbitrator or other tribunal having competent jurisdiction), administrative agency or commission or other governmental authority, instrumentality, domestic or foreign, or quasi-governmental authority.
“GRAND CANYON Study” means that portion of the clinical study being conducted by or on behalf of Seller as of the date hereof entitled “A Phase 2 randomized, double-blind, placebo-controlled study to evaluate the effect of EDG-5506 on safety, biomarkers, pharmacokinetics and functional measures in adults and adolescents with Becker muscular dystrophy” in accordance with clinical trial protocol no. EDG-5506-201, dated November 6, 2025, as amended, which consists of the patients enrolled in Cohort 6 of such clinical study.
“Health Care Laws” means any health care Law, in each case to the extent applicable to Seller or the Product, including (a) the FD&C Act and any other applicable Laws governing or relating to good laboratory practices, good clinical practices, recordkeeping, the Development, approval, Manufacture, storage, use, sale or distribution of drugs (or components or compounds thereof) and the purchase or prescription of or reimbursement for drugs by any Governmental Authority, private health plan or entity, or individual, (b) any Laws pertaining to a government sponsored or funded health care program, including the collection and reporting requirements, and the processing of any applicable rebate, chargeback or adjustment, (c) the federal Medicare statute, federal and state Medicaid statutes (Title XVIII and Title XIX of the Social Security Act), (d) the federal Anti-Kickback Statute (42 U.S.C.A §1320a7b(b)), False Claims Act (31 U.S.C.A §3729 et seq.) and state analogues and civil monetary penalties law (42 U.S.C. §§1320a-7a and 1320a-7b), (e) state licensing, disclosure and reporting regulatory requirements, (f) the anti-fraud
10
provisions of the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information and Technology for Economic and Clinical Health Act, (g) regulations regarding any advertising, marketing and promotional activities, (h) regulations promulgated pursuant to any of the statutes in subclauses (a) through (h), and (i) any comparable non-U.S. Laws. Health Care Laws do not include Data Requirements.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as compiled.
“IND” means an Investigational New Drug application, as defined in the FD&C Act, submitted to the FDA in the United States pursuant to Part 312 of Title 21 of the U.S. Code of Federal Regulations, including any amendments thereto, and any corresponding or equivalent foreign application or registration filed with a Regulatory Authority of a country, group of countries or territory other than the United States.
“Intellectual Property Rights” means any and all of the following and any and all intellectual property and other similar proprietary rights associated with the following, in any country or jurisdiction throughout the world, by whatever name or term known or designated, whether arising by operation of law, Contract, or otherwise: (a) Patent Rights, (b) Trademark Rights, (c) Copyrights, (d) Know-How, (e) domain names and social media identifiers (and accounts therefor), and (f) all other intellectual property rights and industrial rights arising in any jurisdiction of the world, including any rights to sue or recover and retain damages and costs and attorneys’ fees for past, present and future infringement or misappropriation of any of the foregoing.
“Inventory” means all the materials or components (including raw materials, intermediates, excipients, active ingredients and bulk drug product and packaging materials and components), work-in-process, packaging materials, goods in transit and finished goods inventory currently existing, and exclusively used in or held exclusively for use in the Program or with respect to any Product, including the Inventory set forth on Schedule 1.1(c).
“IT Systems” means all software, computer hardware, servers, networks, platforms, peripherals, and similar or related items of automated, computerized, or other information technology networks and systems (including telecommunications networks and systems for voice, data and video) owned, leased, licensed, or used (including through cloud-based or other third-party service providers) by Seller in connection with the Program, Purchased Assets, or Assumed Liabilities.
“Know-How” means any and all trade secrets confidential business information (including, confidential data, technical information and other information), ideas, research and development, technology, processes, techniques, inventions, assays, data, know-how and other proprietary information, including specifications, formulations, methods, techniques, manufacturing processes, chemical or biological manufacturing control data, quality control and testing procedures, clinical data, and customer and supplier lists. For purposes of Seller’s representations and warranties in Section 3.1.10, Know-How does not include Personal Data.
“Law” means any domestic or foreign, federal, state or local statute, law, treaty, ordinance, rule, administrative interpretation, standard, regulation, Order or other requirement having the force and effect of law of any Governmental Authority.
“Liabilities” means any obligations, debts, liabilities, Losses, claims, complaints or commitments of any kind, whether accrued or unaccrued, matured or unmatured, known or unknown,
11
asserted or unasserted, fixed or contingent, determined or determinable, and whether or not the same would be required to be reflected in financial statements or disclosed in the notes thereto.
“Licensed Intellectual Property Rights” means any Intellectual Property Rights (a) that are owned or Controlled by Seller or its Affiliates as of the Closing to the extent used, or held for use, by Seller prior to the Closing in connection with the Program or otherwise necessary for the Program or to Exploit any Product, and (b) not otherwise included in the Purchased Intellectual Property, including the items listed in Schedule 1.1(m).
“Litigation” means any claim, demand, charge, hearing, complaint, action, arbitration, mediation, hearing, proceeding, litigation, suit, warning letter, finding of deficiency or non-compliance, notice of violation or request for recall (whether civil, criminal, administrative, investigative or appellate) and shall include any investigation, audit, examination, mediation, consent decree or alternative dispute resolution mechanisms, whether civil, criminal, administrative, arbitral or otherwise and whether pending, threatened or settled.
“Lookback Date” means January 1, 2023.
“Loss” or “Losses” means any losses, damages, judgments, fines, penalties, awards, Taxes, amounts paid in settlement, charges, and reasonable and documented out-of-pocket costs and expenses incurred in connection therewith (including costs and expenses in connection with investigations, suits and proceedings, expert fees, accounting fees, advisory fees and reasonable and documented legal fees); provided, that Losses will exclude any punitive or exemplary damages, except as are awarded pursuant to a final, non-appealable Order to a Third Party.
“Manufacture” and “Manufacturing” means any and all activities related to the sourcing of raw materials, synthesis, production, manufacture, processing, filling, finishing, inspection, storing, packaging, labeling, release, testing quality control, quality assurance and shipping and holding (prior to distribution) of a pharmaceutical product or any intermediate thereto, including process development, process qualification and validation, scale-up, nonclinical, clinical and commercial manufacture and analytic development, product characterization, stability testing, quality assurance and quality control.
“Material Adverse Effect” means an event, fact, condition, occurrence, circumstance, change or effect (“Effect”) that, considered either alone or together with all other Effects, has had, or would reasonably be expected to have, a material adverse effect on the Program, the Purchased Assets and Assumed Liabilities, taken as a whole or that prevents the consummation by Seller of the Transactions prior to the End Date; provided, however, that none of the following, and no Effects resulting from the following, shall be deemed (individually or in combination) to constitute, or shall be taken into account in determining whether there has been, a “Material Adverse Effect”: (a) any other action by Seller (i) expressly contemplated by this Agreement or any Ancillary Agreement, (ii) which a Buyer has expressly requested in writing be taken or (iii) to which a Buyer has expressly consented in writing; (b) any material breach by a Buyer of this Agreement; (c) general regulatory, political or economic conditions anywhere in the world or in the global economy generally, including the worsening thereof, or conditions affecting the financial markets, credit markets, equity markets, debt markets, currency markets or capital markets anywhere in the world, including (i) changes in interest rates or credit ratings, (ii) changes in exchange rates, or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market, including the worsening of any existing conditions; (d) inflation, or any changes in the rate of increase or decrease of inflation anywhere in the world; (e) the imposition of, or changes in, any tariffs, sanctions, trade policies or similar Law, directive, Order or policy (or any threats or announcements of any of the foregoing), or any consequences resulting from any trade disputes or “trade wars” or similar actions anywhere in the world; (f) any Effect generally affecting the
12
biotechnology industry, including increases in operating costs; (g) any change or prospective change after the date hereof in accounting requirements (including GAAP or any other accounting standards or requirements) or applicable Law or the enforcement or interpretation thereof anywhere in the world; (h) any hostility, act of war, sabotage, terrorism, military actions, cyber-attacks or other cyber-crimes (including by a nation-state or nation state-sponsored threat actor), or any escalation or worsening of any of the foregoing; (i) any hurricane, flood, tornado, earthquake or other natural disaster or force majeure event anywhere in the world (or changes in any such events or occurrences, including, in each case, the response of any Governmental Authority); (j) the failure of the Program to achieve any internal or public projections, predictions, forecasts, guidance, estimates, milestones or budgets (financial or otherwise) in and of itself (provided, that the underlying causes of such failure shall not be excluded unless otherwise excluded under any other clauses of this definition); (k) any pandemic, epidemic, plague, contagious disease outbreak or other comparable event, or the worsening thereof (including quarantine restrictions mandated or recommended by any Governmental Authority), or changes in any such events or occurrences, including, in each case, (i) the response of any Governmental Authority (including any mandated or recommended quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive, Order, guideline, response or recommendation), and (ii) any actions taken or not taken as a consequence of such response or to otherwise respond to the impact, presence, outbreak or spread of any of the foregoing; (l) the execution of this Agreement or any Ancillary Agreement or the announcement of, or the pendency of, this Agreement or consummation of the Transactions, including (i) the identity of a Buyer or its Affiliates or (ii) the impact of foregoing items in this clause (l) on the relationships, contractual or otherwise, of Seller with employees (including any employee attrition), suppliers, customers, partners, lenders, lessors, vendors, Governmental Authorities or any other Third Parties; (m) the development of, or changes in, supply chain disruptions anywhere in the world; (n) any regulatory, clinical or manufacturing Effect relating to either Product or the Program provided, that, for purposes of this clause (n), any Effect that results in an issuance by the FDA of a clinical hold on the investigation or development of the Products, the result of which would reasonably be likely to result in the termination of, or delay of twelve (12) months or more to Seller’s GRAND CANYON Study may be considered in determining whether a Material Adverse Effect has occurred; except in the case of clauses (c)-(i), (k) and (m) to the extent that the Products or Program, taken as a whole, are disproportionately affected thereby as compared with other similarly situated programs (in which case only the incremental disproportionate impact or impacts (to the extent not excluded by other provisions of this definition) may be taken into account in determining whether there has been a Material Adverse Effect).
“NDA” means a New Drug Application as described in the FD&C Act, Marketing Authorisation Applications in Europe, and any corresponding or equivalent foreign application or registration filed with a Regulatory Authority of a country, group of countries or territory other than the United States.
“Order” means any judgment, order or decree of any Governmental Authority of competent jurisdiction.
“Patent Assignment Agreement” means the Patent Assignment Agreement to be entered into at Closing, substantially in the form attached as Exhibit D.
“Patent Rights” means (a) any national, regional and international patents and patent applications, including provisional patent applications; (b) any patent applications filed from such patents, patent applications or provisional applications or from an application claiming priority to any of these, including divisionals, continuations, continuations-in-part, substitutions, provisionals, converted provisionals, and continued prosecution applications; (c) any patents that have issued or in the future issue from the foregoing patent applications described in clauses (a) and (b), including utility models, petty patents and design patents and certificates of invention; and (d) all Patent Term Extensions, restorations
13
and the like by existing or future extension or restoration mechanisms, including revalidations, reissues, re-examinations and extensions of the foregoing patents or patent applications described in clauses (a), (b) and (c).
“Patent Term Extension” means any patent term extension under 35 U.S.C. §156 or any non-U.S. counterpart or equivalent of the foregoing, including supplemental protection certificates and any other extensions that are now available or become available in the future.
“Permitted Encumbrance” means any (a) Encumbrance for (i) Taxes not yet due and payable or (ii) Taxes being contested in good faith by appropriate proceedings, and for which adequate reserves have been established on relevant financial statements in accordance with the GAAP; (b) non-exclusive licenses, sublicenses or other rights to Intellectual Property Rights granted in the ordinary course of business; (c) mechanics’, carriers’, workmen’s, repairmen’s or other like Encumbrances arising or incurred in the ordinary course of business; (d) Encumbrances arising under original purchase price conditional sales Contracts and equipment leases with Third Parties entered into in the ordinary course of business; (e) any Encumbrance disclosed on Schedule 1.1(d); and (f) other imperfections of title, licenses or Encumbrances, if any, that do not materially impair the enforceability or value as of the Closing, or the continued use or operation, of the Purchased Assets to which they relate in the conduct of the Program as currently conducted.
“Person” means any individual, partnership, limited partnership, limited liability company, joint venture, syndicate, sole proprietorship, corporation, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, or any other legal entity, including a Governmental Authority.
“Personal Data” means any information Processed by or on behalf of Seller in connection with the Program, Purchased Assets, or Assumed Liabilities that identifies, or could reasonably be used to identify, a natural person, including any such information that constitutes “protected health information,” “personal data,” “personal information” or “personally identifiable information” under applicable Data Requirements.
“Privacy Consents” means the terms of any written consents, authorizations, waiver of authorization or consent, other written permission pursuant to which Seller, or a Third Party acting on Seller’s behalf, Processed or Processes Personal Data.
“Processing” shall mean any operation or set of operations which is performed on Personal Data, whether or not by automatic means, such as collection, recording, organization, storage, access, storage, distribution, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination, transfer or otherwise making available, alignment or combination, blocking, erasure or destruction.
“Product” means each of (a) S Compound and (b) the Backup Compound.
“Product Records” means, other than Purchased Regulatory Documentation, all (a) books, records, data or other information or documentation related to the Manufacture of the Products (but excluding any such books, records, data or other information or documentation that are required by Law to be maintained by a Person other than Seller manufacturing such Product, in any such case subject to the rights with respect thereto (including ownership, access or reference) included in any other Purchased Asset), (b) books, records, data or other information or documentation of or relating to the Program or (including all human resources, personnel records and any other employee books and records) related to the Transferred Employees, (c) books, records, data or other information or documentation that document
14
or otherwise embody Know-How related to the Program or used or held for use in connection with the Program and (d) any other books, records, data or other information or documentation regulated by Health Care Laws, in each case ((a)-(d)), to the extent owned or Controlled by Seller as of the Closing Date, in the format books, records, data or other information or documentation are maintained as of the Closing Date.
“Program Employee” means each employee of Seller listed on Schedule 6.1, as such Schedule may be updated by Seller not less than five (5) Business Days prior to Closing solely to reflect hires, terminations, transfers and changes in employment status made in compliance with this Agreement; provided, that no individual may be added to or removed from Schedule 6.1 without a Buyer’s prior written consent, not to be unreasonably withheld, conditioned or delayed, other than removals resulting from resignation, death, disability or termination for cause.
“Program” means the Exploitation of each Product as conducted by Seller at any time prior to the Closing Date.
“Purchase Price” means the sum of (a) the Closing Consideration and (b) any Milestone Payments to the extent actually paid.
“Purchased Contracts” means the Contracts set forth on Schedule 1.1(e), as such Schedule may be updated by Seller prior to three (3) Business Days prior to Closing to include Contracts with respect to the Products or the Program that are entered into by Seller after the date of this Agreement in accordance with the provisions of this Agreement and, to the extent subject to Section 4.2, copies of which Contracts are provided to the Buyers not less than three (3) Business Days prior to the execution thereof.
“Purchased Copyrights” means all Copyrights that are owned by Seller and are exclusively related to, exclusively used in or exclusively held for use, in each case, in the Program, including the Copyrights listed on Schedule 1.1(f).
“Purchased Domain Names” means the domain names and social media identifiers (and accounts therefor) listed on Schedule 1.1(g).
“Purchased Intellectual Property” means the Purchased Copyrights, the Purchased Domain Names, the Purchased Know-How, the Purchased Patents and the Purchased Trademarks.
“Purchased Know-How” means all Know-How that is owned by Seller and is exclusively related to, exclusively used in or held exclusively for use, in each case, the Program, including all data (including clinical and pre-clinical data) exclusively related to the Products.
“Purchased Patents” means the Specified Patents and any Patent Rights that are owned by Seller and exclusively related to, exclusively used in or held exclusively for use in the Program. Notwithstanding the foregoing, Purchased Patents shall include the Patent Rights listed on Schedule 1.1(h).
“Purchased Product Records” means, other than Purchased Regulatory Documentation, (a) all Product Records to the extent exclusively related to the Program and (b) copies of all Product Records that are not exclusively related to the Program (it being understood and agreed that (i) a transfer of Purchased Product Records under Section 2.1.1(c) does not include an assignment of any Intellectual Property Rights in such Purchased Product Records to the extent not otherwise included in the Purchased Intellectual Property (but without affecting any implied rights) and (ii) Seller may remove or redact from such Product Records any Excluded Communications and redact from such Purchased Product Records any other information to the extent not exclusively related to the Program or any Product).
15
“Purchased Regulatory Documentation” means all regulatory filings and submissions set forth or described on Schedule 1.1(i).
“Purchased Trademarks” means the Trademark Rights listed on Schedule 1.1(j).
“R&W Insurance Policy” means that certain Buyer Side Representations and Warranties Insurance Policy issued by Great American E & S Insurance Company, Policy No. BRWF403580.
“Regulatory Authority” means any Governmental Authority that is concerned with and has jurisdiction over the Development, testing, Manufacture or Commercialization of pharmaceutical products, biologics or biopharmaceuticals in a particular country or jurisdiction, including healthcare programs under which such products are purchased, billed or reimbursed, as applicable, or the protection of personal health information, including the FDA, the United States Centers for Medicare & Medicaid Services, the European Medicines Agency and the Medicines and Healthcare Products Regulatory Agency.
“Regulatory Materials” means clinical studies, safety and efficacy data and other information submitted to and supporting any and all existing or pending regulatory applications or filings, including INDs, NDAs, approvals, licenses, registrations, and authorizations, in connection with the Exploitation of the Products.
“Representatives” means, with respect to any Person, the directors, officers, employees, agents, attorneys, investment bankers, financial advisors, accountants consultants, advisors and other representatives of such Person.
“Restricted Business” means actions taken to (i) Exploit any therapeutic product that includes as an active pharmaceutical ingredient an agent that is primarily intended to treat BMD or DMD, including incidental treatment of cardiomyopathy solely and specifically as a symptom or manifestation of BMD or DMD or (ii) clinically Develop, Manufacture for clinical use or Commercialize any therapeutic product that includes as an active pharmaceutical ingredient an agent that is primarily intended to treat muscular dystrophy, excluding for purposes of this clause (ii), cardiomyopathies associated with muscular dystrophies.
“ROW Purchased Intellectual Property” means the Purchased Intellectual Property that is filed, registered or the subject of an application for registration anywhere in the world other than the United States.
“ROW Intellectual Property Assignment Agreement” means the short form assignment agreement related to the ROW Purchased Intellectual Property in the agreed form between Seller and LLS to be entered into on the Closing Date.
“Seller Board” means Seller’s board of directors.
“Seller’s Knowledge” means the actual knowledge of the individuals listed on Schedule 1.1(k) after due inquiry.
“S Compound” means that certain compound, that is known as of the date hereof as “EDG-5506” or “Sevasemten,” the chemical structure of which is described in Schedule 1.1(l), as well as Compound 35 disclosed in WO2020097258 or WO2021231630, and Compound 9 disclosed in WO2021231572, and prodrugs, salts, free acid form, free base form, hydrates, crystalline hydrates, polymorphs, solvates, active metabolites, enantiomers, diastereomers, racemates, tautomers, stereoisomers, complexes, co-crystals, or other non-covalent modification of Sevasemten.
16
“Shared Contract” means any Contract to which Seller is a party that is used in, or held for use the Program and is used in, or held for use in another program of Seller, including the Contracts listed on Schedule 2.2.2.
“Special Indemnity Amount” means an amount set forth on Section 1.1(b) of the Disclosure Schedules, which amount is to be deposited by the Buyers with the Escrow Agent in accordance with the terms of this Agreement and held and released pursuant to the terms and subject to the conditions set forth in this Agreement and the Escrow Agreement.
“Specified Patents” means the patents and all Patent Rights associates with WO 2021/231572 (Family 714); WO 2020/097258 & WO 2021/231630.
“Straddle Tax Period” means any taxable period that includes (but does not end on) the Closing Date.
“Tax” and “Taxes” means any and all U.S. federal, state or provincial, cantonal or local or non-U.S. taxes, levies, imposts, contributions, duties, or similar charges in the nature of a tax, whether disputed or not, in each case imposed by any Governmental Authority, including income, gains, premium, diverted profits, minimum, base erosion and anti-abuse minimum, gross receipts, employment, franchise, estimated, alternative minimum, add on minimum, production, property, occupancy, sales, use, gross margin, excise, severance, documentary, stamp, occupation, windfall profits, environmental, custom duties, real property, personal property, capital stock, capital gains, disability, unemployment, payroll, social security, value added, ad valorem, goods and services, transfer, recording, real property gains, registration, recapture, withholding, license, and other tax, together with any interest, penalties and additions to tax or additional amounts with respect thereto.
“Tax Return” means any report, return, declaration, election, claim for refund, information return or other document supplied or required to be supplied to any Taxing Authority with respect to Taxes, including any schedule or attachment thereto and any amendment thereof.
“Taxing Authority” means any Governmental Authority administering, assessing, imposing, or collecting any Tax or Tax Return.
“Third Party” means any Person other than Seller, the Buyers and their respective Affiliates and permitted successors and assigns.
“Trademark Assignment Agreement” means the Trademark Assignment Agreement to be entered into at Closing, substantially in the form attached as Exhibit E.
“Trademark Rights” means any and all trademarks, trade dress, service marks, trade names (including social media corporate identifiers), brand names, slogans, logos, designs or other designations or indicia of source or origin, whether or not registered, and any registrations and applications for registration thereof, and all renewals thereof, together with all translations, adaptations, derivations, and combinations thereof and all goodwill associated therewith.
“Transactions” means all of the transactions contemplated by this Agreement and each of the Ancillary Agreements.
“Transfer Taxes” means all sales (including bulk sales), use, transfer (including real property transfer or gains), recording, ad valorem, documentary, registration, filing, conveyance, excise, stamp Taxes and similar Taxes, duties and fees, imposed on any sale, transfer, or assignment of property
17
(or any interest therein) to the Buyers effected pursuant to this Agreement. For the avoidance of doubt, Transfer Taxes shall exclude VAT.
“Transition Services Agreement” means the Transition Services Agreement to be entered into at Closing, in the form attached as Exhibit F, with such changes as may be mutually agreed by the Parties, acting reasonably and in accordance with Section 5.15.
“United States” or “U.S.” means the United States of America and its territories, districts, commonwealths and possessions, including the Commonwealth of Puerto Rico and the District of Columbia.
“U.S. Purchased Intellectual Property” means the Purchased Intellectual Property that is filed, registered or the subject of an application for registration in the U.S.
“U.S. Intellectual Property Assignment Agreement” means the short form assignment agreement related to the U.S. Purchased Intellectual Property in the agreed form between Seller and LLC to be entered into on the Closing Date.
“VAT” means (a) any Tax imposed in compliance with the Council Directive of November 28, 2006 on the common system of value added tax (EC Directive 2006/112) and (b) any goods and services, value added and other Tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or in addition to, such Tax referred to in clause (a) above, or imposed elsewhere.
The terms set forth below shall have the meanings ascribed thereto in the referenced section (or Schedule, if applicable):
Term | Section / Schedule |
“Adjusted Price Allocation” | Section 5.7.5 |
“Agreement” | Recitals |
“Asset Allocation” | Section 2.1.1 |
“Assumed Liabilities” | Section 2.3.1 |
“Audited Program Financial Information” | Section 5.14 |
“Balance Sheet Date” | Section 3.1.14 |
“Buyer Indemnitees” | Section 9.1.2(a) |
“Buyer Welfare Benefit Plans” | Section 6.2.2 |
“Closing” | Section 2.5.1 |
“Closing Date” | Section 2.5.1 |
“Comparable Offer” | Section 6.2.1 |
“Confidentiality Agreement” | Section 5.2.1 |
“Confidential Information” | Section 5.2.2 |
“Current Representation” | Section 10.15.1 |
18
“Deductible” | Section 9.1.2(a) |
“Designated Courts” | Section 10.1.1 |
“Designated Person” | Section 10.15.1 |
“Draft Price Allocation” | Section 5.7.5 |
“End Date” | Section 8.1.2 |
“Enforceability Exceptions” | Section 3.1.2 |
“Expiration Date” | Section 9.1.1(a) |
“Expiration Time” | Section 9.1.1(a) |
“Field” | Schedule 9.1.2 |
“Final Price Allocation” | Section 5.7.5 |
“General Indemnity Escrow Distribution Amount” | Section 9.1.8 |
“General Indemnity Escrow Release Date” | Section 9.1.8 |
“Guaranteed Obligations” | Section 10.16 |
“HSR Regulatory Actions” | Section 4.3.3 |
“ICC” | Section 10.1.2 |
“Indemnified Party” | Section 9.1.3(a) |
“Indemnifying Party” | Section 9.1.3(a) |
“Insurance Policies” | Section 3.1.19 |
“Leave Program Employee” | Section 6.1.1 |
“LLC” | Recitals |
“LLS” | Recitals |
“Material Purchased Contract” | Section 3.1.6(a) |
“Material Suppliers” | Section 3.1.18 |
“Non-Paying Party” | Section 5.7.1 |
“Non-Transferrable Asset” | Section 2.2.1 |
“Non-U.S. Program Employee” | Section 6.1.1 |
“Notice” | Section 10.2.1 |
“Ongoing Activities” | Section 5.12 |
[***] | [***] |
[***] | [***] |
“Party” and “Parties” | Recitals |
“Paying Party” | Section 5.7.1 |
“Post-Closing Representation” | Section 10.15.1 |
“Pre-Closing Period” | Section 4.1.1 |
“Privileged Communications” | Section 10.15.2 |
19
“Program Financial Information” | Section 3.1.14 |
“Prorated 2026 Incentive” | Section 6.2.7 |
“Purchase Price Cap” | Section 9.1.2(a) |
“Purchased Assets” | Section 2.1.1 |
“Registered IP” | Section 3.1.10(a) |
“Safety Notices” | Section 3.1.8(n) |
“Securities Act” | Section 3.1.6(a)(i) |
“Seller” | Recitals |
“Seller Indemnitees” | Section 9.1.2(b) |
“Special Indemnity Escrow Distribution Amount” | Section 9.1.8 |
“Special Indemnity Escrow Release Date” | Section 9.1.8 |
“[***]” | Schedule 9.1.2 |
“Specified Policies” | Section 5.8 |
“Standard IP Contracts” | Section 3.1.6(a)(v) |
“Straddle Period Taxes” | Section 5.7.1 |
“Tax Proceeding” | Section 3.1.9(a) |
“Third Party Claim” | Section 9.1.3(a) |
“Transferred Employee” | Section 6.1.1 |
“WARN Act” | Section 3.1.11(e) |
“Willful Breach” | Section 8.2.2 |
1.2Construction. Except where the context otherwise requires, wherever used, the singular includes the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or). The captions of this Agreement, the Schedules and the Disclosure Schedules are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The terms “including” and “include” and variations thereof shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against any Party. References to days shall be deemed to refer to calendar days, unless otherwise specified. The contents of the Schedules, Exhibits and Disclosure Schedules form an integral part of this Agreement and shall have as full effect as if they were incorporated in the body of this Agreement and any reference to “this Agreement” shall be deemed to include the Schedules, Exhibits and Disclosure Schedules. Any term used in any Schedule or the Disclosure Schedules, or in any Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement, if any. No prior draft of this Agreement nor any course of performance or course of dealing will be used in the interpretation or construction hereof. Unless otherwise specified or where the context otherwise requires, (a) references in this Agreement to any Article, Section, Schedule or Exhibit are references to such Article, Section, Schedule or Exhibit of this Agreement; (b) references in any Section to any clause are references to such clause of such Section unless otherwise specified; (c) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this
20
Agreement; (d) references to a Person are also to its permitted successors and assigns; (e) references to a Law include any amendment or modification to such Law and any rules, regulations or legally binding guidelines issued thereunder, in each case, as in effect at the relevant time of reference thereto; (f) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently amended, replaced or supplemented from time to time, as so amended, replaced or supplemented and in effect at the relevant time of reference thereto; (g) “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”; and (h) references to dollars, or to $, are expressed in the currency of the United States.
ARTICLE 2
PURCHASE AND SALE; LIABILITIES
2.1Purchase and Sale.
2.1.1Purchase and Sale of Purchased Assets. Upon the terms and subject to the conditions of this Agreement, effective as of the Closing, Seller shall sell, transfer, convey, assign and, subject to Section 2.1.2, deliver to the applicable Buyer in accordance with the asset allocation set forth in Schedule 2.1.1 (the “Asset Allocation”), and the Buyers shall purchase, and in accordance with the Asset Allocation, accept and acquire from Seller, all of Seller’s rights, title and interests in, to and under, the following assets (clauses (a) through (j)), in each case as they exist at the time of the Closing, free and clear of all Encumbrances (other than Permitted Encumbrances) (collectively, the “Purchased Assets”):
(a)all (i) Purchased Contracts and (ii) subject to Section 2.2.3, rights under Shared Contracts to the extent related to, used in or held for use in the Program;
(b)all Purchased Regulatory Documentation;
(c)all Purchased Product Records;
(d)all Purchased Intellectual Property, including all (i) royalties, fees, income, payments and other proceeds due and payable on or after the Closing to Seller with respect to such Purchased Intellectual Property and (ii) claims and causes of action against any Third Party with respect to such Purchased Intellectual Property, whether accruing before, on or after the Closing Date, including all rights to and claims for damages, restitution and injunctive and other legal or equitable relief for past, present or future infringement, misappropriation or other violation thereof;
(e)all attorney work-product protections, attorney-client privileges and other legal protections to the extent related to the Program, the other Purchased Assets or the Assumed Liabilities, in each case excluding any Excluded Communications;
(f)all claims, causes of actions, defenses, and rights of set-off against Third Parties to the extent relating to, arising out of or in connection with the Program, the Purchased Assets or the Assumed Liabilities (other than any such claims or causes of action included in Section 2.1.1(d));
(g)Inventories that are owned by Seller;
(h)all goodwill of the Program as a going concern; and
21
(i)all other assets, properties and rights that are exclusively related to, exclusively used in or held exclusively for use in the Program and, without duplication, those assets, properties and rights listed on Schedule 2.1.1(i).
Notwithstanding anything to the contrary herein, the Purchased Assets shall be transferred by Seller to the Buyers in accordance with the Asset Allocation.
2.1.2Notwithstanding Seller’s delivery obligations pursuant to Section 2.1.1 and subject to the access rights of the Buyers as of the Closing under the Transition Services Agreement, Seller shall deliver to the Buyers (a) all Purchased Regulatory Documentation and Purchased Product Records within thirty (30) days of the Closing, and (b) any Inventory required to remain in the Control of Seller to the extent required to perform activities under the Transition Services Agreement as promptly as reasonably practicable following cessation of such services and in accordance with the Transition Services Agreement. Subject to the foregoing, all Inventory included in the Purchased Assets shall be transferred, directly or indirectly, to the applicable Buyer at the Closing. To the extent any such Inventory is in the possession of a Third Party under a Shared Contract or under a Purchased Contract requiring Consent to assign such Purchased Contract to a Buyer, Seller shall use reasonable best efforts to provide the Buyers access to and use of the Inventory, including (i) access to premises where such Inventory is located in accordance with the terms and conditions of the applicable Shared Contract until the transfer or assignment of Seller’s relevant rights under such Contract to the Buyers pursuant to Section 2.1.6 and (ii) enforcing at the reasonable request of, and for the benefit of, the Buyers or their Affiliates any rights of Seller under such Purchased Contract or Shared Contract.
2.1.3Excluded Assets. Notwithstanding anything to the contrary in this Agreement (including Section 2.1), neither the Buyers nor any of their Affiliates shall acquire, pursuant to this Agreement or any Ancillary Agreement, the Excluded Assets, and the Purchased Assets shall not include, and Seller shall retain following the Closing Date, the Excluded Assets.
2.1.4License Grant to the Buyers. Subject to the terms and conditions of this Agreement, Seller hereby grants to the Buyers as of the Closing, a nonexclusive, royalty-free, fully paid-up, perpetual, irrevocable, sublicensable, transferable, worldwide license or sublicense (as the case may be) under any Licensed Intellectual Property Rights.
2.1.5Acknowledgment. Subject to Section 5.2, Seller shall have the right, on behalf of itself and its licensees, sublicensees, licensors, sublicensors, Manufacturers and distributors, to (a) retain copies of the documents, materials and data relating to the conduct of the Program prior to the Closing Date, in each case, as shall solely to the extent required to (i) complete their legal, regulatory, stock exchange, Tax and financial reporting requirements or (ii) defend or manage Excluded Liabilities, including in respect of Covered Insurance Matters, and (b) prior to delivering or making available any Purchased Product Records or Purchased Regulatory Documentation to the Buyers in accordance with Section 2.1.1 and Section 2.5, redact from such Purchased Product Records or Purchased Regulatory Documentation any information to the extent that (i) such information does not relate to the Program or (ii) such information constitutes any Excluded Communications. Notwithstanding anything to the contrary contained in this Agreement, the inclusion of a single asset within the scope of more than one clause of Section 2.1.1 does not imply that such asset must be conveyed to the Buyers more than once.
2.1.6Limited Grant of Rights. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, Seller retains, on behalf of itself and its licensees, sublicensees, licensors, sublicensors, Manufacturers and distributors, such rights in and to the Purchased Assets, including a right of reference to the Purchased Regulatory Documentation, and the Buyers hereby grant to Seller, effective from and after the Closing Date, a worldwide, non-exclusive, royalty-free and non-
22
transferable license and right of reference (with a right to grant sublicenses and further rights of reference through multiple tiers) under the Purchased Assets, including a right of reference to the Purchased Regulatory Documentation, in each case, solely to the extent necessary to perform, and solely for the purpose of performing, its obligations to the Buyers and their Affiliates under this Agreement or any Ancillary Agreement and, in each case, solely during the period of time in which such Person is performing the applicable obligations to the Buyers and their Affiliates under this Agreement or the Ancillary Agreement. Nothing in this Section 2.1.5 shall prohibit the Buyers or any of their Affiliates from exercising any contractual remedies available to it under this Agreement or any Ancillary Agreement as a result of any breach hereof or thereof by Seller, including in connection with any breach of Sections 5.2 and 5.5.
2.2Consents to Certain Assignments; Shared Contracts.
2.2.1Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, but nonetheless subject to the other provisions of Section 2.1.6, this Agreement shall not, nor shall any Ancillary Agreement, constitute an agreement to sell, transfer, convey, assign or deliver, directly or indirectly, any Purchased Asset (including any Contract), or any right or benefit arising thereunder, if an attempted direct or indirect sale, transfer, assignment or delivery thereof, without the Consent of a Third Party (including a Governmental Authority), would constitute a breach, default, violation or other contravention of the rights of such Third Party, would be ineffective with respect to any party to a Contract concerning such Purchased Asset or would be prohibited by Law (any such Purchased Asset, a “Non-Transferable Asset”).
2.2.2If any required Consent in respect of a Non-Transferable Asset is not obtained prior to the Closing, subject to satisfaction of the conditions to Closing set forth in Article 7, the Closing shall nonetheless take place on the terms set forth herein and, thereafter, prior to such Consent being obtained, and for a period of up to twelve (12) months following the Closing Date, (a) the Buyers and Seller shall use their respective reasonable best efforts to secure such Consent as promptly as practicable after the Closing (which efforts shall not require the payment of any money or other consideration), and (b) Seller and the Buyers shall cooperate in good faith (with each Party being responsible for its own out-of-pocket expenses) in any lawful and commercially reasonable arrangement reasonably acceptable to the Buyers and Seller under which (i) the Buyers shall obtain the economic rights and benefits under the Purchased Asset with respect to which the Consent has not been obtained and (ii) the Buyers shall assume any related economic liability or burden with respect to such Purchased Asset to the extent constituting an Assumed Liability. Following the Closing, until such Consent is obtained, the Buyers will, and will cause each of its Affiliates to, use reasonable best efforts to cooperate with Seller to enable them to comply with the terms of any Contract that would have constituted a Purchased Asset except for the failure to receive a required Consent to such transfer or assignment.
2.2.3Without limiting Section 2.2.1, Seller shall use its reasonable best efforts to cause any Shared Contract to be assigned in relevant part to the applicable Buyer or appropriately amended or, to use reasonable best efforts to assist Buyer to replace with Contracts in lieu of Shared, in each case so that such Buyer shall be entitled to the rights and benefits of such Shared Contract to the extent exclusively relating to the Program, and shall be responsible for any burden to the extent constituting an Assumed Liability, and Seller shall be entitled to the rights and benefits to the extent not exclusively related to the Program, and shall be responsible for any burden to the extent constituting an Excluded Liability or otherwise relating to the balance of the subject matter of such Shared Contract. Seller shall cooperate in good faith and consult with the Buyers with respect to the separation and amendment of such Shared Contracts and the negotiation of any such partial assignments and new Contracts and, with respect to any amended Shared Contract or new Contract to be assigned to or executed by a Buyer, shall give such Buyer the ability to comment thereon and shall incorporate any reasonable comments provided by such Buyer. If any such Shared Contract cannot be so separated and amended (and new Contracts cannot be entered into),
23
or if any of the foregoing would impair the benefits that either Buyer or Seller would expect to derive from a Shared Contract, then the Parties shall cooperate with each other and use reasonable best efforts to obtain for the appliable Buyer an arrangement to provide the applicable Buyer with the benefits of such Shared Contract in some other manner, including Seller’s entering into such lawful arrangements with such Buyer to place such Buyer in substantially the same economic and Liability position as if such assignments or amendments and new Contracts were entered into in accordance with the foregoing. Further, Seller shall use reasonable best efforts to enforce, at the request (and for the benefit and burden) of the Buyers, any rights of Seller arising from the portion of any Shared Contract that is not assigned or transferred to the Buyers to the extent such rights are related to the Program. The obligations of Seller pursuant to this Section 2.2.3 shall not extend beyond the remaining term of the applicable Shared Contract as of the Closing Date. The Buyers acknowledge and agree that, with respect to the Shared Contracts listed on Schedule 2.2.3(a), the reasonable best efforts of Seller to cause the applicable rights of Seller under or with respect to the Program to be assigned and transferred to a Buyer shall consist of using reasonable best efforts to effectuate the transfer of purchase orders or statements of work under such Shared Contract to Contracts with such Persons to which Buyer or its Affiliates are a party at the Closing, with respect to which, Buyer shall cooperate and assist Seller in such efforts.
2.2.4Nothing in this Section 2.2 shall require Seller or the Buyers to make any payment, incur any obligation or grant any concession in order to effect any transaction contemplated by this Section 2.2.
2.3Liabilities.
2.3.1Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller shall assign and the applicable Buyer or their respective Affiliates shall assume and agree to pay, perform and discharge when due all Liabilities of Seller to the extent exclusively arising out of or exclusively relating to the Purchased Assets or the Program and not constituting Excluded Liabilities, whether arising before, concurrently with, or after the Closing, including: (a) all Liabilities arising out of Seller’s or any Buyer’s or any of their Affiliates’ ownership or use of, or performance under, the Program or any Purchased Asset; (b) all Liabilities arising out of or relating to, or requiring performance under, any Purchased Contracts (except, in each case, for any Liability arising out of or relating to (i) any breach of, or failure to comply with, prior to the Closing, any covenant or obligation in any such Purchased Contract or (ii) any event that occurred prior to the Closing which, with or without notice, lapse of time or both, would or does constitute such a breach or failure); provided, that Assumed Liabilities in respect of payment obligations arising prior to the Closing Date under (x) Purchased Contracts or (y) Shared Contracts to the extent related to the Program, in each case that would be required to be recorded on a balance sheet prepared in accordance with GAAP, shall in no event exceed $5,000,000 in the aggregate, with any excess constituting an Excluded Liability; (c) any Liabilities arising under a Shared Contract to the extent related to the Program, subject to the performance by Seller of its obligations under Section 2.2; (d) all Liabilities in respect of the Program or the Purchased Assets arising after the Closing Date determined in accordance with Section 5.7.1 and (e) the Buyer’s portion of Transfer Taxes as provided for in Section 5.7.2 (collectively, the “Assumed Liabilities”).
2.3.2Excluded Liabilities. Notwithstanding anything to the contrary herein, no Buyer nor any of its Affiliates shall assume any Excluded Liabilities.
2.4Consideration.
2.4.1Upon the terms and subject to the conditions of this Agreement, in consideration of the conveyances contemplated under Section 2.1, the Buyers shall (a) pay to Seller on the Closing Date the Closing Consideration, (b) pay to Seller, upon achievement of any Milestone Event, the corresponding
24
Milestone Payment in accordance with Schedule 2.4; and (c) assume the Assumed Liabilities pursuant to Section 2.3.
2.5Closing.
2.5.1Closing. Upon the terms and subject to the conditions of this Agreement, the closing of the Transactions (the “Closing”) shall take place remotely via the electronic exchange of documents and signature pages (or in such other manner as shall be mutually agreed upon by Seller and the Buyers) commencing at 10:00 am Mountain time on a date that is no later than the second (2nd) Business Day following the date on which all of the conditions to the obligations of Seller and the Buyers to consummate the transactions contemplated hereby set forth in Article 7 (other than conditions that by their nature are to be satisfied at the Closing itself, but subject to the satisfaction or waiver of those conditions) have been satisfied or waived, or on such other date as shall be mutually agreed upon by Seller and the Buyers prior thereto. The date on which the Closing actually occurs is called (the “Closing Date”).
2.5.2Closing Deliveries.
(a)At the Closing, Seller shall deliver or cause to be delivered the following to the Buyers:
(i)duly executed counterparts to (x) the Transition Services Agreement (including the services schedules thereto), in each case in form and substance mutually agreed pursuant to Section 5.15 and (y) each of the other Ancillary Agreements to which Seller is a party;
(ii)a certificate, executed by an officer of Seller and dated the Closing Date, confirming on behalf of Seller that the conditions set forth in Sections 7.2.1 and 7.2.2 have been satisfied;
(iii) a valid IRS Form W-9 duly executed by Seller;
(iv)other than as set forth in Section 2.1.2, deliver to the Buyers all the Purchased Assets which are capable of passing by delivery when, by virtue of such delivery, title to those Purchased Assets shall pass to the Buyers, in accordance with the Asset Allocation;
(v)the U.S. Intellectual Property Assignment Agreement duly executed by Seller and its relevant subsidiaries; and
(vi)the ROW Intellectual Property Assignment Agreement duly executed by Seller and its relevant subsidiaries.
(b)At the Closing, the Buyers shall deliver the following to Seller:
(i)payment, by wire transfer of immediately available funds to the account(s) set forth in Schedule 2.5.2(b)(i), of an amount equal to the Closing Consideration minus the Escrow Amount;
(ii)payment, by wire transfer of immediately available funds to the accounts designated in writing by the Escrow Agent, of an amount equal to the Escrow Amount;
25
(iii)duly executed counterparts to (x) the Transition Services Agreement (including the services schedules thereto), in each case in form and substance mutually agreed pursuant to Section 5.15 and (y) each of the other Ancillary Agreements to which Buyers are a party;
(iv)a duly executed counterpart of the Escrow Agreement executed by the Escrow Agent;
(v)a certificate, executed by an officer of each Buyer and dated the Closing Date, confirming on behalf of each Buyer that the conditions set forth in Sections 7.3.1 and 7.3.2 have been satisfied;
(vi)the U.S. Intellectual Property Assignment Agreement duly executed by LLC; and
(vii)the ROW Intellectual Property Assignment Agreement duly executed by LLS.
2.6Withholding. The Buyers shall be entitled to deduct and withhold from the Purchase Price and any other amounts payable pursuant to this Agreement, such Tax amounts as are required to be deducted and withheld under the Code or any applicable provision of U.S. state or local, or non-U.S. Law with respect to the making of such payment; provided, however, that the Parties agree that no Taxes are expected to be required by the United States or by France to be withheld or deducted from the payment of the Closing Consideration under applicable Law if Seller provides to Buyers a duly executed and completed IRS Form 6166 or Form n° 5000 prior to the Closing Date. To the extent that amounts are so deducted and withheld and paid over to the relevant Governmental Authority by a Buyer, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. The Buyers shall (except in connection with any compensatory payments or the failure of Seller to deliver an IRS Form W-9 pursuant to Section 2.5.2(a)(iii)) use reasonable best efforts to give advance notice of withholding anticipated to be made in respect of amounts payable to Seller and provide Seller with a reasonable opportunity to provide any forms, certifications or other documents to reduce or eliminate withholding (including, as applicable, an IRS Form W-9 or the appropriate series of an IRS Form W-8, a form n° 5000 or IRS Form 6166 and any similar form). The Buyers and Seller shall use reasonable best efforts to cooperate in minimizing any such withheld amounts to the extent permitted by applicable Tax Law. Notwithstanding anything to the contrary herein, any compensatory amounts subject to payroll reporting and withholding that are payable pursuant to or as contemplated by this Agreement shall be payable in accordance with the applicable payroll procedures.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of Seller. Disclosures in any section or paragraph or cross-referenced in the particular section of the Disclosure Schedules address the corresponding section or paragraph of this Agreement and other sections or paragraphs of this Agreement to the extent that it is reasonably apparent from its face that such disclosure is applicable to such other sections or paragraphs. Except as set forth in the Disclosure Schedules, Seller represents and warrants to the Buyers as follows:
3.1.1Corporate Status. Seller is a legal entity duly organized, validly existing and, to the extent applicable in the relevant jurisdiction, in good standing under the Laws of the jurisdiction of its organization or incorporation. Seller has all requisite corporate or other entity power and authority to enable it to own, operate, lease or otherwise hold the Purchased Assets owned, operated, leased or otherwise held by it and to carry on the business as currently conducted. Seller is duly licensed or qualified to do business
26
and is in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the business as currently conducted makes such licensing or qualification necessary, except where the failure to be so qualified would not have a Material Adverse Effect.
3.1.2Authority. Seller has the requisite corporate or other entity power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery of this Agreement and the Ancillary Agreements to which Seller will be a party and the consummation by Seller of the Transactions have been duly authorized by all necessary corporate or other entity actions of Seller. Seller has duly executed and delivered this Agreement and, as of the applicable time required by this Agreement, will have executed and delivered each Ancillary Agreement to which it will be a party, and this Agreement and each Ancillary Agreement to which it is or will be a party (assuming the due authorization, execution and delivery thereof by each other party thereto) constitutes or, upon the execution and delivery thereof by Seller, will constitute its valid and legally binding obligation, enforceable against it in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally, and subject to equitable principles of general applicability, whether considered in a proceeding at law or in equity (collectively, the “Enforceability Exceptions”).
3.1.3Non-Contravention and Approvals.
(a)The execution, delivery and performance by Seller of this Agreement, and the execution, delivery and performance by Seller and each Ancillary Agreement to which it will be a party, do not and will not (i) conflict with, violate or result in a breach or default of the organizational documents of Seller, (ii) subject to obtaining, making and giving the Consents, filings and notices, as applicable, referred to in Section 3.1.3(b), violate any Law applicable to Seller, the Program or the Purchased Assets, or (iii) subject to obtaining, making and giving the Consents, filings and notices, as applicable, referred to on Section 3.1.3 of the Disclosure Schedules or in Section 3.1.3(b), (A) violate, breach or constitute a default under or an event that, with or without notice or lapse of time or both, would constitute a default under, or result in the termination of, or give rise to a right of termination, cancellation, modification or acceleration of any right or obligation under any Purchased Contract, (B) violate any Order to which Seller is subject to the extent relating to the Program or (C) result in the imposition or creation of any Encumbrance other than a Permitted Encumbrance on any Purchased Asset, except, in the case of (ii) and (iii), for such violations, breaches, defaults, accelerations, cancellations, terminations or Encumbrances that would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole.
(b)Except for (i) if required, compliance with and filings or notifications required under any applicable Antitrust Law and the expiration or termination of the waiting periods thereunder, (ii) Authorizations that if not received, or declarations, filings or registrations that if not made, would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole, (iii) Authorizations, declarations, filings or registrations that have become applicable solely as a result of the specific regulatory status of any Buyer or its Affiliates and (iv) items disclosed in Section 3.1.3(b) of the Disclosure Schedules, no notice to, filing with or Authorization of any Governmental Authority is required for Seller to consummate the Transactions.
3.1.4No Litigation. (a) There is and since the Lookback Date, has been no Litigation pending or threatened in writing against Seller (a) relating to or affecting the Program, the Products, the Purchased Assets or the Assumed Liabilities, except for such Litigation as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed
27
Liabilities, taken as a whole or (b) that challenges or seeks to prevent, enjoin or otherwise delay the Transactions contemplated by this Agreement. There is and since the Lookback Date, has been no Litigation pending in respect of the Program, the Products, the Purchased Assets or the Assumed Liabilities in which Seller is plaintiff or claimant. There are and since the Lookback Date, have been no Orders with respect to the Program, the Products, Purchased Assets or the Assumed Liabilities outstanding against Seller. There are and since the Lookback Date, have been no to Seller’s Knowledge: (i) investigations by a Governmental Authority with respect to the Program, the Products, the Purchased Assets or the Assumed Liabilities outstanding against Seller, or (ii) to pending or threatened in writing whistleblower claims related to the Program.
3.1.5Title to and Sufficiency of Assets.
(a)Seller owns and has good and valid title to, or valid contract rights, or other rights to use, in, as applicable, the Purchased Assets (other than the Purchased Intellectual Property, which is the subject of Section 3.1.10(d), and Personal Data), free and clear of all Encumbrances other than Permitted Encumbrances.
(b)Assuming (x) the receipt of all required Consents of Third Parties required for the transfer of Purchased Assets, and (y) each Program Employee is employed by a Buyer or its Affiliate, or is a contractor or consultant thereof, at and immediately following the Closing, the Purchased Assets and undocumented know-how included in the Licensed Intellectual Property Rights, together with (i) the Products supplied and services provided to any Buyer and its Affiliates under this Agreement and the Ancillary Agreements, (ii) the services provided to the Program by any of the employees of Seller other than the Program Employees, (iii) cash, cash equivalents and working capital, (iv) readily available tangible personal property (such as office space, furniture and office equipment) and support services (such as IT services), in each case that is available on commercially reasonable terms and (v) the assets listed in Section 3.1.5(b) of the Disclosure Schedules, constitute all of the rights, property and assets owned or Controlled by Seller and necessary to conduct in all material respects the Program immediately following the Closing in substantially the same manner as currently conducted by Seller and as conducted immediately prior to Closing, and all such assets are, as applicable, with respect to physical assets, structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put and none of such assets are in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.
3.1.6Material Purchased Contracts.
(a)Section 3.1.6(a) of the Disclosure Schedules sets forth a true and complete list of the Contracts described in the following clauses (i)-(xvi) that are in effect as of the date of this Agreement to which any of the Purchased Assets are bound or affected and to which Seller is a party or by which it is bound in connection with the business or the Program, Products or Purchased Assets (such Contracts, being the “Material Purchased Contract”):
(i)each Purchased Contract that (A) would be required to be filed by Seller as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act of 1933, as amended or (B) is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act;
(ii)each Purchased Contract (other than Contracts terminable without more than sixty (60) days’ advance notice or penalty) for the purchase, sale, license or use of materials, supplies, equipment, services, software, Intellectual Property Rights or other assets with respect to which payments by Seller exceeded $3,000,000 in calendar year 2025;
28
(iii)each Purchased Contract with respect to which payments to Seller exceeded $3,000,000 in calendar year 2025;
(iv)each Purchased Contract that (A) restricts the ability of Seller to compete in any business or with any Person in any geographical area, (B) requires Seller to conduct any business on a “most favored nations” basis with any third party, (C) requires Seller to purchase a minimum quantity of goods or supplies relating to the Products in favor of any third party, or (D) obligates Seller to purchase or otherwise obtain any product or service exclusively from any Third Party;
(v)each Purchased Contract under which Seller assigns, licenses, has licensed or has assigned any material Intellectual Property Rights from, or any material Purchased Intellectual Property to, any third party except, in each case, for (A) off-the-shelf, commercially available or “shrink-wrap” software or computer services agreements (including agreements under which such software is delivered as a service), (B) materials transfer agreements, clinical trial agreements, sponsored research agreements, non-disclosure agreements, employment agreements, employee invention assignment agreements, consulting agreements and other agreements entered into in the ordinary course of business, in each case, that do not transfer ownership of material Purchased Intellectual Property to any Third Party or contain any exclusive license or option to any Third Party to use material Purchased Intellectual Property for the research, supply, Manufacturing, Development or Commercialization of products (other than on behalf of Seller), (C) Contracts granting any license, ownership or other rights in and to incidental rights (including rights in trademarks or feedback), (D) Contracts granting service providers of Seller a non-exclusive license to rights in connection with such service provider’s provision of services to Seller, and (E) invention assignment and consulting agreements that contain assignments of Intellectual Property Rights to Seller (collectively, clauses (A) to (E), “Standard IP Contracts”);
(vi)each Purchased Contract with any academic institution or Governmental Authority that provides for the provision of funding to Seller for Development activities involving the creation of any material Intellectual Property Rights;
(vii)each Purchased Contract pursuant to which Seller has continuing milestone or similar contingent payments obligations, in each case, that would reasonably be expected to result in aggregate payments in excess of $3,000,000 after the date of this Agreement, and in each case, excluding indemnification and performance guarantee obligations provided for in the ordinary course of business and Standard IP Contracts;
(viii)each Purchased Contract that obligates Seller to make any capital commitment or capital expenditure in an aggregate amount in excess of $3,000,000 after the date of this Agreement;
(ix)each Purchased Contract that relates to the formation, creation, operation, management or control of any legal partnership or any joint venture entity;
(x)each Purchased Contract between Seller and any Governmental Authority, except for material transfer agreements, clinical trial agreements, sponsored research agreements and non-disclosure agreements entered into in the ordinary course of business;
(xi)each settlement, consent decree, conciliation or similar agreement with any Governmental Authority that contains material obligations or limitations on the Program;
(xii)each Purchased Contract containing any put, call, right of first refusal, right of first offer or similar right pursuant to which Seller could be required to purchase or sell, or
29
offer for purchase or sale, as applicable, any (A) equity interests of any Person or (B) assets (excluding commitments to purchase goods and products and commercially available off-the-shelf software licenses and software-as-a-service offerings, in each case, entered into in the ordinary course of business) or businesses;
(xiii)each material Purchased Contract with (A) a contract manufacturing organization, (B) a contract development and manufacturing organization (other than those identified in clause (A) or clause (C)); (C) a contract research organization for provision of clinical trial services (other than, for the avoidance of doubt, any individual clinical trial site); or (D) a clinical trial site;
(xiv)each Purchased Contract requiring Seller to supply products for use in (A) initiated sponsored studies, (B) compassionate use programs or (C) collaborative research activities;
(xv)each Purchased Contract that relates to the acquisition or disposition by Seller of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);
(xvi)each Purchased Contract with a Material Supplier;
(xvii)each Contract imposing an Encumbrance on any asset of the Program that individually, or in the aggregate, is in excess of $3,000,000; and
(b)Each of the Material Purchased Contracts is in effect and constitutes a legal, valid and binding agreement of Seller, enforceable against Seller and, to Seller’s Knowledge, each other party thereto, in accordance with its terms, subject to the Enforceability Exceptions, except where such failure to be a legal, valid and binding agreement would not reasonably be expected to be, individually or in the aggregate, material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole. None of Seller, nor, to Seller’s Knowledge, any other party thereto is in material breach or material default in the performance, observance or fulfillment of any obligation or covenant contained in any Material Purchased Contract. Seller has not has received any written notice from a Third Party (i) stating that such Third Party intends to terminate, or modify or amend in any material respect, any Material Purchased Contract or (ii) alleging that Seller is in breach or default of any material obligation or covenant contained in any Material Purchased Contract, in each case, other than any such notices that have been withdrawn or relate to a breach or default that has been cured and except for those notices that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Seller has not given any written notice to any Third Party stating that Seller intends to terminate, or modify or amend in any material respect, any Material Purchased Contract, except for those notices that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. A true and complete (except with respect to any redaction of financial terms) copy of each Material Purchased Contract, including all material schedules, exhibits, appendices, amendments, modifications and waivers relating thereto, has been made available to the Buyers. There are no material disputes pending or threatened in writing under any Material Purchased Contract.
3.1.7Compliance with Law.
(a)Seller and, to Seller’s Knowledge, the Third Parties that have been engaged by Seller in the conduct of the Program, are, and since the Lookback Date have been have been, in compliance with all applicable Laws with respect to the conduct of the Program and the ownership of and use of the Purchased Assets, including all applicable Health Care Laws, except for such noncompliance that would not reasonably be expected to be material to the Program, the Purchased Assets and the Assumed
30
Liabilities, taken as a whole. For the last five (5) years, Seller has not received any written notice from a Governmental Authority alleging that Seller was in material violation of any Law applicable to the conduct of the Program or the ownership and use of the Products or the Purchased Assets.
(b)Solely with respect to the Program, none of Seller nor, to Seller’s Knowledge, any of its directors, officers, employees or agents or other Person acting on behalf of Seller, in the last five (5) years, has made any unlawful payment to foreign or domestic governmental officials has violated, the Foreign Corrupt Practices Act of 1977, the USA PATRIOT Act or any other applicable anti-corruption, anti-bribery, export, import, re-export, anti-boycott, sanctions, embargo or similar applicable Law in any jurisdiction, except as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole. In the last five (5) years, Seller has not (A) received any written communication from any Governmental Authority or any third party alleging any of the foregoing violations related to the Program, (B) received a subpoena, written voluntary request for the production of documents from a Governmental Authority regarding an actual or potential investigation or prosecution of any of the foregoing applicable Laws related to the Program, or (C) made any disclosure (voluntary or otherwise) in writing to any Governmental Authority with respect to any potential violation relating to any of the foregoing applicable Laws related to the Program, in each case (A) through (C), except as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole.
3.1.8FDA Regulatory Matters.
(a)Since January 1, 2022, to the extent applicable to the Products or the Program, Seller has filed with the applicable Regulatory Authorities all required material filings, declarations, listings, registrations, reports or submissions, including Adverse Event reports, with respect to any and all existing or pending regulatory applications or filings, including INDs, NDAs, approvals, licenses, registrations, and authorizations, to permit the Exploitation of the Products. All such applications, filings, declarations, listings, registrations, reports and submissions were in material compliance with applicable Law when filed, and, as of the date of this Agreement, no deficiencies have been asserted in writing by any applicable Regulatory Authority to Seller with respect to any such filings, declarations, listings, registrations, reports or submissions. Seller is, and during the last five (5) years has been, in material compliance with all applicable Laws administered or enforced by the FDA or any similar Regulatory Authority, including under the FD&C Act and similar laws regarding Exploitation of the Product.
(b)In the last five (5) years, Seller has not received any written adverse communication from any Regulatory Authority relating to the Program, the Products or the facilities in which the Products are Manufactured that has not been fully resolved, including (i) any FDA Form 483 or warning letters or in the form of other written correspondence directly relating to the Products or the facilities in which the Products are Manufactured or (ii) any “Notices of Adverse Findings” from the FDA or similar written notices from other Governmental Authorities with respect to the Products, in each case (clauses (i) and (ii)), except as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole.
(c)There has not been reported to Seller any Adverse Event related to the Products that resulted or, to Seller’s Knowledge, would be reasonably likely to result, in the FDA or equivalent Governmental Authority placing a clinical hold or taking any other action which would be material to the ongoing Development or Manufacture of the Products.
(d)All material reports, registrations, filings, applications, documents, claims, amendments, modifications, notices, or submissions with respect to the Products or the Program that were
31
required to be filed by Seller since January 1, 2022, with the FDA or any other similar Regulatory Authority have been filed and maintained in accordance with applicable Law. All such material reports, registrations, filings, applications, documents, claims, amendments, modifications, notices, and submissions were in compliance with applicable Laws when filed or as amended or supplemented, and no material deficiencies have been asserted in writing to Seller by any such Regulatory Authority with respect to same that have not been cured, except, in each case, as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities. Seller is and at all times since January 1, 2022 has been in compliance in with, and possesses and has possessed, all licenses, permits and approvals necessary for the conduct of the Program and has paid all material fees and assessments due and payable in connection therewith. With respect to the Products, Seller has delivered or made available to the Buyers all material correspondence (which shall include observations, establishment inspection reports and any other material documents received by Seller) and meeting minutes received from or sent to the FDA and any other similar Regulatory Authority, including any and all notices of inspectional observations, establishment inspection reports and any other material documents received by Seller from the FDA or similar Regulatory Authority which relate to Seller’s compliance with regulatory requirements of the FDA or similar Regulatory Authorities.
(e)The Products are and have been Developed and Manufactured in material compliance with applicable Law. The Products that are subject to the jurisdiction of the FDA or comparable Regulatory Authorities are being Developed and Manufactured by or for Seller in compliance in all material respects with all applicable rules and regulations of the FDA and all other requirements of applicable Regulatory Authorities. All Development and Manufacturing activities, including all preclinical studies and Clinical Trials, of the Products conducted by or on behalf of Seller with respect to the Program have been and, if still pending, are being, conducted in material compliance with the applicable protocol for such Clinical Trial, including informed consent, to the extent applicable, good manufacturing practice, good laboratory practices and good clinical practices, as applicable, cGMP, as applicable, and all Laws applicable to such Clinical Trials, including Health Care Laws. No Clinical Trial conducted by or on behalf of Seller with respect to the Program has been terminated or suspended prior to scheduled completion, and neither the FDA nor any other Regulatory Authority has initiated, or, to Seller’s Knowledge, threatened in writing to initiate, any action to place a clinical hold order on, or otherwise terminate or suspend, any proposed or ongoing Clinical Trials of the Products conducted by or on behalf of Seller. Section 3.1.8(e) of the Disclosure Schedules contains a complete and accurate list of all Clinical Trials that have been conducted or are currently being conducted with respect to the Products.
(f)All Manufacturing operations conducted by or for the benefit of Seller with respect to the Products being used in Clinical Trials have been and are being conducted in accordance, in all material respects with cGMP for pharmaceutical products and applicable Laws. Without limiting the foregoing, Seller and its subcontractors have consistently applied all necessary safety requirements in Manufacturing operations and Seller provided to its subcontractors all necessary safety information with respect to the handling of the Product and any component thereof.
(g)The Manufacturing operations and process of Manufacturing Products as in effect as of the Closing Date (a) yield Products that conform with the Products as described in the Regulatory Materials, including with respect to the identity, composition, purity, potency, physical form, and physicochemical characteristics of such Products, and (b) do not result in the production of any material amounts of Product-related substances or variants with properties differing from the Products as so characterized in the Regulatory Materials.
(h)None of Seller nor, to Seller’s Knowledge, any of its directors, officers, employees or agents or other Person acting on behalf of Seller, is subject to any investigation that is pending, or to Seller’s Knowledge, threatened, in each case by the FDA, the Department of Health and Human
32
Services Office of Inspector General or the Department of Justice pursuant to the Federal Healthcare Program Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)) or under the Federal False Claims Act (31 U.S.C. §3729) with respect to the Program.
(i)None of Seller nor, to Seller’s Knowledge, any of its directors, officers, employees or agents or other Person acting on behalf of Seller, (i) has been, is, or is employing or utilizing the services of any individual who has been debarred or excluded from participating in any federal or state health care programs or is listed on the U.S. General Services Administration/System for Award Management or the Department of Health and Human Services Office of Inspector General excluded individuals and entities listings or on any FDA debarment list, or (ii) has been convicted under any criminal Laws or engaged in any conduct that would reasonably be expected to result in (A) debarment under 21 U.S.C. §335a or any similar state or foreign applicable Law or (B) exclusion under 42 U.S.C. §1320a–7 or any similar state or foreign applicable Law, nor has Seller received notice of an impending or potential exclusion, debarment or listing.
(j)Seller has not submitted any claim for payment to any government healthcare program in connection with any referrals related to the Products or the Program, or engaged in any other conduct that violated in any material respect any applicable Health Care Law governing such referrals, including the U.S. Federal Ethics in Patient Referrals Act (42 U.S.C. §1395nn) or any applicable state or non-U.S. self-referral Law.
(k)Seller has not submitted or caused to be submitted any false statement or representation in connection with a claim for payment to any government healthcare program related to the Products or the Program, or engaged in any other conduct in material violation of any Laws relating to false claims or fraud, including the U.S. Federal False Claim Act (31 U.S.C. §3729) or any applicable state or non-U.S. false claim or fraud Law, or that would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in the FDA’s Compliance Policy Guide Sec. 120.100 (CPG 7150.09) and any amendments thereto, or for any analogous state or foreign Regulatory Authority to invoke any similar policy.
(l)Seller has not willfully offered, paid, solicited or received any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind (i) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare, Medicaid, or other state or federal healthcare programs, or (ii) in return for purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service, or item for which payment may be made in whole or in part by Medicare, Medicaid or other state or federal healthcare programs.
(m)Seller is in material compliance with all applicable registration and listing requirements set forth in 21 U.S.C. §360 and 21 C.F.R. Part 207 and all other applicable Laws in those jurisdictions in which Clinical Trials have been or are being conducted by or on behalf of Seller.
(n)Section 3.1.8(n) of the Disclosure Schedules sets forth a list of (i) all recalls, field notifications, investigator notices, “Dear Healthcare Provider” letters, safety alerts, IND safety reports, Safety Labeling Change Notification pursuant to FD&C Act §505(o)(4) or other notices of action relating to an alleged lack of material safety (excluding expected or known safety signals for the Product) or regulatory compliance of the Products issued by Seller (“Safety Notices”), (ii) the dates such Safety Notices, if any, were resolved or closed and (iii) to Seller’s Knowledge, any material complaints with respect to the Products that are currently unresolved. To Seller’s Knowledge, there are no facts that would be reasonably likely to result in (x) a material Safety Notice with respect to either Product or (y) a termination or suspension of testing the Products.
33
(o)Seller has made available to the Buyers all internal and third party audits and audits by a Governmental Authority related to compliance with applicable requirements by Seller with respect to the Products or Program in the possession, custody or control of Seller that report material non-compliance of any such applicable requirements. Seller has made available to the Buyers accurate and complete copies of all material correspondence and minutes of meetings or memoranda of meetings or material regulatory contacts with a Governmental Authority that concerns the Products or the Program in the possession, custody or control of Seller.
(p)Seller is not a party to any corporate integrity agreement, monitoring agreement, consent decree, settlement order, or similar agreement with or imposed by any Governmental Authority and, to Seller’s Knowledge, no such agreement, decree or order is currently contemplated, proposed or pending.
3.1.9Taxes.
(a)All (i) income and other material amounts of Taxes of or with respect to the Purchased Assets or the Program have been paid in full, (ii) all income and other material Tax Returns that are required to be filed in respect of the Purchased Assets or the Program have been properly and timely filed, taking into account valid extensions, and (iii) such Tax Returns are true, correct and complete in all material respects. To the extent related to the Purchased Assets or the Program, no claims have been asserted in writing with respect to any material amount of such Taxes. There are no outstanding agreements or waivers extending the statutory period of limitations applicable to any income or other material Tax Return or income or other material Taxes of or with respect to Purchased Assets or the Program, in each case, other than any extensions obtained in the ordinary course of business for which consent from the applicable taxing authority is not required. There are no currently pending or threatened (in writing) audits, exams, assessments, investigations, or administrative or judicial proceedings with respect to Taxes or Tax Returns (a “Tax Proceeding”) of or with respect to the Purchased Assets or the Program.
(b)Seller has withheld and paid all material amounts of Taxes required to have been withheld and paid in connection with the Purchased Assets and the Program with respect to amounts paid or owing to any employee or other third party and have complied in all material respects with all related Tax information reporting and backup withholding provisions of applicable Law.
(c)There are no Encumbrances for Taxes on any of the Purchased Assets other than Permitted Encumbrances. The Purchased Assets do not include any partnership interest or other equity interest in any Person for Tax purposes.
(d)Seller is a tax resident of the United States and does not file income Tax Returns outside of the United States. No written claim has been made by any Taxing Authority in a jurisdiction where Seller does not file income Tax Returns indicating that Seller is or may be subject to income Tax in that jurisdiction. Seller has, with respect to the Purchased Assets or the Program, no fixed place of business or a permanent establishment in any country other than the country in which it is organized.
(e)Seller is not a party to any contract relating to Tax sharing or Tax allocation affecting the Purchased Assets or the Program that would, in any manner, bind, obligate or restrict the Buyers after Closing, other than agreements entered into in the ordinary course of business the primary purpose of which does not relate to Taxes.
(f)There is no material escheat or unclaimed property obligation with respect to the Purchased Assets or the Program.
34
3.1.10Intellectual Property; Privacy.
(a)Section 3.1.10(a) of the Disclosure Schedules sets forth, as of the date hereof, a true and complete list of (i) each item of all Purchased Intellectual Property that has issued, been registered or granted, or is the subject of an application for registration, issuance or grant, and has not finally expired or been abandoned or withdrawn without the possibility of being revived or re-instated and (ii) the jurisdiction in which such item of Purchased Intellectual Property has been registered or filed, the applicable application, registration, or serial or other similar identification number, and the filing date or registration date and issuance or grant date (collectively, the “Registered IP”).
(b)(i) All Registered IP is subsisting and all necessary registration, maintenance and renewal fees for each item of Registered IP have been paid and (ii) all Registered IP that has been registered, granted or issued is in full force and effect and has not been abandoned or adjudged invalid or unenforceable. To Seller’s Knowledge, each of the issued claims in the Purchased Patents included in the Registered IP is valid, unexpired and enforceable according to its terms. Neither Seller nor any of its Affiliates has received a written opinion, whether preliminary in nature or qualified in any manner, which concludes that a challenge to the validity or enforceability of any such Purchased Patent may succeed.
(c)To Seller’s Knowledge, (i) the Patent Rights identified on Section 3.1.10(a) of the Disclosure Schedules are the only Patent Rights owned by Seller and its Affiliates that relate exclusively to, or are otherwise exclusively used in or held exclusively for use in the Program or the Products, and (ii) all Patent Rights and Know-How owned by Seller or its Affiliates that are not included in the Purchased Assets are not necessary for the Development, Commercialization or Manufacturing of the Products.
(d)Seller owns (either solely and exclusively or, to the extent specified in Section 3.1.10(d) of the Disclosure Schedule, jointly with one or more Third Parties) all right, title, and interest in and to the Purchased Intellectual Property included in the Purchased Assets, free and clear of all Encumbrances, except for any Permitted Encumbrances.
(e)Except with respect to (i) non-exclusive licenses (A) granting to Seller the right to use commercially available software, databases or information technology services on standardized terms, (B) that are otherwise immaterial and granted to Seller solely for the purpose of enabling (1) Seller’s receipt and use of vendor services or (2) its or their vendors to perform such services, and (ii) non-disclosure agreements (without material licensing terms or covenants not to sue) entered in the ordinary course of business, Section 3.1.10(e) of the Disclosure Schedules sets forth as of the date hereof a true and complete list of all Contracts pursuant to which Seller grants or receives a license, sublicense, covenant not to sue or similar right with respect to Intellectual Property Rights, which license, sublicense, covenant not to sue or other right is exclusively related to or otherwise material to the Program or the Products, including the Exploitation of the Products.
(f)No Litigation is pending or, to Seller’s Knowledge, threatened in writing against Seller by any other Person (i) alleging that the conduct of the Program infringes, misappropriates or otherwise violates the Intellectual Property Rights of any other Person, including any written claim, “cease and desist” letter, or like correspondence, (ii) challenging, or seeking to deny or restrict, the use of any of the Purchased Intellectual Property or any of Seller’s rights therein, (iii) alleging that any of the Purchased Intellectual Property is invalid or unenforceable in whole or in part, or (iv) alleging that Seller does not own good and marketable title to, or otherwise does not validly own or license or have a valid right to use any Purchased Intellectual Property or any Product. There is no outstanding Order adversely affecting in any material respect, nor has Seller received any written notice or claim threatening, the validity, patentability, registrability or enforceability of, or Seller’s ownership or use of, or rights in or to,
35
any Purchased Intellectual Property. No Litigation is pending or, to Seller’s Knowledge, threatened in writing against Seller by any other Person (x) alleging that either Product infringes, misappropriates or otherwise violates the Intellectual Property Rights of any other Person, including any written claim, “cease and desist” letter, or like correspondence, (y) alleging that Seller is obligated or has a duty to defend, indemnify, or hold harmless any other Person with respect to, or has assumed any liability or is otherwise responsible for, any claim of infringement or misappropriation related to the Exploitation of any Product, or (z) seeking to limit or challenge the validity, enforceability, ownership, or use of any Product. To Seller’s Knowledge, neither the Purchased Intellectual Property in whole or in part nor does either Product (or would if either Product was Commercialized in its current form) infringe or misappropriate any Intellectual Property Rights Controlled by any other Person.
(g)(i) The conduct of the Program and the Exploitation of the Products has not during the last five (5) years, infringed, misappropriated or otherwise violated, in any material respect, the Intellectual Property Rights of any other Person, and, (ii) to Seller’s Knowledge, no Third Party is engaging in any activity that infringes, misappropriates or otherwise violates any of the Purchased Intellectual Property, except, in each case (i) and (ii), as would not reasonably be expected to result in material liability, or otherwise be material to the Program, the Purchased Assets and the Assumed Liabilities.
(h)Since the Lookback Date, (i) Seller has taken commercially reasonable measures to protect the confidentiality of all Purchased Know-How, and (ii) to Seller’s Knowledge, no such Purchased Know-How has been disclosed to or accessed by any Third Party except pursuant to valid and enforceable non-disclosure agreements that have not been breached by such Third Party, except in each case ((i) and (ii)), as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and Assumed Liabilities, taken as a whole.
(i)Seller has taken reasonable steps in accordance with industry standards to protect Seller’s Intellectual Property Rights, including its trade secrets. To Seller’s Knowledge, Seller has entered into binding, valid and enforceable written Contracts with each of its current and former employees and independent contractors who have contributed to the invention, creation or development of any Intellectual Property Rights related to the Program within the scope of their employment or engagement, pursuant to which the applicable employee or independent contractor assigns to Seller all of his, her or its right, title and interest in and to such Intellectual Property Rights and agrees to maintain the confidentiality of such Intellectual Property Rights. To Seller’s Knowledge, each Person who was involved in, or who has participated in or contributed to, the conception, development, authoring, creation, or reduction to practice of the patents included in the Registered IP, in each case, has been accurately identified to applicable government agencies in all countries where such patents are nationalized, validated or registered, and all such Persons have executed valid and enforceable agreements or assignments that presently and irrevocably assign all right, title and interest to the owner of such patents. Seller has paid all payments due or owing under Seller’s inventor incentive schemes to employees or independent contractors of Seller who contributed to the invention, creation or development of any Purchased Intellectual Property, and there are no outstanding claims for compensation by any Person in relation to the Purchased Intellectual Property.
(j)Since the Lookback Date, and, to Seller’s Knowledge before the Lookback Date, no funding, facilities or personnel of any Governmental Authority, university, college or other educational institution or research center was used in the development of any Purchased Intellectual Property, except as would not result in any such Person obtaining any ownership interest or commercial right or license under, or the ability to direct or control the use or licensing of, any element of the Products or any Purchased Intellectual Property.
36
(k)Seller has implemented and maintains commercially reasonable administrative, technical and physical safeguards to protect the confidentiality, privacy and security of Personal Data. With respect to the Program, the Purchased Assets and the Assumed Liabilities, since the Lookback Date, (i) Seller has not experienced any data breach or security incident in which any Personal Data was subject to any unauthorized access, disclosure, or other misuse that required notification to any third party under applicable Data Requirements that required notification to any third party under applicable Data Requirements, (ii) there has been no malfunction, failure, continued substandard performance, denial-of-service, or other cyber incident, including any cyberattack, or other impairment of Seller IT Systems that has resulted in a material disruption or damage to the Program, Purchased Assets, or Assumed Liabilities that has not been remedied in all material respects; (iii) Seller has operated in material compliance with all applicable Data Requirements, including by obtaining all Privacy Consents when required by applicable Data Requirements, and (iv) there has been no actual or, to Sellers’ Knowledge, threatened litigation, nor has Seller received any written complaint from any Third Party or been party to any audit, proceeding, judgments, claim or investigation by or before any Governmental Authority, in each case with respect to the foregoing, arising from or relating to any of Seller’s information privacy, protection or security practices or related to Seller’s collection, use, processing, storage, transfer, and security of Personal Data. Neither the execution, delivery or performance of this Agreement by Seller, nor the consummation by Seller of any of the transactions contemplated by this Agreement or the Ancillary Agreements, including any transfer of Personal Data to the Buyers as set forth hereunder or thereunder, will violate any applicable Data Requirements in any material respect.
3.1.11Employment Matters.
(a)On or before the date hereof, Seller has provided to the Buyers, via secure filing sharing means a true and complete census of each Program Employee as of a date that is within five (5) Business Days prior to the date of this Agreement, including (as permitted by applicable Law) each employee’s name or employee identification number, job position, principal work location, manager’s name or employee identification number, exempt or non-exempt status, hire date for service crediting purposes, salary or hourly rate of pay, as applicable, target cash incentive or bonus opportunity, active or inactive status (and if inactive, the anticipated date of return), and visa sponsorship status (if applicable).
(b)On or before the date hereof, Seller has provided to the Buyers a true and complete list of all leased employees who are currently engaged by Seller and primarily provide services with respect to the Program, including, to the extent maintained by Seller in the ordinary course of business, the nature of services provided, start date, and fee or compensation arrangement.
(c)Seller is not a party to any collective bargaining agreement covering any Program Employees and is not subject to a collective bargaining or other labor-related agreement or arrangement with any labor union or labor organization applicable to the Program. To Seller’s Knowledge, no union or other labor organization represents any Program Employees or, since the Lookback Date, has made any written demand to Seller to be recognized as, or filed a petition to be certified as, the bargaining unit representative of any Program Employees.
(d)There are no, and since the Lookback Date there have not been any, (i) pending or, to Seller’s Knowledge, threatened organizational efforts by or on behalf of any Program Employees or (ii) material strikes, material work stoppages, material work slowdowns, or material lockouts pending, or, to Seller’s Knowledge, threatened in writing involving any Program Employees or with respect to the Program.
(e)Since the Lookback Date, Seller has not taken any action with respect to the Program or any Program Employee that would constitute a “plant closing” or “mass layoff” within the
37
meaning of the Worker Adjustment and Retraining Notification Act of 1988 or its regulations or any similar applicable Laws (the “WARN Act”), and, during the ninety (90)-day period preceding the date hereof, no Program Employee has suffered an “employment loss,” as defined in the WARN Act or any similar applicable Law, with respect to the Program.
(f)Except as would have a Material Adverse Effect with respect to the Program or Program Employees, Seller is in compliance with all applicable Laws governing the employment of labor and employment practices, including terms and conditions of employment, labor standards, collective bargaining, worker classification, disability, harassment, retaliation, immigration, health and safety, social insurance, statutory contributions, wages, hours and benefits, non-discrimination in employment and workers’ compensation. Except as would not reasonably be expected to result in material liability with respect to the Program or the Program Employees, Seller is not delinquent in any payments to any Program Employee or any individual independent contractor or other individual contingent worker primarily providing services to the Program for any wages, salaries, commissions, bonuses, fees or other compensation due with respect to services performed for Seller.
(g)In the past five (5) years, Seller has not been party to a settlement agreement with a current or former officer, employee or independent contractor resolving allegations of sexual harassment by or against either (i) a current or former officer of Seller engaged with the Program, or (ii) a Program Employee. In the past five (5) years, to Seller’s Knowledge, there have not been any allegations of sexual harassment in the workplace by or against any Program Employee or any current or former officer of Seller engaged with the Program.
(h)Except as would not reasonably be expected to result in material liability with respect to the Program or the Program Employees, Seller has complied with applicable immigration and work authorization Laws with respect to the Program Employees, including completion and retention of Forms I-9 as required by applicable Law. To Seller’s Knowledge, no Program Employee currently requires visa sponsorship by Seller.
3.1.12Employee Benefit Plans.
(a)Section 3.1.12(a) of the Disclosure Schedules sets forth a list of all material Employee Benefit Plans. With respect to each material Employee Benefit Plan, Seller has made available to the Buyers true and complete copies, to the extent applicable, of the most recent summary plan description or other written description made available to eligible employees, and, to the extent applicable to any Program Employee, the current Employee Benefit Plan document and the current form of any employment, consulting, retention, severance, change-in-control, bonus, incentive, equity or equity-based award agreement.
(b)Except as would not be expected to result in material liability to any Buyer or its Affiliates following the Closing, each Employee Benefit Plan has been established, maintained, funded (if applicable), operated and administered in accordance with its terms and the requirements of all applicable Laws, including the applicable provisions of ERISA and the Code. Neither Seller or any of its ERISA Affiliates has previously maintained, sponsored, contributed to, or been required to contribute to, or currently maintains, sponsors or participates in, or contributes to, or is required to contribute to, or had or currently has any Liability with respect to: (i) a “multiemployer plan” (as defined in Section 3(37) of ERISA); (ii) a “multiple employer plan” (as defined in Section 4063 or Section 4064 of ERISA); (iii) a “defined benefit pension plan” (as defined in Section 3(35) of ERISA) or any other plan subject to Section 302 of Title I of ERISA, Section 412 of the Code, or Title IV of ERISA; (iv) a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA, or (v) any UK defined benefit plan. No Employee Benefit Plan provides, and Seller has no obligation to provide, post-employment or retiree
38
health, life insurance or other welfare benefits to any Program Employee, other than coverage required by COBRA for which the covered individual pays the full cost of coverage.
(c)Neither the execution, delivery or performance of this Agreement nor the consummation of the Transactions, either alone or together with any other event, will (i) result in any payment or benefit becoming due or payable to any Program Employee, (ii) increase the amount or value of any compensation or benefits payable to any Program Employee, (iii) accelerate the time of payment, funding or vesting of any compensation or benefits payable to any Program Employee, or (iv) result in any payment or benefit to any Program Employee that could reasonably be expected to constitute an “excess parachute payment” within the meaning of Section 280G of the Code.
(d)Each Employee Benefit Plan that constitutes a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code and that is applicable to any Program Employee has been operated and administered in material compliance with Section 409A of the Code. Seller has no obligation to gross-up, indemnify or otherwise reimburse any Program Employee for Taxes or penalties under Section 409A or Section 4999 of the Code.
(e)Other than routine claims for benefits made in the ordinary course of business, as of the date hereof, there are no pending or, to Seller’s Knowledge, threatened in writing suits or proceedings by or on behalf of any Program Employee that would, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole.
3.1.13Inventory. All Inventory (a) has been produced in accordance with GxP, where applicable, and the specifications applicable to the applicable Product in all material respects; (b) has been stored and handled by Seller in accordance with the quality agreements applicable to the applicable Product in all material respects (c) consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established and (d) are calculated in accordance with the accounting standards of Seller, in each case (clauses (a) – (d)), except as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole. All Inventory is owned by Seller free and clear of all Encumbrances, and no Inventory is held on a consignment basis. The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive, but are reasonable in the present circumstances of Seller.
3.1.14Program Financial Information. Section 3.1.14 of the Disclosure Schedules sets forth copies of certain unaudited financial information of the Program, consisting of (a) the balance sheets of the Program as of December 31, 2024 and 2025 and the related statements of income for the years then ended, and (b) the balance sheet and statement of operations for the Program for the twelve (12)-month period ended December 31, 2025 and March 31, 2026 (the “Balance Sheet Date”) (collectively, the “Program Financial Information”). The Program Financial Information has been derived in all material respects from the books and records of Seller, which books and records are maintained in accordance with GAAP, and has been prepared in good faith based on reasonable assumptions and methodologies used by Seller in preparing such information for internal purposes. The Program Financial Information reflects reasonable allocations of certain assets, liabilities, revenues and expenses attributable to the Program, as further described in Section 3.1.14 of the Disclosure Schedules. The Program Financial Information reconciles in all material respects to the applicable portions of Seller’s financial statements for the corresponding periods. The Program Financial Information presents fairly, in all material respects, the financial data included therein for the periods covered thereby, subject to the assumptions, limitations and allocation methodologies described in this Section 3.1.14 and the Disclosure Schedules. Notwithstanding
39
the foregoing, the Program Financial Information does not include full financial statements prepared in accordance with GAAP (including statements of cash flows or stockholders’ equity), and no representation or warranty is made with respect thereto.
3.1.15Absence of Certain Changes. Since the Balance Sheet Date until the date of this Agreement:
(a) the Program has been conducted in the ordinary course of business consistent with past practice, including with respect to Ongoing Activities, except as would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole;
(b)there has not been any event, occurrence, development or state of circumstances or facts that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect;
(c)Seller has not materially changed any method of accounting or accounting practice for the Program, except as required by GAAP or as disclosed in the notes to the Program Financial Information;
(d)Seller has not accelerated, terminated, cancelled or materially modified any Contract that would constitute a Material Purchased Contract, other than in the ordinary course of business and as would not reasonably be expected to be material to the Program and the Purchased Assets individually or in the aggregate;
(e)Seller has not incurred, assumed or guaranteed any indebtedness for borrowed money in connection with the Program except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice;
(f)Seller has not transferred, assigned, sold or otherwise disposed of any of the Purchased Assets shown or reflected in the Program Financial Information, except for the sale of Inventory in the ordinary course of business;
(g)Seller has not adopted any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
(h)Seller has not contracted to do any of the foregoing, or any action or omission that would result in any of the foregoing; and
(i)Seller has not taken any action that, if occurring after the date hereof through the Closing, without a Buyer’s consent, would constitute a breach of Section 4.2.1(i), (ii), (viii)-(xii), or, solely with respect to the preceding subclauses, (xiii).
3.1.16No Material Undisclosed Liabilities. Seller has not incurred any liabilities with respect to the Program other than (a) liabilities provided for in the Program Financial Information or specifically disclosed in the notes thereto; (b) liabilities incurred in the ordinary course of business consistent (and where none of such liabilities relates to a breach of or default under any Purchased Contract or Shared Contract or violation of applicable Law); (c) liabilities incurred in connection with the Transactions; and (d) other liabilities which would not, individually or in the aggregate, reasonably be expected to be material to the Program, the Purchased Assets and the Assumed Liabilities, taken as a whole.
40
Section 3.1.16 of the Disclosure Schedules sets forth all the off-balance sheet commitments existing as of December 31, 2025 not reflected in the Program Financial Information, which individual value exceeds USD $500,000. Following the Closing, the Buyers and their Affiliates shall not have any liability for any Excluded Liabilities.
3.1.17No Broker. There is no broker, finder, investment banker or financial advisor acting or who has acted on behalf of or based upon arrangements made by Seller, who is entitled to receive any brokerage or finder’s or other fee or commission in connection with the Transactions.
3.1.18Material Suppliers. Section 3.1.18 of the Disclosure Schedules sets forth with respect to the Program (i) each supplier to whom Seller has paid consideration for goods or services rendered in an amount greater than or equal to $1,000,000 for each of the two (2) most recent fiscal years (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material Supplier during such periods. Seller has not received any notice that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the Program or to otherwise terminate or materially reduce its relationship with the Program.
3.1.19Insurance. Section 3.1.19 of the Disclosure Schedules sets forth a true and complete list of all current insurance policies and binders maintained by Seller or its Affiliates and relating to the Program, the Purchased Assets, the Assumed Liabilities or the Excluded Liabilities (collectively, the “Insurance Policies”), including, with respect to each such Insurance Policy, the insurer, policy number, amount and type of coverage, applicable deductibles, annual premiums, policy period, and the date through which coverage will continue by virtue of premiums already paid. All premiums associated with the Insurance Policies have been paid, and neither Seller nor any of its Affiliates has received any notice regarding any amounts due or payable to any insurer. Neither Seller nor any of its Affiliates has received any written notice of cancellation, non-renewal, premium increase, reduction in coverage, reservation of rights, or other adverse modification with respect to any Insurance Policy. There are no outstanding or pending claims relating to the Program, the Purchased Assets, or the Assumed Liabilities under any Insurance Policy as to which coverage has been denied or disputed by the applicable insurer. All known incidents, occurrences, facts, or circumstances existing prior to the Closing Date that could reasonably be expected to result in a claim under any Insurance Policy following the Closing Date have been or, prior to the Closing Date, will be notified to the applicable insurer in accordance with the terms of the applicable Insurance Policy. Seller has made available to the Buyers accurate and realistic estimates with respect to all outstanding claims under the Insurance Policies, and Seller is not aware of any fact or circumstance that would reasonably be expected to result in a material change to such estimates. The Insurance Policies satisfy all contractual insurance requirements applicable to the Program, the Purchased Assets, and the Assumed Liabilities. The full limits of liability under the Insurance Policies, subject to applicable deductibles, remain available and unimpaired.
3.1.20[***].
3.2Representations and Warranties of Each Buyer. Each Buyer represents and warrants to Seller as follows:
3.2.1Corporate Status. LLC is a Delaware limited liability company, validly existing and in good standing under the Laws of Delaware. LLS is a Société par Actions Simplifiée, validly existing under the Laws of France.
3.2.2Authority. Each Buyer has the requisite corporate or other entity power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution
41
and delivery of this Agreement and the Ancillary Agreements to which such Buyer will be a party and the consummation by each Buyer of the Transactions have been duly authorized by the necessary corporate or other entity actions of each Buyer. Each Buyer has duly executed and delivered this Agreement and, as of the applicable time required by this Agreement, will have executed and delivered each Ancillary Agreement to which it will be a party, and this Agreement and each Ancillary Agreement to which such Buyer will be a party (assuming the due authorization, execution and delivery hereof by each other party thereto) constitutes or, upon the execution and delivery thereof by such Buyer, will constitute the valid and legally binding obligations of such Buyer, enforceable against such Buyer in accordance with their respective terms, subject to the Enforceability Exceptions.
3.2.3Non-Contravention and Approvals.
(a)The execution, delivery and performance by each Buyer of this Agreement, and the execution, delivery and performance by each Buyer, do not and will not (a) conflict with, violate or result in a beach or default of the organizational documents of such Buyer, (b) subject to obtaining, making and giving the Consents and notices, as applicable referred to in Section 3.2.3(b), violate any Law applicable to such Buyer, or (c) subject to obtaining the Authorizations, making the filings and giving the notices referred to in Section 3.2.3(b), (i) violate, breach or constitute a default under or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the termination of, or give rise to a right of termination, cancellation, modification or acceleration of any right or obligation under, any Contract to which such Buyer is a party or (ii) violate any Order to which such Buyer is subject, except, with respect to clauses (b) and (c), for violations, breaches, defaults, accelerations, cancellations or terminations that would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect.
(b)Except for (i) if required, compliance with and filings or notifications required under any applicable Antitrust Law and the expiration or termination of the waiting periods thereunder or (ii) Authorizations that if not received, or declarations, filings or registrations that if not made, would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect, no notice to, filing with or Authorization of any Governmental Authority is required for either Buyer to consummate the Transactions.
3.2.4No Litigation. Except as would not reasonably be expected to have a Buyer Material Adverse Effect, as of the date hereof, there is no Litigation pending or, to any Buyer’s knowledge, threatened in writing against any Buyer or any of its Affiliates.
3.2.5Solvency. After giving effect to the Transactions, including the payment of each component of the Purchase Price and all other amounts required to be paid by each Buyer and its Affiliates in connection with the consummation of the Transactions, no Buyer will (a) be insolvent, (b) have unreasonably small capital with which to engage in its business or (c) have incurred or plan to incur debts beyond its ability to pay as they become absolute and matured.
3.2.6Financial Ability to Perform. Each of the Buyers have as of the date hereof, and will have as of the Closing, sufficient cash on hand and access to readily available funds to pay the full Purchase Price and will have, when and if due, sufficient cash on hand and access to readily available funds to pay the full the Milestone Payments. Notwithstanding anything in this Agreement to the contrary, in no event shall the receipt or availability of any funds or financing by or to the Buyers or any of their Affiliates or any other financing or other transaction be a condition to any of the obligations of the Buyers hereunder.
42
3.2.7Compliance with Laws. None of either Buyer, or any employee or consultant of either Buyer has been debarred or deemed subject to debarment pursuant to Section 306 of the Act, nor are any such Persons the subject of a conviction described in such section.
3.2.8Data Security Program. No Buyer is a “covered person” as that term is defined in Executive Order 14117 and rules and regulations issued thereunder, including 28 C.F.R. Part 202, as implemented or amended from time to time.
3.2.9No Broker. There is no broker, finder, investment banker or financial advisor acting or who has acted on behalf of or based upon arrangements made by any Buyer, who is entitled to receive any brokerage or finder’s or other fee or commission payable by Seller in connection with the Transactions.
3.3Exclusivity of Representations. Notwithstanding anything to the contrary in this Agreement:
3.3.1EACH BUYER, TOGETHER WITH AND ON BEHALF OF ITS AFFILIATES AND REPRESENTATIVES, ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 3.1 OR IN THE CERTIFICATE DELIVERED UNDER SECTION 2.5.2(a)(ii) OR CONTAINED IN ANY ANCILLARY AGREEMENT, (A) SELLER HAS NOT MADE ANY REPRESENTATION OR WARRANTY EXPRESS OR IMPLIED OTHER THAN THE FOREGOING, RELATED TO THE PRODUCTS, THE PROGRAM, THE PURCHASED ASSETS, THE ASSUMED LIABILITIES, THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS, INCLUDING WITH RESPECT TO ANY INFORMATION, DOCUMENTS, OR MATERIALS FURNISHED TO OR FOR ANY BUYER BY SELLER OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, INCLUDING ANY INFORMATION, DOCUMENTS, OR MATERIALS MADE AVAILABLE TO ANY BUYER IN ANY “DATA ROOM,” MANAGEMENT PRESENTATION, OR ANY OTHER FORM IN CONNECTION WITH THE TRANSACTIONS AND (B) BUYER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED IN CONNECTION WITH THE PRODUCTS, THE PROGRAM, THE PURCHASED ASSETS, THE ASSUMED LIABILITIES, THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY CONTAINED IN SECTION 3.1 OR IN THE CERTIFICATE DELIVERED UNDER SECTION 2.5.2(a)(ii) OR IN ANY ANCILLARY AGREEMENT, THE BUYERS ARE ACQUIRING THE PURCHASED ASSETS ON AN “AS IS, WHERE IS” BASIS (SOLELY TO THE EXTENT NOT INCONSISTENT WITH SUCH EXPRESS OR IMPLIED WARRANTIES), INCLUDING ANY WARRANTY AS TO QUALITY, NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY, CONDITION OF ASSETS, THE PROBABLE SUCCESS OR PROFITABILITY OF THE PROGRAM AFTER THE CLOSING OR AS TO ANY OTHER MATTER. FOR THE AVOIDANCE OF DOUBT, NOTHING IN THIS SECTION 3.3.1 SHALL PRECLUDE A CLAIM BY A PARTY HERETO FOR FRAUD (AS DEFINED HEREIN).
3.3.2Acknowledgements Regarding Certain Representations and Warranties. Each Buyer acknowledges and agrees that the representations and warranties set forth in Section 3.1.5(b) and Section 3.1.10(d) make no representation or warranty with respect to infringement and misappropriation of Third Party intellectual property.
43
ARTICLE 4
PRE-CLOSING COVENANTS
4.1Access and Information.
4.1.1During the period commencing on the date hereof and ending on the earlier to occur of (a) the Closing and (b) the termination of this Agreement in accordance with Article 8 (the “Pre-Closing Period”), Seller shall afford the Buyers and their Representatives reasonable access, upon reasonable prior notice during normal business hours, to the books and records and personnel of Seller to the extent related to the Products, the Program, the Purchased Assets or the Assumed Liabilities (for clarity, excluding the Excluded Assets and Excluded Liabilities), as the Buyers may reasonably request in connection with the consummation of the Closing and for integration planning; provided, however, that (i) such access may be provided through an electronic data room; (ii) the reasonableness of such access and requests shall be determined by taking into account, among other considerations, the competitive positions of the Parties; (iii) such access shall be subject to all reasonable applicable safety and security requirements communicated by Seller to the Buyers and their Representatives; and (iv) such access shall not unreasonably disrupt Seller’s ordinary course operations. The auditors and independent accountants of Seller shall not be obligated to make any work papers available to any Person under this Agreement, unless and until such Person has signed a customary confidentiality and hold harmless agreement relating to such access to work papers in form and substance reasonably acceptable to such auditors or independent accountants. If so reasonably requested by Seller, the Buyers shall, and shall cause their Affiliates (as applicable) to, enter into a customary joint defense agreement with Seller with respect to any information to be provided to the Buyers pursuant to this Section 4.1.1.
4.1.2Each Buyer acknowledges and agrees that (a) certain records may contain information relating to Seller, other than the Program (and, notwithstanding the inclusion of such information in such records, such information shall not constitute Purchased Assets), and that Seller may retain copies thereof in accordance with the terms of this Agreement, and (b) prior to making any records available to any Buyer, Seller may redact any portions thereof to the extent they (i) do not relate to the Program, (ii) relate to any product or product candidate other than the Products or (iii) constitute Excluded Communications.
4.1.3Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be required to disclose any information or provide any such access pursuant to this Section 4.1 if such disclosure or access would reasonably be expected, in Seller’s reasonable judgment, to (a) breach, or take any action that could violate or breach, any fiduciary duty, duty of confidentiality owed to any Person (whether such duty arises contractually, statutorily or otherwise), Law (including any applicable Antitrust Law) or Contract with any other Person (other than any such Contract entered into by Seller with the intent to subvert or circumvent Seller’s obligations under this Section 4.1), (b) waive or jeopardize any established legal privileges, including the attorney-client privilege or (c) disclose any trade secrets or other sensitive information (provided, that, in any case, Seller shall use its reasonable best efforts to obtain any required Consents and take such other reasonable action (such as the entry into a joint defense agreement or other arrangement to avoid loss of attorney-client privilege) to enable Seller to satisfy its obligations under this Section 4.1).
4.2Ordinary Course of Business.
4.2.1During the Pre-Closing Period, except (a) as set forth in Schedule 4.2.1, (b) as required by applicable Law, (c) as required by the terms of any Contract to which Seller is a party as of the date hereof that has been made available to the Buyers, (d) for any actions taken by Seller that are reasonably necessary to consummate the Transactions, (e) as required or expressly contemplated by the terms of this
44
Agreement or any Ancillary Agreement, or (f) as the Buyers shall otherwise consent in writing, which consent shall not be unreasonably withheld, conditioned or delayed, Seller shall use reasonable best efforts to (x) conduct the Program in the ordinary course of business, (y) maintain in effect all material Authorizations relating to the Program and (z) not take any of the following actions with respect to the Program, the Purchased Assets or Assumed Liabilities:
(i)transfer, sell, assign, lease, license, sub-license, abandon, waive, relinquish, allow to lapse, fail to maintain or otherwise dispose of any Registered IP or other material Purchased Assets, in each case, other than (A) dispositions of assets at the end of their useful lives, (B) the abandonment, cancellation or lapse of any such Purchased Intellectual Property at the end of its final, non-extendable term under the rules of the applicable patent or trademark offices or under operation of Law or (C) non-exclusive licenses granted to service providers of Seller in connection with such service provider’s provision of services to Seller;
(ii)subject any material Purchased Assets to any Encumbrance (other than any Permitted Encumbrance);
(iii)solely with respect to the Program Employees and except as required pursuant to the terms of any Employee Benefit Plan in effect on the date of this Agreement, (A) establish, adopt, enter into, terminate or amend, or take any action to accelerate the vesting, funding or payment of any compensation or benefits under any material Employee Benefit Plan; (B) grant any material increase in cash compensation, bonus, commission, target incentive opportunity or material fringe or other benefits (other than annual merit increases and bonus determinations in the ordinary course of business consistent with past practice); (C) grant or promise any increase in change in control, retention, transaction, severance or termination pay; or (D) hire, transfer into or out of the Program, promote, demote, furlough or terminate any Program Employee other than terminations for cause or in the ordinary course of business;
(iv)recognize a labor union or similar organization or enter into a collective bargaining agreement or similar agreement with any Program Employee or, to the extent such recognition or agreement would be binding upon any Buyer or any of its Affiliates after the Closing, any other service provider to the Program;
(v)commence, terminate or suspend any Clinical Trial for the Products (except as required by applicable Law or due to safety concerns, as determined by Seller in good faith);
(vi)enter into any Contract that would be a Material Purchased Contract if in effect on the date hereof or terminate any Material Purchased Contract, or make any material amendment to or waive any material right or remedy under any Material Purchased Contract except (A) for the expiry of any Contracts on their terms or the entry into or renewal of Contracts in the ordinary course of business; and (B) with respect to purchase orders in the ordinary course of business, in each case, that would be reasonably expected to result in aggregate payments in excess of $1,000,000;
(vii)discharge, settle, compromise, satisfy or consent to any entry of any judgment with respect to, any Litigation (other than a Tax Proceeding) that results in any material restriction on the Program or the Products;
(viii)fail to pay when due any material amounts due under, or otherwise allow to lapse or permit any loss of coverage under, any Insurance Policies;
45
(ix)adopt a plan of complete or partial liquidation or dissolution, recapitalization or other reorganization affecting the Purchased Assets, the Program or the Products;
(x)make any change in any method of tax accounting, financial accounting or auditing practice in respect of the Program (including, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable) other than changes required as a result of changes in GAAP or applicable Law;
(xi)enter into any exclusive partnership, joint venture or joint development arrangement with one or more Persons for to the Program or the Products;
(xii)incur, assume or guarantee any indebtedness that would be an Assumed Liability (other than any such indebtedness incurred in the ordinary course of business); or
(xiii)enter into any agreement with a Taxing Authority, make or change any Tax election, amend a previously filed Tax Return, waive or extend any statute of limitations in respect of any Taxes or settle a dispute with a Taxing Authority, in each case that affects the Purchased Assets, the Program or the Products after the Closing Date;
(xiv)agree, in writing or otherwise, to take any of the foregoing actions.
4.2.2Notwithstanding Section 10.2, all requests for, and the granting of any, consent under this Section 4.2 may be provided by email, if to Seller, to [***], and if to the Buyers, to [***].
4.2.3Nothing contained in this Agreement is intended to give the Buyers or their Affiliates, directly or indirectly, the right to control, direct or influence the Program prior to the Closing, and nothing contained in this Agreement is intended to give Seller, directly or indirectly, the right to control, direct or influence the Buyers’ operations. Prior to the Closing, each of the Buyers, on the one hand, and Seller, on the other hand, shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Affiliates’ respective operations.
4.3Efforts; Regulatory and Other Authorizations; Notices and Consents.
4.3.1Each of the Buyers and Seller shall, and shall cause their respective Affiliates to, (a) use its reasonable best efforts to as promptly as practicable obtain all Consents of, or make registrations, declarations or filings with, all Governmental Authorities and officials that may be or become necessary or advisable for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement (including receiving or obtaining the termination or expiration of any waiting periods applicable under any Antitrust Law or similar Law), (b) cooperate fully in seeking to obtain all such Consents as promptly as practicable, or make such registrations, declarations, or filings, and (c) consistent with the other provisions in this Section 4.3, provide such other information to any Governmental Authority as such Governmental Authority may request in connection herewith.
4.3.2Without limitation of the foregoing, the Parties agree to, and, if applicable, shall cause their Affiliates to, file promptly (but in no event later than ten (10) Business Days after the date hereof) any Notification and Report Forms and related material required to be filed with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice under the HSR Act with respect to the Transactions and to supply as promptly as practicable and advisable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the HSR Act. The Parties agree to, and, if applicable, shall cause their Affiliates to, make as promptly as practicable and advisable (but in no event later than ten (10) Business Days after the
46
date hereof) any filings and notifications, jointly determined by the Parties to be required for consummation of the Transactions, under any other applicable Antitrust Laws and to supply as promptly as practicable and advisable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to such Antitrust Laws. Neither the Buyers, on the one hand, nor Seller, on the other hand, may (or may permit any of their respective Affiliates to), without the consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed), (a) cause any such filing or submission applicable to it to be withdrawn or refiled for any reason, including to provide the applicable Governmental Authority with additional time to review the Transactions, or (b) consent to any voluntary extension of any statutory deadline or waiting period or to any voluntary delay of the consummation of the Transactions at the behest of any Governmental Authority.
4.3.3Notwithstanding the foregoing and not in limitation of any other provision of this Section 4.3, the reasonable best efforts obligations of the Buyers and Seller under Section 4.3.1 shall not require any Buyer to engage in (a) proposing, negotiating, committing to, effecting and agreeing to, by consent decree, hold separate order, or otherwise, the sale, divestiture, license, hold separate, and other disposition of, any entities, operations, assets, divisions, businesses, product lines, customers or facilities of the Buyers or their Affiliates, (b) creating, terminating, amending or assigning existing relationships, ventures, contractual rights, or obligations of the Buyers or their Affiliates, (c) amending, assigning, or terminating existing licenses or other agreements (and entering into such new licenses or other agreements), (d) otherwise taking or committing to any action that would limit any Buyer’s freedom of action with respect to, or its ability to retain or hold, directly or indirectly, any businesses, assets, products, or equity interests of the Buyers or their Affiliates, or (e) entering into any order, consent decree or other agreement with any Governmental Authority to effectuate any of the foregoing.
4.3.4Without limiting the generality of anything contained in Section 4.3.1, the reasonable best efforts obligations of the Buyers and Seller under Section 4.3.1 shall not require any Party to defend, or cause their respective Affiliates to defend, through litigation on the merits any claim asserted by any Person in order to avoid entry of, or to have vacated or terminated, any order or judgment (whether temporary, preliminary or permanent) that would prevent the Closing prior to the End Date.
4.3.5To the extent permitted by applicable Law or the applicable Governmental Authority, each of the Buyers, on the one hand, and Seller, on the other hand, shall promptly notify the other of any substantive communication it or any of its Affiliates receives from any Governmental Authority relating to the matters that are the subject of this Section 4.3 and permit the other to review in advance any proposed substantive communication by such Party to any Governmental Authority. Unless required by a Governmental Authority, neither the Buyers, on the one hand, nor Seller, on the other hand, shall (or permit any of their respective Affiliates to) agree to participate in any pre-arranged meeting with such Governmental Authority in respect of any filings, investigation (including any settlement of the investigation), litigation or other inquiry relating to this Section 4.3 unless it consults with the other in advance and, to the extent permitted by such Governmental Authority, gives the other the opportunity to attend and participate at such communication. The Buyers, on the one hand, and Seller, on the other hand, will, and will cause their respective Affiliates to, coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods, including under the HSR Act; provided, however, that, subject to the other obligations under this Section 4.3, the Buyers and Seller shall jointly control and lead all communications and strategy in connection with the process of obtaining any Consents pursuant to this Section 4.3 (other than with respect to Section 4.3.5). The Buyers, on the one hand, and Seller, on the other hand, will promptly provide each other with copies of all substantive correspondence, filings or communications between them or any of their Representatives or Affiliates, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the Transactions; provided, however, that such materials may be
47
redacted (x) to remove references concerning the valuation of the Products, the Program or Purchased Assets, (y) as necessary to comply with contractual arrangements, and (z) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns, to the extent that such attorney-client or other privilege or confidentiality concerns are not governed by a common interest privilege or doctrine.
4.3.6The Buyers shall not, and shall cause their respective Affiliates not to, acquire or license (or agree to acquire or license) any assets, property or securities in the BMD or DMD if, individually or in the aggregate, such acquisition, acquisitions, license or licenses would reasonably be expected to make it more difficult, or to materially increase the time required, to: (a) obtain the expiration or termination of the waiting period under the HSR Act, or approval under any Antitrust Law, applicable to the Transactions; (b) avoid the entry of, or the commencement of litigation seeking the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other Order that would materially delay or prevent the consummation of the Transactions; or (c) obtain all Consents of, or registrations, declarations or filings of Governmental Authorities necessary for the consummation of the Transactions.
4.4Notices. During the Pre-Closing Period, each Party shall as promptly as practicable, after any of its officers obtains actual knowledge of such matter, notify the other Party of the occurrence of any event or condition or the existence of any fact that may reasonably be expected to cause any of the conditions to the obligations of the other Party to consummate the Transactions set forth in Article 7 not to be satisfied, or any written notice or other written communication received by such Party from a Governmental Authority or from any Person indicating that the Transactions may require such Person’s Consent; provided, however, that an unintentional failure to give notice under this Section 4.4 shall not be deemed to be a breach of covenant under this Section 4.4 and shall constitute only a breach of any underlying representation, warranty, covenant, agreement or obligation, as the case may be, that resulted in the need to provide such notice.
ARTICLE 5
ADDITIONAL COVENANTS
5.1Publicity.
5.1.1Other than the press release(s) to be agreed on by the Buyers and Seller to be issued following the execution of this Agreement, neither the Buyers nor Seller will issue or authorize or permit their respective Affiliates to issue any press release, website posting or other public announcement related to this Agreement, the Ancillary Agreements or the Transactions without the joint approval of Seller and the Buyers, which approval shall not be unreasonably withheld, conditioned or delayed, except in any public disclosure which either Seller or any Buyer, in its good faith judgment, believes is required by applicable Law or by any stock exchange on which its securities are listed. If any Party, in its good faith judgment, believes such disclosure is required, such Party will use its reasonable best efforts to consult with the other Party prior to its issuance to allow the other Party to comment on such disclosure in advance of such issuance and to consider in good faith any timely revisions proposed by the other Party, as applicable, prior to making (or prior to any of its Affiliates making) such disclosure, and shall limit such disclosure to only that information which is legally required to be disclosed. Notwithstanding the foregoing, without the approval of the other Party, subject to the other terms and conditions of this Agreement (including Section 4.3 and Section 5.2), (a) the Buyers and Seller and their respective Affiliates may communicate with Governmental Authorities and Seller and its Affiliates may communicate with their suppliers or other Persons engaged in the Program, regarding this Agreement, the Ancillary Agreements and the Transactions, including in order to obtain Consents of or from any such Person necessary or desirable to effect the consummation of the Transactions, and (b) the Buyers and Seller and their respective Affiliates may make public statements and engage in public communications regarding this Agreement, the Ancillary
48
Agreements and the Transactions in response to questions from the press, analysts, investors or those attending industry conferences, make internal announcements to employees and make disclosures in filings with the United States Securities and Exchange Commission, so long as such statements are substantially consistent with previous press releases, in the case of this clause (b), to the extent such announcements or communications are consistent with the Parties’ prior public communications made in compliance with this Section 5.1.
5.2Confidentiality.
5.2.1Each Buyer acknowledges and agrees that the information provided to it, its Affiliates or its or their respective Representatives in connection with the Transactions, including pursuant to Section 4.1.1 and Section 5.5, is subject to the terms of the Confidentiality Agreement, dated January 25, 2026 (the “Confidentiality Agreement”), among the Parties or their respective Affiliates. Effective upon, and only upon, the Closing, the Confidentiality Agreement shall terminate and be of no further force and effect with respect to information to the extent pertaining to the Purchased Assets, the Assumed Liabilities and the Program; provided, however, that each Buyer acknowledges and agrees that any and all other information provided to it by Seller or Representatives concerning Seller (other than information to the extent pertaining to the Purchased Assets, the Assumed Liabilities and the Program) shall remain subject to the terms and conditions of the Confidentiality Agreement following the Closing.
5.2.2From and after the date hereof, until the date that is five (5) years after the Closing (provided, that, the obligations herein with respect to trade secrets shall survive indefinitely), Seller shall, and shall cause its authorized Representatives acting on its behalf and that receive or have access to Confidential Information to, treat as confidential and safeguard any and all trade secret, confidential, proprietary or nonpublic information, knowledge or data (a) that is obtained by Seller (or its Representatives) from the Buyers (or their Representatives) in connection with this Agreement, any Ancillary Agreement or the Transactions or (b) to the extent pertaining to the Program or any Assumed Liabilities or otherwise constituting Purchased Assets (collectively, the “Confidential Information”) (whether such Confidential Information was obtained prior to or following the Closing) by using the same degree of care to prevent the unauthorized use, dissemination or disclosure of such Confidential Information as Seller used with respect thereto prior to the execution of this Agreement; provided, however, that Seller and its Representatives shall be entitled to disclose and use any such Confidential Information (i) in order to comply with applicable Law and their respective legal, regulatory, stock exchange, Tax and financial reporting requirements (subject to compliance with the immediately subsequent sentence), (ii) in order to perform its respective obligations or exercise or enforce their respective rights and remedies under, this Agreement or any Ancillary Agreement (including, prior to the Closing, to operate the business in the ordinary course in accordance with the provisions of this Agreement), or (iii) if such disclosure is deemed necessary by Seller to be disclosed to its attorneys, independent accountants, or financial advisors for the sole purpose of enabling such attorneys, independent accountants, or financial advisors to provide advice to Seller. In the event Seller or any of its Affiliates is requested pursuant to, or required by, applicable Law, including stock exchange listing rules and regulations, or legal process (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information pursuant to clause (a) above or, from and after Closing, clause (b) above, (x) Seller shall notify the Buyers in writing in a timely manner so that the Buyers may, at the sole cost and expense of the Buyers, seek a protective Order or other appropriate remedy or, in the Buyers’ sole discretion, waive compliance with the confidentiality provisions of this Agreement, and (y) Seller shall cooperate with all reasonable requests by the Buyers in connection with actions taken for the foregoing purpose, at the sole cost and expense of the Buyers (and in any event, Seller may furnish only that portion of the information which Seller is advised by an opinion of its counsel is legally required, and if confidential treatment is available Seller exercises reasonable efforts to obtain reliable assurances that confidential treatment will be accorded to such information). The obligations of Seller and its Affiliates pursuant to this Section 5.2.2 shall not
49
extend to any information, that (A) is required to be disclosed by applicable Law, (B) solely with respect to the Confidential Information described in clause (a) above, is known by Seller at the time of its receipt from the Buyers without any obligation to keep it confidential or restriction on its use, and not through a prior disclosure by the Buyers, (C) is or becomes generally available to the public or part of the public domain through no breach of this Agreement or any Ancillary Agreement by Seller or its Representatives, (D) after disclosure by the Buyers or their Representatives, is subsequently disclosed to Seller or its Representatives by a Third Party who may lawfully do so and is not under an obligation of confidentiality or any restriction on use with respect to such information, (E) solely with respect to the Confidential Information described in clause (a) above, is developed by Seller or its Representatives independently of Confidential Information received from the Buyers, or (F) solely with respect to the Confidential Information described in clause (b) above, the terms or conditions of this Agreement and any Ancillary Agreement, to the extent provided to any potential or prospective Acquiring Entity of Seller pursuant to customary confidentiality obligations. The Parties acknowledge and agree that (x) Seller, and its Affiliates currently, and following the Closing may continue to, maintain and expand business and commercial relationships (whether as a customer, supplier or otherwise) with the same Persons and engage in commercial relationships with such Persons and with the Buyers, and may employ, or continue to employ, individuals who previously worked in or with the Program and possess knowledge and Know-How used in, relating to, or arising from the Program and (y) nothing in this Section 5.2 shall prohibit or restrict the maintenance or expansion of any such relationships or employment of any such individuals, in each case provided, that Confidential Information is not used or disclosed in violation hereof.
5.3No-Shop. From and after the date of this Agreement through the Closing, Seller and Seller’s directors and executive officers will not, and Seller will not authorize or direct any of its other Representatives to, directly or indirectly, (a) solicit, initiate, propose or knowingly induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal that constitutes, or would reasonably be expected to lead to, a Competing Proposal; (b) furnish to any Person (other than the Buyers or any of their respective Representatives) any non-public information relating to the Program or the Purchased Assets or afford to any Person (other than the Buyers or any of their respective Representatives) access to the business, properties, assets, books, records or other non-public information of Seller concerning the Program or included in the Purchased Assets, in any such case in connection with any Competing Proposal or with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, a Competing Proposal or the making of any proposal that would reasonably be expected to lead to a Competing Proposal; (c) participate or engage in discussions or negotiations with any Third Party with respect to a Competing Proposal or with respect to any inquiries from third Persons for the apparent purpose of making a Competing Proposal (other than informing such Persons of the provisions contained in this Section 5.3); (d) enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other Contract relating to a Competing Proposal; or (e) authorize or commit to do any of the foregoing.
5.4Noncompetition.
5.4.1Commencing on the Closing Date and continuing until the fifth (5th) anniversary thereof, without the Buyers’ prior written consent, Seller shall not, directly or indirectly, (a) engage in, or knowingly enable a Third Party to engage in, a Restricted Business anywhere in the world, or (b) knowingly encourage, induce, attempt to induce, solicit or attempt to solicit (on its own behalf or on behalf of any other Person) or hire any Transferred Employee to leave his or her employment relationship with the Buyers or any of their Affiliates; provided, however, (i) that this Agreement will not prohibit or otherwise restrict Seller or its Affiliates from publishing general advertisements or making general public solicitations for employment for any position not specifically targeted at any Transferred Employee provided, that no Transferred Employee is hired as a result unless such Transferred Employee has been terminated by the Buyers at least six (6) months prior to such hiring and (ii) any indirect use of Know-How excluded from
50
the Purchased Assets the primary purpose of which is not to circumvent the restrictions in this Section 5.4 shall not be considered a violation of this Section 5.4. Notwithstanding the foregoing, the restrictions set forth in Section 5.4.1(a) shall not limit the activities of any Acquiring Entity or any of its Affiliates (other than Seller) to the extent (i) the Acquiring Entity or such Affiliates shall ensure that no Confidential Information is used by the Acquiring Entity or any of its Affiliates in connection with a Restricted Business, whether existing as of the effective time of such acquisition by the Acquiring Entity or thereafter; and (ii) the Confidential Information is maintained in a separate, firewalled operating unit of Seller with appropriate physical and electronic barriers designed to prevent such use of Confidential Information by the Acquiring Entity and its Affiliates; provided, however, that management personnel may receive general information regarding the status and progress of the Program for financial and business planning purposes; provided further, that an Acquiring Entity and its Affiliates may access and use Confidential Information to the extent necessary to comply with applicable Law or the rules and regulations of a national stock exchange, or to comply with bona fide tax, accounting or financial reporting obligations.
5.4.2Seller acknowledges that: (a) its obligations under this Section 5.4 are reasonable in the context of the nature of the Program and the competitive injuries likely to be sustained by the Program and the Buyers if Seller was to violate such obligations; (b) the covenants in this Section 5.4 are adequately supported by consideration from the Buyers for the benefit of Seller; and (c) the foregoing makes it necessary for the protection of the Program and the Buyers that Seller uphold its obligations under this Section 5.4 for the reasonable time period contained herein. If any provision in this Section 5.4 shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Section 5.4, but this Section 5.4 shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. It is the intention of the Parties that if any of the restrictions or covenants contained herein is held to cover a geographic area or to be for a length of time which is not permitted by applicable Law, or in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under applicable Law, a court of competent jurisdiction shall construe and interpret or reform this Section 5.4 to provide for a covenant having the maximum enforceable geographic area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under such applicable Law.
5.5Post-Closing Access and Information.
5.5.1After the Closing Date and through the sixth (6th) anniversary of the Closing Date, the Buyers shall, and shall cause their Affiliates to, on the one hand, and Seller shall on the other hand, grant to the other such access to financial records and other information in their possession to the extent related to their conduct of the Program, in each case with respect to periods or occurrences prior to the Closing Date, and such cooperation and assistance, in each case, as shall be reasonably required to enable the other to comply with their legal, Tax, regulatory, stock exchange and financial reporting requirements and in respect of Litigation and insurance matters (other than in connection with any Litigation between or among the Parties arising out of the Transactions, with respect to which applicable rules of discovery shall apply), in each case during normal business hours upon reasonable notice, and in a manner that does not unreasonably interfere with the ordinary course operation of the Program, consistent with applicable Law and in accordance with the reasonable safety and security requirements communicated by the Party granting access to the Party requesting access. The Buyers, on the one hand, and Seller, on the other hand, shall promptly reimburse the other for such other’s reasonable fees, costs or expenses associated with requests made by such first Party under this Section 5.5, but no other charges shall be payable by the requesting Party to the other Party in connection with such requests.
5.5.2Notwithstanding anything to the contrary contained in this Agreement, no Party shall be required to disclose any information or provide any such access pursuant to this Section 5.5 if such
51
disclosure or access would reasonably be expected, in such Party’s reasonable judgment, to (a) breach, or take any action that could violate or breach, any fiduciary duty, duty of confidentiality owed to any Person (whether such duty arises contractually, statutorily or otherwise), Law (including any applicable Antitrust Law) or Contract with any other Person, (b) waive or jeopardize any established legal privileges, including the attorney-client privilege or (c) disclose any trade secrets or other sensitive information (provided, that, in any case, each Party and their respective Affiliates shall use their respective reasonable best efforts to obtain any required Consents and take such other reasonable action (such as the entry into a joint defense agreement or other arrangement to avoid loss of attorney-client privilege) to enable such Party to satisfy its obligations under this Section 5.5).
5.5.3Notwithstanding anything to the contrary contained in this Agreement, each of the Buyers and Seller may destroy such records and information in accordance with their respective prevailing records retention procedures to the extent such books and records are no longer required by Law to be maintained, so long as the Buyers or Seller has previously provided copies of such records and information pursuant to Section 5.5.1 or 5.5.2.
5.6Wrong Pockets.
(a)If, following the Closing Date, either the Buyers, on the one hand, or Seller, on the other, become aware that any of the Purchased Assets has not been transferred to the applicable Buyer or that any of the Excluded Assets has been transferred to a Buyer, it shall promptly notify the other Party in writing and the Parties shall, as soon as reasonably practicable, ensure that such property is transferred, for no additional consideration to the other Party, to (a) the applicable Buyer, in the case of any Purchased Asset which was not transferred to such Buyer at the Closing, or (b) Seller, in the case of any Excluded Asset which was transferred to a Buyer. Prior to any such transfer, (a) the applicable Buyer, in the case of any Purchased Asset which was not transferred to such Buyer at the Closing, or (b) Seller, in the case of any Excluded Asset which was transferred to a Buyer, in each case, shall hold such asset in trust for the use and benefit and burden of the other Party.
5.7Certain Tax Matters.
5.7.1Straddle Tax Period Allocation. For purposes of this Agreement, in the case of any Taxes attributable to the Purchased Assets or the Program with respect to a Straddle Tax Period (“Straddle Period Taxes”), (i) any real or personal property Taxes (or other similar Taxes imposed on a periodic basis) attributable to the Purchased Assets or the Program shall be allocated on a per diem basis to Seller, on the one hand, and the Buyers, on the other hand, based on the number of days in such Straddle Tax Period accruing on or prior to the Closing Date with respect to Seller and after the Closing Date with respect to the Buyers; and (ii) any other Taxes not described in clause (i) shall be allocated based on an interim closing of the books as of the close of business on the Closing Date. The Party required by Law to pay any such Straddle Period Tax (the “Paying Party”) shall file the Tax Return related to such Straddle Period Tax within the time period prescribed by Law and shall timely pay such Straddle Period Tax. To the extent any such payment exceeds the obligation of the Paying Party hereunder, the Paying Party shall provide the other Party (the “Non-Paying Party”) with notice of payment, and within ten (10) Business Days of receipt of such notice of payment, the Non-Paying Party shall reimburse the Paying Party for the Non-Paying Party’s share of such Straddle Period Taxes. For the avoidance of doubt, Seller shall be responsible for and shall pay all U.S. federal, state and local and non-U.S. income and capital gains Taxes payable on any income or gain resulting from the sale of the Purchased Assets to the Buyers. Except as set forth in Section 5.7.2, Seller shall prepare all Tax Returns with respect to the Purchased Assets and the Program for taxable periods ending on or before the Closing Date and shall pay all Taxes shown as due thereon.
52
5.7.2Transfer Taxes and VAT. The Buyers, collectively, shall be responsible for 50% of all Transfer Taxes, and Seller shall be responsible for 50% of Transfer Taxes, in each case imposed on any sale, transfer, or assignment of property to the Buyers pursuant to this Agreement; provided, however, that the Buyers shall be responsible for all VAT imposed on the sale of the Purchased Assets. For the avoidance of doubt, the Purchase Price is exclusive of any applicable Transfer Taxes and VAT. The Party required to remit or pay Transfer Taxes to the Governmental Authority under applicable Tax Law shall pay the Transfer Taxes. Seller and the Buyers shall reasonably cooperate with each other in timely making all filings, returns, reports and forms as may be required in connection with the payment of Transfer Taxes, including any claim for exemption or exclusion from the application or imposition of any Transfer Taxes, and Seller and the Buyers shall reimburse the other Party for their portion of any Transfer Taxes required to be paid by the other Party pursuant to the applicable Law. Seller use its reasonable best efforts to execute and deliver all instruments and certificates necessary to enable the Buyers and their Affiliates to comply with any filing requirements relating to any such Transfer Taxes, and shall reasonably cooperate with the Buyers to minimize any Transfer Taxes to the extent permitted by applicable Tax Law. If the VAT accounting applicable to the sale of any Purchased Assets needs to change for valid contractual or legal reasons, Seller will, if reasonably requested by the Buyers, promptly issue an amended VAT invoice, or credit note as applicable, and the Parties will adjust payments accordingly.
5.7.3Assistance and Cooperation. The Buyers and Seller shall reasonably cooperate, including with respect to the provision of documentation and information, as and to the extent reasonably requested by the other Party, in connection with (a) the preparation and filing of any Tax Return, (b) determining a Liability for Taxes, a right to refund of Taxes or other Tax benefits and (c) conducting any Tax Proceeding or other claim or proceeding with respect to Taxes, in each case, relating to the Purchased Assets or the Assumed Liabilities. Such cooperation shall include the retention (in accordance with Section 5.7.4) and, upon the other Party’s request, the provision of records and information that are reasonably relevant to any such request.
5.7.4Records. The Buyers and Seller agree to retain all records relating to Taxes with respect to the Purchased Assets for all taxable periods (or portions thereof) ending on or prior to the Closing Date for the shorter of (a) the expiration of all applicable statutes of limitation (including any extensions thereof) for the taxable period or periods to which such records relate and (b) six (6) years. Thereafter, the Party holding such records may dispose of them after offering the other Party reasonable notice and opportunity to take possession of such records at such other Party’s own expense. Notwithstanding anything to the contrary in this Agreement, access to and retention of all records relating to Taxes shall be governed by this Section 5.7 and the provisions of Section 5.5 shall not apply.
5.7.5Purchase Price Allocation. The Buyers shall provide to Seller within thirty-five (35) days from the date of this Agreement an allocation of the estimated Purchase Price and any other items, including Assumed Liabilities, that are treated as additional consideration for U.S. income tax purposes among the Purchased Assets (the “Draft Price Allocation”), which allocation shall be in accordance with Schedule 5.7.5 attached hereto. Seller shall have fifteen (15) days from the receipt of the Draft Price Allocation to provide any reasonable comments on the Draft Price Allocation. If Seller does not provide written comments within fifteen (15) days of the receipt of the Draft Price Allocation, the Draft Price Allocation shall be deemed final. If Seller provides written comments on the Draft Price Allocation within fifteen (15) days of the receipt of the Draft Price Allocation, the Buyers and Seller shall use reasonable best efforts for five (5) days to agree on a final allocation. If the Parties cannot agree on a final allocation, the Buyers shall identify an independent accounting firm reasonably acceptable to Seller to resolve the disputed items prior to the Closing Date with such costs borne equally by the Buyers and Seller. The Draft Price Allocation, when finalized either by (i) no written comments from Seller, (ii) as agreed by the Parties, or (iii) as determined by the independent accounting firm, shall be the final allocation (the “Final Price Allocation”). The Final Price Allocation shall be adjusted by the Buyers, as necessary, to reflect any
53
adjustments to the Purchase Price pursuant to this Agreement and any subsequent payments treated as adjustments to the Purchase Price or such other items (such revised allocation, the “Adjusted Price Allocation”). Except to the extent otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code (or any similar or corresponding provision of state, local or non-U.S. Law), each of the Buyers and Seller shall, file all Tax Returns (including an IRS Form 8594) in a manner consistent with the Final Price Allocation (or the Adjusted Price Allocation, as applicable) and shall not take, and shall cause their respective Affiliates not to take, any position inconsistent with the Final Price Allocation (or the Adjusted Price Allocation, as applicable) on any Tax Return (including an IRS Form 8594), in connection with any Tax Proceeding or otherwise.
5.7.6Survival of Tax Covenants. The covenants contained in this Section 5.7 shall survive until thirty (30) days after the expiration of the statute of limitations (including any extensions thereof) applicable to the relevant Taxes or Tax Return.
5.7.7Tax Residency. Seller undertakes to remain a tax resident of the United States with respect to all payments made by the Buyers to Seller pursuant to this Agreement and to be eligible for the withholding tax exemption under the U.S.-France double tax treaty as in existence on the date hereof or promptly notify Buyers if it becomes aware that it is no longer eligible.
5.8Insurance. The Buyers acknowledge that the Insurance Policies have been arranged or maintained by Seller for the benefit of Seller and will be retained by Seller. Notwithstanding the foregoing, from and after the Closing, Seller shall, and shall cause its Affiliates and insurance brokers to, (i) provide each applicable Buyer and its representatives with reasonable access, upon reasonable notice and during normal business hours, to the Insurance Policies (including the Specified Policies), related records, underwriting files and claim files relating to pre-Closing occurrences affecting the Program or the Purchased Assets, (ii) furnish copies of such Insurance Policies and related documentation as the Buyers may reasonably request, and (iii) reasonably cooperate with the Buyers, at the Buyers’ expense, in connection with the submission, pursuit and administration of any claims by the Buyers or their Affiliates under such Insurance Policies with respect to pre-Closing occurrences, including by providing information, executing reasonable claim-related documents, and permitting the Buyers to participate in communications with insurers. Seller shall use reasonable best efforts to continue to maintain for a period of not less than three (3) years after the Closing Date, (a) any “claims made” policies included within the Insurance Policies (or substantially equivalent coverage or “tail” coverage) and (b) any “occurrence-based” insurance policies covering occurrences prior to the Closing relating to the Program (including any Excluded Liability to the extent related to the Program or any Purchased Assets) or any Purchased Assets (the “Specified Policies”), and shall not take any action with the primary intention of eroding, impairing, compromising, or diminishing the rights of any insured or additional insured with respect to coverage under any Specified Policies for pre-Closing occurrences, including cancelling, commutating, buying back, exhausting, or materially amending such Specified Policies or entering into any coverage-in-place agreement or taking any adverse coverage position with insurers that would reasonably be expected to impair such rights; provided, that Seller may take such actions if it reasonably determines they are not materially adverse to the Buyers’ rights and has provided prior written notice to the Buyers and a reasonable opportunity to comment. To the extent permitted under the applicable Insurance Policies, Seller shall use reasonable best efforts to cause the Buyers and their Affiliates to be recognized, following the Closing, as additional insureds (or otherwise as parties entitled to claim) with respect to coverage for pre-Closing occurrences relating to the Program or the Purchased Assets.
5.9Services from Seller. Other than as may be provided pursuant to the terms of any Ancillary Agreement, each Buyer acknowledges and agrees that any and all administrative, corporate and other services and benefits provided to the Program by Seller prior to the Closing shall cease, and any agreement in respect thereof shall terminate with respect to the Program, as of the Closing Date, and
54
thereafter, Seller’s sole obligation with respect to the provision of any services with respect to the Program shall be as set forth in the Ancillary Agreements.
5.10Delivery of Data Site Copy. Promptly, but no later than ten (10) Business Days, following the date of this Agreement, Seller shall deliver to the Buyers a USB flash drive or other electronic storage device containing the true and complete contents of the Data Site as of the time at which this Agreement was executed and delivered by the Parties.
5.11Litigation Support.
5.11.1Subject to the provisions of Article 9 and Article 10, in the event that and for so long as Seller or any of its Affiliates is prosecuting, contesting or defending any Litigation, by or against a Third Party (for the avoidance of doubt, other than the Buyers or any of their Affiliates) in connection with (i) the Transactions or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction relating to, in connection with or arising from the Program, the Purchased Assets or the Assumed Liabilities, the Buyers shall, and shall cause their Affiliates (and its and their officers and employees and Representatives) to, cooperate with the reasonable request of Seller and its counsel in such prosecution, contest or defense, including making available its personnel, and providing such testimony and access to its books and records and other information, including any books, data and information that Seller transferred to the Buyers as Purchased Assets, as shall be reasonably necessary in connection with such prosecution, contest or defense; provided, that (A) such cooperation does not unreasonably interfere with the conduct of the Program and (B) Seller reimburses the Buyers and their Affiliates for any out-of-pocket costs and expenses incurred in connection with such cooperation.
5.11.2Subject to the provisions of Article 9 and Article 10, in the event that and for so long as the Buyers or any of their Affiliates are prosecuting, contesting or defending any Litigation by or against a Third Party (for the avoidance of doubt, other than Seller or any of its Affiliates) in connection with (i) the Transactions, or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction relating to, in connection with or arising from the Excluded Assets or the Excluded Liabilities, Seller shall, and shall cause its Affiliates (and its and their officers and employees and Representatives) to, cooperate with the reasonable request of the Buyers and their counsel in such prosecution, contest or defense, including making available its personnel, and providing such testimony and access to its books and records and other information as shall be reasonably necessary in connection with such prosecution, contest or defense; provided, that (A) such cooperation does not unreasonably interfere with the conduct of the business of Seller and (B) the Buyers reimburse Seller and its Affiliates for any out-of-pocket costs and expenses incurred in connection with such cooperation.
5.11.3Notwithstanding the foregoing, nothing in this Section 5.11 shall require any Party to (a) breach, or take any action that could violate or breach, any fiduciary duty, duty of confidentiality owed to any Person (whether such duty arises contractually, statutorily or otherwise), Law (including any applicable Antitrust Law) or Contract with any other Person (other than any such Contract entered into by such Party with the intent to subvert or circumvent such Party’s obligations under this Section 5.11) or (b) waive any established legal privileges, including the attorney-client privilege (provided, that, in any case, such Party shall use its reasonable best efforts to obtain any required Consents and take such other reasonable action (such as the entry into a joint defense agreement or other arrangement to avoid loss of attorney-client privilege) to enable such Party to satisfy its obligations under this Section 5.11).
5.12Completion of Ongoing Activities. From and after the date hereof until the Closing Date, Seller shall use reasonable best efforts to perform at its cost the studies and other activities described in
55
Schedule 5.12 (the “Ongoing Activities”) and provide regular update to Buyers, including disclosing without delay any results, data or material information available to Seller in relation of such activities or similar matters. Seller shall take into account Buyers’ comments in the conduct of the Ongoing Activities.
5.13[***].
5.14Additional Financial Information. Seller shall use its best efforts to prepare and deliver to Buyer as promptly as practicable the Audited Program Financial Information; provided, however, that Buyer acknowledges and agrees that delivery of the Audited Program Financial Information shall not constitute a condition to Buyer’s obligation to consummate the transactions contemplated hereby. For the purposes of this Section 5.14, “Audited Program Financial Information” means: (a) copies of the financial statements of the Program (on the basis of an agreed upon procedure), consisting of (i) the balance sheets of the Program as of December 31, 2024 and 2025 and the related statements of income for the years then ended, and (ii) the balance sheet and statement of income for the Program for the three (3)-month period ended March 31, 2026, in each case (A) together with the related notes thereto and accompanied by an a report issued by Seller’s independent auditors describing the application of agreed-upon procedures and (B) prepared on a basis consistent with the Program Financial Information, and (b) an unaudited reconciliation of such Audited Program Financial information to the Program Financial Information.
5.15Transition Services Agreement . The Parties shall negotiate in good faith the schedules and exhibits to the Transition Services Agreement (which schedules and exhibits shall include and describe in reasonable detail all services necessary to enable the Buyers, together with the Purchased Assets, to conduct the Program for a transition period in substantially the same manner as conducted by Seller prior to the Closing, with the costs for such services determined reasonably and good faith by the Parties based upon the actual costs incurred by Seller to provide such services), and use reasonable best efforts to agree on exhibits no later than thirty (30) days after the date hereof.
5.16Representations and Warranties Insurance The Buyers shall obtain the R&W Insurance Policy substantially in the forms attached hereto as Exhibit G. The Buyers may not amend, terminate, modify, waive or otherwise revise the subrogation provisions of the R&W Insurance Policy in any manner that would materially and adversely increase the liability of Seller hereunder, in each case without the prior written consent of Seller. The premiums, costs and expenses of the R&W Insurance Policy shall be borne 50% by Seller, on the one hand, and 50% by the Buyers on the other hand.
ARTICLE 6
EMPLOYEES
6.1Offers of Employment.
6.1.1During the Pre-Closing Period, Seller shall provide the Buyers with reasonable access to each of the Program Employees, in cooperation with Seller and upon reasonable prior notice, and the Buyers shall be permitted, in their sole discretion, to make offers of employment to any such Program Employees in accordance with the terms of Section 6.1.1 that are conditioned upon the Closing and effective as of immediately following the Closing. Seller shall reasonably cooperate fully and in good faith with the Buyers in connection with the Buyers’ employment process and use reasonable best efforts to secure the transition, to the applicable Buyer or its designated Affiliate(s), of all Program Employees. Without limiting the immediately preceding sentence, Seller will (a) consult with the Buyers on any material communications to be provided to any Program Employee with regards to their terms and conditions of employment following the Closing, and the Parties will (i) mutually agree on any material communications to Program Employees with regards to terms and conditions of employment following the Closing and, (ii) with respect to any material communications regarding the terms and conditions of the employment of any Program Employee following the Closing, deliver only such material communications
56
as approved by a Buyer, (b) make reasonable efforts to deliver promptly to each Program Employee any communications, notices and information relating to the applicable Buyer or its Affiliate(s) or the terms and conditions of the employment of any Program Employee following the Closing as reasonably requested by the applicable Buyer and which is agreed to by Seller, and (c) at such times as the applicable Buyer may reasonably request after providing Seller with reasonable advance notice, permit the Buyers and their respective Representatives to speak with and meet with Program Employees to discuss such Program Employees’ employment with the applicable Buyer or its Affiliate(s) and use reasonable best efforts to facilitate any such meetings between the Buyers and the Program Employees in a time and manner that does not interference with Seller’s business operations. Seller shall not, and shall cause its Affiliates and Representative not to, take any action intended to discourage or interfere with the Buyers’ employment offer process or the acceptance of any offers of employment by the Buyers or their Affiliates. Without limiting the foregoing, Seller shall (A) notify each Program Employee of the elimination by Seller of the position held by such Program Employee in connection with the consummation of the transactions contemplated by this Agreement and (B) shall not, and shall cause its Affiliates not to, without the Buyers’ prior written consent, offer or grant any retention, counteroffer, promotion or other incentive to any Program Employee that would reasonably be expected to deter acceptance of any offer of employment from the Buyers or their Affiliates or solicit or encourage any Program Employee to remain with Seller or accept alternative employment. Seller shall cause each Program Employee to be released from employment with Seller effective as of immediately prior to the Closing; provided, that, Seller shall not release from employment any Program Employee who is on an authorized leave of absence as of immediately prior to the Closing (a “Leave Program Employee”), and such Leave Program Employee will remain employed with Seller until such Leave Program Employee returns to work, at which time Seller shall release from employment such Leave Program Employee for employment with the Buyers; and provided, further, that any Leave Program Employee who does not return to work within twelve (12) months of the Closing shall remain employed with Seller, and the Buyers shall have no obligation to provide such Leave Program Employee with an offer of employment, and such Leave Program Employee shall not become a Transferred Employee. . Prior to the Closing, the Buyers shall not make offers of employment to any current employee, individual independent contractor or officer of Seller or any of Seller’s Affiliates, or any member of the Seller Board, other than the Program Employees. Notwithstanding anything herein to the contrary, no Buyer nor any of its Affiliates shall be obligated to cause the continuation of any employment relationship with any Program Employee for any specific period of time; and with respect to each Program Employee who is based outside of the United States (each, a “Non-U.S. Program Employee”), Seller and the Buyers shall cooperate in good faith to effectuate the transfer of each such Non-U.S. Program Employee in accordance with applicable Law. Any Program Employee hired by a Buyer or one of its Affiliates in accordance with this Section 6.1 shall be referred to as a “Transferred Employee.” The Buyers shall provide Seller with a copy of the form of offer letter, and any other material form documentation, to be used to make offers in accordance with this Section 6.1 at least five (5) Business Days prior to the extension of such offers and will consider in good faith any comments promptly received from Seller.
6.2Terms of Employment.
6.2.1Compensation and Benefits. Commencing on the Closing Date and ending on the first (1st) anniversary of the Closing Date, for so long as a Transferred Employee remains employed by a Buyer or one of its Affiliates, such Buyer shall, or shall cause one or more of its Affiliates to, provide to each Transferred Employee: (a) a base salary or wage that is no less favorable than the base salary or wage provided to such Transferred Employee immediately prior to the Closing Date, (b) target cash incentive or bonus opportunities, or sales incentive opportunities, as applicable, that are no less favorable than the target cash incentive or bonus opportunities, or sales incentive opportunities, as applicable, provided to such Transferred Employee immediately prior to the Closing Date, and (c) employee benefits that are substantially comparable in the aggregate to those generally available to similarly situated employees of the Buyers and their Affiliates, (excluding severance, retention, transaction, change-in-control, perquisite,
57
defined benefit pension, post-employment health or welfare and equity or equity-based benefits). The compensation and benefits terms required to be provided by Buyer or one of its Affiliates under this Section 6.2.1 shall constitute, in their totality, a “Comparable Offer.”
6.2.2Health and Welfare Benefits. Effective as of the Closing Date, each Buyer shall, or shall cause its Affiliates to, maintain health and welfare benefit plans, programs and policies, including a group health plan, in which Transferred Employees and their respective eligible spouses, dependents or other beneficiaries shall be eligible to participate (the “Buyer Welfare Benefit Plans”). Each Buyer shall use reasonable best efforts to cause each Transferred Employee (and eligible dependents thereof) to be eligible to participate in each Buyer Welfare Benefit Plan on the Closing Date, such that there is no gap in coverage. Effective from and after the Closing Date and with respect to each Transferred Employee (and eligible dependents thereof), each Buyer shall, and shall cause its Affiliates to, use reasonable best efforts to (a) waive any pre-existing condition exclusion, actively-at-work requirement, evidence of insurability, waiting period, pre-certification, ongoing treatment or similar condition, limitation or requirement under all Buyer Welfare Benefit Plans and (b) provide credit under all Buyer Welfare Benefit Plans that provide health benefits for any co-payments, deductibles, out-of-pocket maximums or similar payments made or incurred under an Employee Benefit Plan by such Transferred Employee (or covered dependent thereof) prior to the Closing Date for the plan year in which the Closing occurs, in each case, subject to the terms of the applicable plan, applicable Law, the requirements of the applicable insurer or third-party administrator and Seller’s timely provision of all reasonably necessary information.
6.2.3Service Crediting. Effective from and after the Closing Date and with respect to each Transferred Employee, each Buyer shall, and shall cause its Affiliates to, recognize all prior service with Seller and its predecessors, to the same extent such service was recognized by Seller immediately prior to the Closing Date, for purposes of eligibility and vesting, and for purposes of determining levels of benefits for vacation, paid time off and severance, under all Buyer Welfare Benefit Plans and any other employee benefit plans of the Buyers and their Affiliates, except (a) to the extent such recognition would result in a duplication of benefits for the same period of service, (b) with respect to benefit accrual under any defined benefit pension plan, (c) for any Buyer benefit plan that is a frozen plan, provides grandfathered benefits or provides post-employment welfare benefits, or (d) to the extent not permitted under the terms of the applicable plan, applicable Law or the requirements of the applicable insurer or third-party administrator.
6.2.4Accrued PTO, Overtime Hours and Additional Work Time. Except to the extent required by applicable Law, the Buyers and their Affiliates shall not assume any Liability for accrued or unused vacation, paid time off or similar leave accrued by any Program Employee prior to the Closing, nor for any overtime hours and additional work time (as defined by the “Loi fédérale sur le travail dans l’industrie, l’artisanat et le commerce”) accrued by any Program Employee prior to the Closing, and Seller shall retain and satisfy all such Liabilities. To the extent the Buyers or their Affiliates are required by applicable Law to assume any such Liability, Seller shall provide the Buyers with a dollar-for-dollar credit or reimbursement for the amount of such assumed Liability, including any related employer payroll social security and Taxes.
6.2.5COBRA. Seller shall retain all obligations to provide continuation coverage under COBRA with respect to any qualifying event occurring on or prior to the Closing Date or with respect to any individual who is not a Transferred Employee. The applicable Buyer shall be responsible for continuation coverage obligations under COBRA with respect to Transferred Employees and their qualified beneficiaries solely to the extent arising from a qualifying event occurring after the Closing Date.
6.2.6Severance or Other Termination Liabilities. Seller and its Affiliates (a) shall, within thirty (30) days after the Closing Date, terminate the employment of any Program Employee who
58
rejects a Comparable Offer, (b) shall not, during the period of eighteen (18) months after the Closing Date, without the prior written consent of the Buyers, re-employ any Program Employee so terminated and (c) shall be solely responsible for any severance, termination indemnity, redundancy or similar termination payments or benefits that may become payable to any Program Employee who (i) rejects a Comparable Offer or (ii) becomes entitled to any severance, termination indemnity, redundancy or similar termination payments or benefits notwithstanding such Program Employee’s receipt or acceptance of a Comparable Offer. The Buyers and their Affiliates shall be solely responsible for any severance, termination indemnity, redundancy or similar termination payments or benefits that may become payable to any Program Employee who does not become a Transferred Employee because (A) none of the Buyers nor any of their Affiliates provide a Comparable Offer, and (B) such Program Employee rejects (or does not accept) such non-Comparable Offer.
6.2.7Short-Term Incentive Compensation. With respect to any cash incentive compensation payable under any Employee Benefit Plan in which any Transferred Employee participates in the calendar year in which the Closing occurs (or any portion thereof), Seller and the Buyers agree that, with respect to each Transferred Employee who (a) was a participant in an Employee Benefit Plan that provides for a cash bonus or incentive based on calendar year 2026 performance prior to the Closing and (b) remains employed by Seller or one of its Affiliates through the Closing, Seller shall, or shall cause an Affiliate to, pay (for the pre-Closing period) to such Transferred Employee an amount equal to (i) the amount that such Transferred Employee would have earned under the applicable Employee Benefit Plan for calendar year 2026, based on actual performance as of the Closing Date (as determined by Seller in good faith), multiplied by (ii) a fraction, the numerator of which is the number of days between January 1, 2026 and the Closing Date and the denominator of which is three hundred sixty-five (365) (each, a “Prorated 2026 Incentive”). Seller shall pay the Prorated 2026 Incentives to the relevant Transferred Employees within ten (10) Business Days after the Closing.
6.3Cooperation. Following the date hereof, Seller and the Buyers shall, and shall cause their respective Affiliates to, reasonably cooperate and use good faith efforts in all matters reasonably necessary to effect the transactions contemplated by this Article 6, including exchanging information and data relating to workers’ compensation, employee benefits, employee benefit plan coverages, service, compensation, accrued paid time off and payroll, making any required filings and notices, and coordinating employee communications, in each case, except to the extent prohibited by Law and subject to applicable privacy and data protection requirements.
6.4No Third Party Beneficiaries. Subject to Section 1.1, no provision in this Article 6 or otherwise in this Agreement, whether express or implied, shall (a) create or confer any third-party beneficiary or other rights in any current or former employee, independent contractor, consultant, director or officer of Seller (including any Program Employee, Transferred Employee or beneficiary or dependent thereof); (b) create any rights to continued employment with Seller, any Buyer or any of their respective Affiliates or in any way prevent or limit the ability of Seller, any Buyer or any of their respective Affiliates to terminate the employment of any individual, including any Program Employee or Transferred Employee, at any time and for any reason; (c) constitute or be deemed to constitute an amendment to any Employee Benefit Plan, Buyer Welfare Benefit Plan or any other employee benefit plan, program, policy, agreement or arrangement sponsored or maintained by Seller, any Buyer or any of their Affiliates; or (d) alter or in any way limit the ability of Seller, any Buyer or any of their respective Affiliates to amend, modify or terminate any Employee Benefit Plan or any other employee benefit plan, program, policy, agreement or arrangement sponsored or maintained by Seller, any Buyer or any of their respective Affiliates.
59
ARTICLE 7
CONDITIONS PRECEDENT
7.1Conditions to Obligations of the Buyers and Seller. The obligations of the Buyers and Seller to complete the Transactions are subject to the satisfaction at or prior to the Closing of the following conditions:
7.1.1No Injunction. No Law or Order by any Governmental Authority of competent jurisdiction restraining, enjoining or otherwise making illegal the consummation of the Closing shall be in effect; and
7.1.2Antitrust Law. All waiting periods applicable to the Transactions under the HSR Act (and any extension thereof, including under any agreement between a Party and a Governmental Authority agreeing not to consummate the Transactions prior to a certain date) shall have expired or been terminated.
7.2Conditions to Obligations of the Buyers. The obligation of the Buyers to complete the Transactions is subject to the satisfaction or waiver by the Buyers at or prior to the Closing of the following additional conditions:
7.2.1Representations and Warranties. (a) The representations and warranties of Seller contained in Section 3.1, other than the Fundamental Representations of Seller, shall be true and correct in all respects (disregarding all “material,” “in all material respects” and “Material Adverse Effect” qualifiers) at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except for breaches of such representations and warranties that would not have a Material Adverse Effect; (b) the Fundamental Representations of Seller set forth in Section 3.1.5 (Title to and Sufficiency of Assets) and Section 3.1.10(d) (Title to Intellectual Property) shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct in all material respects as of such date) and (c) the Fundamental Representations of Seller set forth in Section 3.1.1 (Corporate Status), Section 3.1.2 (Authority), and Section 3.1.17 (No Broker), shall be true and correct in all respects other than de minimis inaccuracies at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date);
7.2.2Covenants. Seller shall have performed or caused to be performed, in all material respects, all covenants, agreements and obligations required to be performed or complied with by Seller on or prior to the Closing; and
7.2.3Material Adverse Effect. Since the date hereof, there shall not have been a Material Adverse Effect that is continuing.
7.2.4Closing Deliverables. Seller shall have delivered to the Buyers each of the items required to be delivered at Closing pursuant to Section 2.5.2(a).
7.3Conditions to Obligations of Seller. The obligation of Seller to complete the Transactions is subject to the satisfaction or waiver by Seller at or prior to the Closing of the following additional conditions:
60
7.3.1Representations and Warranties. The representations and warranties of the Buyers contained in Section 3.2, other than the Fundamental Representations of the Buyers, shall be true and correct in all respects (disregarding all “material”, “in all material respects” and “Buyer Material Adverse Effect” qualifiers) at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except for breaches of such representations and warranties that would not have a Buyer Material Adverse Effect; and the Fundamental Representations of the Buyers shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date (except that those representations and warranties that address matters only as of a particular date need only be true and correct in all material respects as of such date);
7.3.2Covenants. Each Buyer shall have performed and complied with or caused to be performed and complied with, in all material respects, all covenants, agreements and obligations required to be performed or complied with by such Buyer prior to the Closing; and
7.3.3Closing Deliverables. The Buyers shall have delivered to Seller each of the items required to be delivered at Closing pursuant to Section 2.5.2(b).
7.4Frustration of Closing Conditions. Neither the Buyers nor Seller may rely on the failure of any condition set forth in this Article 7 to be satisfied if such failure was primarily caused by such Party’s failure to comply with its agreements set forth herein.
ARTICLE 8
TERMINATION
8.1Termination. Prior to the Closing, this Agreement shall terminate on the earliest to occur of any of the following events:
8.1.1the mutual written agreement of the Buyers and Seller;
8.1.2by written notice delivered by either the Buyers or Seller to the other, if the Closing shall not have occurred on or prior to September 30, 2026 (the “End Date”); provided, however, that the right to terminate this Agreement under this Section 8.1.2 shall not be available to any Party whose breach of any representation or warranty hereunder or failure to comply with or perform any of its covenants, agreements or obligations under this Agreement, including the obligations under Section 4.3, primarily caused the failure of the Closing not to have occurred on or before the End Date;
8.1.3by written notice delivered by either the Buyers or Seller to the other, if consummation of the Transactions would violate any non-appealable final Order of any Governmental Authority having competent jurisdiction; provided, however, that the right to terminate this Agreement under this Section 8.1.3 shall not be available to any Party whose failure to comply with any of its obligations under this Agreement primarily caused the issuance of such Law or Order;
8.1.4by written notice delivered by the Buyers to Seller, if (a) there has been a breach by Seller of a representation or warranty of Seller contained in this Agreement or (b) there shall be a breach by Seller of any covenant, agreement or obligation of Seller in this Agreement, and such failure or breach described in clause (a) or (b) would result in the failure of a condition set forth in Section 7.2.1 or Section 7.2.2 or, in the case of a breach of any covenant, agreement or obligation, is not cured (if capable of being cured) upon the earlier to occur of (a) the thirtieth (30th) day after written notice thereof is given by the Buyers to Seller and (b) the day that is three (3) Business Days prior to the End Date; provided, that the Buyers may not terminate this Agreement pursuant to this Section 8.1.4. If any Buyer is in breach of
61
any of its representations, warranties, covenants, agreements or obligations contained in this Agreement and such breach would result in the failure of a condition set forth in Section 7.3.1 or Section 7.3.2 (other than those conditions the failure of which to be satisfied is primarily caused by a breach by Seller of its representations, warranties, covenants, agreements or obligations contained in this Agreement); or
8.1.5by written notice delivered by Seller to the Buyers, if (a) there has been a breach by any Buyer of a representation or warranty of such Buyer contained in this Agreement or (b) there shall be a breach by any Buyer of any covenant, agreement or obligation of such Buyer in this Agreement, and such failure or breach would result in the failure of a condition set forth in Section 7.3.1 or Section 7.3.2 or, in the case of a breach of any covenant, agreement or obligation, is not cured (if capable of being cured) upon the earlier to occur of (i) the thirtieth (30th) day after written notice thereof is given by Seller to the Buyers and (ii) the day that is three (3) Business Days prior to the End Date; provided, that Seller may not terminate this Agreement pursuant to this Section 8.1.5 if Seller is in breach of any of its representations, warranties, covenants, agreements or obligations contained in this Agreement and such breach would result in the failure of a condition set forth in Section 7.2.1 or Section 7.2.2 (other than those conditions the failure of which to be satisfied is primarily caused by a breach by any Buyer of its representations, warranties, covenants, agreements or obligations contained in this Agreement).
8.2Procedure and Effect of Termination.
8.2.1Notice of Termination. Termination of this Agreement by either the Buyers or Seller shall be by delivery of a written notice to the other. Such notice shall state the termination provision in this Agreement that such terminating Party is claiming provides a basis for termination of this Agreement. Termination of this Agreement pursuant to the provisions of Section 8.1 shall be effective upon and as of the date of delivery of such written notice as determined pursuant to Section 10.2.
8.2.2Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.1 by the Buyers or Seller, this Agreement shall be terminated and have no further effect, except that Article 1 (Definitions), Section 5.1 (Publicity), Section 5.2 (Confidentiality), Article 8 (Termination) and Article 9 (Miscellaneous) shall survive any termination of this Agreement and there shall be no liability hereunder on the part of Seller, the Buyers or any of their respective Affiliates or Representatives, except (i) as liability may exist pursuant to the Sections or Articles specified in this Section 8.2.2 that survive such termination, and (ii) that no such termination shall relieve a Party from any liability arising out of any Fraud by such Party or Willful Breach by such Party of any representation, warranty, covenant, agreement or obligation of such Party contained herein prior to such termination. “Willful Breach” means an intentional and willful material breach, or an intentional and willful material failure to perform, in each case, that is the consequence of an act or omission by a party with the knowledge that the taking of such act or failure to take such act would cause a breach of this Agreement. For clarity, in the event of termination of this Agreement pursuant to Section 8.1, the Parties shall not enter into any of the Ancillary Agreements not entered into on the date hereof or have any obligations thereunder.
ARTICLE 9
INDEMNIFICATION
9.1Survival; Indemnification.
9.1.1Survival and Time Limitations.
(a)Seller Representations. The representations and warranties of Seller will automatically terminate at 11:59 p.m. (Prevailing Pacific Time) on the twelve (12)-month anniversary of the Closing Date (the “Expiration Time” and such date on which the Expiration Time occurs, the
62
“Expiration Date”); provided, however, that the Fundamental Representations will automatically terminate on the three (3)-year anniversary of the Closing Date; provided, further, that in the event of Fraud with respect to any such representation or warranty, such representation or warranty will survive until 11:59 p.m. (Prevailing Pacific Time) on the later of (i) the six (6)-year anniversary of the Closing Date, and (ii) sixty (60) days after the expiration of the statute of limitations applicable to such Fraud; provided, further, that all such representations and warranties of Seller will survive beyond the Expiration Date or other survival periods specified above with respect to any inaccuracy therein or breach thereof if a notice of such claim is validly delivered pursuant to Section 9.1.3 prior to the expiration of the survival period for such representation or warranty, in which case such representation or warranty will survive as to such claim until such claim has been finally resolved. Notwithstanding anything set forth in this Article 9, the survival periods set forth in this Section 9.1.1(a) shall not affect or otherwise limit any claim made or available under the R&W Insurance Policy.
(b)Buyers Representations. The representations and warranties of the Buyers will automatically terminate at the Expiration Time; provided, however, that the Fundamental Representations of the Buyers will automatically terminate on the three (3)-year anniversary of the Closing Date; provided, further, that in the event of Fraud with respect to any such representation or warranty, such representation or warranty will survive until 11:59 p.m. (Prevailing Pacific Time) on the later of (i) the six (6)-year anniversary of the Closing Date and (ii) sixty (60) days after the expiration of the statute of limitations applicable to such Fraud; provided, further, that all such representations and warranties of the Buyers will survive beyond the Expiration Date or other survival periods specified above with respect to any inaccuracy therein or breach thereof if a notice of such claim is validly delivered pursuant to Section 9.1.3 prior to the expiration of the survival period for such representation or warranty, in which case such representation or warranty will survive as to such claim until such claim has been finally resolved.
(c)Covenants. All covenants in this Agreement that (i) by their terms require performance prior to the Closing will terminate at the Closing, and (ii) by their terms, require performance at or following the Closing shall survive until performed.
9.1.2Indemnification.
(a)Indemnification by Seller. Subject to the terms and conditions of this Section 9.1, Seller will indemnify, defend and hold harmless the Buyers, their subsidiaries and Affiliates, and their respective successors and assigns (collectively, the “Buyer Indemnitees”) from and against the entirety of any Losses that any Buyer Indemnitee may suffer or incur resulting from, arising out of, relating to, or caused by (i) any breach or inaccuracy of (A) any representation or warranty made by Seller in Article 3, other than a Fundamental Representation of Seller and (B) any breach or inaccuracy of any Fundamental Representation of Seller; (ii) any breach of any covenant or agreement of Seller in this Agreement; (iii) any Excluded Liability; and (iv) the matter described on Schedule 9.1.2. With respect to the matters described in Section 9.1.2(a)(i)(A), Seller will have no liability with respect to such matters until Buyer Indemnitees have suffered aggregate Losses by reason of all such breaches in excess of $3,875,000 (the “Deductible”), after which point Seller will be obligated to indemnify Buyer Indemnitees from and against all Losses exceeding the Deductible; provided, that the foregoing limitations shall not apply in respect of any Losses relating to or arising out of Fraud. With respect to the matters described in Section 9.1.2(a)(i)(A), the aggregate maximum liability of Seller shall be the General Indemnity Escrow Amount, with respect to (x) the matter described in Section 9.1.2(a)(iv) or (y) the matters described in Section 9.1.2(a)(i)(B), the maximum liability of Seller shall, in each case, be an amount equal to the Special Indemnity Amount and with respect to all other matters described in Section 9.1.2(a), the aggregate maximum liability of Seller shall be the sum of (x) the Closing Consideration and (y) any Milestone Payments actually paid to Seller (the “Purchase Price Cap”); provided, that the foregoing limitations shall not apply in respect of any Losses relating to or arising out of Fraud.
63
(b)Indemnification by the Buyers. Subject to the terms and conditions of this Section 9.1.2, the Buyers will indemnify and hold harmless Seller, its Affiliates, and their respective successors and assigns (collectively, the “Seller Indemnitees”) from and against the entirety of any Losses they may suffer or incur (including any Losses they may suffer or incur after the end of any applicable survival period, provided, that an indemnification claim with respect to such Losses is made pursuant to this Section 9.1.2 prior to the end of such applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by (i) any breach or inaccuracy of (A) any representation or warranty made by the Buyers in Article 4 (other than the representations and warranties in clause (B) of this Section 9.1.2(b)(i)) and (B) any breach or inaccuracy of the Fundamental Representations of the Buyers, (ii) any breach of any covenant or agreement of any Buyer in this Agreement, and (iii) any Assumed Liability. With respect to the matters described in Section 9.1.2(b)(i)(A), the Buyers will have no liability with respect to such matters until the Seller Indemnitees have suffered Losses by reason of all such breaches in excess of the Deductible, after which point the Buyers will be obligated to indemnify the Seller Indemnitees from and against all Losses exceeding the Deductible. With respect to the matters described in Section 9.1.2(b)(i), the aggregate maximum liability of the Buyers shall be an amount equal to the Deductible and with respect to all other matters described in Section 9.1.2, the aggregate maximum liability of the Buyers shall be the Purchase Price Cap; provided, that the foregoing limitation shall not apply in respect of any Losses relating to or arising out of Fraud.
(c)Other Indemnification Matters. All indemnification payments under this Section 9.1.2 will be deemed adjustments to the Closing Consideration. For purposes of determining whether there has been any misrepresentation or breach of a representation or warranty, and for purposes of determining the amount of Losses resulting therefrom, all qualifications or exceptions in any representation or warranty relating to or referring to the terms “material”, “materiality”, “in all material respects”, “Material Adverse Effect” or any similar term or phrase shall be disregarded, it being the understanding of the Parties that for purposes of determining liability under this Section 9.1.2, the representations and warranties of the Parties contained in this Agreement shall be read as if such terms and phrases were not included in them. Notwithstanding anything to the contrary in this Agreement or otherwise, in no event shall the Buyers’ actual or alleged knowledge of any breach of any representation, warranty or covenant of any Seller set forth herein in any limit the rights of the Buyers or any Buyer Indemnitees under this Agreement, including without limitation under this Section 9.1.2.
(d)Setoff. If any Buyer Indemnitee makes a claim for indemnification in accordance with this Section 9.1.2, the Buyers shall be entitled, but not obligated, to recover any such amounts due from Seller under this Agreement by setting off such amounts against the Milestone Payments. The exercise of such right of set off by the Buyers, whether or not ultimately determined to be justified, will not constitute a breach of this Agreement. Neither the exercise nor the failure to exercise such right of set off will constitute an election of remedies or limit the Buyers in any manner in the enforcement of any other remedies that may be available to them.
(e)Order of Recovery. The Buyers agree that the only source of recovery and recourse for any claims that a Buyer Indemnitee may have under Section 9.1.2(a)(i)(A) shall be from the recovery of the then remaining General Indemnity Escrow Amount (subject to the terms of the Escrow Agreement) and under the R&W Insurance Policy (subject to the terms of the R&W Insurance Policy). The Buyers further agree that (x) with respect to any other claims that a Buyer Indemnitee may have under Section 9.1.2(a)(i)(B), the Buyers shall, prior to seeking recovery from Seller directly, first seek the recovery from any then remaining General Indemnity Escrow Amount (subject to the terms of the Escrow Agreement), next seek recovery under the R&W Insurance Policy (subject to the terms of the R&W Insurance Policy) and seek recovery by set off against any Milestone Payment and (y) with respect to any claims that a Buyer Indemnitee may have under Section 9.1.2(a)(iv), the Buyers shall, prior to seeking recovery from Seller directly, first seek the recovery from any then remaining Special Indemnity Amount
64
(subject to the terms of the Escrow Agreement and the limitations herein); provided, that, a Buyer Indemnitee may, at its option, elect to seek recovery from the then remaining Special Indemnity Amount (subject to the terms of the Escrow Agreement) with respect to any claims under Section 9.1.2(a)(i)(B), (ii) or (iii) (in which case the aggregate amount of any such Losses actually recovered by the Buyer Indemnitees with respect to such claims under Section 9.1.2(a)(i)(B), (ii) or (iii) shall not be taken into account in determining the aggregate Losses of Buyer with respect to the matter described in Section 9.1.2(a)(iv) for the purposes of the last sentence of Section 9.1.2(a). Seller acknowledges that the Buyers are entering into the R&W Insurance Policy and that, in connection therewith, a Buyer Indemnitee may concurrently make claims for the same Loss or series of related Losses under both this Article 9 and the R&W Insurance Policy. Seller further acknowledges and agrees that the denial of any claim by any Buyer Indemnitee under the R&W Insurance Policy shall not be construed as, or used as evidence that, such Buyer Indemnitee is not entitled to indemnification under this Article 9, subject to the limitations set forth in this Article 9. Nothing in this Agreement shall limit the right of a Buyer Indemnitee to make claims against the R&W Insurance Policy.
9.1.3Procedures.
(a)Any Person entitled to be indemnified under this Article 9 (the “Indemnified Party”) shall promptly give written notice to the party from whom indemnification may be sought (the “Indemnifying Party”) of any pending or threatened Litigation against the Indemnified Party that has given or would reasonably be expected to give rise to such right of indemnification with respect to such Litigation (a “Third Party Claim”), indicating, with reasonable specificity, the nature of such Third Party Claim, the basis therefor, a copy of any documentation received from the third party, the amount and calculation of the Losses for which the Indemnified Party is entitled to indemnification under this Article 9 (and a good faith estimate of any such future Losses relating thereto), and the provision(s) of this Agreement in respect of which such Losses shall have occurred, and the Indemnified Party shall promptly deliver to the Indemnifying Party any information or documentation related to the foregoing reasonably requested by the Indemnifying Party. A failure by the Indemnified Party to give notice and to tender the defense of the Litigation in a timely manner pursuant to this Section 9.1.3(a) shall not limit the obligations of the Indemnifying Party under this Article 9, except to the extent such Indemnifying Party is prejudiced thereby.
(b)With respect to any Third Party Claim, the Indemnifying Party under this Article 9 shall have the right, but not the obligation, to assume the control and defense, at its own expense and by counsel of its own choosing, of such Third Party Claim and any Third Party Claims related to the same or a substantially similar set of facts; provided, that the Indemnifying Party shall not be entitled to assume the control and defense of such Third Party Claim, and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party, if such Third Party Claim (i) involves criminal or regulatory proceedings, (ii) seeks injunctive or other non-monetary relief, (iii) would reasonably be expected to have a material adverse effect on the business or reputation of the Indemnified Party, (iv) presents a conflict of interest between the Parties, (v) includes both parties as defendants under circumstances where joint representation would be inappropriate, (vi) claims Losses in excess of any limitations on the Indemnifying Party’s obligations to indemnify hereunder, (vii) has a defense that has already been assumed by the insurer pursuant to the R&W Insurance Policy, (viii) is not being diligently defended in good faith. In any such case, the Indemnified Party may assume and control the defense at the Indemnifying Party’s expense. If the Indemnifying Party so undertakes to control and defend any such Third Party Claim, it shall provide the Indemnified Party, within ten (10) days after receiving notice of the Third Party Claim, with notice of (i) an unequivocal statement that the Indemnifying Party elects to assume and control the defense of the Third Party Claim and acknowledges its obligation to indemnity the Indemnified Party for all Losses arising from such claim subject to the terms, conditions and limitations herein; (ii) confirmation that the Indemnifying Party will defend the claim diligently and in good faith and will keep the Indemnified Party reasonably informed of all material developments; and (iii) to the extent applicable, evidence of adequate financial
65
capacity (or applicable insurance coverage) to satisfy the reasonably anticipated exposure associated with the Third Party Claim. The Indemnified Party shall reasonably cooperate with the Indemnifying Party and its counsel in the defense against, and settlement of, any such Third Party Claim; provided, however, that the Indemnifying Party shall not settle any such Third Party Claim without the written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed) unless such settlement does not involve any injunctive relief against or any finding or admission of any violation of Law or wrongdoing by the Indemnified Party, and any money damages are borne solely by the Indemnifying Party. Subject to the foregoing, the Indemnified Party shall have the right to employ separate legal counsel and to participate in but not control the defense of such Litigation at its own cost and expense; provided, that, subject to the provisions of this Article 9, the Indemnifying Party shall bear the reasonable fees of one firm of legal counsel (and one additional firm of legal counsel in each jurisdiction implicated in such Litigation) representing all Indemnified Parties in such Litigation and all related Litigation, if, but only if, the defendants in such Litigation include both an Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have reasonably concluded, based on the advice of legal counsel, that there is a material conflict of interest between the Indemnifying Party and the Indemnified Party with respect to such Litigation. In any event, the Indemnified Party shall cause its legal counsel to cooperate with the Indemnifying Party and its legal counsel and shall not assert any position in any Litigation inconsistent with that asserted by the Indemnifying Party. No Indemnified Party may settle any Third Party Claim without the written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed). If the Indemnifying Party does not assume the control and defense of a Third Party Claim, it shall nevertheless be entitled to participate in the defense of such Litigation at its own cost and expense, and the Indemnified Party shall cooperate fully with the Indemnifying Party and its counsel in the defense against, and settlement of, any such Third Party Claim.
(c)In the event that any Indemnified Party has or may have an indemnification claim against any Indemnifying Party under this Article 9 that does not involve a Third Party Claim, the Indemnified Party shall promptly give written notice thereof to the Indemnifying Party indicating, with reasonable specificity, the nature of such claim, the basis therefor, the amount and calculation of the Losses for which the Indemnified Party is entitled to indemnification under this Article 9 (and a good-faith estimate of any such future Losses relating thereto), and the provision(s) of this Agreement in respect of which such Losses shall have occurred, and the Indemnified Party shall promptly deliver to the Indemnifying Party any information or documentation related to the foregoing reasonably requested by the Indemnifying Party. A failure by the Indemnified Party to give notice in a timely manner pursuant to this Section 9.1.3(c) shall not limit the obligations of the Indemnifying Party under this Article 9, except to the extent such Indemnifying Party is prejudiced thereby. If the Indemnifying Party disputes its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by the arbitration procedures set forth set forth in Section 10.1.2.
9.1.4Exclusive Remedy. Each Buyer and Seller acknowledge and agree that, except with respect to claims under the Transition Services Agreement (which shall be governed exclusively by the Transition Services Agreement) and the dispute resolution mechanism contemplated in Section 10.1.2, claims for Fraud and claims seeking specific performance or other equitable relief with respect to covenants or agreements to be performed after the Closing, following the Closing, the indemnification provisions of Article 9 shall be the sole and exclusive remedies of the Buyers and Seller, respectively, and any of their respective Affiliates, for any Liabilities (including in respect of any claims for breach of Contract (including for breach of any representation, warranty, covenant or agreement), warranty, tortious conduct (including negligence), under Law or otherwise and whether predicated on common law, statute, strict liability, or otherwise) that each Party may at any time suffer or incur, or become subject to, as a result of or in connection with this Agreement, the Transaction or the other transactions contemplated by this Agreement,
66
including any breach of, or failure by any Party to perform or comply with, any covenant or agreement in this Agreement and the other Ancillary Agreements.
9.1.5Additional Indemnification Provisions. With respect to each indemnification obligation contained in this Agreement, all Losses shall be net of, and reduced by any third-party insurance or indemnity, contribution or similar proceeds that have been recovered by the Indemnified Party or its Affiliates in connection with the facts giving rise to the right of indemnification (it being agreed that if third-party insurance or indemnification, contribution or similar proceeds in respect of such facts are recovered by the Indemnified Party or its Affiliates subsequent to the Indemnifying Party’s making of an indemnification payment in satisfaction of its applicable indemnification obligation, such proceeds shall be promptly remitted to the Indemnifying Party to the extent of the indemnification payment made).
9.1.6Mitigation. Each of the Parties agrees to use, and to cause its Affiliates to use, its reasonable best efforts to mitigate its respective Losses to the extent required by applicable Law upon and after becoming aware of any event or condition that would reasonably be expected to give rise to any Losses that are indemnifiable hereunder; provided, however, that nothing in this Section 9.1.6 shall require any Indemnified Party to: (a) initiate or prosecute any litigation, arbitration or other proceeding; (b) waive or forgo any material right, privilege or claim; (c) accept any settlement, compromise or consent to any judgment; (d) take any action that would reasonably be expected to result in a material adverse effect on its business, operations, assets, condition (financial or otherwise) or reputation; (e) incur any material out-of-pocket costs or expenses (unless such costs are promptly reimbursed or indemnified); (f) take any action that is unreasonable, impracticable or disproportionately burdensome under the circumstances; or (g) take any action that would reasonably be expected to prejudice its insurance coverage or indemnification rights.
9.1.7Tax Treatment. Any payment made under this Article 9, to the maximum extent permitted by applicable Law, shall be treated for all applicable Tax purposes as an adjustment to the Purchase Price.
9.1.8Release of Escrow Amount. Within three (3) Business Days following the date that is the twelve (12)-month anniversary of the Closing Date (the “General Indemnity Escrow Release Date”), the Buyers and Seller shall, subject to this Section 9.1.8, deliver to the Escrow Agent a joint written instruction to distribute the General Indemnity Escrow Distribution Amount to Seller. The “General Indemnity Escrow Distribution Amount” shall equal (i) the General Indemnity Escrow Amount, minus (ii) the aggregate amount of any claims that have been resolved in favor of Buyer Indemnitees and released to Buyer (or on behalf of Buyer at Buyer’s direction) from the General Indemnity Escrow Amount in satisfaction of such claims pursuant to Article 9 as of the General Indemnity Escrow Release Date, minus (iii) the aggregate amount reasonably necessary to satisfy all then-pending indemnification or reimbursement claims (to the extent such claims may be satisfied from the General Indemnity Escrow Amount) set forth in any written notice(s) delivered to Seller pursuant to Article 9 that remain unresolved as of the General Indemnity Escrow Release Date, which amounts shall continue to be retained by the Escrow Agent as part of the General Indemnity Escrow Amount until such claims are fully resolved. Within three (3) Business Days following the earlier to occur of (x) [***], and (y) the date that is the twenty-four (24)-month anniversary of the Closing Date (the “Special Indemnity Escrow Release Date”), the Buyers and Seller shall, subject to this Section 9.1.8, deliver to the Escrow Agent a joint written instruction to distribute the Special Indemnity Escrow Distribution Amount to Seller. The “Special Indemnity Escrow Distribution Amount” shall equal (i) the Special Indemnity Amount, minus (ii) the aggregate amount of any claims that have been resolved in favor of Buyer Indemnitees and released to Buyer (or on behalf of Buyer at Buyer’s direction) from the Special Indemnity Amount in satisfaction of such claims pursuant to Article 9 as of the Special Indemnity Escrow Release Date, minus (iii) the aggregate amount reasonably necessary to satisfy all then-pending indemnification or reimbursement claims (to the extent such claims may be satisfied from the Special Indemnity Amount) set forth in any written notice(s) delivered to Seller
67
pursuant to Article 9 that remain unresolved as of the Special Indemnity Escrow Release Date, which amounts shall continue to be retained by the Escrow Agent as part of the Special Indemnity Amount until such claims are fully resolved. Notwithstanding the foregoing, in the event that as of the twenty-four (24)-month anniversary of the Closing Date, the matter set forth on Schedule 9.1.2 remains unresolved to Buyer’s reasonable satisfaction as a result of ongoing litigation or negotiations, the Special Indemnity Escrow Release Date shall be extended until such matter is fully resolved. [***].
ARTICLE 10
MISCELLANEOUS
10.1Dispute Resolution.
10.1.1Governing Law; Limited Court Jurisdiction. This Agreement will be governed by and interpreted in accordance with the laws of the State of Delaware, without giving effect to conflicts of laws principles (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Subject to Section 10.1.2, the Parties hereby irrevocably and unconditionally consent to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware or, if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, if jurisdiction is not then available in the United States District Court for the District of Delaware, then any Delaware state court (collectively, the “Designated Courts”), solely for (a) the recognition, enforcement, confirmation, modification, vacatur, or entry of judgment upon any arbitral award rendered pursuant to Section 10.1.2, and (b) prior to the Closing, actions seeking specific performance or other equitable relief in aid of consummating the transactions contemplated hereby. Except as expressly set forth in the immediately preceding sentence, the Parties agree not to commence any action, suit, or proceeding arising out of or relating to this Agreement in the Designated Courts but instead any other action shall be subject to the dispute resolution mechanism contemplated in Section 10.1.2. The Parties further irrevocably waive any objection to venue in the Designated Courts for the limited purposes described above and waive any claim of inconvenient forum with respect thereto. The Parties intend for any disputes, other than those expressly set forth above, to be determined by arbitration.
10.1.2Disputes. Any dispute, claim, or controversy arising out of or relating to this Agreement, including but not limited to the existence, breach, termination, enforcement, interpretation, or validity thereof, any payments required hereunder (including milestone payments) and the determination of the scope, applicability, or enforceability of this agreement to arbitrate, shall be finally resolved by binding arbitration administered by the International Chamber of Commerce (the “ICC”) in accordance with the ICC Rules of Arbitration then in effect, which rules shall be deemed incorporated by reference to the extent they do not conflict with this Section 10.1.2. The seat (legal place) of arbitration shall be New York, New York. The language of the arbitration shall be English. The arbitral tribunal shall apply the substantive law of the State of Delaware (without giving effect to any choice or conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than the State of Delaware). The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. The Parties further recognize and intend that this arbitration agreement and any award fall within the Convention on the Recognition and Enforcement of Foreign Arbitral Awards as implemented in Chapter 2 of the Federal Arbitration Act. The Parties expressly agree that the parties shall be limited to no more than twenty-five (25) reasonably tailored requests for documents, and that the arbitral tribunal will determine whether any other discovery mechanisms (such as interrogatories, depositions, requests for admission or other discovery mechanism) shall be available. The Parties further agree that the International Bar Association Rules on the Taking of Evidence in International Arbitration shall apply. The arbitrator(s) shall have the authority to grant any legal or equitable remedies available in a court, including injunctive relief and specific performance, and to allocate costs, including reasonable attorneys’ fees, in accordance with the ICC Rules
68
and as the arbitrator(s) deems appropriate (including in cases of bad faith conduct). However, under no circumstances shall the arbitrator(s) have the authority to allocate or award contingency fees. The Parties agree that judgment upon any arbitral award may be entered and enforced exclusively in the Designated Courts in accordance with Section 10.1.1. Notwithstanding the foregoing, prior to the Closing, any Party may seek specific performance or other interim or equitable relief in the Designated Courts in respect of the obligations of the Buyers under Article 2 without constituting a breach of this Section 10.1.2 or a waiver of the agreement to arbitrate. In addition, the arbitral tribunal shall retain full authority to grant interim or conservatory measures, to modify or supersede any court-issued interim relief, and to award damages for any non-compliance with its orders. The Parties waive, to the fullest extent permitted by applicable law, any right to trial by jury in any proceeding permitted under Section 10.1.1. All proceedings, including any negotiations, mediations, arbitrations or litigations, conducted pursuant to this Article 10 shall be confidential. Except as may be required by law, neither a Party nor the arbitrator(s) may disclose the existence, content, documents exchanged, pleadings or written submissions filed, testimony rendered or arguments made, orders or awards issued or results of any proceedings conducted hereunder without the prior written consent of both Parties. For avoidance of doubt, no award or procedural order made in the arbitration shall be published absent agreement by both parties in writing. In the event either Party seeks to enforce or vacate an any award issued under this Article 10, they shall make every effort to file such action (including the award) under seal. To the extent not possible, the Parties shall work together to seek to protect the confidentiality of the arbitration, including its existence, to the greatest extent possible.
10.1.3Service. Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 10.2.2 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.
10.2Notices.
10.2.1Notice Requirements. Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement (each, a “Notice”) shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if delivered by hand or sent by email of a PDF (or similar electronic) attachment (so long as no notice of failure of delivery is received by the sender) or by overnight registered mail, courier or express delivery service that maintains records of delivery, addressed to the applicable Party at its address specified in Section 10.2.2 or to such other address as the Party to whom notice is to be given may have provided to the other Party at least ten (10) days prior to such address taking effect in accordance with this Section 10.2. Such Notice shall be deemed to have been received: (a) as of the date delivered by hand or by overnight registered mail, courier or express delivery service; or (b) on the day sent by email if no automated notice of delivery failure is received by the sender (notice given upon transmission if sent by e-mail transmission prior to 9:00 p.m. in the local time of the recipient on a Business Day, or at 9:00 a.m. local time on the next Business Day if sent by e-mail transmission after 9:00 p.m. on a Business Day or on a day that is not a Business Day).
10.2.2Address for Notice.
If to Seller, to:
Edgewise Therapeutics, Inc.
1715 38th St.
Boulder, CO 80301
Attention:[***]
Email:[***]
69
with a copy (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attn:Tony Jeffries; Robert Ishii; Ross Tanaka
Email:naj@wsgr.com; rishii@wsgr.com; rtanaka@wsgr.com
and
Wilson Sonsini Goodrich & Rosati, Professional Corporation
12235 El Camino Real
San Diego, California 92130
Attention:Miranda Biven; Nellie Brutocao
Email:mbiven@wsgr.com; nbrutocao@wsgr.com
If to the Buyers, to:
Servier Pharmaceuticals LLC
Pier Four Boulevard
Boston, MA 02210 USA
Attention:Chief Executive Officer
Email:[***]
and
Les Laboratoires Servier
50 rue Carnot 92284
Suresnes Cedex, France
Attention:Head of Global Business Development
Email:[***]
with a copy (which shall not constitute notice) to:
Les Laboratoires Servier
Attention:Legal Department
Email:[***]
and
McDermott Will & Schulte LLP
23 rue de l’Université
75007 Paris, France
Attention:Emmanuelle Trombe
Email:etrombe@mcdermottlaw.com
and
McDermott Will & Schulte LLP
444 West Lake Street, Suite 4000
Chicago, Illinois 60606
70
Attention:Andrew Warmus
Email:awarmus@mcdermottlaw.com
10.3No Benefit to Third Parties. This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein expressed or implied shall give or be construed to give to any Person, other than the Parties and such successors and assigns, any legal or equitable rights hereunder; provided, however, that Seller may seek to enforce the Buyers’ compliance with the covenants expressly set forth in Article 6, subject to the limitations and defenses set forth therein.
10.4Waiver. 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. The waiver by any Party of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise. No failure or delay by any Party in exercising any right, power or privilege hereunder, and no course of dealing between the Parties, shall be effective to amend or waive any provision of this Agreement.
10.5Expenses. Except as otherwise specified herein or in any Ancillary Agreement, and whether or not the Closing takes place, each Party shall pay its own legal, accounting and other fees and expenses incurred in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed pursuant hereto and the consummation of the Transactions and any other costs and expenses incurred by such Party.
10.6Assignment. Neither this Agreement nor any Party’s rights or obligations hereunder may be assigned or delegated by such Party without the prior written consent of the other Party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by any Party without the prior written consent of the other Parties shall be void and of no effect except that any Party may assign or delegate any or all of its rights or obligations hereunder (i) to an Affiliate without the prior written consent of the other Parties, provided, that such assigning Party shall remain responsible for the performance of all of its obligations under this Agreement or (ii) pursuant to Schedule 2.4. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.
10.7Amendment. Subject to Section 1.1, this Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Parties.
10.8Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties.
10.9Equitable Relief. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that (a) any Party shall be entitled to an injunction or injunctions, specific performance
71
or other equitable relief to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction without proof of damages or otherwise, this being in addition to any other remedy to which it is entitled under this Agreement, at law or in equity, and (b) the right of specific enforcement is an integral part of the Transactions and without that right, no Party would have entered into this Agreement. Each Party agrees not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the other Parties otherwise has an adequate remedy at law. The Parties acknowledge and agree that any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 10.9 shall not be required to provide any bond or other security in connection with any such Order or injunction.
10.10Bulk Sales Statutes. The Buyers acknowledge that neither Seller nor any of its Affiliates has taken, and do not intend to take, any action required to comply with any applicable bulk sale or bulk transfer Laws or similar Laws, and the Buyers waive compliance by Seller and its Affiliates therewith.
10.11Fulfillment of Obligations. The Parties shall take any and all actions necessary to cause their respective Affiliates to perform and fulfill their covenants, obligations and agreements under this Agreement and any Ancillary Agreement to which an Affiliate of such Party is a Party.
10.12Counterparts. This Agreement may be executed in any number of counterparts and manually or electronically, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
10.13Entire Agreement. This Agreement, together with the Schedules and Exhibits expressly contemplated hereby and attached hereto, the Disclosure Schedules, the Ancillary Agreements, the Confidentiality Agreement and the other agreements, certificates and documents delivered in connection herewith or therewith or otherwise in connection with the Transactions, contain the entire agreement between the Parties with respect to the Transactions and supersede all prior agreements, understandings, promises and representations, whether written or oral, between the Parties with respect to the subject matter hereof and thereof.
10.14Disclosure Schedules. The inclusion of a reference to or disclosure of any information in the Disclosure Schedules (a) shall not be construed as an admission or indication that such information is material or that such information is required to be referred to or disclosed, nor shall it be deemed to establish a standard of materiality now or in the future (it being the intent that none of Seller or its Affiliates shall be penalized for having disclosed more than may be required), (b) does not represent a determination by Seller or its Affiliates that such matter or item did not arise in the ordinary course of business, (c) shall not imply that such matter or item constitutes or would constitute a Material Adverse Effect and (d) shall not imply that disclosure of such matter or item is required by Law or by any Governmental Authority.
10.15Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege; Communications with Internal Counsel.
10.15.1The Buyers waive and will not assert, and agree to cause their respective Affiliates to waive and not assert, any conflict of interest arising out of or relating to the representation, after the Closing (the “Post-Closing Representation”), of Seller or any of its Affiliates, or any shareholder, officer, employee or director of Seller or any of its Affiliates (any such Person, a “Designated Person”) in any matter involving this Agreement, any Ancillary Agreement or any other agreements or transactions
72
contemplated hereby or thereby, by any legal counsel currently representing any Designated Person in connection with this Agreement, any Ancillary Agreement or any other agreements or transactions contemplated hereby or thereby, including Wilson Sonsini Goodrich & Rosati, Professional Corporation (any such representation, the “Current Representation”).
10.15.2Except in the case of Fraud, the Buyers will not assert against Seller or its Affiliates, and agree to cause their respective Affiliates to not assert against Seller or its Affiliates, any attorney-client or other applicable legal privilege or protection with respect to any communication between any legal counsel and any Designated Person occurring during the Current Representation or in connection with any Post-Closing Representation, including in connection with a dispute with the Buyers or their respective Affiliates, including in respect of any claim for indemnification by a Buyer Indemnitee.
10.15.3The Parties acknowledge that, in the course of the negotiation and implementation of this Agreement and the resolution of any Litigation relating thereto, each Party may call upon the members of its internal legal department to provide advice to such Party and its directors, employees and agents on legal matters. Notwithstanding any rights to the contrary under applicable procedural or substantive rules of Law, each Party agrees not to request, produce or otherwise use any such communications between members of its legal department and directors, employees or agents in connection with any such Litigation, to the extent such communications, if they had been exchanged between such Party and external attorneys, would have been covered by attorney-client or other legal privilege and not disclosable.
10.16Performance by LLC and LLS. LLC unconditionally guarantees to Seller performance of LLS’s obligations under this Agreement and any Ancillary Agreement (including all agreements, covenants, undertakings, licenses and payment obligations) (“Guaranteed Obligations”), and LLS unconditionally guarantees to Seller performance of LLC’s Guaranteed Obligations. Each of LLC and LLS agrees that the validity of their respective guaranties in this Section 10.16 and their respective obligations hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Seller any of the rights or remedies reserved to Seller pursuant to the provisions of this Agreement or otherwise or any other remedy or right which such Seller may have at law or in equity or otherwise.
[Signature page follows]
73
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.
Edgewise Therapeutics, Inc. | ||
| | |
By: | /s/ Kevin Koch | |
| Name: | Kevin Koch |
| Title: | Chief Executive Officer |
Servier Pharmaceuticals LLC | ||
| | |
By: | /s/ David Lee | |
| Name: | David Lee |
| Title: | Chief Executive Officer |
| | |
Les Laboratoires Servier | ||
| | |
By: | /s/ Olivier Laureau | |
| Name: | Olivier Laureau |
| Title: | President |
| | |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Koch, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Edgewise Therapeutics, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 6, 2026
| EDGEWISE THERAPEUTICS, INC. | |
| | |
| By: | /s/ Kevin Koch |
| Name: | Kevin Koch |
| Title: | President, Chief Executive Officer and Director (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Nofi, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Edgewise Therapeutics, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 6, 2026
| EDGEWISE THERAPEUTICS, INC. | |
| | |
| By: | /s/ Michael Nofi |
| Name: | Michael Nofi |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Kevin Koch, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, (1) the Quarterly Report on Form 10-Q of Edgewise Therapeutics, Inc. for the quarterly period ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Edgewise Therapeutics, Inc.
| | /s/ Kevin Koch |
| | Kevin Koch |
| | Chief Executive Officer and Director (Principal Executive Officer) |
| | Date: August 6, 2026 |
Exhibit 32.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Nofi, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, (1) the Quarterly Report on Form 10-Q of Edgewise Therapeutics, Inc. for the quarterly period ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Edgewise Therapeutics, Inc.
/s/ Michael Nofi | ||
Michael Nofi | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
Date: August 6, 2026 |